On September 18, 2025, the SEC’s Investor Advisory Committee (IAC) published a major report outlining its recommendations for facilitating increased participation by retail investors in private investment markets. In recent months, significant pressure for increased access has come from numerous sources, making it important and timely to consider what protections for retail investors can and should accompany any increase.
This article provides only a brief outline of the IAC report’s 26 pages of recommendations and analysis. Generally speaking, the IAC believes that the regulatory framework of registered funds (e.g., mutual funds, exchange-traded funds (ETFs), and closed-end funds) can provide the optimal way for retail investors to directly and indirectly gain more access to private market assets.
To facilitate increased indirect retail investor access and protection, the IAC recommends:
- Reforming valuation disclosures, including requiring that registered funds disclose more information on how the values of portfolio assets that are not actively traded are determined. In addition, funds should disclose “when fund sponsors reject or replace third party appraisals”; and fund directors should require funds they oversee to disclose additional “details as to how valuations are determined” to facilitate comparisons “across various investment vehicles.”
- Reforming staff interpretations and/or rules under the Investment Company Act of 1940. Specifically, the SEC should (a) consider codifying, as well as extending to open-end funds, the type of simplified co-investment relief that the SEC has recently granted by exemptive order for closed-end funds; (b) amend 1940 Act Rule 23c-3 to allow for monthly, instead of quarterly, repurchasing of securities by interval funds; (c) eliminate the need for closed-end funds to obtain individual exemptive orders to offer multiple classes of shares; and (d) allow interval funds and tender offer funds to operate as series investment companies.
- Reforming liquidity disclosures. Among other things, registered funds should make clear to investors the major differences between retail funds invested in alternative assets that may be “subject to longer redemption timelines and lockups,” as compared with funds that do not invest in such assets. To do this, the IAC proposes that registered funds implement simplified risk disclosures, layered disclosure forms, and standardized language across documents.
- Reforming investor protections. The IAC believes the SEC should (a) work with FINRA and state regulators to develop guidelines as to when private market investments are in an investor’s best interest and to ensure that sales to retail investors comply with applicable requirements of the SEC’s Regulation Best Interest and fiduciary duties under the Investment Advisers Act of 1940; (b) ensure proper disclosure of financial conflicts of interest; (c) prohibit “clearly conflicted” transactions that do not have fund director approval; and (d) continue to rigorously enforce rules and regulations governing deceptive marketing and false claims to investors, including “advertising of funds primarily invested in illiquid assets … as more liquid or less risky than they are in reality.”
The IAC report also recommends that, if action is taken to facilitate increased direct retail investor access to private investments, the SEC implement the following types of “guardrails” to enhance retail investor protection:
- Expanded focus on investor sophistication, versus wealth and income, when evaluating accredited investor status. The SEC should expand the categories of permitted Regulation D investors to include those it believes have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of a prospective investment based on the investors’ credentials and designations. Further, the IAC supports the idea of a test that retail investors would take to enable them to qualify as accredited investors, provided that it (a) sufficiently probes the retail investors’ ability to understand the unique features and risks of the private markets and (b) is developed by the SEC in consultation with other federal and state regulators and stakeholders in the industry.
- Prudential limits to the amount that can be invested by retail investors who do not meet the sophistication or wealth criteria. For example, the SEC should allow those not meeting the sophistication and wealth criteria to invest directly the greater of (a) 10% of the individual’s previous year individual or joint spousal annual income; (b) “up to 10% of individual or joint spousal net worth,” exclusive of any residences or automobiles; or (c) up to 10% of the value of the individual’s total investments in securities.
- Strict enforcement of specific already existing requirements. The IAC believes that the SEC should strictly enforce the current Form D filing requirements, including by developing and imposing penalties for failures to make timely filings. The SEC also should require that filers who take advantage of a “decline to disclose option” on Form D provide an explanation for doing so.
- Other enhancements to Form D filing requirements. The IAC’s report recommends that the SEC expand the information provided in Form D filings to include (a) the identity of any issuer legal counsel, accountants, or auditors; (b) a brief description of the issuer’s “general solicitation” plans, if any; (c) a brief description of the issuer’s existing and proposed business; (d) the name of any officer or director with greater than a 5% equity interest in the issuer; (e) expanded information about use of proceeds; (f) disclosure of any findings of securities fraud or noncompliance with the securities laws by the issuer or any of its related persons; and (g) disclosure of material risks and conflicts of interest, including details regarding any fees, costs, or charges assessed to
investors.
It bears emphasizing that this article by no means mentions all of the recommendations that the IAC makes in its report. Moreover, the report makes clear that the IAC itself believes that considerable additional analysis remains necessary to flesh out, refine, and further supplement its recommendations so far. The IAC, therefore, seems to expect the regulatory remixing to continue in earnest for a good while yet.
