The SEC Is Reopening the Rules of Private Capital — Here’s What’s Coming in 2026

The SEC Is Reopening the Rules of Private Capital

By Joe Wallin | April 2026

In This Guide

• → The SEC Is Reopening the Rules of Private Capital
• → The Two Proposals
• → Why These Proposals Matter Now
• → Current State of Private Capital Markets
• → What Reg D Modernization Could Look Like
• → What a Private Securities Secondary Market Could Look Like
• → How This Connects to the Broader Trend of Private Companies Staying Private Longer
• → Timeline and Expectations
• → How This Connects to Existing Secondary Options
• → What Founders Should Do Now
• → Key Takeaways

In Spring 2025, the Securities and Exchange Commission announced two major regulatory initiatives that could reshape how private companies raise capital and how employees and investors access liquidity in their private shareholdings. Both proposals are part of the SEC's Regulatory Flexibility Agenda and are expected to move toward rulemaking in 2026.

If finalized, these changes could affect nearly every founder, investor, and startup employee in America. Yet few have heard about them.

This post explains what the two proposals are, why they matter, what timeline to expect, and what founders should do to prepare.

The Two Proposals

Proposal 1: Regulation D (Reg D) Modernization

Regulation D is the SEC's framework for private offerings. It allows companies to raise capital from accredited investors (and, under Reg D Rule 506(b), from unlimited accredited investors and up to 35 non-accredited investors) without registering the securities with the SEC.

The SEC's Reg D modernization proposal would likely include:

• Higher dollar limits. Currently, Reg D Rule 506(c) allows offerings up to unlimited amounts, but practical constraints exist. The SEC may raise or clarify the thresholds for which Reg D can be used without triggering Form S-1 registration requirements for certain situations.
• Updated accredited investor thresholds. The accredited investor definition (currently $200,000 annual income or $1 million net worth for individuals) has not been meaningfully updated since 1982. The SEC has discussed modernizing these thresholds to either expand the pool of accredited investors (making it easier for more people to invest) or tighten the definition (if Congress mandates it).
• Simplified filing and compliance. The SEC may streamline Form D filing requirements and reduce compliance burdens for small to mid-size private offerings. This could include allowing more flexibility in how companies demonstrate investor accreditation and reducing post-issuance reporting requirements.
• Crowdfunding expansion. Regulation Crowdfunding (CF) currently caps raises at $5 million per year. The SEC has indicated interest in raising this limit and expanding the universe of who can invest via crowdfunding platforms.

Proposal 2: A Regulated Secondary Market Framework for Private Securities

This is the more significant proposal. Currently, there is no SEC-regulated secondary market for private company securities. If you own stock in a private company and want to sell it, your options are limited: wait for the company to go public or be acquired, negotiate a direct sale to another shareholder or investor, or use informal platforms like Forge, EquityZen, or company-run tender offers.

The SEC is exploring a new framework that would create a regulated secondary market for private securities, similar to NASDAQ or the New York Stock Exchange, but for private company stock.

This framework would likely include:

• Regulated alternative trading systems (ATSs) for private securities. The SEC might authorize new ATSs or modify the rules governing existing ATSs to allow them to trade in private company securities. These platforms would operate under SEC oversight and would have standardized listing requirements, transparency rules, and investor protections.
• Standardized disclosure requirements. Companies listing on a private ATS might be required to provide standardized financial disclosures (quarterly financials, annual audits, etc.). This is less burdensome than public company disclosure but more rigorous than the current anything-goes environment for private companies.
• Employee stock sale framework. A key driver of the SEC's proposal is enabling private company employees to have a liquid market for their equity. The framework might include special rules allowing employees to sell shares on a private ATS without triggering registration requirements, and might establish a process for companies to facilitate employee stock sales.
• Investor protections. The framework would likely require platforms to implement safeguards against fraud, have adequate capital reserves, and maintain clear pricing and trading rules.

Why These Proposals Matter Now

The problem: Liquidity is trapped until IPO or M&A.

For decades, private companies were expected to go public within 7-10 years of founding. If they did not, employees and early investors simply waited. Today, the timeline is very different. The median age of unicorns at IPO is now over 12 years. Many large private companies (SpaceX, Stripe, ByteDance, Canva) show no signs of going public at all. And in economic downturns, IPO windows close entirely.

For an employee who has been granted stock options in a private company 8-10 years ago, the absence of a secondary market means:

• Their equity is worth nothing for practical purposes — they cannot sell it.
• If the company eventually files for bankruptcy, their shares are worthless.
• If the company is acquired at a lower valuation than private market investors expected, common shareholders (employees) may receive nothing.
• They have no way to diversify their wealth, even if the stock has appreciated significantly on paper.

The demand: Employees and investors want liquidity.

Over the past 5-10 years, a secondary market for private securities has organically emerged. Platforms like EquityZen, Forge, SharesPost, and others have facilitated hundreds of billions of dollars in private stock transactions. Company-run tender offers have become common — Stripe has held multiple tender offers allowing employees to cash out vested stock at a valuation determined by the company's board.

These platforms and tender offers operate in a regulatory gray area. The SEC has looked the other way because the volume is not large enough to pose systemic risk, and because the alternative (forcing companies to go public early) is worse for the broader economy.

But the SEC is now considering formalizing and regulating this secondary market rather than leaving it in the shadows.

The political timing: New SEC leadership.

The SEC's Regulatory Flexibility Agenda is driven by new leadership under the Biden administration (at the time the proposals were announced in Spring 2025). The new SEC chair has signaled openness to modernizing capital markets rules, especially in ways that democratize access and reduce friction for startups and employees.

The proposals are part of a broader SEC agenda to make capital markets more accessible and efficient — and to keep regulatory pace with market innovation.

Current State of Private Capital Markets

To understand the importance of these proposals, it is helpful to understand how private capital and secondary trading currently work.

Reg D and Rule 506(c) are the backbone of startup fundraising. Nearly all Series A, B, C, and beyond rounds are done under Reg D Rule 506(c), which allows offers to an unlimited number of accredited investors. Because the securities are not registered with the SEC, companies can raise capital quickly and inexpensively, without the compliance burden of public company registration.

This is a huge advantage for startups. But Reg D has not been meaningfully updated in decades. The accredited investor threshold ($200K income or $1M net worth) is arbitrary and outdated. The filing requirements (Form D) are minimal. And there are legal ambiguities around things like whether certain vehicles (SPVs, crowdfunding platforms, etc.) qualify for Reg D protection.

Secondary trading in private securities is a patchwork. There are roughly three mechanisms for secondary trading in private companies:

• Direct peer-to-peer sales. Shareholders negotiate directly with each other to buy and sell stock. This is how most secondary trading happens but it is inefficient (takes time, no real price discovery) and carries legal risk (does the transaction violate Rule 144 or Section 4(a)(1) exemptions? is the buyer an accredited investor? does the company's bylaws restrict transfers?).
• Third-party platforms. Companies like EquityZen, Forge, and SharesPost operate as matchmakers, connecting buyers and sellers. These platforms do not act as brokers under SEC rules (this is a legal gray area), but they take fees and facilitate transactions. They do verify accreditation and handle some legal documentation. However, they are not regulated the same way a stock exchange is, and investors have fewer protections.
• Company-run tender offers. The company itself buys back shares from employees or investors at a price set by the board (often determined by a third-party valuation). This is clean legally (the company authorizes the repurchase) but only available when the company has cash and is willing to facilitate the transaction.

None of these mechanisms are ideal. Direct peer-to-peer sales are inefficient. Third-party platforms operate in a regulatory gray area. And company-run tender offers are not always available.

What Reg D Modernization Could Look Like

Expanded accredited investor pool. The SEC might add new categories of accredited investors beyond just income and net worth thresholds. For example, it might allow:

• Employees of startups with a certain amount of equity to be treated as accredited.
• Investors who have passed a financial literacy test to be treated as accredited (even without meeting the income/net worth thresholds).
• Fans or community members of a company to invest in crowdfunding offerings.

This would not eliminate accredited investor requirements (Congress likes those) but would expand the pool.

Higher dollar limits or simplified compliance for smaller offerings. The SEC might create a new category of offering (e.g., "Reg D Tier 2" or "Reg CF Plus") with higher dollar limits but slightly more disclosure than the current minimal requirements. For example:

• Reg CF could increase from $5 million to $20 million per year.
• A new tier might allow raises up to $50 million or $100 million with audited financials but without full SEC registration.

Simplified Form D and reduced ongoing reporting. The SEC might simplify the Form D filing process and reduce requirements for companies to report subsequent activities (follow-on raises, secondary transactions, etc.).

Clearer guidance on SPVs and other vehicles. Startups increasingly use Special Purpose Vehicles (SPVs) to aggregate investors (especially international investors) into a single entity. The SEC might issue clearer guidance on how SPVs fit into Reg D and what disclosure or compliance requirements apply.

What a Private Securities Secondary Market Could Look Like

New regulated platforms. The SEC would authorize new Alternative Trading Systems (ATSs) that specialize in trading private securities. These platforms would be regulated similarly to stock exchanges but with lighter compliance requirements.

Examples might include:

• A "Private Growth ATS" that allows trading in pre-IPO company stock, with listing requirements (audited financials, minimum revenue, accreditation of retail investors).
• An "Employee Stock Market" where private company employees can trade their shares with pre-set daily or weekly trading windows.
• An expansion of existing platforms (like Forge) into formal ATSs with SEC oversight.

Standardized disclosure. Companies listing on a private ATS might be required to provide:

• Annual audited financial statements (or reviewed financials for smaller companies).
• Quarterly unaudited financials.
• Disclosure of material events (major contracts, funding rounds, key personnel changes).
• Annual cap table disclosures (to prevent surprise dilution).

This is less burdensome than public company disclosure (no MD&A, no proxy statements, no 10-K/10-Q detail) but far more than what private companies currently provide.

Investor protections. The framework would likely include:

• Rules against insider trading on the private ATS (similar to public company rules).
• Suitability requirements (brokers must ensure retail investors understand the risk).
• Settlement and clearance mechanisms.
• Platform capital and insurance requirements.

Employee-specific provisions. The SEC might include special rules allowing:

• Companies to facilitate employee stock sales without requiring a tender offer.
• Employees to sell stock without triggering 409A violations (a current concern).
• Companies to provide cash-less exercise mechanisms for employees nearing liquidity events.

How This Connects to the Broader Trend of Private Companies Staying Private Longer

These SEC proposals are, in many ways, a response to market reality. Companies are staying private longer, and employees and investors are demanding liquidity options.

The data is striking:

• In 1980, the average age of a company at IPO was 5-7 years. Today it is over 12 years.
• The number of public companies has declined by more than 50% since 1996, despite the growth in the number of startups and venture funding.
• Many $1 billion+ "unicorns" have no current plans to go public (SpaceX, Stripe, Databricks, etc.).
• The secondary market for private securities has exploded, with platforms facilitating $50+ billion in annual trading volume.

The traditional IPO-as-exit-path is no longer the dominant narrative. Companies stay private, take in secondary funding rounds that allow existing shareholders to sell some shares, and may never go public.

The SEC's proposal acknowledges this shift and seeks to create a more formal, regulated framework rather than let it remain in the shadows.

Timeline and Expectations

2025 (Spring/Summer): Proposal announcement and public comment. The SEC has announced the proposals and is accepting public comments. Major stakeholders — venture firms, company executives, employee advocacy groups, financial industry associations — are weighing in.

2026: SEC drafting and consideration. Based on public comments, the SEC will draft more detailed rules. This could include multiple proposals (Reg D modernization as a standalone rulemaking, secondary market framework as a separate rulemaking, etc.).

2027-2028: Final rules and implementation. If the SEC moves to final rules in 2026 or 2027, there would likely be a phase-in period (6-12 months) before companies must comply with any new disclosure or listing requirements.

Wild card: Congressional action. Congress could intervene at any point with legislation that either accelerates these changes (e.g., mandating that the SEC modernize Reg D) or blocks them (e.g., restricting the ability to expand accredited investor definitions). Congressional priorities can shift, especially around election cycles.

How This Connects to Existing Secondary Options

If the SEC's secondary market proposal is adopted, platforms like EquityZen, Forge, and SharesPost would likely either:

• Register as formal ATSs and come under full SEC oversight. This would increase their compliance costs but also legitimize them and allow them to operate more openly.
• Continue as informal platforms but work under the shadow of the new regulated framework. They might operate a formal ATS for larger companies while continuing informal matchmaking for smaller companies.
• Be acquired or absorbed by larger financial platforms (brokers, investment banks) that register as ATSs.

Company-run tender offers would likely continue, but might become more standardized if the SEC issues guidance on compliance.

What Founders Should Do Now

1. Start building towards secondary market compliance. If your company is large enough that employees will expect liquidity (raised $50M+ or has 100+ employees), start thinking about financial reporting and audit practices now. Even if the secondary market framework is not finalized for 2-3 years, having clean, audited financials will make you an attractive candidate for an eventual listing.

2. Review your equity documents. Many private company bylaws contain transfer restrictions that would be incompatible with a secondary market. Review your cap table, bylaws, and stockholders agreements to understand what changes you might need to make. If a secondary market becomes available, you may want to simplify transfer procedures to allow employees to sell.

3. Plan for transparency. If a secondary market exists and your company is listing on it, investors will expect transparency. Start documenting your financials in a way that is audit-ready, even if you are not yet hiring an outside auditor.

4. Engage with proposed changes to Reg D. If you are actively fundraising, monitor developments in Reg D modernization. Changes to accredited investor definitions or compliance requirements could affect your next funding round.

5. Educate employees about liquidity options. Many employees do not understand that their stock options may have value before an IPO. As secondary markets become more available, educate employees about secondary markets, tender offers, and the difference between paper gains and actual liquidity.

6. Consider facilitating secondary transactions. Even before any SEC secondary market framework is adopted, you might consider running a company-facilitated tender offer or licensing one of the existing platforms (Forge, EquityZen, etc.) to allow employees to trade shares. This signals to employees that you are serious about liquidity and can improve retention and employee satisfaction.

Key Takeaways

The SEC's two proposed initiatives — Reg D modernization and a new secondary market framework for private securities — could fundamentally reshape startup capital markets over the next 2-5 years. These are not minor tweaks; they are significant structural changes that would make it easier for startups to raise capital and easier for employees and investors to achieve liquidity.

Founders should monitor these developments closely. If adopted, the proposals could affect how you raise capital, how you report financials, and how your employees access liquidity in their equity. Early planning and compliance now will position you advantageously for the transition.

This post is for informational purposes only and does not constitute legal or tax advice. Consult with a qualified tax professional or securities attorney regarding your specific circumstances.

Related Reading

For more on startup fundraising and securities law, see our Complete Guide to Regulation D, Rule 506(b) vs. 506(c) Comparison, and Accredited Investor Rules.