Clear the blockage: Improve access to private markets

Over the past five decades, investing in America's public markets has transformed profoundly. Once the domain of institutions and pensions, they are now broadly accessible to everyday households, thanks to low-cost, diversified investment products. This shift began with the passage of the Employee Retirement Income Security Act of 1974, paving the way for IRAs and 401(k)s. Thirty years ago, self-directed retirement accounts overtook pensions in total assets, and regulators were caught flat-footed. Rather than adapting the system to allow everyday investors the same access to private market opportunities once enjoyed through pensions, State Securities Administrators and others started to build barriers and protections. 

Today, most retail investors remain largely out of reach for the same private credit, infrastructure, real estate, and private equity strategies that funded US pensions. The reason isn't risk, complexity, or a lack of investor demand. It's regulation. A web of overlapping federal and state rules has created friction, inflated costs, and erected barriers. The result: private market opportunities are often reserved for the wealthy.

It doesn't have to be this way.

America's public markets have undergone a remarkable democratization over the last half-century. A typical household today can invest in everything from index funds to sector ETFs with the click of a button.

In the late 1980s and early 1990s, mutual funds, closed-end funds, unit investment trusts, and other exchange-listed pooled investment funds were bogged down in a maze of duplicative and inconsistent regulations. Congress intervened in 1996 with the National Securities Markets Improvement Act (NSMIA), sweeping away individual state regulation for federally registered funds traded on exchanges. The impact was immediate. Investors flocked to mutual funds and ETFs, sparking competition, lowering fees, and building real wealth for middle-class households.

Unfortunately, federal preemption for publicly registered offerings not listed on exchanges wasn't explicitly included, likely because most such offerings were nascent or nonexistent in 1996. The result has been another almost 30 years of buildup of regulatory plaque clogging investment into private market pooled investment vehicles. Federal and state authorities, including the SEC, FINRA, the Department of Labor, and 50 state securities regulators, have imposed rules upon rules on how publicly registered but non-listed offerings should be marketed, who can access them, and how much can be invested. The result is a patchwork of overlapping, often contradictory rules that limit access to promising opportunities, effectively reserving them for the wealthy.

The SEC has acknowledged the need for a change. Commissioner Mark T. Uyeda recently remarked at the Annual Conference on Federal and State Securities Cooperation:
"The interplay between federal and state securities laws…should be reconsidered. This is particularly the case when a person needs to consider the registration requirements of not just a single state, but perhaps dozens."

While these funds file 10-Ks and 10-Qs and follow rigorous SEC disclosure rules, they must still undergo duplicative merit reviews in every state where they seek to raise capital. The process delays fund launches, increases legal fees, bloats disclosure documents, and ultimately restricts or excludes many retail investors.

Ironically, many issuers now choose private placements off-limits to everyday investors simply to avoid the cost and complexity. Subscribing to an investment can take days or even weeks. Innovation continues, but regulatory friction slows progress. These dynamics enrich law firms but harm investors.

The result is regulatory arbitrage with a perverse outcome: less transparency, fewer protections, and more exclusivity.

Critics argue that private markets are riskier and require more safeguards. But the line between "risky" and "regulated" is increasingly blurred. Retail investors can buy triple-leveraged ETFs, speculative SPACs, or volatile microcaps with a click. Yet they're denied access to investment-grade private credit. Risk exists across all markets, public and private. Diversification, not restriction, is the better form of protection.

Private markets are no longer a niche. 87 percent of global companies remain private. These markets are where innovation, capital formation, and value creation increasingly happen. How do investors achieve diversification when prevented from participating in private markets? Many firms today recommend a preferred allocation of 50/30/20 for stocks/bonds and alternatives. How can that be achieved for anyone but the wealthy?

There is a simple fix. Congress should amend NSMIA to classify all federally registered, non-listed investment companies as "covered securities." It would extend the same federal preemption that mutual funds and ETFs enjoy today. Investors would benefit from cleaner disclosures, lower fees, and broader access. Issuers would spend less time with state regulators and more time building better portfolios.

Let's clear the blockage and restore healthy capital flow. All Americans deserve access to a well-regulated, diversified investment marketplace. Purchasing a publicly registered and reporting Alternative Investment fund should be as efficient as buying an ETF or mutual fund. Expanding access to private market investing shouldn't be a privilege reserved for the wealthy. Let's not shut the door on investors. Bring alternative investments under NSMIA, lower costs, improve portfolios, and unlock economic growth.

Mark Goldberg is a recognized leader in the financial services industry. He currently serves as an Independent Board Director and Advisor to several companies. He has been Chair and Director of several financial services associations and the CEO of brokerage and investment management firms. He has received numerous awards and recognition for his professional and philanthropic efforts, including the IPA Lifetime Achievement Award in recognition of having significantly advanced the goals and reputation of the Investment Management Industry. He is a sought-after public speaker and contributes to several investment-focused publications.