On 7 January 2026, the U.S. Securities and Exchange Commission proposed amendments to its rules defining “small entities” for purposes of the Regulatory Flexibility Act. The proposal covers registered investment companies, investment advisers, and business development companies. The US SEC stated that the existing thresholds no longer reflect current market realities. The amendments seek to modernise asset-based thresholds, to better capture the scale and composition of smaller market participants and proposes amendments as to how assets of related funds are aggregated. The proposal introduces periodic inflation adjustments every ten years.
The US SEC proposes three material structural changes in the proposed rules.
First, the asset thresholds defining “small entities” are increased. For investment companies, the threshold moves from an outdated USD 50 million in net assets to USD 10 billion, measured at the fund family level, not the individual fund. For investment advisers, the “small adviser” threshold rises from USD 25 million RAUM to USD 1 billion RAUM, with corresponding alignment of control-relationship tests. This is a paradigm shift: entities previously treated as mid-sized or even substantial are now recognised as potentially facing disproportionate regulatory burdens.
Second, the aggregation methodology is modernised. The proposal replaces the ambiguous and manually assessed concept of a “group of related investment companies” with the already-reported and operationally clearer concept of a “family of investment companies” as disclosed in Form N-CEN. This materially reduces interpretive uncertainty, compliance friction, and regulatory discretion in classification.
Third, the SEC introduces a formal inflation-adjustment mechanism every ten years, by Commission order. This ends the historical problem of static thresholds becoming obsolete over time and signals a shift toward dynamic regulatory calibration.
According to US SEC Chairman Paul S. Atkins, in his statement “The Commission has a longstanding commitment to understanding and addressing the concerns of small entities, today’s proposal – consistent with the SEC’s intent to modernize regulatory requirements – would further this commitment by more accurately capturing the types and numbers of investment advisers and investment companies that are ‘small.’ This, in turn, would help the Commission more appropriately promote the effectiveness and efficiency of its regulations, with the goal of minimizing the significant economic impact on small entities.”
It is clear that the objective is to ensure regulatory analysis remains accurate and proportionate. The proposal is intended to improve the effectiveness of rulemaking. It focuses on minimising unintended economic impacts on genuinely small entities. The release will be published in the Federal Register. Public comments will be accepted for sixty days after publication.
The proposal reflects an institutional regulatory recalibration rather than a substantive relaxation of regulatory standards. The US SEC has methodological shift in how it measures regulatory burden. This affects how future rules assess economic impact on smaller market participants. The US SEC is aligning legacy definitions with contemporary asset growth and market consolidation under a data-driven rulemaking.
