How a 2020 SEC exemption and $796 million in fees fueled retail private credit

A narrow SEC exemption adopted in early 2020 allowed private-credit firms to offer multiple share classes, enabling wealth advisors to earn upfront commissions and ongoing servicing fees when selling semi-liquid retail private-credit funds. An analysis found advisors have collected at least $796 million in those commissions since 2020, a boost that has helped channel roughly $80 billion into retail business development companies (BDCs).

The change followed a 2014 application from Future Standard seeking permission to use multiple share classes; the SEC accepted an amended application in early 2020 and other firms quickly filed similar requests. Non-traded and private BDCs raised about $35 billion from 2013 through 2020 and $152 billion after the rule shift, while reported fair-value portfolios expanded from $21.5 billion to $393.6 billion.

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