SEC proposes higher small‑entity thresholds for investment firms

USA: SEC proposes higher small‑entity thresholds for investment firms

The U.S. Securities and Exchange Commission (SEC) announced a proposal to amend the rules that define small entities for registered investment companies, investment advisers, and business development companies under the Regulatory Flexibility Act (RFA). The proposal, released in a press statement dated Jan. 7, 2026, seeks to raise asset‑based thresholds and update aggregation methods to better reflect the size and scope of these firms.

The changes aim to improve the SEC’s ability to assess the economic impact of its regulations on smaller market participants. By adjusting the thresholds, the agency intends to capture a more accurate count of entities that qualify as “small,” thereby tailoring its analyses and potentially reducing regulatory burdens where appropriate.

Key Amendments to Small‑Entity Definitions

The proposal outlines three primary adjustments: an increase in the asset‑based thresholds for investment companies and advisers, a revised approach to aggregating related funds’ assets, and a provision for inflation‑based adjustments to the thresholds every ten years. These modifications would be reflected in the final rule published in the Federal Register.

Statement from SEC Leadership

SEC Chairman Paul S. Atkins emphasized the agency’s longstanding commitment to small entities, noting that the proposal “would further this commitment by more accurately capturing the types and numbers of investment advisers and investment companies that are ‘small.’” He added that the changes are intended to promote regulatory effectiveness and efficiency while minimizing economic impact on smaller firms.

Public Comment Process

The SEC will open a public comment period lasting 60 days after the proposing release appears in the Federal Register. Stakeholders are invited to submit feedback on the proposed thresholds, aggregation methodology, and inflation adjustment schedule.

Potential Implications for the Industry

If adopted, the higher thresholds could reclassify a number of currently small‑entity firms as larger entities, potentially altering the scope of regulatory analysis required under the RFA. Industry observers note that the adjustments may also influence how firms plan capital structures and reporting obligations.

Next Steps

Following the comment period, the SEC will review submissions and may issue a final rule that incorporates stakeholder input. The agency indicated that the final rule would be published in the Federal Register, providing definitive guidance on the new small‑entity criteria.

This report is based on information from SEC, licensed under Public Domain (U.S. Government Work). Source: Official U.S. Government release.