For most of modern financial history, promising young companies and the loans behind private businesses have sat behind a velvet rope. To get past it, an individual generally had to be an “accredited investor,” a status tied mostly to income and wealth. The Securities and Exchange Commission has voted to propose changes that would let more people through.
The idea is simple. Instead of measuring sophistication only by bank balance, the SEC wants to give weight to what people actually know. The proposals would add professional credentials, including the CPA and the CFA designation, as ways to qualify. The agency is also asking for comment on a new exam, administered by FINRA, that individuals could pass to earn accredited status. SEC Chairman Paul Atkins framed the effort as a matter of fairness, arguing that exposure to “one of the great engines of American enterprise” should not belong only to the wealthiest or to those labeled the most sophisticated.
The second part of the plan is aimed at the people who run private funds. Today, investment advisers can generally charge performance fees only to “qualified clients” who clear higher wealth thresholds. The SEC proposal would let registered investment advisers charge performance fees of up to 20% to accredited investors, mirroring a long-standing hedge fund pay structure. The reasoning is that private fund managers have had little incentive to serve smaller investors when they couldn’t be paid the way they are used to. Brian Daly, who leads the SEC’s Division of Investment Management, described performance fees as a defining characteristic of private funds.
None of this is final yet. The proposals now face a 60-day public comment period after they are published in the Federal Register, and they could change before anything is adopted. They also fit into a broader policy push. In August 2025, the President signed an executive order titled “Democratizing Access to Alternative Assets for 401(k) Investors,” which directed the Department of Labor and the SEC to ease the barriers keeping private equity, private credit and other alternatives out of workplace retirement plans.
The timing, however, is awkward. Private assets tend to offer higher yields partly because they are hard to sell. A loan to a private company has no exchange where it changes hands every day. Fund managers have tried to bridge that gap with “semi-liquid” vehicles that let investors withdraw a slice of their money, typically about 5% of a fund’s shares, each quarter. That works until many investors want out at the same time.
That is roughly what happened earlier this year. Worries about loans to software companies, a favorite sector for many private lenders, sent withdrawal requests climbing. In February, Blue Owl Capital Inc. (NYSE: OWL) ended regular quarterly redemptions in its retail-focused Blue Owl Capital Corporation II fund and shifted to periodic distributions. Blackstone Inc. (NYSE: BX) saw first quarter requests in its flagship private credit fund reach 7.9% of shares, above its usual cap. Apollo Global Management, Inc. (NYSE: APO) reported requests equal to 11.2% of shares in its Apollo Debt Solutions fund, more than double its 5% limit.
Industry leaders argue the system did exactly what it was built to do. Blackstone President and Chief Operating Officer Jon Gray told CNBC in March that withdrawal caps are “really a feature, not a bug” of these products, because they stop funds from dumping loans at bad prices. Critics read the same events differently. Advocacy groups such as Better Markets warn that retail investors may not fully grasp the fees, the valuation challenges and the limits on getting their money back.
That tension sits at the heart of the SEC’s plan. The proposals would widen the doorway, yet they would not change what lies on the other side: assets that can pay well while remaining slow to turn back into cash. For anyone weighing private market funds once these rules take shape, the more useful question may be less about whether they qualify and more about whether they can comfortably leave their money untouched when the exit gets crowded.
