Amendments to the “Small Business” and “Small Organization” Definitions for Investment Companies and Investment Advisers for Purposes of the Regulatory Flexibility Act
AI Analysis
The SEC finalized amendments to Investment Company Act rule 0-10 and Advisers Act rule 0-7 that substantially expand the entities treated as small for Regulatory Flexibility Act analysis. The thresholds rise to $10 billion in fund net assets and $1 billion in adviser regulatory assets under management, but the amendments do not change SEC registration thresholds or impose, remove, or reduce substantive compliance obligations.
Key dates
- 2026-11-06
- The final rule was published in the Federal Register at 91 FR 69955.
- 2027-02-04
- Amendments to Investment Company Act rule 0-10 and Advisers Act rule 0-7 become effective.
- 2027-02-04 Deadline
- The amendments to Advisers Act rule 203-3(b) and Form ADV become effective and compliance is required.
Suggested considerations
- Compliance teams may wish to assess whether the adviser or any relevant control group will qualify as a small entity under the revised less-than-$1 billion RAUM test once the amendments become effective.
- Advisers may wish to review Form ADV Item 12 procedures, reporting logic, and filing controls so that the revised definition is applied from the February 4, 2027 compliance date.
- Advisers and fund groups may wish to map control relationships and family-of-investment-companies aggregation methodology against the amended thresholds rather than treating each legal entity independently.
- Firms may wish to confirm that internal policies do not incorrectly treat the revised RFA thresholds as changes to SEC registration, exemption, fiduciary, reporting, custody, or other substantive obligations.
- Advisers relying on or considering a continuing hardship exemption may wish to review the conforming amendments to Advisers Act rule 203-3(b) and update related filing documentation.
- Regulatory-change inventories and future rulemaking impact assessments may benefit from recording the inflation-adjustment mechanism and monitoring subsequent Commission adjustment orders.
What changed
Effective February 4, 2027, rule 0-10 will increase the threshold for a registered investment company or business development company to qualify as a small entity from $50 million to $10 billion of net assets. Asset aggregation will use the Form N-CEN concept of a family of investment companies rather than the former group of related investment companies terminology. Rule 0-7 will increase the adviser RAUM threshold from less than $25 million to less than $1 billion, eliminate the separate $5 million total-assets test, and raise the control-relationship threshold to $1 billion so an adviser generally will not qualify as small if it controls, is controlled by, or is under common control with an adviser or other qualifying person at or above the applicable threshold. The amended rules will i
Compliance impact
The direct compliance impact is low because the rule changes RFA classification criteria used in SEC rulemaking analyses rather than substantive obligations applicable to advisers or funds. The practical impact is nevertheless significant for regulatory reporting and change-management purposes because many more advisers and funds may be treated as small entities in future SEC rulemakings, and Form
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original SEC source before acting. Full disclaimer.
What the SEC said
Final rule. The Securities and Exchange Commission (the "Commission" or the "SEC") is amending the definitions of "small business" and "small organization" (collectively, "small entities") that are used in connection with Commission rulemaking under the Investment Company Act of 1940 (the "Investment Company Act") and…
Extract from SEC . Read the full notice at the source for the authoritative text.