IM Director Daly Delivers Remarks on Responsible Retailization of Private Assets

In October, the Director of the Division of Investment Management Brian Daly delivered remarks at the Stanford University Private Capital Roundtable. Director Daly’s remarks touched on the “Responsible Retailization” of alternative investments. In his remarks, Director Daly noted that many retail investors miss out on the returns provided by companies prior to going public. The Commission’s Responsible Retailization Initiative relies on “a three-legged stool approach” which includes access, transparency, and incentives.

• Access involves amending and then deploying the existing regulated fund framework to provide retail investor access to alternative investments in structures that still require board oversight.
• Transparency requires disclosure of the underlying alternative exposures in funds in order to assess their values. This not only includes transparency for retail investors but also for the broader market.
• Incentives include the ability of fund managers to charge performance fees to bring alternative strategies to retail investors, subject to numerous protective conditions.

Director Daly emphasized that “any retail access proposal have fiduciary protections and other ‘guardrails’ to address these kinds of risks.” His comments noted that retail investors are familiar with the risks of poor performance but may be less familiar with risks like novel strategies, suspension gates, and binary payouts.

Director Daly also briefly touched on the Commission’s thoughts on “Super Intelligence” or AI. Director Daly noted “My recommendation to advisers and sponsors is to enthusiastically innovate in a responsible and thoughtful manner.”

Click here to read Director Daly’s full remarks.