SEC Commissioner Urges Broader 401(k) Access to Private Markets
Commentary by Andrew Lom
SEC Commissioner Mark T. Uyeda urged expanding 401(k) access to private markets, warning that current limits leave workers with a "diversification deficit."
In remarks at the ICI Retail Alternatives and Closed-End Funds Conference, Mr. Uyeda emphasized that democratizing access to private investments—such as private equity, private credit, and real estate—is essential for improving long-term outcomes for defined contribution plan participants. He noted that pension funds for decades have relied on private markets to enhance returns and manage risk, while 401(k) savers remain confined largely to public markets. He argued that giving everyday investors access, through professionally managed structures, would bring retirement portfolios closer to those used successfully by large institutional plans.
Mr. Uyeda rejected what he called the "fallacy of zero exposure," pushing back on the idea that banning private investments is a form of protection for retail investors. He contended that a complete prohibition is a policy choice—not an inherent safeguard—and that the proper standard is the fiduciary’s duty of prudence. That duty, he stressed, is designed to allow fiduciaries to evaluate and manage small, appropriate allocations to private assets, not to prevent such allocations categorically. Mr. Uyeda argued that presuming fiduciaries cannot responsibly oversee these options would limit opportunity without improving safety.
To make meaningful access possible, Mr. Uyeda called for structural reforms. First, he highlighted the need for litigation reform to address the chilling effect of ERISA’s litigation environment, which discourages plan sponsors from offering innovative options for fear of hindsight-driven lawsuits. He suggested protections similar to those in the Private Securities Litigation Reform Act to shield prudent fiduciaries acting in good faith. Second, he urged closer collaboration between the SEC and the Department of Labor to develop a unified regulatory framework. Such coordination, he said, is critical to provide clear rules on valuation, fees, disclosures, and oversight.
Commentary
Commissioner Uyeda concluded his address by urging the SEC and Department of Labor to coordinate on ERISA standards for private-market access, warning that fragmented oversight could chill innovation. His call evokes memories of the industry’s whiplash during the DOL fiduciary rule era and the SEC’s rollout of Regulation Best Interest—two regimes that left firms juggling overlapping "best interest" obligations and unclear enforcement priorities. Without genuine alignment, history suggests we’ll see more regulatory turf wars instead of progress on investor protection, and that’s a risk neither agency should ignore.