On July 7, the SEC released its latest regulatory flexibility agenda. Browsing through the agenda, its a clear sign of de-regulation of financial services. Of the 38 items on the agenda, I highlight some that are most applicable to private funds.
Pay-to-Play Reform
The SES is considering “recommending that the Commission propose “amendments to rule 206(4)-5 under the Investment Advisers Act of 1940, which prohibits investment adviser pay-to-play practices, to address identified compliance burdens.” Which compliance burdens are those? Low contribution thresholds? Steep penalties for inadvertent violation? Who is covered? Rescind it allow federal and state election laws to cover this.
Amendments to Investment Adviser Recordkeeping Rule
A project to propose amendments to Rule 204-2, the books and records rule, to address the “appropriate scope” and “identified compliance burdens related to electronic communications” and “to account for certain technological developments since the rule was adopted.” The book and records rule has been a mess for decades.
Enhancing Retail Exposure to Private Markets
A proposal to “better facilitate retail investor exposure to private markets through registered investment companies” and to allow “investment advisers to charge performance fees to an expanded set of clients.” This sounds like a reduction of the threshold for qualified client or a removal of the restriction. Not sure what the SEC is thinking about retail exposure to private markets through 40 Act funds.
My position with private market exposure is not an investors qualifications to discern good investments from bad. It’s an investor’s ability to withstand the illiquidity in private markets. Some public company may or may not be a good investment. But if you change your mind, you can be out of the position is seconds. There is little to no ability to exit from a private markets investment.
Updating the Exempt Offering Pathways
This seems to go hand in hand with the retail in private markets rule. Its looking to simplify pathways for raising capital and to amend the definition of accredited investors. As I said the risk with private placements is much more about liquidity than risk analysis.
Amendments to the Custody Rule
Pro-Crypto Chair Atkins is looking to make it easier for crypto to comply with the custody rule. Great. More ways for scammers to dump shitcoins on the public.
Sources:
- Statement on the 2026 Regulatory Agenda from Chair Atkins
- SEC Agency Rule List 2026
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