Access Via Your Adviser Is Not Access on Your Own Terms: The SEC Private Markets Proposal Explained

SEC Chairman Paul Atkins has put forward a proposed rulemaking that would let retail investors reach private securities markets through registered investment companies managed by registered investment advisers, without requiring those investors to independently qualify as accredited investors. Crowdfund Insider reported on the proposal on September 8, 2026, noting the SEC's own framing: that this would provide retail investors with needed opportunities to diversify in line with their risk tolerance and time horizon, while also allowing investment advisers to charge performance fees to an expanded set of clients. Nick Morgan, founder of ICAN (Investors Choice Advocate Network) and a former SEC attorney, pushed back sharply, calling the approach "progress for advisors, incrementalism for retail investors" and arguing that routing access through advisers simply preserves the structural gatekeeping model. As of this writing, the formal proposed rule text has not been published in the Federal Register for the standard public comment period.

How Regulation D Works Today

Regulation D is the most widely used exemption from full securities registration under the Securities Act of 1933. When a private company, real estate sponsor, hedge fund, or venture fund wants to raise capital without filing a public registration statement with the SEC, Reg D is typically how they do it. The filing burden is intentionally light: issuers submit a Form D notice to the SEC within 15 days of the first sale, and there is no ongoing disclosure requirement comparable to a public company's quarterly or annual filings. That simplicity, combined with no cap on the total amount raised, has made Reg D the backbone of the U.S. private capital markets. The SEC estimates the exemption covers multiple trillions of dollars in private capital formation each year. Every prominent private firm, from venture-backed startups to large real estate funds, uses it.

Within Reg D, two rules handle nearly all private placements: Rule 506(b) and Rule 506(c). Under 506(b), issuers cannot advertise or generally solicit their offering to the public. They can sell to an unlimited number of accredited investors and to up to 35 non-accredited investors who are nonetheless "sophisticated," meaning the issuer reasonably believes they have enough financial and business knowledge to evaluate the deal on its merits. Accredited status in a 506(b) deal is typically established through the investor's own written representations. Under 506(c), general solicitation and advertising are permitted, but all investors must be accredited, and the issuer must take "reasonable steps" to verify that status, which often means reviewing tax documents, brokerage statements, or letters from third-party professionals rather than relying on self-certification alone.

Under SEC Rule 501, a natural person qualifies as an accredited investor by meeting one of these tests. First, individual income exceeding $200,000 in each of the two most recent calendar years (or $300,000 combined with a spouse), with a reasonable expectation of the same in the current year. Second, net worth exceeding $1 million excluding the value of the primary residence. Third, a valid Series 7, Series 65, or Series 82 securities license in good standing. Entities qualify under separate standards based on assets or ownership composition. Roughly 13 to 18 percent of U.S. households meet one of these criteria. Every other household is, for practical purposes, excluded from most Reg D deals.

That exclusion carries a real economic consequence. The companies raising capital through Reg D are frequently high-growth, pre-IPO businesses where the most significant returns accrue before any public listing. By the time a company's shares become available to retail investors on a public exchange, accredited investors and institutional funds have often already captured the bulk of the early appreciation. Critics of the current system argue this pattern amplifies wealth concentration because access to higher-returning asset classes is reserved for people who already meet a wealth threshold.

What the SEC Proposal Actually Does

The Atkins proposal, as described in the SEC's Spring 2026 Regulatory Agenda published by the Office of Information and Regulatory Affairs on July 7, 2026, and confirmed by subsequent reporting, targets two connected changes. First, it would amend the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to allow registered investment companies, including interval funds and registered closed-end funds, to invest in private market securities and make those investments accessible to retail investors through an RIA (registered investment adviser) relationship. Second, it would expand the pool of clients from whom investment advisers may charge performance fees. Currently, advisers can only charge performance-based compensation to "qualified clients," defined as those with at least $1.1 million in assets under management with the adviser or a net worth of at least $2.2 million. The proposal would expand that category to include more retail clients who fall below those thresholds but are investing through the new registered fund pathway.

What the proposal does not do is equally important to understand before you get excited or alarmed. It does not lower the accredited investor income or net worth thresholds. It does not create a new registration exemption that individual retail investors can use on their own. It does not give a non-accredited investor the right to call a startup directly and write a check. If you do not currently qualify as accredited, this rule, if passed, will not change that legal classification. What it does is add an indirect route: you invest in a registered fund that your RIA manages or recommends, and that fund holds private market positions on your behalf. The investment decision about which private assets to hold is made by the fund manager and your adviser, not by you.

That distinction is the core of Nick Morgan's critique. The proposal does not give retail investors the power to choose their own private market investments. It gives advisers the authority to make those choices on behalf of retail clients through a registered fund structure. That deserves to be named plainly rather than buried in regulatory summary language about diversification.

As of September 14, 2026, the formal proposed rule text has not been published in the Federal Register for public comment. Any specific rule number, binding comment period deadline, or confirmed effective date not sourced from a published Federal Register notice should be treated as speculative.

Who Stands to Gain from This Structure

The most direct beneficiaries of this proposal are registered investment advisers and private fund managers. Retail investors benefit in theory. Whether they benefit in practice depends on what happens at the implementation layer.

For RIAs, the proposal offers two advantages. First, they become the required bridge for retail clients seeking private market exposure, which creates both an advisory relationship and a management fee. Second, the performance fee expansion means advisers can charge incentive-based compensation to a wider slice of their client base. If an RIA outperforms a benchmark for a client who was previously below the qualified client threshold, the adviser could now earn carried interest on that outperformance. Chairman Atkins has framed his approach to the Investment Advisers Act as modernizing adviser regulation to reduce unnecessary burdens, as reflected in his September 2026 statements at SEC.gov.

For private fund managers, registered funds provide a new distribution channel for retail capital. Instead of limiting a fundraise to accredited investors under Reg D, a fund manager can seek to have a registered fund allocate to their strategy, widening the addressable capital base. For retail investors, the headline benefit is access to private equity, private credit, and venture capital, which have historically outperformed public markets over long holding periods. Whether that benefit materializes in net-of-fee terms depends on fund selection, fee structure, and the investor's capacity to sustain illiquidity. That is where the real friction lies.

The Friction Points Your Adviser May Not Volunteer

Nick Morgan's point, that routing retail access through advisers preserves the gatekeeping model rather than dismantling it, surfaces something concrete: the structural tensions that any non-accredited investor should examine carefully before committing capital to a private market strategy through a registered fund and an RIA.

Conflicts of interest. RIAs carry a fiduciary duty under the Investment Advisers Act, meaning they are legally required to act in your best interest. That duty does not eliminate economic incentives that can affect judgment. If a private fund manager offers an adviser preferred economics, revenue sharing, or co-investment rights in exchange for directing client assets into their fund, those arrangements can influence which funds get recommended even when the adviser believes in good faith that the fund is suitable. The SEC's Form ADV Part 2 requires advisers to disclose material conflicts of interest. Ask your adviser for this document, read the conflict disclosures section, and ask follow-up questions about any compensation arrangements with the underlying fund managers.

Fee layering. When you invest through an RIA into a registered fund that itself holds private market positions, you typically bear fees at multiple levels. Your adviser may charge an annual management fee between 0.5% and 1.5% of assets. The registered fund charges its own expense ratio. The underlying private fund charges its own management fee, typically 1.5% to 2% annually, plus carried interest of around 20% of profits. These layers compound against your returns each year. A combined total expense drag of 3% to 4% per year is not unusual in layered structures of this type. That drag must be overcome before your net returns exceed what a lower-cost public market index alternative would produce.

Liquidity constraints. Interval funds and registered closed-end funds with private market exposure typically offer quarterly redemption windows limited to 5% of total fund assets per quarter. You may not be able to exit on your own schedule, particularly in periods of market stress when many investors want to redeem at the same time. The underlying private assets also rely on long holding periods, and the fund's stated net asset value can diverge from what you would actually receive in a stressed redemption scenario. Investors who may need liquid access to their capital within a three to five year window should consider this carefully.

Suitability analysis quality. Advisers must determine that any recommendation fits your specific risk tolerance, time horizon, and financial situation. The quality and depth of that analysis varies considerably across the industry. Before you invest, ask your adviser why a private market allocation is appropriate for your personal circumstances, and request a written explanation that connects your specific situation to the recommendation. If the answer is vague or generic, that is a signal to slow down.

Questions to Ask Your Adviser If This Rule Passes

If the proposed rule moves through rulemaking and is adopted, and your adviser approaches you about a private market opportunity through a registered fund, put these questions on the table before signing anything.

How is your firm compensated for recommending this fund? Ask specifically whether the fund manager pays your adviser any distribution fees, revenue sharing, or co-investment rights. This is a different question from asking about your advisory fee.

What is my total annual cost in dollars, counting every fee layer inside the fund and your advisory fee? Ask for a written estimate based on your specific investment amount. Percentages are harder to evaluate than dollars when you are comparing options.

When can I get my money out, and under what conditions can the fund restrict redemptions? Get the liquidity terms in plain language before you invest, not in fund document footnotes.

Why is this investment appropriate for me specifically? If your adviser cannot articulate a clear rationale connecting your financial situation to this recommendation in a few sentences, that absence of clarity is itself informative.

Frequently Asked Questions

What is an accredited investor and how do I know if I qualify?

Under SEC Rule 501 of Regulation D, you qualify as an accredited investor if your individual income exceeded $200,000 in each of the past two calendar years (or $300,000 combined with a spouse or spousal equivalent) with a reasonable expectation of the same this year, OR if your net worth exceeds $1 million excluding the value of your primary residence, OR if you hold a valid Series 7, Series 65, or Series 82 securities license. The proposed SEC rule does not change these thresholds. If you do not currently meet one of these tests, your accredited investor classification will not change under this proposal.

If this rule passes, can I invest directly in startup or private equity deals without an adviser?

No. The proposed rule creates an indirect pathway for retail investors through registered investment companies managed by RIAs, not a direct right to participate in Reg D offerings independently. If you want to invest in a private company directly and you are not an accredited investor, the legal framework governing that transaction does not change under this proposal. You would still be ineligible to participate in most Reg D offerings on your own.

How does fee layering work and how much could it cost me each year?

When you invest through an RIA into a registered fund holding private assets, you typically bear your adviser's annual management fee, the registered fund's internal expense ratio, and the fees charged by the underlying private fund, often 1.5% to 2% annual management plus 20% carried interest on profits. Combined, these layers can reduce your net annual return by 3% to 4% or more before accounting for investment performance. Always request a total cost estimate in dollar terms for your specific investment amount before you commit capital.

Does the SEC proposal reduce the risk of investing in private securities?

No. Private securities accessed through a registered fund still carry liquidity risk, valuation uncertainty, and the possibility of total loss of principal. The registered fund wrapper adds governance requirements and board oversight that pure Reg D vehicles often lack, but it does not insulate investors from the underlying market and credit risks of the private assets held inside the fund. This proposal is a structural change to how retail investors can access private markets. It is not a change to the risk profile of the asset class itself.

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.