SEC Proposes to Eliminate 15% Asset Limit on Closed-End Funds
U.S. Securities and Exchange Commission (SEC) Chair Paul Atkins announced plans to remove the 15% asset limit on closed-end funds investing in private funds, marking a significant shift from the 2002 rule that imposed restrictions on these offerings.
The initial regulation limited closed-end fund investments in hedge funds and private equity funds, requiring a $25,000 minimum investment and restricting sales to accredited investors.
In his first major speech as SEC Chair at the SEC Speaks conference in Washington, D.C., Paul Atkins announced plans to direct staff to explore expanding retail investor access to private markets.
“Atkins emphasized that retail investors have missed opportunities to access private markets due to these restrictions,” stating that eliminating the rule would allow for greater diversification and investment flexibility.
The Managed Funds Association (MFA) welcomed the proposal, with President and CEO Bryan Corbett highlighting that retail investors have been excluded from private markets for too long.
“Reevaluating these arbitrary limits will give everyday Americans more opportunities to save for retirement, build wealth, and diversify their portfolios,” Corbett stated.
Atkins assured that investor protections will remain intact, emphasizing the need to improve disclosure standards for closed-end funds trading on exchanges. Key transparency measures will address conflicts of interest, illiquidity, and fee structures, reinforcing a common-sense approach to market expansion.
