SEC Commissioner Wants to Expand Retail Access to Private Markets

SEC Commissioner Mark T. Uyeda urged the SEC to "modernize the exemptive landscape" to expand retail investor participation in private markets. He also highlighted recent research on ESG-related fund practices. 

At the 12th Annual Conference on Financial Market Regulation, Commissioner Uyeda recommended:

Expanding Retail Access to Private Markets. Commissioner Uyeda urged the SEC to reconsider its framework for exempt offerings, with particular focus on individual access to private equity. He highlighted research showing that retail investors in private equity "perform similarly to those of institutions and outperform public markets." He identified structural innovations enabling this participation, including "the proliferation of funds with low minimum commitments, pooling capital via advisors, and leveraging advisors' networks to access fund managers."

He also called for a reexamination of the accredited investor definition, stating that while the current standard offers predictability, it may also carry "potential unintended consequences." Mr. Uyeda contended that the SEC should not prevent financially sophisticated individuals from participating in private markets simply due to outdated benchmarks.

While acknowledging that investments in growth-stage companies are risky, Mr. Uyeda argued they may serve a legitimate role in diversified portfolios, especially when offered through pooled vehicles. He cited survey results showing growing investor interest: "14.4% of accredited investors reported being ‘interested’ in investing in this space, while 4.7% of non-accredited investors reported interest."

Scrutiny of Greenwashing by Funds. Commissioner Uyeda also addressed a rising concern about greenwashing among ESG funds. Citing a new academic study, he noted: "Funds engaging in greenwashing charge higher fees while attracting greater flows from investors." He cautioned that such practices could lead to "higher overall investment costs, without corresponding clear and unequivocal disclosure of the downsides of such strategies." He also pointed out that greenwashing funds are more likely to "incur regulatory costs and experience outflows."  He argued: "to the extent that funds elect to pursue strategies not directly tied to financial performance of the underlying investments, investors should not be penalized through higher overall investment costs, without corresponding clear and unequivocal disclosure of the downsides of such strategies."