US SEC proposes wider retail investor access to private assets amid risk concerns

The US securities regulator proposed rules on Wednesday that would broaden access to private assets traditionally reserved for wealthy or professional investors. This could potentially give more Americans opportunities for higher returns while exposing them to greater risks, according to the Reuters report.

The Securities and Exchange Commission’s proposals form part of the Donald Trump administration’s broader effort to “democratise” investments such as private equity, private credit, real estate and venture capital, which can potentially deliver higher returns than conventional stock-and-bond portfolios.

One measure could allow hundreds of thousands of certified professionals—including accountants, financial analysts, financial planners and licensed research analysts—to qualify as accredited investors and purchase private investments.


Accredited-investor status currently depends largely on meeting wealth or income thresholds or holding certain professional credentials, such as a broker-dealer license.

For live updates on US Markets, click here

Critics argue that the initiative would benefit Wall Street at the expense of retail investors, who may not fully understand the fees and risks associated with private assets. Such investments can be difficult to value and may not be readily converted into cash.

“As I’ve said repeatedly, exposure to the full dynamism of our markets should not be reserved for the wealthiest or for those deemed the most sophisticated,” SEC Chair Paul Atkins said at a public meeting, Reuters reported. “Private market investments, like any investments, are not without risks. But the mere presence of investment risk is not grounds to exclude individual investors in perpetuity.”

Analysts remain divided over whether private investments consistently outperform public stock markets.

The three-member SEC, which currently has no Democratic commissioners, also proposed changes governing performance fees charged by investment advisers and share redemptions at closed-end funds.

Separately, the agency issued five notices indicating that it was considering allowing accountants, chartered financial analysts, certified financial planners, investment-banking license holders and licensed research analysts to qualify as accredited investors.

“For too long, the accredited investor definition has focused on income and wealth as a stand-in for sophistication, and that choice has shut out many Americans who understand investing well, but have not yet built up a large personal balance sheet or income statement,” said Republican SEC Commissioner Mark Uyeda.

Also Read: Anthropic IPO explained: $2 trillion valuation, ballooning net loss, AI risks and other details in leaked IPO papers

If adopted, the changes would give asset managers greater freedom to charge performance fees linked to clients’ capital gains. SEC officials said this could encourage advisers to provide retail investors with access to private-asset funds whose compensation structures rely on such fees.

Investment advisers can currently charge performance fees only to “qualified” clients whose net worth or portfolio assets exceed specified thresholds. Several financial advisers told Reuters that the changes could create incentives for advisers to expose clients to greater risk.

“An adviser paid a share of gains has a reason to reach for risk, so I’d want strong valuation policies and informed client consent,” Jeff Judge of Chesapeake Financial Planners told Reuters.

A second proposal would allow closed-end funds, investment companies that raise fixed amounts of capital, to redeem investor shares monthly and offer additional share classes.

Susan Ali, an attorney in the SEC’s investment-management division, told Reuters that the change would improve liquidity for shareholders. A regulatory advisory committee said last year that such measures would give retail investors greater access to private assets.

The proposals will undergo a public notice-and-comment period before the SEC decides whether to adopt them.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)