What You Need to Know
On September 30, 2026, the SEC voted to propose a package of rule amendments aimed at what Chairman Paul Atkins calls the "responsible retailization" of private markets. The goal is to give everyday investors greater access to private equity, private credit, venture capital, and hedge fund-style strategies through SEC-regulated funds, while keeping investor protections in place. The SEC also asked for public comment on new ways for individuals to qualify as accredited investors based on professional credentials, or a new exam.
The proposals would:
- Expand performance fees. Advisers to registered funds and business development companies (BDCs) could charge performance fees of up to 20% of a fund’s net gains, including unrealized gains, without investor net worth requirements. The "qualified client" definition would also be expanded to include any accredited investor, allowing advisers to certain private funds and separately managed accounts to charge carried interest to accredited investors without a separate net worth or assets-under-management test.
- Modernize interval funds. New interval funds could defer their first repurchase offer for up to two years, offer repurchases as often as monthly without an exemptive order, and manage liquidity under a board-approved, principles-based standard rather than holding liquid assets equal to 100% of each repurchase offer. Any registered closed-end fund could make an extra discretionary repurchase offer once a year.
- Codify multiple share classes. Registered closed-end funds and BDCs could offer multiple share classes and pay distribution and service fees under a rule, rather than through individual exemptive orders.
- Expansion of accredited investors. The SEC is seeking comment on letting individuals qualify as accredited investors by passing a FINRA-developed accredited investor exam, or by holding in good standing certain credentials, including a CPA license, CFA charter, CFP certification, or FINRA Series 79, 86, or 87 license. (A license to practice law would not qualify an individual as an accredited investor.)
Why It’s Important
Performance-based compensation has long defined private fund strategies, which has, as a practical matter, limited them to a narrow group of eligible investors. By allowing comparable incentives in regulated funds, the SEC expects more sponsors to bring private market strategies to retail investors.
For BDC sponsors, the proposal would narrow a structural advantage over registered closed-end funds and could shift the economics of choosing among product types. Fund boards, including a majority of independent directors, would need to approve performance fee arrangements as being in the best interest of the fund and its shareholders, and those fees could face excessive fee claims under the Investment Company Act, a litigation exposure private fund sponsors do not face on carried interest today.
Emerging companies may also benefit over time from a broader pool of capital flowing to private funds and from a larger accredited investor base for direct offerings. Investors should keep in mind, as Commissioner Mark Uyeda cautioned, that interval funds "provide periodic liquidity; they are not a promise of frequent redemption."
Comments are due 60 days after the proposing releases and notices are published in the Federal Register. The proposals are not final, and their content and timing may change.
What You Need to Do
- Evaluate Product Strategy - Sponsors should assess whether registered funds, interval funds, or BDC structures could become more attractive vehicles for private market strategies under the proposed fee and liquidity framework.
- Review Fee and Governance Arrangements - Consider how performance fees would be structured, approved by fund boards, and disclosed, and how exposure to excessive fee claims would affect fee design.
- Revisit Investor Eligibility - Companies and funds raising capital under Regulation D should monitor the proposed accredited investor pathways, which could expand the pool of eligible investors.
- Submit Comments - Consider participating in the comment process before the 60-day window closes.
- Monitor Developments - Track the Federal Register publication, comment deadlines, and any final rules.
Contact Gil Greber, Bob Lamm, or any other member of Gunster's Securities Law & Corporate Governance practice to discuss how these proposals may affect your funds, investments, or capital-raising plans.
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