Statement at Open Meeting on Proposals to Expand Responsible Retailization of Private Markets

Good morning, ladies and gentlemen. And thank you for joining us today for this public meeting of the Securities and Exchange Commission under the Government in the Sunshine Act.

We have three items on today's agenda. First, the Commission will consider whether to issue a release proposing rule amendments expanding the circumstances under which a registered investment adviser may receive performance-based compensation. Second, we will consider whether to issue a release proposing amendments to the rule that allows regulated closed-end funds to make repurchase offers to shareholders at net asset value at periodic intervals. Finally, we will consider whether to issue five notices that the Commission is considering regarding whether to designate by order certain certifications, designations, or credentials as qualifying natural persons for accredited investor status.

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Before we begin, I should like to take a moment to recognize my friend and colleague, Commissioner Hester Peirce. As her remarkable tenure at the Commission draws to a close, I thank her for her nearly nine years of principled leadership and dedicated public service as Commissioner.

Even before her tenure as commissioner, she served the SEC in the Division of Investment Management and then in my office when I was a commissioner. One of the most attractive aspects to me in returning to the Commission as chairman was the opportunity to work again with Commissioner Peirce and Commissioner Uyeda, who also served in my office back in the Aughts. We were able to bring the "band" back together. What a pleasure it has been for the past 17 months.

Commissioner Peirce has always brought an independent mind to the work of the Commission. She has never been afraid to question conventional wisdom or to stand alone when principle demanded it. At the heart of her approach has been a deep respect for investors- particularly for their judgment, their freedom to participate in our markets, and for their right to benefit from the opportunities that those markets create.

Nowhere has her courage to stand apart from the crowd proven more consequential than in digital assets. Long before regulatory clarity became a shared objective at this Commission, Commissioner Peirce was calling for it. She of all people truly deserves the nickname of "Crypto Mom."

Many of the ideas that we are now putting into practice were first articulated and developed in her speeches and dissents. Even when those ideas had no purchase with the rest of the Commission, she continued to ask whether there was a better way. Over time, her vision for the future became a roadmap. Moreover, I am very happy to be able to say that we are actually putting those principles and ideas into practice for the benefit of investors, innovators, and the American economy.

So, Hester, thank you. Thank you very much for your friendship, for your service to this institution, and above all for the example that you have set. You have demonstrated how much one determined, persistent voice can prevail even after years of opposition and indifference. This Commission is better for your service, and the work that we carry forward will bear the imprint of your leadership for years to come. God bless you as you move on to other endeavors. I will miss you and your always pleasant demeanor, but am happy that you will not be too far away. Please remember that, as long as I am around, the door will remain open for you and especially for your comments and ideas.

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Now, let me turn to the first two items on today's agenda. Private markets are one of the great engines of American enterprise, equipping businesses with the capital to launch, to experiment, to scale-and, in many cases, to mature-before assuming the obligations of a public company. Investor demand for private market investment opportunities is growing, and one of my priorities for the Commission is to explore ways to facilitate the ability of individual investors to participate in private markets, while at the same time protecting those investors from bad actors and fraud. The Commission's efforts in this regard-focused on expanding opportunities for investors' post-tax, pre-retirement dollars-complement efforts undertaken pursuant to President Trump's Executive Order on Democratizing Access to Alternative Assets for 401(k) Investors.

These goals are not incompatible with another priority of mine - to make IPOs great again. As I have said repeatedly, exposure to the full dynamism of our markets should not be reserved for the wealthiest or for those deemed to be the most sophisticated. Private market investments-like any investment-are not without risks. But the mere presence of investment risk is not grounds to exclude individual investors in perpetuity. At its core, this is a question of freedom and fairness.

Accordingly, our efforts are focused on what we have called "responsible retailization"-the notion of embracing investment growth and innovation across all asset classes, while protecting individual investors with appropriate safeguards.

Today, we will consider two proposals from the Division of Investment Management that help to realize our responsible retailization vision.

The first proposed rulemaking is designed to modernize the regulatory framework related to performance-based compensation. Performance-based compensation can offer a rational and effective means to define and align adviser and investor goals. Expanding the ability for advisers to charge performance-based fees could incentivize advisers currently operating in the private markets as well as complex or differentiated public market strategies to bring diverse strategies to a wider group of clients and investors, including investors in regulated funds.

The second proposed rulemaking, meanwhile, is designed to modernize, enhance, and simplify the interval fund framework, which may allow for the broader adoption of the interval fund structure by fund managers seeking to offer retail investors exposure to private markets.

Taken together, these proposals are important steps towards providing individual investors with more access to private market investment opportunities, including through the registered fund channel. I am pleased to support this rulemaking package and excited by the possibilities that it presents-and, as always, I look forward to reviewing the public's feedback in the coming weeks.

Before I turn it over, I should also like to thank the staff for their hard work in developing these proposals:

In the Division of Investment Management: Brian Daly, Sarah ten Siethoff, Brian Johnson, Robert Holowka, Blair Burnett, Brad Gude, Pam Ellis, Daniel Levine, Neema Nassiri, Larry Pace, Susan Ali, and Claudia Rios.

In the Division of Economic and Risk Analysis: Joshua White, Lauren Moore, Alexander Schiller, James McLoughlin, Dasha Safonova, Caroline Schulte, Joe Simmons, and Aliya Ishmukhamedova.

In the Office of the General Counsel: Russell McGranahan, Bryant Morris, Elise Bruntel, Alice Wang, Amy Scully, and Rebecca Orban

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The third item on today's agenda is a recommendation from the Division of Corporation Finance to issue five notices of potential designations of additional ways that an individual can qualify as an accredited investor.

The Commission's designation of accredited investors is core to the facilitation of retail access to private markets. Qualifying as an accredited investor provides individuals with the opportunity to participate in a variety of capital raising transactions that are exempt from the Commission's registration requirements under the Securities Act of 1933. Access to early investment in growth-stage companies relying on these exemptions can provide a meaningful way to build wealth if the investment's value increases. At the same time, investing in private offerings can carry greater risk and afford fewer protections, compared to public investments. The Commission should weigh these considerations when determining how an individual may qualify as an accredited investor.

I support the recommendation to issue these notices to inform the public of the potential designations of the following ways for an individual to qualify as an accredited investor: (1) passing an examination to be developed by FINRA; (2) holding a license as a U.S. certified public accountant; (3) holding a charter as a Chartered Financial Analyst; (4) holding a certification as a Certified Financial Planner in the United States; (5) holding a FINRA Investment Banking Representative license, and (6) holding a FINRA Research Analyst license.

Each of these potential designations would leverage the Commission's previous recognition that an individual can demonstrate the requisite financial sophistication to participate in offerings exempt from Securities Act registration by holding in good standing certain professional certifications, designations, or credentials. These potential designations would also build upon the Commission's prior designations of the FINRA General Securities Representative license, Private Securities Offerings Representative license, and Investment Adviser Representative license as ways to qualify as an accredited investor.

I agree with the fundamental notion ingrained in today's notices that 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.

I look forward to receiving and reviewing the public's feedback on each of the five notices.

Before turning the meeting over to Jim Moloney, Director of the Division of Corporation Finance, for the recommendation, I would like to thank the following members of the Commission staff for their work on the notices.

Division of Corporation Finance: Jim Moloney, Sebastian Gomez Abero, Christina Thomas, Luna Bloom, Jeb Byrne, Kenisha Nicholson, Max Corey, Jonathan Ingram, Heather Maples, Anna Abramson, Jessica Ansart, Dillon Hagius, and Doris Gama.

Division of Economic and Risk Analysis: Joshua T. White, Oliver Richard, Amy Edwards, Vladimir Ivanov, Angela Huang, Lauren Moore, Charles Woodworth, Samantha Croffie, Robert Girouard.

Office of the General Counsel: Russell McGranahan, Bryant Morris, Dorothy McCuaig, Evan Jacobson, Ken Alcé, and Michael Killoy.

Office of the Chief Accountant: Kurt Hohl, Shehzad Niazi, Blaine Roundy and Patrick Foley.

Division of Investment Management: Brian Daly, Sarah ten Siethoff, Robert Holowka, Brian Johnson, Blair Burnett, Samuel Thomas, Neema Nassiri, Daniel Levine, Marc Mehrespand, Adele Kittredge Murray, and Janet Jun.

Division of Trading and Markets: Devin Ryan, Edward Schellhorn, and Kyra Grundeman.