Sep. 30, 2026
-----Original Message----- From: Robert Rutkowski Sent: Wednesday, September 30, 2026 1:16 PM To: Chairman Subject: Private-Market Retailization: Investor Protection, Liquidity, Valuation, and Compensation Safeguards Subject: Private-Market Retailization: Investor Protection, Liquidity, Valuation, and Compensation Safeguards The Honorable Paul S. Atkins Chair U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Dear Chairman Atkins: I am writing regarding the Securities and Exchange Commission's September 30, 2026 proposals concerning expanded retail participation in private markets. The September 30 SEC release states that the Commission is seeking to expand retail investor choice and innovation in regulated fund structures while preserving appropriate investor protections and safeguards. The proposals would expand the circumstances in which registered investment advisers could receive performance-based compensation, modernize the interval-fund framework, establish a rules-based framework for multiple share classes, and separately consider additional professional qualifications and examinations as pathways to accredited-investor status. These proposals warrant particularly careful analysis because the Commission's own staff, only two days earlier, issued a statement emphasizing the valuation and liquidity characteristics of private assets. The staff stated that private-credit assets are typically illiquid, generally do not trade on established secondary markets, and frequently require significant unobservable inputs in determining fair value. The staff also reported that private-credit investment within registered-fund portfolios had grown from $170 billion in December 2020 to $270 billion in December 2025. That juxtaposition raises an important regulatory question: what additional safeguards and empirical evidence establish that broader retail access can be provided without transferring risks that were historically concentrated among investors presumed to possess greater financial capacity, experience, or sophistication? In evaluating the proposals, I respectfully ask the Commission to address at least the following questions in the proposing releases and subsequent rulemaking record. First, valuation risk. Where private assets are valued using significant unobservable inputs, investors may receive a reported net asset value that does not correspond closely to a price at which the underlying asset could actually be sold. The Commission's September 28 staff statement expressly recognizes the judgment involved in such valuations. The rulemaking record should therefore quantify the potential effects of valuation uncertainty on retail investors, including under stressed market conditions. Second, liquidity mismatch. The SEC proposes to modify interval-fund rules so that repurchase schedules can better correspond to portfolio liquidity. The Commission should explain how the proposed framework would perform when redemption demand rises sharply while underlying private assets cannot be sold promptly without material price concessions. The existing interval-fund framework illustrates the underlying issue: Rule 23c-3 permits repurchase offers ranging from 5 percent to 25 percent of outstanding shares during the applicable interval, rather than providing the daily redemption available from an open-end mutual fund. The practical consequences of that distinction should be made conspicuous to retail investors. Third, performance-based compensation. Congress generally prohibited registered investment advisers from receiving compensation based on a share of capital gains or capital appreciation, while authorizing the Commission to provide exemptions under specified circumstances. The SEC's own historical rulemaking materials explain that the performance-fee restrictions were intended in part to address incentives for advisers to take undue risks and that Rule 205-3 was designed around investors considered financially experienced and able to bear those risks. The new proposal would expand performance-based compensation arrangements to additional categories of clients, including regulated funds. The Commission should therefore provide a detailed analysis of the incentives created by those arrangements where the underlying portfolios contain difficult-to-value or illiquid assets, including the treatment of unrealized gains and losses, loss carryforwards, fee layering, and circumstances in which an adviser or underlying manager can receive performance compensation while investors experience weak or negative overall results. Fourth, accredited-investor standards. The Commission is considering additional professional credentials and an examination as possible non-financial pathways to accredited-investor status. Existing Rule 501(a)(10) contemplates consideration of whether a credential reliably demonstrates sophistication in securities and investing and whether holders can reasonably be expected to possess sufficient knowledge and experience to evaluate investment risks. The Commission should therefore explain how each proposed credential or examination was evaluated against those criteria and whether possession of such a credential is sufficiently related to the specific risks associated with private equity, private credit, venture capital, and other illiquid private-market investments. Fifth, disclosure. The Commission's own mission emphasizes investor access to material facts concerning investments and those who sell them. Disclosure should therefore address not merely headline historical performance but also valuation methodology, liquidity limitations, redemption restrictions, total direct and indirect fees, performance compensation, conflicts of interest, leverage, concentration, and the circumstances under which an investor may be unable to obtain liquidity when needed. Finally, I respectfully ask that the Commission's economic analysis examine the proposals under stressed rather than merely normal-market conditions. In particular, the analysis should consider simultaneous declines in private-asset values, increased redemption requests, widening credit spreads, deteriorating borrower information, and reduced secondary-market liquidity. The Commission's September 28 statement makes clear that these are not merely theoretical characteristics of private credit: the staff specifically identifies illiquidity, valuation judgment, information quality, and changing market conditions as matters requiring careful attention. The SEC has stated that its objective is to broaden opportunity while maintaining investor protections. A transparent evidentiary record addressing valuation, liquidity, compensation incentives, investor sophistication, disclosure, and stressed-market behavior would materially assist the public in evaluating whether the proposed framework achieves that objective. I respectfully request that these issues receive detailed consideration during the Commission's 60-day public-comment process and in any subsequent final rulemaking. Respectfully, Robert E. Rutkowski