Capital Markets Subcommittee Holds Hearing on Opening Private Markets to Retail Investors, Increase Access to Capital

In two recent House Financial Services hearings, the Subcommittee on Capital Markets examined numerous legislative measures that would allow retail investors new access to private markets as well as increasing capital access for smaller and emerging companies. Two notable legislative measures were discussed in these hearings, the “Increasing Investor Opportunities Act” and a bill that would permit a registered investment company to omit certain fees from the calculation of Acquired Fund Fees and Expenses.

The Increasing Investor Opportunities Act would enable closed-end funds to gain greater exposure to private investments while restricting the amount of closed-end fund shares activist investors and their affiliates could acquire to no more than 10 percent. This legislation, in the same iteration, was introduced on a bipartisan basis last Congress. Currently, Capital Market Subcommittee Chair Ann Wagner (R-MO) is the sole sponsor of the bill but is likely to be interested in a Democratic co-sponsor. In her opening remarks, Chair Wagner noted, that “approximately three million retail investors rely on closed-end funds as a source of retirement savings and investment opportunities.” She added that “we must expand access to investment opportunities for retail investors through closed-end funds,” while also allowing closed-end funds to “invest all their assets in private securities to increase retail investor exposure to private markets while maintaining investor protections.”

In a later hearing, the Committee heard testimony from several panelists including former SEC Commissioner Mike Piwowar on legislative proposals that would increase access to capital for small and emerging companies. While the hearing focused on ways to aid emerging market companies, the Subcommittee included on its legislative hearing list a discussion draft that would permit a registered investment company to omit from the calculation of Acquired Fund Fees and Expenses those fees and expenses that the investment company incurred indirectly as a result of investment in shares of one or more Acquired Funds that is a business development company. The legislation was introduced on March 7 by Subcommittee Ranking Member Brad Sherman (D-CA) and Representative Bill Huizenga (R-MI).

Click here to read the discussion draft of the Increasing Investor Opportunities Act.
Click here to read the bill impacting the calculation of Acquired Fund Fees and Expenses for certain registered investment companies.