Sec Cryptocurrency SEC Adopts Amendments to Update Definitions of Small Entity for Investment Companies and Investment Advisers

The Securities and Exchange Commission today adopted amendments to the rules that define which registered investment companies, investment advisers, and business development companies qualify as small entities for purposes of the Regulatory Flexibility Act (RFA).

The Commission has a longstanding commitment to understanding and addressing the concerns of small entities. The adopted amendments recognize the substantial growth in the asset management industry over the decades since the asset-based thresholds for identifying “small entities” were initially set. By helping to ensure the Commission’s RFA analyses capture a more meaningful population of investment companies, investment advisers, and business development companies that are considered “small entities,” the adopted amendments are therefore intended to minimize the significant economic impact of the Commission’s rules on these market participants. 

“Updating the SEC’s definition of small entities for investment companies and investment advisers – which has not been done in nearly 30 years – is an important step to eliminate unnecessary regulatory burdens and modernize our rulebook,” said SEC Chairman Paul S. Atkins. “These amendments more accurately capture the types of registered investment companies, investment advisers, and business development companies that are considered small relative to today’s market and will help ensure the Commission’s rulemaking is reflective of that reality.”

The RFA seeks to, in part, promote the effectiveness and efficiency of regulations, including through consideration of alternative regulatory approaches, with the goal of minimizing the significant economic impact of federal rulemaking on small entities. The Commission tailors its regulations to the relevant characteristics of regulated entities and weighs the impact of its rules on small entities, including through performing regulatory flexibility analysis under the RFA.

Specifically, the amendments:

• Increase the asset-based thresholds under which investment companies, investment advisers, and business development companies are deemed small entities.
• Update the way that related funds’ assets are aggregated for purposes of defining small entities.
• Eliminate the investment adviser total assets threshold.
• Provide for inflation adjustments to the asset-based thresholds by order every 10 years.

The adopting release is published on the SEC website and will be published in the Federal Register.