On December 11, 2025, the US House of Representatives, with a vote of 302 to 123, passed the Incentivizing New Ventures and Economic Strength Through Capital Formation (INVEST) Act. The INVEST Act is now headed to the US Senate but it remains unclear when the Senate vote will occur and whether the Senate will approve the INVEST Act in its totality.
The INVEST Act is sweeping bi-partisan legislation that proposes changes to various securities and capital markets rules and regulations, including but not limited to:
Excluding Business Development Companies (BDCs) from the Acquired Fund Fees and Expenses (AFFE)
The INVEST Act proposes to allow registered investment companies to exclude fees and expenses incurred indirectly as a result of investment in one or more business development companies.
Changes to the General Solicitation Rules under Regulation D
The INVEST Act directs the US Securities and Exchange Commission (SEC) to revise Regulation D under the Securities Act of 1933 to permit presentations at specified sponsored events (e.g., universities, nonprofits, angel groups, accelerators) without such presentations being deemed “general solicitation” if certain conditions are met.
Changes to the Accredited Investor Definition
The INVEST Act proposes to create new categories of accredited investors for those persons that do not meet the current financial requirements or other criteria. The SEC would be required to establish an exam program allowing any natural person to obtain an accredited investor certification upon the completion of the exam. In addition, certain licensed professionals, and individuals with qualifying education or experience would be able to qualify as accredited investors automatically.
The INVEST Act would also require the SEC to adjust the net worth and income thresholds to the accredited investor definition every five years for inflation.
Changes to the Crowdfunding Exemptive Offering Threshold
The INVEST Act proposes to increase the crowdfunding exemptive offering threshold requiring independent public accountant review of the financial statements from $100,000 to $250,000 (with the SEC having discretion to increase it up to $400,000).
Changes to the Private Fund Adviser Exemption
The INVEST Act proposes to raise the exemption threshold for the private fund adviser exemption under US Investment Advisers Act of 1940 from $150 million to $175 million with inflation indexing.
Updates to the Venture Capital Regulations
The INVEST Act proposes to increase the beneficial owner limit for qualifying venture capital funds under the Investment Company Act of 1940 from 250 persons to 500 persons and the capital limit for qualifying venture capital funds from $10 million to $50 million.
Currently, venture capital funds must invest 80% of their assets in qualifying investments (e.g., direct equity securities of operating companies that are not publicly traded). The INVEST Act directs the SEC to expand the definition of “qualifying investments” to include (i) investments in secondary transactions and (ii) investments in other venture capital funds, so long as such investments do not exceed 49% of the venture capital fund’s aggregate capital contributions and uncalled committed capital.
Inclusion of Additional Investment Opportunities for 403(b) Retirement Plans
INVEST Act allows 403(b) retirement plans to invest in collective investment trusts aligning them more closely with 401(k) plans.1
Changes to E-Delivery Requirements
The INVEST Act requires the SEC to issue rulemaking allowing electronic delivery of investor documents, with safeguards for failed deliveries, opt-out rights, and transition rules.
Elimination of Restrictions on Closed-End Fund Ability to Invest in Private Funds
The INVEST Act restricts the SEC from prohibiting or limiting a closed-end fund from investing any or all of its assets in securities issued by private funds.
Reduction of Emerging Growth Company (EGC) Registration Requirements
The INVEST Act provides that an EGC would only be required to provide the prior two years of profit and loss statements, rather than the prior three years, when conducting an initial public offering. Additionally, EGCs undertaking an initial public offering would be able to submit draft registration statement to the SEC on a confidential basis.
Expansion of WKSI Eligibility
The INVEST Act proposes to decrease the public float threshold for well-known seasoner issuer (WKSI) eligibility from $700 million to $400 million, allowing more companies to qualify as WKSIs and benefit from the added flexibility in capital raising, including, among other things, the ability to file an automatically effective registration statement.
Addition of the Multi-Class Share Arrangement Disclosure to the Proxy Statements
The INVEST Act directs the SEC to adopt rules requiring issuers with multi-class share structures to disclose the following information with respect to securities held by a director, officer or 5% beneficial holder in proxy statements: (i) the number of shares of all classes of voting securities held by such person; and (ii) the total voting power held by such person, in each case, expressed as a percentage of the total number of outstanding securities of all classes or total voting power of all classes entitled to vote, respectively.
If the INVEST Act is signed into law, many SEC-registered investment advisers, closed-end funds and venture capital firms will have to work closely with their legal counsel to evaluate their compliance with the new requirements and revise their compliance policies and procedures in response to the changes ultimately implemented by the INVEST Act.
1 This change was first implemented via the Secure 2.0 Act of 2022 but the INVEST Act makes this change permanent.
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