SEC Votes to Propose Rules Expanding Retail Access to Private Markets

The Securities and Exchange Commission voted on September 30, 2026 to propose rule amendments aimed at expanding retail investor access to private market opportunities through regulated fund structures, according to an SEC press release. The package includes a conditional framework under which advisers to regulated funds could receive performance-based compensation of up to 20% of a fund’s net gains, a modernization of the interval fund rule, and a rules-based framework allowing regulated closed-end funds to issue multiple share classes. The Commission is separately requesting public comment on additional ways for individuals to qualify as accredited investors by holding certain professional certifications, designations, or credentials in good standing.

The Commission issued the package as two proposing releases covering registered management investment companies and business development companies, and said the amendments would facilitate capital formation in the public and private markets by expanding retail investor choice and promoting innovation in regulated fund structures while preserving appropriate investor protections and safeguards. Chairman Paul S. Atkins said in a statement at the open meeting that “Investor demand for private market investment opportunities is growing,” and he described the Commission’s focus on expanding opportunities for investors’ post-tax, pre-retirement dollars as complementary to efforts undertaken pursuant to President Trump’s Executive Order on Democratizing Access to Alternative Assets for 401(k) Investors.

Performance-Based Compensation Proposal

The first proposing release, assigned file number S7-2026-28, would amend the rule under the Investment Advisers Act of 1940 that exempts registered investment advisers from the prohibition on receiving compensation based on a client account’s capital gains or appreciation. The amendments would expand that ability to advisers serving registered management investment company and business development company clients, subject to conditions, and would require funds to separately disclose performance-based compensation paid to the adviser in registration and reporting forms.

Under the conditions set out in the Commission’s fact sheet, the performance-based compensation could not exceed 20% of the regulated fund’s net gains over a specified period. The regulated fund would have to satisfy the fund governance standards of Rule 0-1(a)(7) under the Investment Company Act. The fund’s board, including a majority of independent directors, would have to determine that the arrangement is in the best interest of the fund and its shareholders and make specific findings regarding the arrangement’s appropriateness, structure, and investor protection features.

The proposal would also revise the rule’s qualified client definition to include investors that meet the accredited investor definition in Regulation D under the Securities Act, removing the separate net worth test and assets under management test from the definition. The release is numbered 33-11443, 34-106533, IA-7022, and IC-36350, with RIN 3235-AN59.

According to the press release, performance-based compensation has long been a common and defining characteristic of investment strategies associated with private funds, such as hedge fund, private equity, and venture capital strategies, and access to those strategies has, as a practical matter, been limited to a narrow group of eligible investors. The Commission said that permitting similar incentives for advisers to regulated funds could make those advisers more likely to offer private market strategies to regulated funds. Atkins said performance-based compensation can offer a rational and effective means to define and align adviser and investor goals, and that expanding its availability could incentivize advisers operating in the private markets to bring diverse strategies to a wider group of clients and investors, including investors in regulated funds.

Interval Fund and Share Class Changes

The second proposing release, assigned file number S7-2026-34, would amend Rule 23c-3 under the Investment Company Act of 1940, which governs interval funds: registered closed-end funds and business development companies that make periodic share repurchase offers to shareholders pursuant to a fundamental policy. The proposed amendments would permit extended deferral of the first repurchase offer, allow more frequent discretionary repurchases, permit monthly periodic intervals, and permit the deduction of deferred sales loads from repurchase proceeds subject to certain conditions. They would also simplify and clarify the process for determining the repurchase pricing date and the treatment of oversubscribed repurchase offers, and would replace the rule’s specified liquidity amounts with a principles-based liquidity approach.

The same release would replace individual exemptive orders with a rules-based framework permitting regulated closed-end funds to issue multiple share classes, generally consistent with existing exemptive rules for registered open-end funds, and would allow the funds and their affiliates to enter into arrangements for the payment of asset-based distribution and service fees. Prospectus disclosures would be updated to account for multiple share class and master-feeder structures, certain reporting forms would be updated to enhance multiple share class reporting, and enhanced expense disclosures would apply to all regulated closed-end funds. The Commission also proposed to rescind certain existing exemptive orders related to interval funds and multiple share class arrangements. The release is numbered 33-11444, 34-106534, and IC-36351, with RIN 3235-AN83.

Atkins said the interval fund modernization may allow for broader adoption of the structure by fund managers seeking to offer retail investors exposure to private markets.

The third item on the meeting agenda, a recommendation from the Division of Corporation Finance, was the issuance of five notices of potential designations of additional ways an individual can qualify as an accredited investor. One potential designation is passage of an accredited investor exam to be developed by the Financial Industry Regulatory Authority (FINRA), which the Commission said would provide a non-financial pathway for investors to demonstrate their sophistication in the areas of securities, investing, and financial and business matters. The other designations under consideration are a license as a U.S. certified public accountant, a charter as a Chartered Financial Analyst, a certification as a Certified Financial Planner in the United States, the FINRA Investment Banking Representative license (Series 79), and the FINRA Research Analyst license (Series 86 and Series 87).

Atkins said the potential designations would build on the Commission’s prior designations of the FINRA General Securities Representative, Private Securities Offerings Representative, and Investment Adviser Representative licenses as ways to qualify as an accredited investor. He said accredited investor access to private offerings should not be limited solely to individuals satisfying financial thresholds and that such thresholds are not the sole indicators of a person’s ability to assess the merits and risks of an investment. He noted that qualifying as an accredited investor provides individuals the opportunity to participate in capital raising transactions exempt from registration requirements under the Securities Act of 1933, and that investing in private offerings can carry greater risk and afford fewer protections compared to public investments.

The proposals and notices were considered at a September 30, 2026 open meeting held under the Government in the Sunshine Act, where Atkins described the Commission’s approach as “responsible retailization,” the notion of embracing investment growth and innovation across all asset classes while protecting individual investors with appropriate safeguards. The public comment periods for both proposing releases and the notices will remain open for 60 days after their publication in the Federal Register. Both releases carry an SEC issue date of September 30, 2026.