SEC Must Create Two-Page Risk Form for Private Investments: New Rule Hits Next Year

If you’ve ever looked at a private investment opportunity—the kind that doesn't trade on the stock market—you know the paperwork can be intense. The Risk Disclosure and Investor Attestation Act aims to change that, but maybe not in the way you expect. Essentially, this bill mandates that when a company (the issuer) sells a private investment, they must now get a signed statement from the investor confirming they fully grasp the risks involved. This isn't just a casual handshake; it’s a formal attestation designed to make sure investors are going in with eyes wide open (SEC. 2).

The biggest catch here is the paperwork itself. The Securities and Exchange Commission (SEC) is tasked with creating the official attestation form, but the law imposes a strict, almost unbelievable limit: the form cannot be longer than two pages. Think about that for a second. The risks associated with a complex, non-public investment—something that could involve anything from real estate funds to startups—must be distilled into a two-page document. The SEC is on the clock, too; they have just one year from the bill's enactment to finalize and implement these new rules.

The Two-Page Tightrope Walk

This two-page limit is the heart of the bill and where things get complicated for everyday investors. On one hand, it’s a win for clarity. No one wants to wade through a 50-page legal document written in tiny font. This forces the disclosure to be concise, which is great for busy people who need the key facts fast. For a small business owner looking to raise capital, this standardized, short form could also streamline compliance, making it easier to secure funding.

On the other hand, the complexity of private markets often requires nuance that two pages simply cannot capture. Imagine trying to summarize the potential risks of a highly specialized tech startup or a complex debt instrument in a single sheet of paper. If the SEC is forced to oversimplify the disclosure to meet the page limit, investors—especially those new to private markets—might sign off without truly understanding the deep, specific risks involved. The benefit of increased awareness could be undermined if the disclosure is too brief to be meaningful.

The SEC’s Implementation Hurdle

The SEC has a tough job ahead. Creating a standardized, two-page risk form that works across the entire spectrum of private investments is a massive regulatory lift, especially with the strict one-year deadline. They need to figure out how to cover all the bases—from liquidity risks (can you sell this thing?) to valuation risks (is the price real?)—without exceeding the page count. If they rush the process, the resulting form might be so generic that it offers little real protection, benefiting the issuers more than the investors by checking a compliance box with minimal effort. This bill is a classic example of good intentions meeting a very tight constraint, and the real-world impact will depend entirely on how much crucial information can fit onto two sides of paper.