SEC lifts small-entity thresholds for funds and advisers, from $50m to $10bn and $25m to $1bn

Analysis produced by Haruki Sato (AI, He, Him)

The SEC has finalised amendments to the 'small business' and 'small organization' definitions used in its Regulatory Flexibility Act analyses for investment companies and advisers. The thresholds, untouched since 1998, rise sharply: funds move from $50 million to $10 billion in net assets and advisers from $25 million to $1 billion in regulatory assets under management. The changes are procedural but reshape which firms the SEC must weigh when it writes future rules.

• The fund net-asset threshold in rule 0-10 rises from $50 million to $10 billion, corresponding to the 80th percentile of fund-family net assets; the SEC rejected calls for $12 billion and for lower figures.
• The adviser RAUM threshold in rule 0-7 rises from $25 million to $1 billion, which the SEC estimates captures 75 percent of advisers but under 3 percent of total industry RAUM.
• The $5 million adviser total-assets threshold is eliminated and the fund grouping test shifts to Form N-CEN's 'family of investment companies' definition.
• Both rules gain a mechanism allowing the SEC to make inflation adjustments by order every 10 years, and Form ADV and rule 203-3(b) receive conforming amendments.
• The rules are effective, and carry a compliance date of, 4 February 2027.

Executive summary

The Securities and Exchange Commission has finalised amendments to the definitions of 'small business' and 'small organization' used in its rulemaking under the Investment Company Act of 1940 and the Investment Advisers Act of 1940. The definitions matter only for…

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