SEC signals retail access to private markets may come with guardrails

Topline

• SEC report outlines recommendations to improve the capital-raising process

• Atkins signals additional guardrails to expand private market access for retail investors 

• SEC’s lone Democrat cautions against private market retail access push

• Carta Fund Performance Report 

• Congress heading toward government shutdown

• H-1B directive blindsides innovation ecosystem

• Quick hits

SEC report outlines recommendations to improve the capital-raising process

The SEC released its Small Business Forum Report to Congress, which includes recommendations to improve access to capital for emerging funds and founders. These recommendations include:

• Expanding retail investor access to private investments, including through registered funds that invest in private offerings

• Bolstering and expanding tax incentives that promote equity ownership and drive investment in the startup ecosystem 

• Expanding the accredited investor definition to include additional measures of financial sophistication, including through exams

• Improvements to the exempt offering framework, including Regulation Crowdfunding and Regulation A

• Providing more resources to help emerging founders and fund managers navigate the regulatory framework

Many of the forum’s recommendations align with those Carta submitted, and we were honored to serve on the Forum Advisory Planning Group to help shape the conversation. 

Why it matters: The forum’s recommendations are not binding on the Commission, but they can help bolster rulemaking efforts and have served as the basis for bipartisan capital formation efforts in Congress. Efforts to expand access to private markets and improve capital formation are on the SEC and congressional agendas, but engagement will remain key to pushing these initiatives across the finish line. We will continue to work with the SEC, Congress, and our ecosystem partners to help advance these policies, enabling emerging funds, founders, and startups to continue building and growing.

Atkins signals additional guardrails for private market retail access 

A key focus of SEC Chairman Paul Atkins’s agenda is increasing private market investment exposure for everyday investors, including coordination with the Department of Labor on new rules to open 401(k) accounts to private market investments. However, access may come with some additional strings attached. This week, Chairman Atkins suggested additional guardrails could accompany efforts to expand access to private markets. Atkins highlighted valuations, liquidity, and transparency regarding fees and side letters as areas the SEC would need to address, stressing the SEC must ensure “ground rules” are in place to prevent lower-quality assets from being pushed onto retail and retirement accounts. 

Why it matters: As public and private markets continue to blur, so will regulatory expectations. We have been saying this for some time: more access will come with more accountability (and scrutiny). Broad retail access to private funds will necessitate a shift toward increased transparency around valuations and liquidity mechanics, as well as enhanced disclosures around conflicts and fees. Engagement will be critical in shaping the future of private capital regulation in a manner that reflects industry standards and practices, while addressing concerns around retail investor protection, so that the framework is not only workable but also sustainable across political shifts.

SEC’s lone Democrat cautions against private market retail access push

While momentum is building to expand opportunities for retail investors to participate in private market access, skeptics are starting to sound the alarm. SEC Commissioner Caroline Crenshaw warned that efforts to drive retail investors to private capital under the guise of democratization could leave them holding the bag without adequate safeguards and oversight. Crenshaw questioned whether the push was being driven by investor demand or industry searching for a new supply of capital, but rather, industry searching for a new supply of capital and raised concerns around risks associated with private markets, including illiquidity, higher fees and expenses, and adverse selection—where retail investors may be left with deals that sophisticated investors have passed over. She further criticized the Commission for advancing retail access while simultaneously scaling back other oversight functions, which could increase systemic vulnerabilities.  

Why it matters: As the lone Democratic commissioner, Crenshaw cannot block policy, but her critique carries weight. Growing concerns could complicate bipartisan capital formation efforts in Congress to expand access to private capital. Over the longer term, her warnings could set the foundation for future policy shifts in private fund regulation if the balance of power in Washington changes. As retail access expands, scrutiny will continue to increase.

New VC Fund Performance report: LPs seeing greater returns

Venture funds on Carta saw a notable uptick in capital returned to LPs in Q2, with DPI rising across all vintages from 2017 to 2023, according to the latest data report from Carta. Eighty-five percent  of 2017 vintage funds and over half of 2019 funds have now generated DPI, while newer cohorts like 2023 are returning capital at a faster clip than prior vintages at the same stage. The shift reflects mounting pressure from LPs for liquidity amid a slow exit environment.

Read the full VC Fund Performance: Q2 2025 report here.

Congress heading toward government shutdown

Congress is barreling toward another funding deadline with no deal in sight. The House passed a seven-week stopgap along party lines. Democrats are demanding an extension of expiring health care subsidies, in addition rollbacks of some healthcare cuts included in H.R. 1. President Trump has shown little appetite for negotiating—even though Democratic support is needed to clear the 60-vote threshold in the Senate. Tensions further escalated after the administration directed agencies to prepare plans to terminate federal workers in programs that are unfunded or do not align with the president’s priorities—an unprecedented move designed to add additional pressure for Democrats to fall in line. 

What’s next: While shutdown brinksmanship has become more common, this one marks a notable departure from past episodes that could impact the ability to advance private market policy goals. At this point, a shutdown seems likely—at least temporarily.

H-1B directive blindsides innovation ecosystem

Last weekend, President Trump issued a surprise directive that imposes a $100,000 fee on new H-1B petitions and restricts entry for foreign workers. While existing visa holders are exempt (despite initial confusion), the change drastically increases the cost of bringing in new technical talent, raising barriers for startups and early-stage companies that rely on global engineers and researchers in critical fields such as AI, fintech, and biotech, while larger incumbents may be able to absorb the costs more easily. The Department of Homeland Security also proposed reforms to tilt the H-1B lottery in favor of higher-skilled or higher-paid applicants, with comments due Oct. 24. In the meantime, we expect to see more guidance, as well as litigation. 

What’s next: Expect additional guidance in the coming weeks as agencies clarify implementation, in addition to legal challenges. In the meantime, employers are scrambling to reassess immigration strategies, accelerate green card sponsorship, and weigh near-shoring alternatives.

Quick hits

• HFSC Chairman French Hill previews Committee’s Fall agenda. Committee priorities include community banking regulatory reform, housing reform, securing Senate passage of a crypto market structure bill, and the issue that has been top of mind for Carta—advancing capital formation legislation to expand access to private market investments and increase the ability for VC funds to invest in secondaries and other VC funds. More to come on these efforts soon. 

• Treasury seeks public input on GENIUS Act implementation. Treasury is soliciting public comment on a range of issues to shape implementation of a federal regulatory framework for stablecoins, including criteria determining who can issue stablecoins and how key aspects are defined; illicit finance controls; risk protections and insurance; tax; and coordination with state and foreign stablecoin regimes. Comments are due Oct. 20, as there is pressure from the White House to act fast in standing up the regime.

• Newsom signals support for AI legislation. CA Gov. Gavin Newsom signaled he is prepared to sign SB 53, landmark AI legislation that requires developers to publicly disclose safety and security protocols and establishes a reporting framework for major AI safety incidents. If enacted, this would represent one of the most significant state-level efforts in AI governance and could influence the development of national AI safety standards, given California’s outsized role in the industry. The move marks a shift from Newsom’s prior veto of a broader AI bill over concerns it would stifle innovation. 

• California publishes list of entities subject to climate disclosure laws. The state’s sweeping climate disclosure laws require companies that do business in CA with total annual revenues over $1B to disclose scope 1, 2, and 3 greenhouse gas emissions annually, and companies with total annual revenues exceeding $500M to publish biennial climate-related financial risk reports. 

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