Securities Regulation Daily Wrap Up, FINANCIAL INTERMEDIARIES—Congressional Democrats raise concerns over private credit and retirement security, (May 13, 2026)

By Donielle Tigay Stutland, J.D.

Senator Reed and Representative Neal reach out to federal agencies to call for more scrutiny of private credit.

Democratic lawmakers Sen. Jack Reed (D-R.I.) and Rep. Richard E. Neal (D-Mass.) took actions to highlight the need for more scrutiny of the private credit market and to urge the agencies to pause efforts to place alternative assets, including private market investments, into Americans’ 401(k) and other defined-contribution retirement plans.

Reed called on the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of the Labor (DOL) to pause their deregulation efforts and take proactive steps to protect the savings and retirement accounts of working Americans. Reed sent a letter to SEC Chair Paul Atkins and a letter to Acting Labor Secretary Keith E. Sonderling, urging the agencies to pause efforts to place alternative assets, including private market investments, into Americans’ 401(k) and other defined-contribution retirement plans. In addition to calling for better scrutiny of private credit, Reed suggested that the administration has been taking actions to weaken investor protections to allow private fund managers to market higher-risk private credit products to retail “mom-and-pop” investors and into 401(k) and other defined-contribution retirement plans. He argues this move prioritizes billionaire fund managers over working Americans’ retirement security. Reed offers that “the Trump Administration’s moves could threaten the retirement security of millions of American workers and spill economic damage into the broader economy.”

Meanwhile, House Ways and Means Committee Ranking Member Neal sent a letter to the Government Accountability Office (GAO), similarly requesting a review of private credit investments in retirement plans. Neal’s letter also expressed concern over what he described as the Administration rolling more regulations back on investments historically associated with wealthier investors.

Reed’s Letters. Reed’s letters highlight what the Senator described as “cracks emerging” in the credit markets, centered in the less transparent private credit market. Senator Reed’s letter to SEC Chair Atkins specifically requests that the SEC take the following steps:

1. Examine sales practices used to place private credit with retail investors, focusing on communications regarding redemption limitations, asset diversification, fees and expenses, valuation practices, and the basic risk-reward profile of these funds. This examination should also cover how brokers and advisers determined that these investments were in the best interests of their clients and the financial incentives (including servicing fees, placement fees, and commissions) to distribute these products.

2. Review prospectuses for retail private credit funds, focusing on whether redemption limitations and valuation practices were fully and fairly disclosed.

3. Reimpose the limitation, which you rescinded in May 2025, on retail closed-end funds investing no more than 15% of their assets in private funds. Do not drop similar limitations that remain in place for open-end funds.

4. Bolster systemic risk reporting by private credit funds through Form PF, so the Financial Stability Oversight Council (FSOC) can assess systemic risk.

5. Pause efforts to make alternative assets available in defined-contribution retirement accounts, which you are actively pursuing, pending a systemic risk review that I have asked Treasury Secretary and FSOC Chair Bessent to conduct.

Reed’s press release announcing his letters also referenced a recent Financial Stability Board report titled “Vulnerabilities in Private Credit” that identified potential trends and risks related to private credit and interlinkages with banks. The report also noted that healthcare, services, and tech sectors—including AI companies, which have increasingly turned to private lenders to fund data centers and other infrastructure—have become the biggest borrowers of private credit while also highlighting a lack of transparency that causes challenges in collecting and analyzing data for effective oversight of the sector itself.

Neal’s Letter. Neal sent a letter to Acting Comptroller General Orice Williams Brown similarly requesting GAO’s responses amid growing interest in private credit as part of retirement plans.

“Because private credit operates outside of the relatively strict and transparent regulation of public credit and banking regulations, we have concerns about the reliability of valuations for these assets and the exposure of plan participants’ retirement savings to an unknown level of risk, Neal wrote to GAO. “Given the significant responsibility that plans and plan participants face in selecting investment options to grow and safeguard their retirement savings, and the known and unknown risks of investing in private credit, we would like GAO to answer the following questions.”

The letter requests the GAO address the following questions:

• To what extent do defined benefit plans invest in alternative investments, specifically private credit? What percentage of these plans' alternative investments are made up of private credit? To what extent do any other investments in defined benefit plans invest in private credit?

• To what extent do the underlying investments options offered in 401(k) plans invest in private credit (e.g., is there exposure to private credit in mutual funds, exchange traded funds or collective investment trust options or other investment vehicles within the plans)? Similarly, how much of stable value fund assets are invested in private credit? With the recent guidance from the administration, are there trends towards increasing the exposure to private credit (either directly or indirectly) within defined contribution retirement plans? To the extent that there is such investment in private credit or that more is expected, would it be investment directly or substantially in private credit, or would it be investment in a broader fund with a small exposure to private credit? If it is the latter, what portion of the broader fund is invested in private credit?

• What are the benefits, risks, and challenges that retirement plans face in investing in private credit or offering it as an investment option (directly as a separate option or indirectly as part of a much larger fund)? How do defined benefit and 401(k) plans address the risks and challenges, such as valuing private credit, managing liquidity, and transparency issues, if any? What is the level of fees with respect to private credit within retirement plans?

• What are the potential conflicts of interest created by possible interrelatedness of private credit to parties-in-interest to retirement plans?

• What actions, if any, do regulators need to take to help plan participants, plan sponsors, and other fiduciaries to balance the risks and benefits of private credit in retirement plans?

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