On January 7, 2026, the SEC proposed amendments to the rules that define which registered investment companies and business development companies (funds) and investment advisers qualify as “small entities” for purposes of the Regulatory Flexibility Act (the RFA). If adopted, the amendments would raise the current asset-based thresholds that apply to funds and advisers and require adjustments to those thresholds for inflation every ten years. In its release, the SEC explained that the proposal is designed to capture the types and numbers of funds and advisers the SEC currently considers “small,” taking into account the substantial growth in net assets and assets under management since the applicable rules were last updated in 1998.
Under the RFA, the SEC is required to determine if a proposed or final rulemaking is likely to have a “significant economic impact on a substantial number of small entities.” Unless the SEC certifies that the rulemaking will not have such an impact, the SEC must conduct a regulatory flexibility analysis in connection with both the proposed and final rulemaking stages. By right-sizing the “small entity” asset thresholds, the SEC expects the proposal will improve its analyses of potential regulatory impacts faced by small entities so that it may consider adapting its rulemakings accordingly.
With respect to funds, the proposal would raise the small entity threshold set forth in Rule 0-10 under the Investment Company Act of 1940 from $50 million to $10 billion in net assets, applicable to a fund together with other related funds. The proposal would also replace the term “group of related investment companies” in Rule 0-10 with the term “family of investment companies,” as that term is used in Form N-CEN, for purposes of aggregating the net assets of related funds, thereby enabling the SEC to rely on Form N-CEN information for its RFA analyses. With respect to advisers, the proposal would raise certain small entity thresholds set forth in Rule 0-7 under the Investment Advisers Act of 1940 from $25 million to $1 billion in assets under management, applicable to an adviser and separately to its control persons. Additionally, the proposal would provide that the SEC would issue an order every ten years to adjust the small entity thresholds for inflation.
Comments on the proposal are due by March 13, 2026. The SEC’s proposing release is available here, a related press release is available here and a related fact sheet is available here.
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