WASHINGTON, D.C.—Benjamin Schiffrin, Director of Securities Policy, issued the following statement in connection with Better Markets’ letter to the House Financial Services Committee in response to the Committee’s request for feedback on ways to increase access to the public and private markets and facilitate capital formation:

“The best way for policymakers to facilitate real capital formation is to revitalize the public markets. That’s because in the public markets there are disclosure requirements that provide investors with the information necessary for them to make informed investment decisions. So disclosures such as those mandated in the public markets allow investors to identify where capital is best directed. This ensures real capital formation—getting capital to its most productive uses. Indeed, a recent study shows that public markets allocate capital much more efficiently than private markets and that the reason is the greater informational efficiency and better governance mechanisms in the public markets.

“This means that proposals to further expand the private markets, either by broadening the definition of an accredited investor or by providing retail investors with greater access to the private markets, take exactly the wrong approach. Such proposals may make it easier for the private funds industry to get their hands on the hard-earned retirement and other savings of ordinary Americans. They will not make it easier to ensure that the companies with the best ideas get the capital that they need to turn those ideas into a reality.

“All broadening the definition of an accredited investor or otherwise exposing retail investors to the private markets would do is subject everyday investors to the devastating financial consequences of high-risk investments that are not as transparent or well-regulated as publicly-listed securities. As discussed in our letter, the lack of disclosures, illiquidity, and valuation difficulties that plague the private markets have led even sophisticated institutional investors to lose millions of dollars in private market investments. If skilled institutional investors can suffer losses because private market assets are opaque, illiquid, and hard to value, what chance would retail investors have?”

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.