The Securities and Exchange Commission has submitted a proposal to better facilitate retail investor access to private markets through registered investment companies, AdvisorHub reports.
The SEC’s plan, which was sent to the White House Office of Management and Budget, would also allow investment advisers to charge performance fees to an expanded set of clients.
The proposal would involve amendments to existing rules and/or new rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940.
The SEC said the time is right for these changes given the transformation of private markets in recent years.
“Over the last two decades, profound shifts have taken place in accelerated growth of private markets as well as increased oversight of and reporting by both private fund advisers and registered funds,” the SEC stated. “Facilitating retail investor exposure to private markets through registered funds and modernizing the performance fee framework would provide needed investment opportunities for retail investors seeking to diversify their investment allocation in line with their investment time horizon and risk tolerance and open more opportunities for retail investors.”
The SEC said this will widen the amount of investment options for everyday investors.
“Exposure to the full dynamism of our markets – both public and private – should not be reserved for wealthy insiders,” the SEC said in a statement.
SEC Chairman Paul Atkins has said in the past that not limiting access to private markets to institutional investors and wealthy individuals is a matter of “freedom and fairness”.
The new proposal will be reviewed by the White House before it is released by the SEC for a period of public comment. Once that input is incorporated into a final version of the rule, it will be voted on by the commission.
Thoreau Bartmann, partner at K&L Gates and former attorney in the SEC’s investment management division, noted that under current rules, investment advisers are limited to charging performance fees for so-called qualified clients.
“Through limiting performance fees, you’re limiting access to that asset class,” Bartmann told AdvisorHub. “Whether that’s a good or bad thing, that’s debatable.”
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