SEC Proposes Amendments to the Small Entity Definitions for Investment Companies and Investment Advisers for Purposes of the Regulatory Flexibility Act
Executive Summary
The SEC proposed amendments on January 7, 2026, to expand the definitions of "small entities" under the Regulatory Flexibility Act (RFA) for registered investment advisers (RIAs), investment companies, and business development companies by significantly raising asset thresholds last updated in 1998. This would increase the number of qualifying small entities, enabling the SEC to better assess regulatory impacts and potentially provide tailored relief like extended compliance timelines during rulemaking. It matters because it could indirectly reduce compliance burdens for mid-sized firms by influencing future SEC rules to minimize disproportionate effects on smaller players. #
What Changed
- Raise the RAUM threshold for RIAs to qualify as small entities from $25 million to $1 billion, with conforming changes for control affiliates. - Increase the net asset threshold for investment companies from $50 million to $10 billion. - Update aggregation of related funds from "group of related investment companies" to "family of investment companies" as defined in Form N-CEN for easier identification. - Introduce inflation adjustments to thresholds every 10 years via SEC order, without formal rulemaking. - Make corresponding amendments to Form ADV and rules on continuing hardship exemptions for electronic filing. #
What You Need To Do
- Submit public comments by the deadline to influence thresholds, alternatives (e
- Monitor Federal Register for exact publication and comment instructions; review proposed rule and fact sheet on SEC site (https://www
- Assess internal status
- No immediate compliance changes, as this affects SEC rulemaking process only; prepare for potential indirect impacts via future rules
Key Dates
Compliance Impact
Urgency: Medium. This proposal does not impose direct new requirements or alter existing obligations—it's procedural for SEC's RFA analyses during rulemaking. However, adoption could lead to meaningful indirect benefits for mid-sized RIAs and funds, such as longer compliance phases or reduced burdens in rules on reporting, recordkeeping, or vendor reliance, addressing outdated 1998 thresholds amid
Who is Affected
Summary
The Securities and Exchange Commission today proposed 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…