SEC outlines exam priorities & signals on 401(k) access to alts

Topline

• SEC commissioner pushes for litigation reform to open 401(k)s to private markets

• 2026 SEC exam priorities reflect retail expansion into alts

• Reg S-P compliance deadline looming

• Trump and Republicans renew push for federal preemption of state AI laws

• Carta Policy takes on Boston and NYC

• Quick hits

SEC commissioner pushes for litigation reform to open 401(k)s to private markets

This week, SEC Commissioner Mark Uyeda argued that 401(k) plan participants should have access to alternative investments and outlined a roadmap for policy changes needed to make that possible.

The issue: Most Americans are restricted to investing in public markets. One area where they can gain exposure is through their retirement savings, if they have a traditional pension. Defined benefit plans (pension plans) and their beneficiaries—teachers, firefighters, and other everyday investors—have long invested in private equity, private credit, and venture capital, benefiting from the diversification and returns these asset classes provide. 

Defined contribution plans (401(k)s), however, have been effectively shut out. Plan sponsors avoid private market options due to litigation risk and a lack of regulatory clarity. As the retirement landscape has shifted from pension to 401(k)s, more retail investors are missing out on the exposure to this important component of long-term wealth creation. 

The solution: Commissioner Uyeda is calling for regulatory clarity and litigation reform that would make it feasible for fiduciaries to include alternative investments in 401(k) menus.

• SEC and DOL alignment: Uyeda emphasized the need for a unified SEC–DOL framework that balances investor protection with expanded access. This framework would need to clarify expectations around disclosure standards, fee transparency, conflicts of interest, valuation practices, and liquidity management. Harmonization is also key to avoiding the fragmentation or inconsistent guidance that causes uncertainty and deters innovation in plan design.

• Litigation risk: Plan sponsors that add alternative investments face litigation risk. Historically, alternatives have been associated with higher fees and harder-to-measure risk. If performance lags traditional benchmarks even in the short term, fiduciaries risk being sued, regardless of the prudence of their process. Uyeda argues for litigation reform that would require specific, evidence-based allegations of fiduciary breach. That would ensure fiduciaries acting responsibly based on information available at the time are not punished simply because an investment failed to achieve the highest possible return.

What’s next: The Trump Administration is pushing to expand access to alternative investments for retirement savers, with the SEC and DOL working “hand in glove” to implement pathways to open retirement plan exposure to alternative assets. But this access will not be unfettered. Commissioner Uyeda notes the need to address conflicts, fee transparency, valuation, and liquidity. Chairman Atkins has also outlined the need for guardrails to protect investors and to prevent adverse selection. Litigation reform, however, requires congressional action, which makes it a little more complicated.

Why it matters: Private markets will continue to grow, and more Americans should be able to benefit from them. Retirement plans provide a natural channel for broadening access, supported by fiduciary oversight, diversification principles, and long investment horizons. As this space evolves, Carta is building the operational, technological, and policy infrastructure to support the responsible expansion of access. Better transparency, credible reporting, robust valuations, and aligned incentives not only strengthen private-market operations but also enable broader participation by millions of American workers and savers.

2026 SEC exam priorities reflect retail expansion into alts

The SEC’s Division of Examinations released its 2026 exam priorities—the first slate under Chairman Paul Atkins. Each year, the SEC highlights compliance areas of focus for regulatory exams to provide a roadmap of where the agency sees heightened investor or market-integrity risks. This list is not exhaustive, but it is instructive in helping advisers understand and meet SEC expectations around compliance. For 2026, private funds will remain a priority, but the scope and tone of exams are clearly shifting. Here are some key takeaways:

• Democratization is driving scrutiny and a renewed focus on the fiduciary: The SEC is zeroing in on fiduciary obligations across alternative investments—private credit, private equity, and registered funds with alts exposure—particularly with respect to retail investors and retirement savers. To that end, expect scrutiny around valuation practices, liquidity and redemption mechanics, fees and expenses, and side letters and preferential treatment. The SEC will also seek to ensure products are offered in a manner that aligns with investor objectives, risk tolerance, and time horizon. This aligns with the broader policy shift to expand access to private markets while ensuring proper guardrails are in place. 

• Core operations still matter: The SEC continues to test whether compliance programs actually operate as written. This includes marketing and advertising practices, valuation policies, custody and safeguarding controls, fee and expense allocation, and how firms oversee vendors and third-party service providers.

• Have we met?: The SEC will prioritize exams for newly registered and never-examined advisers. This focus is intentional, with the goal of ensuring that firms build robust, well-documented compliance programs early on. 

• Reg S-P is here to stay: While many Gensler-era rules have been scuttled, Regulation S-P is not one of them. SEC examiners are prioritizing implementation of the new privacy and incident-response requirements, which go into effect on Dec. 3, 2025, for SEC-registered private fund advisers with assets over $1.5T (more on this below). Cybersecurity, operational resiliency, and AI policies remain evergreen focus areas.

• What about crypto?: One notable omission: crypto and digital assets no longer appear as a standalone priority. Under the previous administration, digital assets were a marquee exam and enforcement focus. Now they are folded into a broader “emerging fintech” category, which is consistent with the shift in posture toward digital assets under Atkins. 

Why it matters: As the door to alternatives opens wider, regulatory expectations are expanding as well. As Atkins has stated and as emphasized in the 2026 exam priorities, the responsibility will largely fall on the fiduciary. The SEC will also remain focused on core exam pillars. However, the tone is shifting from a hunt for technical footfaults and a gotcha exercise to an exam process that reflects transparency and constructive dialogue to help firms build and maintain strong compliance programs. 

The annual release of exam priorities is always a good reminder for current and aspiring private fund managers to understand their regulatory obligations, ensure policies and procedures are in place to meet those compliance obligations, and ensure they are abiding by terms in LPAs and other fund agreements.

Reg S-P compliance deadline looming

On Dec. 3, 2025, new data privacy and safeguarding rules will take effect for larger SEC-registered private fund advisers (>$1.5T AUM). In May 2024, the SEC adopted amendments to Regulation S-P that modernize how advisers protect investor information, respond to cybersecurity incidents, and oversee third-party service providers. The new requirements include:

• Safeguard customer information: Fund managers must implement policies and procedures to protect customer information, which includes LP personal data and any nonpublic information obtained from other financial institutions. 

• Incident response program: Fund managers must implement an incident response program to detect, assess, and contain unauthorized access or use of customer information.

• Mandatory breach notification: If a breach involves sensitive customer information that could cause substantial harm or inconvenience, fund managers must notify affected individuals within 30 days.

• Service provider oversight: Fund managers are now explicitly responsible for monitoring, assessing, and obtaining timely notice of security incidents from any vendor that has customer information, including fund administrators, custodians, and data-management and IT providers.

In addition to these new requirements, private fund RIAs will be subject to additional recordkeeping requirements and ensure they are taking proper steps to dispose of customer information.

Why it matters: The new Reg S-P requirements will require a significant compliance lift. While the SEC has scrapped or delayed many of the Gensler-era rules, this one is going live, and as mentioned above, will be top of mind for SEC examiners. The requirements take effect for RIAs with over $1.5B in assets under management, but other RIAs have until June 2026 to comply.  

Trump and Republicans renew push for federal preemption of state AI laws

President Donald Trump, supported by major tech companies and industry trade groups, renewed pressure on Congress to create a single, unified federal standard for AI regulation, which would preempt state laws.

The issue: The rapid development of AI has created a surge of legislation in states across the country, with varied regulations to address wide-ranging issues like consumer data protection, model training, bias, child safety, and more. The administration and tech leaders argue that a fragmented regulatory landscape stifles U.S. innovation and economic growth, thus making the nation less competitive against global rivals, particularly China, which has a centralized regulatory framework.

What’s happening: 

• Public Call for Preemption: On Tuesday, Trump urged Congress via social media to pass streamlined federal legislation “instead of a patchwork of 50 State Regulatory Regimes.”

• Executive Order: The administration was reportedly planning an executive order, “Eliminating State Law Obstruction of National AI Policy,” which would: 1) Establish an AI Litigation Task Force to challenge state AI laws on the grounds of prohibiting interstate commerce; 2) determine whether a federal reporting and disclosure standard for AI models; and 3) condition federal broadband grant funding on states’ compliance with those standards. Reporting now indicates this EO may not be issued as-is or on the original timeline.

Why it matters: The Trump Administration has shifted the regulatory posture on AI from prescriptive to permissive. States have stepped into that vacuum. Federal preemption—or at least a moratorium on state action—would be a significant win for Big Tech and AI developers, reducing the burden of complying with a diverse patchwork of regulations and creating more clarity and—likely—a more permissive development framework.

What’s next: House Republican leaders are exploring whether to attach a state AI law provision to the National Defense Authorization Act (NDAA), an annual defense spending bill. This latest push, however, has drawn ire from advocacy groups and some Republican Party members, who argue that strong local consumer protections will be jeopardized by a weak federal floor. House Republican leaders urged the White House to pause its plans on executive order so lawmakers can negotiate a possible compromise with Democrats on preemption. As for the NDAA, a final version will likely be introduced on the floor in early December.

Carta Policy takes on Boston and NYC

The Carta Policy team hosted VC dinners in Boston and New York, where we discussed the evolving policy landscape, including AI, investor access, and anticipated capital formation activity in Congress, which could help drive more capital into the ecosystem.

Quick hits

• White House maneuvers on CFPB. This week, President Trump nominated Stuart Levenbach to head the Consumer Financial Protection Bureau (CFPB), but the move is widely viewed as a procedural tactic rather than a serious confirmation effort. Levenbach’s nomination pauses statutory limits on how long an acting director may serve, allowing Russ Vought, who also serves as the Director of OMB, to remain as the acting CFPB director beyond the December deadline that would have forced him out. Vought has been central to the administration’s efforts to scale back the Bureau, and the Levenbach nomination effectively stops the clock to keep him in place at the CFPB’s helm.

• SEC prioritizing IPO filings over shareholder proposals. The SEC announced it would no longer respond to company no-action requests to omit shareholder proposals under Rule 14a-8, deferring to the judgment of the company. Instead, the Division of Corporation Finance will prioritize IPOs and securities filings, where they are currently facing a massive backlog from the shutdown.

• The Fed and the data blackout. The government shutdown deprived the Federal Reserve of its gold standard economic indicators, forcing the central bank to rely on older, less comprehensive data to inform critical monetary policy decisions. Unemployment and payroll data provided by the Labor Department will be the last official labor market data used by the Fed before its December meeting, which will decide interest rates. Reliance on fragmented data raises the risk that the Fed could misread the current environment of slowing job growth, causing ripple effects in the market. For that reason, Fed Chair Jerome Powell has signaled that rates will remain steady.

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