SEC raises the small-entity thresholds for funds and investment advisers to $10bn and $1bn

The SEC has adopted final amendments to the “small business” and “small organization” definitions it uses for funds and investment advisers in rulemaking under the Regulatory Flexibility Act. The rule (Release Nos. IA-7035 and IC-36380) was published in the Federal Register on 6 November 2026. The Commission proposed the changes in January 2026 and adopted them largely as proposed, with some modifications.

Funds

Under amended rule 0-10, a registered investment company or business development company is a small entity if, together with other investment companies in the same family of investment companies, it has net assets of $10bn or less at the end of its most recent fiscal year. The previous threshold was $50m or less.

The rule now aggregates assets across a “family of investment companies” as that term is used in Item B.5 of Form N-CEN, replacing the previous “group of related investment companies” definition. The SEC said this lets it rely on information funds already report.

Advisers

Under amended rule 0-7, an adviser is a small entity if its regulatory assets under management are less than $1bn, up from less than $25m, and it is not in a control relationship with an adviser at or above that threshold. In a change from the proposal, the SEC has removed the separate $5m total-assets test and clarified how the control-relationship test is calculated.

Both thresholds will be adjusted for inflation by Commission order on or about 1 March 2037 and approximately every ten years after that, using the Personal Consumption Expenditures price index.

Dates

The amendments to rules 0-10 and 0-7 take effect on 4 February 2027. Conforming amendments to Form ADV and to rule 203-3, which lets certain small SEC-registered advisers apply for a continuing hardship exemption from filing electronically, take effect and have a compliance date on the same day.

What does not change

The definitions are used to assess how SEC rules affect small entities. The release states that the Commission is not amending the SEC registration threshold for advisers, and notes that some commenters had confused the two. The release confirms that the rule 203-3(b) continuing hardship exemption will become newly available to advisers that qualify as small entities under the new threshold.

Analysis. For ETF issuers, the family test is what matters. A single ETF with modest assets is not small under the rule if its fund family’s net assets exceed $10bn. The change affects how the SEC analyses the cost of future rules. It does not change ETF trading, listing, or creation and redemption requirements.

Sources

• Federal Register, FR Doc. 2026-22741, Securities and Exchange Commission, 6 Nov 2026.