As SEC Chairman Jay Clayton seeks to address the 2-to-1 imbalance of private fundraising vs. public offerings, one of the more controversial ideas being considered is how to make it easier for retirement savers and other investors to get into private markets.
In June, the Securities and Exchange Commission issued a concept release asking issuers, investors and other market participants to comment on how it could improve the regulatory framework for private offerings to make them accessible to more types of investors while fulfilling its mandate to protect all types of investors, including those with little or no experience with private markets.
That release, with the dry title "Harmonization of securities offering exemptions," noted that in 2018, all types of private offerings accounted for an estimated $2.9 trillion, more than twice the $1.4 trillion of new capital raised through registered offerings, the biggest disparity between the two since 2008.
Between 2009 and 2018, U.S. private equity and venture capital managers made up $761 billion of the $1.3 trillion increase in global private market AUM, with private equity accounting for 80% of those dollars and venture capital accounting for 20%, according to PitchBook Data Inc.
That trend has been a major concern for Mr. Clayton, who is also looking for ways to encourage more companies to enter public markets. To that end, the SEC in September approved a rule change so that companies considering going public can test the waters by communicating with institutional investors. Until now, that was an option only available to emerging growth companies.