Atkins' SEC and the New Dawn for Alternative Investments

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As the financial services industry at large braces for a major shift at the Securities and Exchange Commission, investment advisors find themselves at the cusp of a new era. President Trump’s nomination of Paul Atkins as the next SEC Chair signals a potential sea change in regulatory approach, one that could dramatically reshape the landscape of alternative investments.

Atkins, a veteran of the George W. Bush administration, brings a philosophy that could be music to many advisors’ ears. His approach? Let the markets work their magic with minimal interference.

This mindset could usher in a golden age for alternative investments, opening doors that were previously bolted shut. Let’s dive into what this could mean for your practice and, subsequently, the value you can deliver to your clients.

Reduced regulatory barriers for private funds

The Atkins SEC is likely to take a machete to the regulatory underbrush choking private funds. Expect a streamlined compliance process for Reg D funds, particularly those under 506©. This could be a game-changer, making it significantly easier for advisors to onboard private equity, hedge funds, and venture capital offerings.

In a 2023 appearance on the podcast Free the People, Atkins says, “Let’s…enable markets to flourish…because if it challenges incumbents, and it helps to bring down costs for investors and for people who are trying to raise capital, I mean, that’s the reason why we have financial markets.” He continues, “And to have capital find its way to businesses.”

But it’s not just about easing the paperwork burden. Atkins’ SEC might fast-track approvals for innovative products. Imagine being able to offer your clients tokenized private equity or real estate funds without drowning in red tape. That future might be closer than you think.

Clarity on tokenized securities: The digital frontier

Speaking of tokenization, Atkins has a refreshing take on regulatory approach. In a recent report from law firm Skadden, Arps, Slate, Meagher & Flom LLP, the authors write, “While it remains to be seen how Atkins will engage on crypto-related topics, many in the industry expect an emphasis on clearer industry guidance coupled with a lighter and more focused enforcement touch.”

This could translate into clearer, more sensible rules for tokenized securities. For advisors, this means the ability to offer fractional ownership products with confidence. Moreover, expect expanded custody solutions that will allow you to manage tokenized alternatives within client accounts seamlessly.

Broader access to alternative ETFs and interval funds

Atkins’ cost-benefit approach to regulation could be a boon for alternative investment vehicles. During his previous tenure as SEC commissioner, Atkins supported easing rules for ETFs, allowing them to start up more easily and enabling mutual funds to make larger investments in them, as reported in InvestmentNews.

This philosophy could pave the way for the approval of further innovation in alternative ETFs tied to private credit, infrastructure, or commodities. Interval funds fill the gap between liquid ETFs and locked-up private offerings by allowing periodic redemptions in areas like private credit, real estate, or niche alternatives without indefinite capital commitments. As regulations evolve, they could gain traction, offering investors a balanced blend of diversification and liquidity in alternative markets. For your clients seeking diversification without the traditional lock-up periods, interval funds could become more prevalent, offering a taste of alternatives with a side of liquidity.

Support for fiduciary practices: Empowering advisors

In Atkins’ view, market participants, not regulators, should be the primary decision-makers. In remarks delivered in 2008, Atkins says, “No matter how many regulations there are, they are no substitutes for market participants' making sound decisions based on good information.”

This could lead to simplified disclosures on alternative products, making it easier for you to educate clients about risks and benefits. Expect technology solutions for compliance that will streamline the onboarding and monitoring of alternatives, allowing you to focus on what matters most – your clients’ financial well-being.

Opportunities for smaller RIAs

Atkins’ skepticism of overregulation could be a lifeline for smaller RIAs. In a separate 2008 speech, Atkins posed the question, “Can regulators do the jobs of industry better than industry can?”

Lower barriers to entry due to reduced compliance costs could democratize access to alternatives. Keep an eye out for Reg A+ offerings or low-minimum products that could broaden access for retail investors, allowing you to offer sophisticated strategies regardless of your firm’s size.

Institutionalization of alternatives

Atkins’ hands-off approach could catalyze partnerships between RIAs and institutional managers. In a December 2024 post to Truth Social, President Trump wrote, “Paul is a proven leader for common sense regulations. He believes in the promise of robust, innovative capital markets that are responsive to the needs of Investors, & that provide capital to make our Economy the best in the World.”

This could lead to co-branded funds or strategies that blend institutional expertise with the personalized touch of an RIA. Platforms like CAIS and iCapital are likely to expand their offerings and reduce administrative burdens, making alternatives more accessible than ever.

The bottom line: Prepare for the alternative revolution

As Paul Atkins prepares to take the helm at the SEC, the alternative investment landscape stands on the brink of transformation. For savvy advisors, this represents an unparalleled opportunity to differentiate your practice and deliver value to clients.

The key? Stay informed, be prepared to adapt quickly, and don’t be afraid to embrace innovation. The Atkins era at the SEC could usher in a renaissance for alternative investments. The question is: are you ready to seize the moment?

As we enter this new regulatory paradigm, it’s time to reassess your approach to alternatives. Your clients’ portfolios – and your practice’s growth – may depend on it.

Steve Larsen, CPA, CFP®, is the CEO of AET Investment Services and founder of Atlas by AET, a sophisticated alternative investment suite that empowers financial advisors with a customizable platform and regulated custodial services. The platform democratizes access to a diverse range of alternative investments, including local real estate deals, private credit and equity, and digital assets. To learn more about Atlas by AET, visit aetrust.com/atlas. To learn more about AET, visit aetrust.com.

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