SEC Proposes $100 Exam to Open Private Market Access

Opening the Doors to Private Markets

Imagine finding a promising technology startup, only to discover you are barred from investing simply because you do not earn enough money.

For decades, this has been the standard rule for individual investors in the United States. Private companies and early-stage funds have remained off-limits behind high wealth barriers.

Now, the US Securities and Exchange Commission (SEC) is considering a major change. A new regulatory proposal could allow anyone to invest in private markets by passing a simple, standardized exam.

What Does It Currently Take to Be an Accredited Investor?

Under current regulations, you must qualify as an accredited investor to purchase shares in private startups or unlisted funds before they hit public stock exchanges.

The existing rules focus almost entirely on your wealth or your yearly earnings rather than your financial knowledge.

• A net worth exceeding $1 million, excluding the value of your primary residence.
• An individual annual income of at least $200,000 for the past two years.
• A joint annual income with a spouse of at least $300,000 for the past two years.

If you do not reach those financial thresholds, private deals remain unavailable, regardless of how experienced you are in finance.

Inside the Proposed $100 Accredited Investor Test

Under the new proposal released for public feedback, financial knowledge could replace wealth as the qualifying factor.

The Financial Industry Regulatory Authority (FINRA), which licenses US brokers, would create and manage the test.

• Eligibility: Open to anyone aged 18 or older.
• Format: An in-person exam lasting about two hours.
• Structure: Approximately 75 multiple-choice questions.
• Cost: Expected to match FINRA's $100 entry-level broker test fee.
• Validity: A passing score would stay valid for 10 years.

The exam heavily emphasizes understanding financial risk to help test-takers evaluate private market investments carefully.

• Investment risks carry the highest weight, making up 20% to 28% of the test.
• Financial statements and cash flow analysis are key components.
• Conflicts of interest and corporate governance topics are also covered.

The SEC is also asking whether licensed professionals—such as Certified Public Accountants (CPAs), Chartered Financial Analysts (CFAs), and Certified Financial Planners (CFPs)—should qualify automatically without taking the exam.

Why Industry Leaders and Crypto Firms Are Cheering

Many industry executives see the plan as a welcome step toward broader financial access.

"For too long, only the richest people have had access to the private markets. Retail has been missing out."

Brian Armstrong, CEO of Coinbase, praised the announcement as a huge step forward for everyday investors who have been excluded from early startup rounds.

Crypto companies are actively positioning themselves for private market expansion. For instance, payment firm MoonPay agreed in September to acquire North Capital, a Utah broker handling private stock transactions.

Pushback and Concerns: Is an Exam Enough?

Despite enthusiasm from proponents, the proposal faces criticism from different sides.

SEC Commissioner Hester Peirce supports reducing restrictions, but noted that a mandatory test still leaves the government in a gatekeeping role.

Meanwhile, some wealth advisors worry about retail investor safety. Noah Damsky, a principal at Marina Wealth Advisors, called the idea horrible, warning that many private market products carry high illiquidity and fit standard retail investors poorly.

The Economic Backdrop: Why Is the SEC Acting Now?

The SEC's proposal comes during a period of slowing activity in private fundraising.

Data from PitchBook indicates that capital raised by private funds is on track to fall for a fifth consecutive year.

Because exits and payouts have slowed down, institutional investors have less liquidity to pledge toward new private funds.

Financial reform group Better Markets suggests this capital decline is driving the push. Securities Policy Director Benjamin Schiffrin noted that private funds need retail capital as institutional funding pulls back.

What Comes Next?

The exam proposal aligns with SEC Chair Paul Atkins' broader initiative to expand retail access to private markets, alongside potential rules allowing more funds to charge performance fees.

Investors should keep in mind that private market assets carry elevated risks, limited transparency, and longer lock-up periods. Past returns of digital assets or private investments do not guarantee future performance.

The public comment period for this SEC proposal remains open until December 4.