Gary Gensler: Full disclosure rules are key to maintaining market stability

Outgoing SEC Chairman Gary Gensler has a warning for the next administration: Be careful not to touch the guardrails that protect mom-and-pop traders. Going too far in reducing disclosure requirements or expanding the definition of "accredited investor" could harm the public interest, Gensler said in an interview Friday. Critics say accredited investor rules are designed to protect retail traders from the potential risks of private investing but have stifled growth. "Project 2025," an initiative designed to provide a policy blueprint for the incoming Trump administration, calls on financial regulators to expand the definition of accredited investors or remove restrictions altogether. "Depending on how far this goes, this could undermine this important part of our capital markets," Gensler said, adding that adequate disclosure is essential for investor confidence and market stability. "As long as issuers provide full, fair, and truthful disclosure, investors can decide what risks to take," Gensler said. Corporate disclosures are a core part of SEC regulations and how investors measure risk. But private companies, including early-stage startups and others, are largely exempt from those disclosures. Currently, people who meet certain professional or income thresholds, such as a net worth of more than $1 million (excluding a primary residence), may qualify as accredited investors. When the definition was implemented in the 1980s, that was about 1% of the U.S. population. The SEC estimates that by 2022, more than 18% of U.S. households will qualify. Key lawmakers, including House Financial Services Committee Chair French Hill, D-Calif., want to expand the definition. Hill has introduced a bill in 2023 that would allow individuals who "demonstrate an understanding of the subject" to invest in private markets. Some supporters of updating the definition also say that it currently presents a high barrier to building generational wealth for Black, Latino and other minority communities. In December, President-elect Trump announced that former SEC Commissioner Paul Atkins would lead the agency. During his time as a commissioner and in the private sector, Atkins has spoken publicly about unnecessary corporate disclosures and how it hinders investment opportunities. (Bloomberg)