SEC Updates Small Entity Definitions to Reflect Growth in Asset Management Sector and Reduce Burdens
The SEC has revised the definitions of small entities under the Regulatory Flexibility Act (RFA) for investment companies, advisers, and development companies. This update accounts for the significant growth in the asset management sector over the past 30 years, aiming to better reflect current market realities. Chairman Paul S. Atkins stated that these changes will alleviate unnecessary regulatory burdens, enhancing the regulatory framework's efficiency and effectiveness. The new rules strive to minimize the economic impact of SEC regulations on smaller market participants, ensuring a more accurate representation of what constitutes a small entity today. This initiative promotes a better understanding of small entities’ concerns and allows for tailored regulations that consider their unique characteristics.
Statement Summary
The Securities and Exchange Commission (SEC) has updated the rules that determine which registered investment companies, investment advisers, and business development companies qualify as small entities under the Regulatory Flexibility Act (RFA). This update recognizes the growth in the asset management industry over the past three decades and aims to more accurately reflect the characteristics of small entities in today's market.
SEC Chairman Paul S. Atkins emphasized that these changes will help reduce unnecessary regulatory burdens, ensuring the Commission's rules are aligned with modern industry realities. The amendments are intended to minimize the economic impact of SEC regulations on small market participants, thus enhancing the effectiveness and efficiency of the regulatory framework.
Original Statement
The Securities and Exchange Commission today adopted 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 Commission has a longstanding commitment to understanding and addressing the concerns of small entities.
The adopted amendments recognize the substantial growth in the asset management industry over the decades since the asset-based thresholds for identifying “small entities” were initially set. By helping to ensure the Commission’s RFA analyses capture a more meaningful population of investment companies, investment advisers, and business development companies that are considered “small entities,” the adopted amendments are therefore intended to minimize the significant economic impact of the Commission’s rules on these market participants.
“Updating the SEC’s definition of small entities for investment companies and investment advisers – which has not been done in nearly 30 years – is an important step to eliminate unnecessary regulatory burdens and modernize our rulebook,” said SEC Chairman Paul S. Atkins.
“These amendments more accurately capture the types of registered investment companies, investment advisers, and business development companies that are considered small relative to today’s market and will help ensure the Commission’s rulemaking is reflective of that reality.”
The RFA seeks to, in part, promote the effectiveness and efficiency of regulations, including through consideration of alternative regulatory approaches, with the goal of minimizing the significant economic impact of federal rulemaking on small entities. The Commission tailors its regulations to the relevant characteristics of regulated entities and weighs the impact of its rules on small entities, including through performing regulatory flexibility analysis under the RFA.
Specifically, the amendments:
The adopting release is published on the SEC website and will be published in the Federal Register.