The SEC Wants Retail Money in Private Funds. Its Interval-Fund Proposal Loosens the Liquidity Rule

On 30 September 2026 the SEC voted 3-0, with Chairman Paul Atkins and Commissioners Hester Peirce and Mark Uyeda all in favour, to advance what Atkins called responsible retailization: three rule proposals and five requests for comment aimed at getting individual investors into private-market funds (Faegre Drinker's summary of the open meeting). The coverage has focused on access. The more consequential detail for a saver is the interval-fund proposal, because the question that decides whether retail investors get hurt in a private fund is not whether they can buy in. It is whether, and how fast, they can get out. On that point the proposal as described does not tighten the liquidity rule. It loosens it.

What was proposed

The first proposal would widen the use of performance fees by advisers to regulated funds, which include registered funds and business development companies. According to Mayer Brown's analysis, a regulated fund could qualify as a qualified client if the fee is capped at 20% of net capital gains or appreciation, the fund's board meets governance standards and makes a best-interests finding. The fee could include unrealised appreciation. A second channel would drop the existing dollar tests for qualified clients, which Mayer Brown puts at 1.4 million dollars of assets under management and 2.7 million of net worth, in favour of accredited-investor status.

The second proposal modernises interval funds and lets closed-end funds, including business development companies, offer multiple share classes under a rule instead of case-by-case exemptive orders. The third is a set of five notices seeking comment on new ways to qualify as an accredited investor: a FINRA-administered exam, or holding a CPA licence, CFA charter, CFP certification, or FINRA's Series 79, 86 or 87. Faegre Drinker describes the exam as modelled on FINRA's SIE: 75 multiple-choice questions over two hours, a 100 dollar fee, open to anyone 18 or older and valid for ten years. These notices are requests for comment, not rules, and the sources do not give a separate deadline for them.

The liquidity promise, and what the proposal changes

An interval fund is a closed-end fund that promises to buy back a set slice of its shares at regular intervals, instead of letting them trade daily. Under the existing rule, per Mayer Brown, the repurchase offer must be between 5% and 25% of shares, and the fund must hold liquid assets covering the offer, described as a 100% liquid-assets requirement. Intervals today are three, six or twelve months.

Mayer Brown lists the proposed changes: a new one-month interval; permission for a new fund to defer its first repurchase offer by up to two years; discretionary repurchase offers once every 12 months instead of every two years; a shorter shareholder notice window (14 to 42 days instead of 21 to 42); payment within seven days of pricing; and permission to deduct deferred sales loads from repurchase proceeds, where today only a repurchase fee of up to 2% is allowed. The 5% to 25% offer range stays, though the SEC asks whether a 2% monthly minimum should be permitted. The 100% liquid-assets requirement would be replaced by a principles-based standard.

Read together, these changes make exits more frequent in principle (monthly), but also easier for the fund to postpone (two-year initial deferral), and they replace a bright-line asset test with judgement. Some early coverage described the changes as tying repurchase schedules to portfolio liquidity. The reporting we read supports only part of that: a principles-based liquidity standard is proposed, but the changes in the amount and timing of repurchase are not described as mechanically linked to what the fund holds. We therefore describe it as a loosening of a hard rule, not as a stricter alignment.

What redemption stress already shows

Yahoo Finance reports two recent data points from the private-credit sector. In the second quarter, Blackstone's BCRED capped investor withdrawals at 5% of shares after requests reached 10%. Morgan Stanley's North Haven Private Income Fund, with a 5% quarterly repurchase cap, received requests for 11.6% of units and fulfilled roughly 43% of them. Separately, Yahoo reports that in the first quarter, money leaving non-traded private credit exceeded new money coming in for the first time on record.

Our arithmetic on those numbers (DrafterDaily calculations): BCRED met 5/10, or 50%, of requests. North Haven's 5 divided by 11.6 is 43.1%, which matches the reported 43% and confirms the two figures are consistent. Now suppose a holder who is only partly filled resubmits the remainder every quarter and the fill rate stays constant. At 50%, the holder has exited 93.75% of the position after four quarters (1 minus 0.5 to the fourth power). At 43%, the holder has exited about 89.4%. The calculation is an illustration, not a forecast, because fill rates move with sentiment. It shows that a 5% cap does not trap investors permanently; it converts a sale into a queue, and the length of the queue depends on how many others join it.

Now compare capacity. A quarterly programme that repurchases 5% per period can return at most 20% of the fund's shares in a year. A monthly interval at the 2% floor the SEC floats would offer 24% a year (12 times 2%). The proposed range of exits therefore changes the schedule more than the total, and neither figure would have covered the 10% to 11.6% of shares that holders asked for in a single quarter if that pace continued: four quarters at 10% is 40% of the fund. In a run, the binding constraint is the fund's willingness and ability to sell assets, which is what a liquid-assets rule exists to test. Replacing the test with a principle moves the decision from the rule book to the fund's board and adviser, who are also the parties paid on assets under management.

A limit on this comparison: the reporting does not describe BCRED or North Haven as interval funds, and we have not verified their legal structures. We use them as evidence of what redemption demand in private credit looks like, not as a test of the proposed interval-fund rule. DrafterDaily's earlier analysis of private-credit redemption gates examines why a cap works as a design feature rather than a failure, and we do not repeat it here.

The case for the proposal, and what is still missing

Atkins's argument is on the demand side. Quoted by Yahoo Finance, he said investor demand for private-market opportunities is growing; Faegre Drinker records his view that exposure to the full dynamism of markets should not be reserved for the wealthiest. The proposals also sit alongside an executive order on democratising access to alternative assets in 401(k) plans, as Faegre Drinker notes. Defenders would add that a monthly option and flexible liquidity management let funds hold more illiquid assets that pay an illiquidity premium, and that a fund board's judgement may adapt to conditions better than a fixed ratio.

The counter-argument is the stress data above: when demand to leave rises, a cap rations exits, and the investors least able to watch their fund are the ones a retail framework is meant to protect. Performance fees raise a second question. Mayer Brown says the fee could include unrealised appreciation. A 20% fee on a 10% paper gain is 2 percentage points of net asset value paid out of valuations that are, in private markets, estimates. The sources we read do not say whether the proposal requires a hurdle rate or high-water mark, or how a fee would be reversed if valuations fall, and we have not read the proposing release itself.

What it means for a saver

None of this is in force. But the questions it raises can be asked of any private-markets fund today. How often can I redeem, and is the repurchase offer mandatory or discretionary? What happens if requests exceed the cap, and what fraction was filled in the last two quarters? How much of the portfolio is liquid, and who decides what counts as liquid? Do performance fees include unrealised gains, and is there a high-water mark? What are the exit costs, including any deferred sales load? A fund that cannot answer these in plain numbers has not told you what you are buying.

The comment period will show how sharply the industry and investor advocates split. Watch the responses to two items: whether commenters want the liquid-assets standard kept as a floor, and whether the performance-fee channel gets a requirement to base fees on realised gains.