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The Securities and Exchange Commission today proposed amendments to the rules that define which registered investment companies, investment advisers, and business development companies qualify as small entities for purposes of the Regulatory Flexibility Act (RFA).

The RFA requires federal agencies to conduct certain analyses, with the goal of minimizing the significant economic impact of federal rulemaking on small entities. This proposal would raise the small entity thresholds for investment companies and advisers. It is designed to help the Commission better tailor its analyses to address the specific regulatory challenges that these small entities face and consider adapting its rulemaking accordingly.

“The Commission has a longstanding commitment to understanding and addressing the concerns of small entities,” said SEC Chairman Paul S. Atkins. “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.”

Specifically, this proposal would:

• Increase the asset-based thresholds under which investment companies and investment advisers are deemed small entities;
• Update the way that related funds’ assets are aggregated for purposes of defining small entities; and
• Provide for inflation adjustments to the asset-based thresholds by order every 10 years.

The proposing release will be published in the Federal Register. The public comment period will remain open until 60 days after the date of publication of the proposing release in the Federal Register.