WASHINGTON, D.C.—Benjamin Schiffrin, Director of Securities Policy, issued the following statement in connection with Better Markets’ new Fact Sheet and Report, “The Rise of the Private Markets Poses Risks for Retail Investors and Capital Formation.”
“Public securities markets in America are deep, liquid and the envy of the world, providing capital to American and global businesses as well as investment opportunities for investors worldwide. But private markets—the markets for corporate securities that are not sold to the general public and are normally available only to institutions and wealthy individuals—have exploded in the past twenty years. Because much of this growth has come at the expense of the public markets, the rise of the private markets presents real challenges.
“As we detail in our new fact sheet and report, the rise of the private markets has significant ramifications for institutional investors, retail investors, capital formation, the entire economy, and all Americans. For example, pension funds have been increasing their investments in the private markets. But the lack of transparency in the private markets means that these investments have heightened risks, which endangers the retirement savings of America’s teachers, firefighters, and police officers. The financial industry is also increasingly trying to induce retail investors to invest in the private markets directly. But the private markets lack the fundamental protections that the federal securities laws provide retail investors in the public markets. And, crucially, empirical research shows that capital is allocated more efficiently in public markets rather than private markets. So capital raising through the private markets may not lead to productive capital formation.
“We now have two parallel markets. One is a shrinking public market that is transparent and well-regulated, and the other is an expanding private market that is dark and mostly unregulated. Policymakers must carefully consider these drastic changes in the markets and the fact that a shift away from the public markets threatens the benefits they provide.”
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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.
