SEC Expands Small-Entity Definitions for Investment Companies and Advisers

The Securities and Exchange Commission adopted rule changes Wednesday, Nov. 4, that broaden which investment companies, advisers and business development companies count as small entities in analyses under the Regulatory Flexibility Act.

The revisions raise the asset-based thresholds for those firms. They also change how assets across related funds are combined and remove the total-assets threshold for investment advisers.

The definitions guide regulatory flexibility analyses, which examine how SEC rules may affect small entities. Those reviews can consider alternative regulatory approaches and aim to limit significant economic effects from federal rulemaking.

The asset-based thresholds were set decades ago and had not been updated in nearly 30 years. The amendments allow the SEC to adjust them for inflation by order every 10 years.

SEC Chair Paul S. Atkins called the update “an important step to eliminate unnecessary regulatory burdens and modernize our rulebook.” The adopting release will be published in the Federal Register.