Mar. 12, 2026
The proposal would redefine "small entity" thresholds for investment advisers and investment companies as: • $1 billion in regulatory assets under management (RAUM) for advisers • $10 billion in net assets for investment companies. These thresholds represent increases of approximately 40x and 200x relative to the existing definitions. The proposal appears to redefine "small entity" based primarily on relative industry size, rather than regulatory risk or compliance capacity. As a result, firms managing hundreds of millions or billions of dollars in investor assets could receive regulatory accommodations intended for entities with limited regulatory capacity. The proposal does not appear to evaluate the investor-protection consequences of this reclassification. The Commission should quantify and analyze: 1. Investor exposure: Total investor assets managed by firms that would newly qualify as "small entities."" 2. Regulatory relief consequences: Which SEC reporting, compliance, or procedural accommodations become newly available once firms qualify as small entities. 3. Risk-based threshold alternatives: Whether thresholds based on investor exposure, client count, or compliance capacity would better align with the Commission's investor-protection mandate. 4. Regulatory gap risk: Whether the proposal creates a mid-tier regulatory gap in which firms managing substantial assets receive regulatory accommodations intended for genuinely small entities. Absent this analysis, it is unclear how the Commission determined that extending "small entity" treatment to firms managing up to $1 billion or $10 billion in assets remains consistent with its statutory responsibilities to protect investors and maintain fair markets. The Commission should address these issues explicitly in the final rulemaking record.