SEC Proposes Exam-Based Path to Private Market Investing

Historically, the private market has remained the exclusive domain of accredited investors—those holding at least $1 million in net worth or earning annual incomes exceeding $200,000. SEC Chair Paul Atkins argued that financial thresholds are imperfect proxies for an individual’s ability to assess investment risks. By allowing individuals to qualify through a FINRA-administered exam, the agency hopes to diversify participation beyond the ultra-wealthy.

The proposed test would mirror the structure of the existing Securities Industry Essentials Exam, focusing on core concepts like conflict of interest, market disclosures, and investment structures. While the exam would be open to anyone over 18 for a $100.50 fee, it would not grant professional credentials or allow participants to work in the securities industry. This initiative aligns with broader administration efforts to integrate private assets into retail portfolios, including recent Department of Labor moves regarding 401(k) plans.

Beyond individual accreditation, the SEC is refining rules for business development companies and performance fee structures. With advisors currently managing $1.9 trillion in liquid private market strategies—a figure projected to reach $3.7 trillion by 2029—these changes aim to streamline how capital flows into non-public assets. Despite the regulatory momentum, prospective investors should note that passing an exam does not remove the high minimum investment requirements often set by the funds themselves.