SEC raises small entity thresholds to USD 10 billion for funds and USD 1 billion for advisers for regulatory impact analysis

The U.S. Securities and Exchange Commission (SEC) adopted broader small entity definitions for assessing regulatory impacts under the Regulatory Flexibility Act. Registered investment companies and business development companies will qualify if their fund family’s combined net assets are USD 10 billion or less, up from USD 50 million. The adviser threshold rises from below USD 25 million to below USD 1 billion in regulatory assets under management, subject to control relationship restrictions. The amendments finalize the January 2026 proposal and update definitions last revised in 1998. Related fund assets will be aggregated using the existing “family of investment companies” definition in Form N-CEN, replacing the “group of related investment companies” definition. In a change from the proposal, the final rules eliminate advisers’ USD 5 million total assets test and the corresponding total assets restriction on control relationships. An adviser remains excluded if it controls, is controlled by or is under common control with another adviser managing USD 1 billion or more. The SEC registration threshold is unchanged. Inflation adjustments will be made by SEC order approximately every 10 years, beginning on or about March 1, 2037. Conforming Form ADV changes will require about 10,180 additional advisers registered with the SEC to complete Item 12, generally through their regular annual amendments. The broader definition also expands eligibility to apply for a continuing exemption from electronic filing, which still requires demonstrating undue hardship.