SEC Moves the Goalposts on Who Counts as a Small Fund or Adviser

The Securities and Exchange Commission adopted amendments on November 4, 2026 that redefine what counts as a small entity for registered investment companies, investment advisers and business development companies. The change lands under the Regulatory Flexibility Act, and it drags thresholds that had barely budged since 1998 into the current economy.

The numbers move a long way. A registered investment company used to squeak in as small if it and its related funds held $50 million or less in combined net assets; now the bar is $10 billion in aggregate net assets for a fund family, measured under Form N-CEN Item B.5. Investment advisers get a similar jolt: the old test required under $25 million in regulatory assets under management, under $5 million in balance-sheet assets and certain control-relationship conditions, while the new regulatory-assets threshold sits at $1 billion, with matching adjustments to the other criteria. The SEC will also bump these figures for inflation every 10 years.

Why bother? Because the old definitions were pinching almost nobody. The SEC's January 2026 proposal found they captured a mere 0.6% of registered investment companies and 3% of registered investment advisers. Widening the definition pulls more firms into the pool that gets weighed in regulatory impact analyses under the Regulatory Flexibility Act.

None of this hands anyone a pass. The amendments do not exempt these entities from their securities-law obligations, and they do not touch the asset threshold that determines whether an adviser must register with the SEC at all.

The SEC's own math backs the $10 billion fund-family cut: it lines up with an 80th-percentile family size of $10.04 billion, covering roughly 80% of fund families, 22.9% of individual funds and 2.13% of aggregate average total net assets. The agency framed the package as a better fit for the current economic landscape and a way to trim compliance burdens for smaller firms in future rulemaking.