The Securities and Exchange Commission on Wednesday adopted amendments to its rules defining which registered investment companies, investment advisers and business development companies count as small entities. The definitions apply under the Regulatory Flexibility Act, a law that asks federal agencies to consider how their rules affect small entities.
According to the SEC, the asset-based thresholds were first set decades ago, and the asset management industry has grown substantially since then. The commission said the changes are meant to make its analyses under the act cover a more meaningful group of small firms and funds. The stated goal is to minimize the significant economic impact of SEC rules on those market participants.
SEC Chairman Paul S. Atkins said the definition had not been updated in nearly 30 years. He called the update “an important step to eliminate unnecessary regulatory burdens and modernize our rulebook.” Atkins said the amendments more accurately capture the entities that are small relative to today’s market.
The amendments make four changes, according to the SEC. They raise the asset-based thresholds under which investment companies, investment advisers and business development companies are deemed small entities. They also update how the assets of related funds are added together when deciding whether an entity is small.
The amendments eliminate the investment adviser total assets threshold. They also provide for inflation adjustments to the asset-based thresholds, made by order every 10 years.
The SEC said the Regulatory Flexibility Act aims in part to promote the effectiveness and efficiency of regulations. That includes considering alternative regulatory approaches. The commission said it tailors its regulations to the characteristics of the entities it regulates and weighs the impact of its rules on small entities, including by performing a regulatory flexibility analysis.
The press release did not state the new dollar thresholds, the previous thresholds or an effective date. The SEC said the adopting release is published on its website and will be published in the Federal Register, the government’s daily publication of rules and notices.