The 2010 Dodd-Frank Act established the Investor Advisory Committee (the "IAC") to advise the SEC on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace. On September 18, 2025, the IAC met and adopted recommendations concerning the regulatory framework that should govern retail investors' access to private market assets, as set out in a joint report from two IAC subcommittees (the "Report").1
The Report recommends that registered funds are the best way for retail investors to obtain such access. In support of this recommendation, the IAC highlights that registered funds offer a practical and more transparent vehicle to expand retail investor access to private assets compared to unregistered or exempt offerings because registered funds (i) "were developed specifically for retail use," and (ii) offer numerous protections that are not found in non-public offerings, including "[SEC] review, audited financials, professional fund management, diversification, various levels of liquidity, and the protections of the [1940 Act]."
TARGETED REFORMS TO REGISTERED FUND REGULATION
In Part II of the Report, the IAC makes five recommendations intended to (i) enhance the ability of registered funds to invest in private market assets and (ii) better protect retail investors who invest in these registered funds. These IAC recommendations are described below with some observations.
1. Provide Clarity and Transparency on Valuations
The IAC recommends that the SEC require funds to disclose additional information to retail investors to better understand how the values of portfolio assets that do not actively trade are determined, including (i) disclosing "when fund sponsors reject or replace third-party appraisals," and (ii) "[r]equiring fund directors, who have a fiduciary duty to protect shareholder interests and manage potential conflicts of interest, to require funds they oversee to disclose more details as to how valuations are determined, ensuring consistency across various investment vehicles."
Observations
Registered funds of all types may already reject or replace prices from third parties as part of their fair-value process (e.g., when a readily available market quotation is no longer deemed reliable due to events occurring after a securities principal market closes, or when a price received from third-party pricing service is deemed stale or otherwise unreliable). Moreover, registered funds may already invest to some extent in "illiquid investments," as defined in Rule 22e-4 under the 1940 Act. The IAC fails to justify why registered funds that invest in private market assets should have additional disclosure requirements from other registered funds that similarly override third-party appraisals particularly in light of the advent of Rule 2a-5 under the 1940 Act in 2022. The Rule "address[es] valuation practices and the role of the board of directors with respect to the fair value of the investments of a registered investment company." Rule 2a-5 permits a fund's board to designate the fund's primary investment adviser to perform the fund's fair value determinations (i.e., the "valuation designee") and the valuation designee is subject to board oversight and certain quarterly reporting, annual reporting and other requirements intended to aid the board's oversight of the investment adviser's fair value determinations. The IAC does not explain why Rule 2a-5 would be uniquely inadequate with respect to private market assets.
2. Changes to Staff Interpretations and/or Rules under the 1940 Act
Expand and Codify Co-Investment Exemptive Orders. The IAC observes that the SEC has issued numerous exemptive orders permitting closed-end funds and business development companies to participate in co-investment transactions with affiliated funds and accounts that are otherwise prohibited by Section 17 of the 1940 Act and Rule 17d-1 thereunder. The IAC recommends that the SEC consider codifying and simplifying this co-investment relief, as well as expanding the relief to apply to open-end registered funds.
Codify Monthly Repurchases Under Rule 23c-3. Currently, Rule 23c-3 under the 1940 Act permits closed-end interval funds to conduct share repurchases on an annual, semi-annual or quarterly basis. The IAC notes that the SEC has granted exemptive relief to closed-end funds that rely upon the Rule to conduct monthly repurchases subject to certain conditions. The IAC recommends that the SEC amend Rule 23c-3 to permit monthly repurchases.
Codify Multi-Class Exemptive Orders. The IAC notes that SEC has issued numerous exemptive orders permitting closed-end funds to offer multiple classes of shares. The IAC recommends that the SEC codify these orders into a new rule.
Closed-End Funds Organized as Series Funds. The IAC recommends that the SEC permit interval funds and tender offer funds to operate as series funds.
Observation
This recommendation would require SEC rulemaking with respect to closed-end funds that is analogous to rules adopted under 1940 Act Section 18(f)(2) for open-end series funds. The ability to organize interval and tender offer closed-end funds as series funds would result in significant savings in organizational and governance costs. Allowing these continuously offered closed-end funds to operate as series funds would also enable fund sponsors to save the time and expense associated with launching separate registrants.
3. Enhance Disclosure
The IAC recommends that the SEC simplify risk disclosures for registered funds that invest in private market assets so that retail investors can better understand the funds. The IAC states that the enhanced disclosure should employ a layered disclosure format to make key risks more digestible. The SEC also should "[r]equire standardized language across fund documents to reduce confusion and improve comparability."
Observation
While certain terms are already standardized in SEC registration forms and financial statements, a requirement to use "standardized language," if interpreted broadly by the SEC, is likely to be unworkable in practice.
4. Provide for Additional Investor Protections
The IAC recommends the SEC work with the Financial Industry Regulatory Authority ("FINRA") and state securities regulators for the purpose of monitoring broker-dealers and investment advisers for their compliance with Regulation Best Interest and the Investment Advisers Act in connection with offers and sales of shares of registered funds invested in private market assets to these firms' retail clients.
5. Request for Public Comment
Finally, the IAC recommends the SEC open a "Request for Comment" process to obtain additional input on the (i) additional methods investment managers can use to facilitate private market investments to retail investors, (ii) other impediments retail investors may have in safely accessing private market investments, (iii) the approaches other jurisdictions have taken to facilitate retail investments in private markets, (iv) how to expand retail investor access to private markets while maintaining an appropriate level of investor protection and (v) systemic risks of the growth in the private markets.
REMARKS TO THE IAC FROM COMMISSIONER CRENSHAW
SEC Commissioner Caroline Crenshaw addressed the IAC at its September 18 meeting and provided her views on the IAC's recommendations. She noted that she "remain[s] skeptical about the overall proposition of stuffing an increasing amount of inherently illiquid investments into registered funds," but "wholeheartedly agree[s] with some of the Committee's other recommendations." Commissioner Crenshaw agreed with the IAC's general recommendations regarding enhanced disclosures around valuation and liquidity, but disagreed with certain specific recommendations, including expanding co-investment exemptive relief to open-end funds and permitting closed-end funds to operate as series funds.
Footnote
1. The Report was authored by the IAC's Investor as Owner Subcommittee and the Market Structure Subcommittee, although the Report notes that its "[r]ecommendations are the result of work done by all four IAC Subcommittees, which in turn drew on the extensive evidence presented at past IAC panels."
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