On February 26, 2025, Center for American Progress Senior Director of Financial Regulation Alexandra Thornton testified before the House Financial Services Committee’s Subcommittee on Capital Markets regarding proposals to increase investor access to private markets and facilitate capital formation for small businesses. The hearing focused on 36 bills primarily aimed at loosening restrictions on the ability of private funds and companies to offer securities for sale to retail, or nonprofessional, investors and the public.
Thornton’s written statement and oral testimony focused on the heightened risks in private markets due to lack of transparency around financials and other information critical to investment decisions; the disparate treatment of different groups of investors, hidden fees, and other practices prevalent in private markets that are not permitted in public markets; and the ability of private market companies to grow to billions of dollars in value without being required to disclose audited financials or information about their operations, management, and risks.
These issues, Thornton testified, raise serious concerns not only about extending private market risks into millions of American homes where investors may be unaware of the pitfalls of private market investing, but also about potential risks to financial stability, given the increasing interaction between huge private market companies, private credit funds, and the regulated banking system. Moreover, the existence of ever-expanding exemptions from the rules that public companies must follow has resulted in the rapid growth of largely opaque private markets at the expense of public securities markets and put the pensions and other retirement savings of American workers at greater risk.
Thornton recommended requiring billion-dollar companies or those that employ more than 250 employees to comply with the public disclosure framework, scale back exemptions from public disclosure, and require any securities offerings that remain private to nevertheless include expanded disclosure requirements. She testified that these measures would protect investors, free up long-term investment capital for smaller companies and startups in the private markets, rebalance the public and private markets, and reduce risk to the financial system.
Click here to view the author’s testimony.