SEC Chair Paul Atkins announced plans by the regulatory body to expand access for retail investors to private investments, citing President Donald Trump's order.
SEC's New Initiatives and Trump's Order
Paul Atkins, the Chair of SEC, reported on the agency's collaboration with President Donald Trump's administration to provide retail investors with equal opportunities to invest in private equity. Atkins referred to Trump's order, which allows crypto and alternative assets in 401K retirement plans, as a catalyst for this initiative. He stated, "It's not really great to have a situation where large endowments and pension funds can be diversified in the public and private markets, while the 401ks cannot."
Challenges with Accredited Investor Rules
In 2020, the SEC overhauled accredited investor regulations to emphasize financial knowledge and skill rather than net worth, broadening who qualifies. However, current regulations prohibit retail investors from accessing certain investment products, according to Christopher Perkins, president of investment fund CoinFund.
Potential Risks of Expanding Access to Private Investments
Accreditation rules act as a consumer protection measure to shield investors from taking on excessive financial risks. These risks are exacerbated in private businesses that do not have to follow the same disclosure requirements as public counterparts, making them more complex to understand. Private investments are also illiquid, which can lead to contagion during financial crises.
While expanding access to private investments may open new opportunities for retail investors, the associated risks need careful evaluation and the establishment of appropriate regulatory guardrails.
