SEC Redraws the Meaning of Small for Investment Firms
Published Date: 11/6/2026
Rule
Summary
The SEC is updating the rules that define what counts as a 'small business' or 'small organization' for investment companies and advisers. They’re raising asset limits and removing some outdated rules to keep things fair and current, with changes kicking in February 2027. This helps small investment firms better understand their regulatory responsibilities without unnecessary burdens.
Analyzed Economic Effects
7 provisions identified: 7 benefits, 0 costs, 0 mixed.
Funds: 'Small' threshold raised to $10 billion
If you run a registered investment company or business development company, the SEC raised the net asset threshold used to call a fund a "small entity" from $50,000,000 to $10,000,000,000. This change is part of the SEC's RFA definitions and is effective February 4, 2027.
Funds: Use Form N-CEN 'family' for aggregation
For deciding whether an individual fund is "small," the SEC will now aggregate net assets using the term "family of investment companies" as reported on Form N-CEN instead of the prior "group of related investment companies." This change is effective February 4, 2027 and leverages existing Form N-CEN reporting.
Advisers: RAUM threshold raised to $1 billion
If you run an SEC-registered investment adviser, the SEC increased the Regulatory Assets Under Management (RAUM) threshold for being a "small entity" from $25,000,000 to $1,000,000,000. This amendment is effective February 4, 2027 and is used for Regulatory Flexibility Act analyses.
Advisers: $5 million total-assets test removed
The SEC removed the $5,000,000 total assets threshold from the Advisers Act small-entity definition, effective February 4, 2027. Rule 0-7 will no longer use that total-assets test when determining whether an adviser is a "small entity."
Form ADV and hardship exemption updated
The SEC made conforming amendments to Form ADV (Item 12, Part 1A) and to Advisers Act rule 203-3(b) so that Form ADV instructions and the continuing hardship exemption from electronic filing reflect the new $1 billion RAUM threshold and the elimination of the $5 million total-assets test. These changes are effective with a compliance date of February 4, 2027.
Thresholds can be inflation-adjusted every 10 years
The SEC added an inflation-adjustment mechanism allowing it to adjust the asset thresholds in rule 0-10 and rule 0-7 by order every 10 years. This mechanism is part of the final rules effective February 4, 2027.
Control-relationship threshold clarified for advisers
The SEC amended the adviser Control Relationship Threshold to conform to the higher $1 billion RAUM threshold and stated it modified the rule to help advisers understand how to calculate that threshold. These amendments are effective February 4, 2027.
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