The Securities and Exchange Commission (SEC) is set to explore the inclusion of private investments in retirement accounts over the next 12 months. This potential regulatory shift could reshape the investment landscape for retail investors. The SEC’s Office of the Investor Advocate, which represents the interests of retail investors within the Commission, announced this initiative in its annual report, released on Wednesday.
Under the leadership of Cristina Begoña Martin Firvida, appointed by SEC Chairman Gary Gensler in 2023, the office has prioritized assessing private investments in retirement accounts. Private equity and private credit are often touted for their diversification benefits and potential for strong returns. However, the Investor Advocate’s report highlights significant concerns about these asset classes, including incomplete and unreliable disclosures, limited liquidity, and heightened risks of fraud.
These risks are compounded by the stricter fiduciary standards governing retirement accounts. With over $12 trillion held in retirement accounts, changes in SEC regulations could have far-reaching implications. Despite the size of this market, plan providers have historically hesitated to include private investments due to regulatory uncertainties.
However, momentum is building. BlackRock CEO Larry Fink called for greater access to private markets in retirement plans, aligning with the efforts of firms like Blackstone, Apollo Global Management, and KKR, which have recently launched hybrid public-private investment products.
Sec seeks private investment inclusion
BlackRock further advanced this agenda by partnering with Great Gray Trust Company to introduce target-date funds incorporating private investments. On Tuesday, the House of Representatives voted to expand the definition of accredited investors to include individuals with relevant education or professional experience. If passed, this measure would broaden access to private investments, allowing more retail investors to participate.
The Office of the Investor Advocate’s report outlines additional focus areas for the SEC in the coming year, including simplifying mandated reports, scrutinizing China-based Variable Interest Entities (VIEs), and supporting the SEC’s Crypto Task Force. The report also raises concerns about the escalating fraud in investment markets. Reports involving securities fraud violations have surged by 142%, mirroring a broader issue.
The U.S. Federal Trade Commission (FTC) reported that consumers lost over $5.7 billion to investment scams in 2024, a 24% increase from the previous year. The SEC’s focus on private investments in retirement accounts presents both opportunities and challenges for wealth advisors and Registered Investment Advisors (RIAs). If regulatory changes open retirement plans to private markets, advisors will need to carefully evaluate these offerings for their clients while considering the associated risks.
As the investment landscape evolves with developments in VIEs, cryptocurrency oversight, and fraud prevention, advisors must stay informed to provide comprehensive guidance. By aligning client strategies with emerging regulatory trends, advisors can position portfolios to capitalize on new opportunities while safeguarding against risks.
Editor in Chief of Under30CEO. I have a passion for helping educate the next generation of leaders. MBA from Graduate School of Business. Former tech startup founder. Regular speaker at entrepreneurship conferences and events.
