Rule2026-22741
Amendments to the “Small Business” and “Small Organization” Definitions for Investment Companies and Investment Advisers for Purposes of the Regulatory Flexibility Act
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Published
November 6, 2026
Issuing agencies
Securities and Exchange Commission
Abstract
The Securities and Exchange Commission (the "Commission" or the "SEC") is amending the definitions of "small business" and "small organization" (collectively, "small entities") that are used in connection with Commission rulemaking under the Investment Company Act of 1940 (the "Investment Company Act") and the Investment Advisers Act of 1940 (the "Advisers Act"). These definitions concern regulatory requirements applicable to registered investment companies and business development companies (collectively, "funds") as well as investment advisers. The definitions are used specifically for purposes of the Regulatory Flexibility Act (the "RFA"), which requires the Commission to consider the impact of its regulations on small entities. The amendments are designed to modernize the definitions, by increasing certain asset-based thresholds, including a mechanism for periodic future inflation adjustments, and eliminating the threshold based on total assets for advisers. In connection with these amendments, the Commission is making conforming amendments to Form ADV as well as the rule that allows certain small SEC-registered advisers to apply for a continuing hardship exemption from making Advisers Act filings electronically.
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<title>Federal Register, Volume 91 Issue 214 (Friday, November 6, 2026)</title>
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[Federal Register Volume 91, Number 214 (Friday, November 6, 2026)]
[Rules and Regulations]
[Pages 69955-69977]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-22741]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 91, No. 214 / Friday, November 6, 2026 /
Rules and Regulations
[[Page 69955]]
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 270, 275, and 279
[Release Nos. IA-7035; IC-36380; File No. S7-2026-01]
RIN 3235-AN39
Amendments to the ``Small Business'' and ``Small Organization''
Definitions for Investment Companies and Investment Advisers for
Purposes of the Regulatory Flexibility Act
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Securities and Exchange Commission (the ``Commission'' or
the ``SEC'') is amending the definitions of ``small business'' and
``small organization'' (collectively, ``small entities'') that are used
in connection with Commission rulemaking under the Investment Company
Act of 1940 (the ``Investment Company Act'') and the Investment
Advisers Act of 1940 (the ``Advisers Act''). These definitions concern
regulatory requirements applicable to registered investment companies
and business development companies (collectively, ``funds'') as well as
investment advisers. The definitions are used specifically for purposes
of the Regulatory Flexibility Act (the ``RFA''), which requires the
Commission to consider the impact of its regulations on small entities.
The amendments are designed to modernize the definitions, by increasing
certain asset-based thresholds, including a mechanism for periodic
future inflation adjustments, and eliminating the threshold based on
total assets for advisers. In connection with these amendments, the
Commission is making conforming amendments to Form ADV as well as the
rule that allows certain small SEC-registered advisers to apply for a
continuing hardship exemption from making Advisers Act filings
electronically.
DATES: This final rule was published in the Federal Register on
November 6, 2026.
<bullet> Final amendments to 17 CFR 270.0-10 (``rule 0-10'') and 17
CFR 275.0-7 (``rule 0-7'') are effective February 4, 2027.
<bullet> Final amendments to 17 CFR 275.203-3 (``rule 203-3'') and
17 CFR 279.1 (``Form ADV'') are effective, and have a compliance date
of, February 4, 2027.
FOR FURTHER INFORMATION CONTACT: Alexis Palascak, Senior Counsel,
Sirimal R. Mukerjee, Senior Special Counsel, or Robert Holowka,
Assistant Director, Investment Adviser Regulation Office, at (202) 551-
6787, or Andrew Deglin, Senior Counsel, or Brian McLaughlin Johnson,
Assistant Director, Investment Company Regulation Office, at (202) 551-
6792, Division of Investment Management, Securities and Exchange
Commission, 100 F Street NE, Washington, DC 20549-8549.
SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to the
following rules and form:
[GRAPHIC] [TIFF OMITTED] TR06NO26.029
Table of Contents
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\1\ 15 U.S.C. 80a-1 et seq.
\2\ 15 U.S.C. 80b-1 et seq.
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I. Introduction
A. Background
B. Overview of the Final Amendments
II. Discussion
A. Amendments to Rule 0-10 Under the Investment Company Act
1. Raising the Net Asset Threshold
2. Group Definition Amendments
B. Amendments to Rule 0-7 Under the Advisers Act
1. The RAUM Threshold
a. Consideration of Alternative Non-RAUM Thresholds
b. The $1 Billion RAUM Threshold
2. The Total Assets Threshold
3. The Control Relationship Threshold
4. Conforming Amendments to Form ADV and the Adviser Hardship
Exemption Rule
C. Periodic Future Adjustments
D. Effective Date and Compliance Date
III. Economic Analysis
IV. Paperwork Reduction Act
A. Introduction
B. Final Amendments
C. Estimated Burdens
V. Regulatory Flexibility Act Certification
VI. Congressional Review Act
VII. Other Matters
Statutory Authority
I. Introduction
We are adopting amendments to Commission rules that define a
``small entity'' under the RFA for funds and investment advisers by
raising the asset thresholds contained in both definitions.\3\
Specifically, the amendments to the Investment Company Act rule (rule
0-10) will increase the net asset threshold for
[[Page 69956]]
funds to be considered ``small'' from $50 million to $10 billion and
replace the ``group of related investment companies'' definition in the
rule with ``family of investment companies,'' as that term is currently
used in Form N-CEN. We are also adopting amendments to the Advisers Act
rule (rule 0-7) that will increase the amount of regulatory assets
under management (``RAUM'') below which an adviser is considered small
from $25 million to $1 billion, eliminate the $5 million total assets
threshold provision from the definition, and make conforming amendments
to the adviser control relationship threshold to reflect the increased
adviser RAUM threshold in the definition. Additionally, the amendments
to Investment Company Act rule 0-10 and Advisers Act rule 0-7 will
provide a mechanism for future inflation adjustments to the thresholds.
Finally, the Commission is making conforming amendments to Form ADV and
Advisers Act rule 203-3(b) for hardship exemptions to implement the
amended adviser RAUM threshold. The final rules reflect comments the
Commission received on amendments it proposed in January 2026 and will
help the Commission more appropriately promote the effectiveness and
efficiency of its regulations, with the goal of minimizing significant
economic impact on small entities, consistent with the RFA.\4\
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\3\ Unless otherwise specified, the term ``investment
companies'' or ``funds'' in this release refers collectively to
registered investment companies and business development companies
but not entities excluded from the definition of investment company
under the Investment Company Act such as private funds.
\4\ See Amendments to the ``Small Business'' and ``Small
Organization'' Definitions for Investment Companies and Investment
Advisers for Purposes of the Regulatory Flexibility Act, Investment
Company Act Release No. 35864 (Jan. 7, 2026) [91 FR 1107 (Jan. 12,
2026)] (the ``Proposing Release''). The comment letters on the
Proposing Release (File No. S7-2026-01) are available at <a href="https://www.sec.gov/rules-regulations/public-comments/s7-2026-01">https://www.sec.gov/rules-regulations/public-comments/s7-2026-01</a>. See also
Enhancement of Emerging Growth Company Accommodations and
Simplification of Filer Status for Reporting Companies, Release No.
33-11419 (May 19, 2026) [91 FR 30086 (May 21, 2026)] (``2026 Filer
Status Release'') (among other things, proposing amendments to the
``small entity'' definitions for purposes of the Securities Act of
1933 and the Securities Exchange Act of 1934 (the ``Exchange
Act'')).
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A. Background
The Commission has a longstanding commitment to understanding and
addressing the concerns of small entities and has established the
Office of Small Business Policy in the Division of Corporation Finance,
the Office of the Advocate for Small Business Capital Formation, and
the Small Business Capital Formation Advisory Committee to be
responsive to such concerns.\5\ In the context of rulemaking, 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 analyses under the RFA.\6\ A
purpose of the RFA is to promote the effectiveness and efficiency of
regulations, including through consideration of alternative regulatory
approaches, with the goal of minimizing the significant economic impact
on small entities consistent with the stated objectives of applicable
statutes.\7\ The Commission is required to determine if a rulemaking is
likely to have a ``significant economic impact on a substantial number
of small entities'' under the RFA.\8\ Unless the Commission certifies
that the rulemaking will not have such an impact, the Commission is
required to conduct a regulatory flexibility analysis both during the
proposal and final stages of adopting a rule.\9\
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\5\ See Proposing Release, at n.1 (discussing the history of
these Commission offices and the committee).
\6\ See Proposing Release, at section I.A.1.
\7\ Public Law 96-354, 2, Sept. 19, 1980, 94 Stat. 1164; 5
U.S.C. 601-612.
\8\ See 5 U.S.C. 605(b). The RFA does not define ``significant
economic impact'' or ``substantial number of small entities.''
\9\ See 5 U.S.C. 603-604; see also 5 U.S.C. 605(b).
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The Small Business Act gives the Administrator of the U.S. Small
Business Administration (the ``SBA'') authority to establish small
business size standards for all Federal agencies, in the absence of
other specific statutory authority.\10\ An agency may nevertheless
prescribe its own small business size standard pursuant to section
601(3) of the RFA if, as described in 13 CFR 121.903(c), the agency
consults with the SBA Office of Advocacy and the size standard will be
used for the sole purpose of performing an RFA analysis.\11\ Allowing
agencies to establish their own definitions for the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction'' for purposes of the RFA analyses gives agencies
flexibility in applying the provisions of the RFA.\12\
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\10\ 15 U.S.C. 632(a)(2). 15 U.S.C. 632(a)(1) sets forth the
default standard for a ``small business concern'' as ``one which is
independently owned and operated and which is not dominant in its
field of operation.''
\11\ 13 CFR 121.903(c); see also Small Business Size
Regulations; Size Standards for Programs of Other Agencies, 67 FR
13714 (Mar. 26, 2002).
\12\ 5 U.S.C. 601. Under the RFA, the term ``small entity'' has
the same meaning as the terms ``small business,'' ``small
organization,'' and ``small governmental jurisdiction'' as defined
under the RFA, unless the agency has established a definition of
such term. In the latter case, the definition of the term is instead
what was established by the agency.
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In 1982, the Commission adopted rule 0-10 for investment companies
and rule 0-7 for investment advisers to define ``small business'' and
``small organization'' for purposes of Commission rulemakings under the
Investment Company Act and Advisers Act, respectively.\13\ These
definitions were last amended in 1998 \14\ and, in connection with
outreach to small entities, the Commission has subsequently received
requests to update the definitions.\15\
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\13\ See Final Definitions of ``Small Business'' and ``Small
Organization'' for Purposes of the Regulatory Flexibility Act,
Investment Company Act Release No. 12194 (Jan. 28, 1982) [47 FR 5215
(Feb. 4, 1982)] (``1982 Adopting Release''); see also Proposing
Release, at section I.A.2 and I.A.3 (explaining the history of the
Commission's investment company and investment adviser size
standards).
\14\ See Definitions of ``Small Business'' or ``Small
Organization'' Under the Investment Company Act of 1940, Investment
Advisers Act of 1940, the Securities Exchange Act of 1934, and the
Securities Act of 1933, Investment Company Act Release No. 23272
(June 24, 1998) [63 FR 35508 (June 30, 1998)] (``1998 Adopting
Release'').
\15\ See Proposing Release, at n.10.
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Under rule 0-10, an investment company is deemed a small entity if
it, together with other investment companies in the same group of
related investment companies, has net assets of $50 million or less as
of the end of its most recent fiscal year.\16\ A group of related
investment companies is defined, with respect to management companies,
as two or more management companies (including series thereof) that (i)
hold themselves out to investors as related companies for purposes of
investment and investor services; and (ii) either (1) have a common
investment adviser or have investment advisers that are affiliated
persons of each other; or (2) have a common administrator.\17\ Under
rule 0-7, an investment adviser is deemed a small entity if it: (i) has
RAUM \18\ of less than $25 million (the ``RAUM Threshold''); \19\ (ii)
did not have total assets \20\ of $5 million or more on the last day of
the most recent fiscal year (the ``Total Assets Threshold''); and (iii)
does not control, is not controlled by, and is not under common control
with (a ``control relationship'') another investment adviser that has
assets under management of $25 million or more, or
[[Page 69957]]
any person (other than a natural person) that had total assets of $5
million or more on the last day of the most recent fiscal year (the
``Control Relationship Threshold'').
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\16\ See 17 CFR 210.6-04 (Regulation S-X section generally
applicable to balance sheets filed by registered investment
companies and business development companies, including requirements
for disclosure of net assets).
\17\ 17 CFR 270.0-10(a). In the case of unit investment trusts
(``UITs''), a group of related investment companies is defined as
two or more UITs (including series thereof) that have a common
sponsor.
\18\ RAUM are securities portfolios for which the adviser
provides continuous and regular supervisory or management services.
See Form ADV, Instructions for Part 1A, Instruction 5(b).
\19\ See Proposing Release, at n.11 (discussing the basis for
the use of the term ``regulatory assets under management'').
\20\ See 17 CFR 275.0-7(b)(2); 1998 Adopting Release at n.42
(describing ``total assets'').
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In January 2026, the Commission proposed amendments to the
investment company and investment adviser ``small entity'' definitions.
Specifically, the Commission proposed to:
<bullet> Amend rule 0-10 for funds to: (i) increase the net asset
threshold for funds from $50 million to $10 billion; and (ii) refer,
for purposes of aggregating the net assets of related funds, to a
``family of investment companies'' as that term is used in Item B.5 of
Form N-CEN rather than to a ``group of related investment companies''
as used in the current rule;
<bullet> Amend rule 0-7 for investment advisers to increase the
RAUM Threshold below which an investment adviser is considered to be a
``small entity'' from $25 million to $1 billion and to conform the
assets under management threshold in the Control Relationship Threshold
with the revisions made to the RAUM Threshold;
<bullet> Amend Form ADV to revise the instructions and Item 12 of
Part 1A of Form ADV, including through making conforming changes to
Form ADV, and amend rule 203-3 providing a continuing hardship
exemption from electronic filing requirements; and
<bullet> Amend rule 0-10 and rule 0-7 to allow the Commission to
make subsequent inflation adjustments to the asset thresholds in these
rules by order every 10 years in accordance with an inflation
adjustment mechanism.
The Commission also requested comment on whether to amend the Total
Assets Threshold, as well as the total assets threshold contained in
the Control Relationship Threshold, in rule 0-7.
The Commission received approximately 20 comments on the proposed
amendments. Commenters generally supported the proposal's goal to
modernize the ``small entity'' definitions.\21\ These commenters noted
that the current rules are out of date and stated that the proposed
amendments would help calibrate the Commission's analysis of the
regulatory and compliance costs for small entities under the RFA.\22\
Some commenters suggested modifications to the proposal, such as a
higher fund net asset threshold, alternative non-RAUM Thresholds,
different mechanisms for future threshold adjustments, elimination of
the adviser Total Assets Threshold, or different treatment of certain
entities.\23\ Some commenters expressed concern that the proposal would
diminish investor protections and suggested lower asset thresholds.\24\
After consideration of the comments received, and as discussed in more
detail below, the Commission is adopting the amendments largely as
proposed but with some modifications in response to comments.
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\21\ See, e.g., Comment Letter of the Investment Company
Institute (Mar. 13, 2026) (``ICI Comment Letter''); Comment Letter
of MFA (Mar. 13, 2026) (``MFA Comment Letter''); Comment Letter of
the Independent Directors Council (Mar. 13, 2026) (``IDC Comment
Letter'').
\22\ See, e.g., Comment Letter of the National Venture Capital
Association (Mar. 11, 2026) (``NVCA Comment Letter''); Comment
Letter of the Small Business Investor Alliance (Mar. 16, 2026)
(``SBIA Comment Letter'').
\23\ See, e.g., ICI Comment Letter; Comment Letter of Proskauer
Rose LLP (Mar. 13, 2026) (``Proskauer Comment Letter''); Comment
Letter of the Committee of Annuity Insurers (Mar. 10, 2026) (``CAI
Comment Letter'').
\24\ See, e.g., Comment Letter of the Public Investors Advocate
Bar Association (Mar. 16, 2026) (``PIABA Comment Letter''); Comment
Letter of Better Markets (Mar. 13, 2026) (``Better Markets Comment
Letter'').
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B. Overview of the Final Amendments
We are amending the definitions of ``small business'' and ``small
organization'' under the Investment Company Act and the Advisers Act
for purposes of the RFA, largely as proposed, but with modifications:
<bullet> Raising the Fund Net Asset Threshold. As proposed, the
Commission is raising the net asset threshold for funds from $50
million to $10 billion.\25\
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\25\ Final 17 CFR 270.0-10.
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<bullet> Amending the Fund Group Definition. As proposed, the
Commission is, for purposes of aggregating the net assets of related
funds, replacing the term ``group of related investment companies''
with ``family of investment companies'' as that term is used in Item
B.5 of Form N-CEN.
<bullet> Raising the Adviser RAUM Threshold. As proposed, the
Commission is raising the RAUM Threshold from $25 million to $1
billion, and making conforming amendments to the Control Relationship
Threshold to reflect the increased RAUM Threshold.\26\ In a change from
the proposal, the Commission is amending the Control Relationship
Threshold to help advisers understand how to calculate the threshold.
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\26\ Final 17 CFR 275.0-7.
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<bullet> Eliminating the Adviser Total Assets Threshold. In a
change from the proposal, the Commission is eliminating the $5 million
Total Assets Threshold, and making conforming amendments to the Control
Relationship Threshold to reflect that the Commission is eliminating
the Total Assets Threshold.
<bullet> Periodic Inflation Adjustments. As proposed, the
Commission is amending rule 0-10 and rule 0-7 to allow the Commission
to make subsequent inflation adjustments to the asset thresholds by
order every 10 years in accordance with the inflation adjustment
mechanism set forth in section II.C below (the ``Inflation Adjustment
Mechanism'').
<bullet> Conforming Amendments to Form ADV and the Hardship
Exemption Rule. As proposed, the Commission is making conforming
amendments to Form ADV, the uniform application for investment adviser
registration and report form by exempt reporting advisers, and rule
203-3(b), which sets forth conditions for certain small SEC-registered
advisers to apply for a continuing hardship exemption from the
requirement to make Advisers Act filings electronically with the
Investment Adviser Registration Depository (the ``IARD'').\27\ The
amendments are designed to reflect the Commission's amendments to the
RAUM Threshold, the Control Relationship Threshold, and their
corresponding periodic Inflation Adjustment Mechanism. In a change from
the proposal, the Commission is also making additional conforming
amendments to Form ADV and rule 203-3(b) to reflect the determination
at adoption to eliminate the Total Assets Threshold.
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\27\ See infra footnote 127, and accompanying text (defining
``exempt reporting advisers'').
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Smaller firms play an important role in the asset management
industry.\28\ We are mindful that smaller firms may face
disproportionate compliance burdens compared to larger firms.\29\ For
example, compliance costs--such as staff time, recordkeeping,
cybersecurity costs, and reliance on outside expertise or market data--
often do not scale with firm size,\30\ and have increased, while client
fees have decreased.\31\ We also are mindful that failure to consider
the impact of regulations on small entities could risk reducing
innovation, competitiveness, and new market
[[Page 69958]]
participants.\32\ 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.
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\28\ Commenters agreed and stated, for example, that smaller
funds offer innovation, and smaller advisers employ diverse
investment philosophies and portfolio construction approaches, which
broadens investor choice. See, e.g., ICI Comment Letter.
\29\ See, e.g., Comment Letter of the Investment Adviser
Association (Mar. 13, 2026) (``IAA Comment Letter'').
\30\ See, e.g., MFA Comment Letter.
\31\ See, e.g., Comment Letter of Garcia Hamilton & Associates,
L.P. (Mar. 12, 2026) (``Garcia Hamilton Comment Letter'').
\32\ See, e.g., Comment Letter of the CFP Board, Financial
Planning Association, et al. (Mar. 13, 2026) (``CFP Board Comment
Letter'').
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The final amendments are designed to help ensure the Commission's
RFA analyses capture a more meaningful population of ``small entities''
so the Commission can continue to address the special concerns of small
businesses. Updating the definitions of ``small business'' and ``small
organization'' is appropriate to reflect the substantial growth in, and
distribution of, regulatory assets under management and net assets over
the decades since these thresholds were set.\33\ The updates to the
definitions reflect more reliable and consistent metrics for whether an
adviser or fund is small, compared to those in the current rules.
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\33\ See infra section II.A.1 and section II.B.1.
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Some commenters stated that the proposed amendments would classify
too many funds or advisers as small (effectively leading the Commission
to prioritize benefits of large funds and advisers instead of truly
small funds and advisers),\34\ or otherwise could result in regulatory
arbitrage between investment advisers and broker-dealers \35\ and
diminish investor protections.\36\ As explained below, the final
amendments will not classify too many funds or advisers as small. The
final amendments also will not diminish investor protections.
Designating an entity as a small entity does not reduce investor
protection. Investor protection is a concern regardless of the size of
an entity. The purpose of the small entity definition is, in part, to
ensure that the Commission considers whether its rules are
appropriately calibrated so that smaller entities are not subject to
regulations that may be disproportionately burdensome relative to the
benefits or improvements in investor protection. The final amendments
will enhance the Commission's rulemaking process by helping ensure the
RFA analyses reflect current economic realities by incorporating the
evolution of adviser and fund growth since the rules were first
adopted, as other commenters stated.\37\
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\34\ See, e.g., PIABA Comment Letter.
\35\ Comment Letter of the Securities Industry and Financial
Markets Association (Mar. 13, 2026) (``SIFMA Comment Letter'')
(noting the differences between the regulatory frameworks applicable
to broker-dealers and investment advisers and stating that
regulatory arbitrage is a contributing factor driving the shift from
broker-dealer to registered investment adviser frameworks).
\36\ PIABA Comment Letter.
\37\ See e.g., IAA Comment Letter. One commenter expressed
concern that the proposal would be inconsistent with an Executive
Order and other Federal efforts to make housing affordable. This
commenter expressed concern that reclassifying billion-dollar
advisers and multi-billion-dollar fund families as ``small'' for
securities rulemaking works at cross purposes with efforts to curb
large institutional purchases of single-family homes. See Comment
Letter of Angela Dowell (Feb. 26, 2026) (``Dowell Comment Letter'')
(citing, for example, ``Stopping Wall Street From Competing with
Main Street Homebuyers,'' Donald J. Trump Executive Order, Jan. 20,
2026, available at <a href="https://www.whitehouse.gov/presidential-actions/2026/01/stopping-wall-street-from-competing-with-main-street-homebuyers/">https://www.whitehouse.gov/presidential-actions/2026/01/stopping-wall-street-from-competing-with-main-street-homebuyers/</a>). We disagree that the final amendments will be
inconsistent with the Executive Order or other Federal efforts to
make housing affordable. The plain language of the current and final
rules limits the application of the definitions, stating that the
definitions of ``small business'' and ``small organization'' are for
purposes of Commission rulemaking in accordance with the provisions
of Chapter Six of the Administrative Procedure Act, unless otherwise
defined for purposes of a particular rulemaking.
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One commenter stated that the proposal did not appear to evaluate
the investor-protection consequences of the proposed amendments and
asserted the proposal focused primarily on industry size, rather than
regulatory risk or compliance capacity. It outlined certain areas that
the Commission should quantify and analyze in this regard, in
particular to focus any regulatory relief on genuinely small entities
and in a risk-based manner.\38\ Because the final amendments primarily
affect the process by which the Commission considers potential impacts
on small entities, including benefits and costs of future rulemaking on
small entities, the final amendments will not have any immediate impact
on investor protection. Rather, the final amendments will require the
Commission to consider and address the potential impacts of future
rulemaking on small entities, including effects on investor protection.
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\38\ Comment Letter of James E. Scarborough (Mar. 12, 2026)
(``Scarborough Comment Letter'') (requesting analysis of investor
exposure, regulatory relief consequences, risk-based threshold
alternatives, and regulatory gap risk).
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Separately, the methodology for the proposed thresholds reflects
that advisory fees are generally scaled with an adviser's assets under
management, where greater advisory fees can support an increased
compliance capacity. The updated thresholds also will allow the
Commission to more appropriately address in future rulemakings, in a
risk-based manner, concerns that are unique to those entities that
should be deemed small entities in view of the growth in assets since
the rules were adopted and the appropriateness of any regulatory
accommodations that may be provided to small entities.
While conducting RFA analyses in future rulemakings, the Commission
can take into account any potential for regulatory arbitrage between
broker-dealers and investment advisers and adjust its future rules
accordingly. The Commission carefully weighs the economic impact of its
rules on all regulated entities, including small businesses, and
tailors its regulations to the relevant characteristics of the
particular entities regulated. In this way, the Commission works to
meet its mandate under the Federal securities laws while at the same
time considering any potentially disproportionate costs and regulatory
burdens for small entities. The Commission intends to continue this
careful, measured regulation that addresses small business concerns
within the protections of the Federal securities laws.
II. Discussion
A. Amendments to Rule 0-10 Under the Investment Company Act
1. Raising the Net Asset Threshold
The Commission is amending the net asset threshold for small funds,
as proposed. The final rule will amend paragraph (a) of rule 0-10 to
increase the net asset threshold from $50 million to $10 billion and,
as discussed in more detail in section II.C below, establish a
mechanism to inflation-adjust this figure every ten years. The increase
accounts for the overall growth in the fund industry since the $50
million threshold was originally set in 1982.\39\ At that time, 62.4%
of funds were deemed ``small entities,'' but by 2024, the share of
funds deemed ``small entities'' had fallen to 0.6%.\40\ Raising the net
asset threshold in rule 0-10 to reflect growth in the investment
company industry over the past decades will improve the utility of RFA
analyses by more closely reflecting the population of funds that does
not have the same competitive advantages as larger fund families (for
instance, due to economies of scale when these larger families perform
certain compliance and other operational functions in-house).\41\ It
also will more closely reflect the population of funds that does not
have the same negotiating power as larger
[[Page 69959]]
fund families when retaining service providers to perform compliance
and operational functions.
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\39\ See Proposing Release, at nn.50-55 and accompanying text.
\40\ See 1982 Adopting Release; Proposing Release, at n.55 (85
small entities/13,630 total registered investment companies and BDCs
= 0.6%).
\41\ Unless stated otherwise, the use of the term ``fund
family'' or ``fund families'' in this release has the same meaning
as ``family of investment companies.''
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In determining how to calibrate the amended threshold, the
Commission considered the distribution of assets across individual
funds and fund families, with the goal of ensuring that the proportion
of funds that may face greater challenges in complying with Commission
regulations due to their size be included in the small entity
definition. Specifically, the Commission analyzed data reported on Form
N-CEN to sort families of investment companies into percentiles
according to their cumulative average total net assets. The Commission
further analyzed this data to determine the percentage of individual
funds and the percentage of average total net assets represented by
each percentile.\42\ At proposal, the Commission estimated that, as of
December 2024, fund families at or below the 80th percentile threshold
of $10.04 billion in net assets accounted for 22.91% of individual
funds and only 2.13% of fund assets.\43\ The analysis that formed the
basis for the proposed threshold reflects that the assets of the
investment company industry are heavily concentrated at the largest
fund families, and these largest fund families not only manage a large
majority of assets in the industry, but also account for a majority of
the individual funds.\44\
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\42\ See Proposing Release, at section II.A.1.
\43\ See Proposing Release, at n.60; Table 1 and accompanying
text. The data the Commission presented in the proposing release
continues to represent the distribution of fund families, individual
funds, and fund assets. See also infra footnote 52 and accompanying
text.
\44\ The SBA considers economic characteristics composing the
structure of an industry such as degree of competition, average firm
size, start-up costs and entry barriers, and distribution of firms
by size in establishing size standards. See 13 CFR 121.102. We have
focused our analysis on the distribution of firms by size, as that
is the metric for which we have the best available data.
---------------------------------------------------------------------------
Most commenters supported generally raising the net asset threshold
from the current level to account for growth in the industry.\45\
Several commenters supported raising the net asset threshold to $10
billion in particular, stating that this threshold appropriately
reflects current market size and structure.\46\ One of the commenters
specifically expressed its support for the distribution-based
methodology used to reach the proposed $10 billion threshold for
funds.\47\ This commenter, while supporting the proposal, further
encouraged the Commission to adjust the threshold to $12 billion to
account for growth in the industry since the date of the data
underlying the proposal. Some other commenters expressed concerns that
$10 billion is too high, one of whom requested that the Commission
quantify and analyze the investor-protection consequences of the higher
threshold and another expressed concerns about the effects of entities
with billions of dollars in assets being deemed to be ``small'' (i.e.,
very large firms could receive regulatory accommodations intended for
smaller firms with limited regulatory capacity, which the commenter
indicated could cause smaller firms to lose the advantages the RFA
provides them and have negative investor protection consequences).\48\
One commenter suggested adjusting the thresholds adopted in the 1998
amendments for inflation, resulting in a $100 million threshold, or
alternatively using the SBA's small entity standard based on $40
million in gross receipts.\49\ Another commenter, asserting that the
proposed threshold is too high, suggested defining ``small entities''
as those at or below the 20th percentile of aggregate fund family net
assets using a distribution methodology based on Form N-CEN data.\50\
---------------------------------------------------------------------------
\45\ See e.g., Comment Letter of Federated Hermes, Inc. (Mar.
12, 2026) (``Federated Hermes Comment Letter''); CAI Comment Letter;
Proskauer Comment Letter.
\46\ See e.g., IDC Comment Letter; Comment Letter of the
American Securities Association (Mar. 13, 2026) (``ASA Comment
Letter'').
\47\ ICI Comment Letter.
\48\ See e.g., Better Markets Comment Letter; Scarborough
Comment Letter.
\49\ Better Markets Comment Letter.
\50\ Dowell Comment Letter.
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After considering these comments, we are, as proposed, raising the
net asset threshold to $10 billion for funds. We agree with commenters'
statements that the increased threshold would better reflect the growth
in the fund industry and aid the Commission's analysis of regulatory
and compliance costs on small funds.\51\ Based on analysis of the
distribution of data discussed above, we are adopting a ``small
entity'' definition that incorporates a $10 billion net asset
threshold, which continues to correspond to the 80th percentile
threshold in that distribution-based analysis.\52\ While the amended
threshold will deem some relatively large individual funds ``small''
for purposes of the RFA, such an outcome is consistent with the
economies of scale rationale for aggregating funds within a family. A
single large fund with no other related funds will bear similar
regulatory costs to several smaller, related funds that collectively
represent a similar level of net assets. Therefore, aggregating assets
across fund families reflects the Commission's understanding that funds
within a complex typically use the same administrative, management, and
compliance systems to oversee all the funds within the complex, so fees
imposed on the fund by the adviser or administrator typically reflect
economies of scale that the adviser or administrator achieves from
managing other funds.
---------------------------------------------------------------------------
\51\ See e.g., IDC Comment Letter.
\52\ Based on Form N-CEN data as of December 2025, fund families
at or below the 80th percentile threshold of $10.59 billion in net
assets similarly accounted for 22.6% of individual funds and 2.1% of
fund assets.
---------------------------------------------------------------------------
While the Commission seeks to ensure that funds and fund families
that may face greater challenges with regulatory compliance due to
their size be deemed small entities, we are also mindful that setting
the threshold too high has the potential to be counterproductive and to
undermine the purpose of the Commission's RFA analyses. A higher
threshold would result in a larger pool of small entities and therefore
would increase the number of small entities needed to be affected by a
rule for the rule to ``have a significant economic impact on a
substantial number of small entities,'' which could lead to fewer RFA
analyses being performed.\53\ Setting the threshold too high might also
inadvertently lead to the Commission overlooking issues that concern
the smallest entities when the Commission attempts to tailor its rules,
and instead focusing primarily on issues of more general concern to the
industry. Such an outcome might have the potential to perpetuate larger
funds' advantages in the market, to the detriment of the smaller funds
that the RFA was designed to protect.\54\ Accordingly, the Commission's
amended threshold is meant to identify a level below which a meaningful
proportion of funds would be deemed small entities, but above which the
size of, and concentration of assets in, fund families increases to
such an extent that treating individual funds within those families as
small entities would not be consistent with the goals of the RFA. We
are therefore not adopting a smaller threshold than the proposed $10
billion threshold. We are also therefore not adopting a threshold of
$12 billion as one commenter suggested. We do not believe this change
from the proposed
[[Page 69960]]
approach, based on one-year market movements, would be appropriate, as
the proposed threshold was designed to be stable and flexible enough to
guide Commission analysis for the next 10 years and not to reflect
short-term market fluctuations.
---------------------------------------------------------------------------
\53\ See 5 U.S.C. 605(b); see also, e.g., 1982 Adopting Release,
supra footnote 13, at n.41 and accompanying text (stating, in the
context of the AUM threshold for investment advisers, ``the bigger
the class, the greater the number of entities within it that must be
adversely affected by a particular rulemaking before it can be said
that the rulemaking affects a `substantial' number of the class'').
\54\ See discussion at supra footnotes 7-9 and accompanying
text.
---------------------------------------------------------------------------
We are not adjusting the current threshold for inflation, as some
commenters suggested, but rather are retaining the proposed
distribution-based methodology as the basis for the final rules'
threshold adjustment. A net asset threshold of $100 million (the result
of inflation-adjusting the current rule's threshold) would cover less
than 3% of funds and less than .03% of fund assets and would constrain
future Commission analysis of small entity issues to this limited
group.\55\ Further, we are not adopting a threshold based on a gross
receipts analysis. As discussed in the Proposing Release, gross
receipts are not well suited to the fund industry, primarily because
the Commission does not have or collect data for gross receipts of
registered investment companies.\56\ As the Proposing Release also
discussed, funds primarily generate revenue through capital
appreciation and other investment returns rather than receipts from the
sale of goods or services, and a fund's investment returns may be
attributable primarily to its particular investment strategy, meaning
that two funds of identical size but pursuing different investment
strategies may produce vastly different returns.\57\ Commenters did not
address or dispute these rationales for using an approach other than a
gross receipts analysis.
---------------------------------------------------------------------------
\55\ Proposing Release, at n.59 and accompanying text (table
showing the distribution of assets across funds and fund families by
percentile).
\56\ Proposing Release, at n.63 and accompanying text.
\57\ See id.
---------------------------------------------------------------------------
We are also not adopting an approach that defines small entities as
fund families with net assets at or below the 20th percentile as
determined annually. The $10 billion net asset threshold and
corresponding percentile we are adopting were derived from a
distribution analysis particular to that data and set of facts and,
therefore, is not necessarily indicative of the proportion of funds
that should be deemed small entities in the future. A fixed percentile
may become stale over time as the size and distribution of fund family
net assets changes. Additionally, as discussed above, we continue to
believe that a lower net asset threshold would not appropriately define
``small entities'' for future Commission analysis.\58\
---------------------------------------------------------------------------
\58\ See supra footnotes 52, 54-55 and accompanying text.
---------------------------------------------------------------------------
Some commenters recommended aligning the adviser and fund
thresholds so that if either a fund or an adviser qualifies as small,
both would be treated as small.\59\ These commenters expressed concerns
that a mismatch between the fund and adviser thresholds could produce
anomalous outcomes where, for example, an adviser managing a few
billion dollars is not considered ``small,'' while the funds it manages
are. We continue to believe that independent asset thresholds for
advisers and funds are appropriate. Advisers and funds are separate
industries with different regulatory requirements and resources
available to comply with these requirements. Therefore, the status of a
fund as small and not dominant in its field is not indicative of its
adviser being similarly situated, or vice versa.
---------------------------------------------------------------------------
\59\ See Federated Hermes Comment Letter; ICI Comment Letter;
IDC Comment Letter.
---------------------------------------------------------------------------
2. Group Definition Amendments
As proposed, we are amending rule 0-10 to replace the term ``group
of related investment companies'' with ``family of investment
companies,'' as that term is used in Item B.5 of Form N-CEN.\60\
Currently, while the ``small entity'' designation applies to individual
funds, whether any individual fund is deemed small depends upon the
aggregate net assets of all funds within its respective ``group of
related investment companies.'' The change from using the term ``group
of related investment companies'' to using ``family of investment
companies'' in the small entity definition will enable the Commission
to rely on information that is already reported on Form N-CEN to
identify small entities for purposes of RFA analyses and to more
efficiently consider whether future adjustments to the net asset
threshold are warranted. For comparison, the table below provides the
existing definition of ``group of related investment companies'' from
rule 0-10 alongside the existing definition of ``family of investment
companies'' from Form N-CEN:
---------------------------------------------------------------------------
\60\ See final 17 CFR 270.0-10(a)-(b); proposed 17 CFR 270.0-
10(a)-(b). Item B.5 of Form N-CEN requires investment companies to
report whether they are part of a ``family of investment companies''
and, if so, to disclose the full name of the family of investment
companies.
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[[Page 69961]]
[GRAPHIC] [TIFF OMITTED] TR06NO26.030
Commenters expressed support for the proposed changes.\61\ They
agreed that the Commission should leverage data that is already
collected in Form N-CEN, so as not to impose the additional burden of a
new reporting requirement related to the ``group of related investment
companies'' definition.\62\ Some commenters, while expressing support
for the proposed changes, also offered views on how the ``family of
investment companies'' definition in Form N-CEN might be improved.\63\
---------------------------------------------------------------------------
\61\ See, e.g., ICI Comment Letter; CAI Comment Letter; IDC
Comment Letter.
\62\ Id. See also Proposing Release, at n. 77 and accompanying
text.
\63\ See Comment Letter of Rohan Sharma (Jan. 27, 2026)
(``Sharma Comment Letter''); CAI Comment Letter.
---------------------------------------------------------------------------
After considering commenters' input, we are adopting a final
definition that uses ``family of investment companies,'' as proposed.
As described in the Proposing Release, the definition of ``family of
investment companies'' serves a substantially similar purpose to the
definition of ``group of related investment companies'' in seeking to
group together funds that hold themselves out to investors as related
(the ``holding out prong'') and that share an investment adviser or key
service provider (an administrator for a ``group of related investment
companies'' or underwriter for a ``family of investment
companies'').\64\ We acknowledge that specific differences from the
``group of related investment companies'' concept may produce different
outcomes at the margins, such as the extent to which an insurance
company's separate account is aggregated (with the insurance company's
general account, as well as with other separate accounts) to determine
whether individual separate accounts are small entities.\65\
Notwithstanding the differences between the two terms, we continue to
anticipate, as discussed in the Proposing Release, that funds that are
part of the same ``family of investment companies'' are likely to
experience similar economies of scale as those funds that are part of
the same ``group of related investment companies.'' Examples of
potential cost savings due to economies of scale might include complex-
wide policies and procedures and recordkeeping systems, a shared chief
compliance officer or board members, and one legal and compliance
function that services the whole complex.
---------------------------------------------------------------------------
\64\ Proposing Release, at nn.69-71 and accompanying text.
\65\ Proposing Release, at nn.74-75 and accompanying text
(discussing the treatment of insurance company separate accounts
under the current and proposed definitions); see also Proposing
Release, at nn.72-73 and accompanying text (discussing the treatment
of UITs under the current and proposed definitions).
---------------------------------------------------------------------------
We are not amending the current definition of ``family of
investment companies'' in Form N-CEN as some commenters have suggested.
One commenter suggested amending the Form N-CEN definition so that it
does not aggregate funds based on a shared principal underwriter,
stating that funds that share an underwriter do not necessarily share
compliance infrastructure.\66\ This commenter, however, did not address
the second prong of the Form N-CEN definition that requires registered
investment companies to hold themselves out as related companies for
purposes of investment and investor services in order to be grouped in
the same family of investment companies, which in our view is likely
indicative that two funds share compliance and operational
infrastructure. Another commenter suggested that the Form N-CEN
definition should aggregate separate accounts if they have the same
insurance company sponsor or depositor, similar to the current ``group
of related investment companies'' definition that aggregates assets of
the general account and all other separate
[[Page 69962]]
accounts of the insurance company.\67\ While this commenter stated that
this approach would be appropriate because the financial guarantees of
variable contracts issued by the same insurance company are backed by
the financial strength and claims-paying ability of the same general
account, regardless of whether those contracts are supported by
different separate accounts, the commenter did acknowledge that the
suggested change would likely not significantly change how separate
accounts are grouped for small entity definitional purposes.
---------------------------------------------------------------------------
\66\ Sharma Comment Letter.
\67\ CAI Comment Letter. See also 17 CFR 270.0-10.
---------------------------------------------------------------------------
As other commenters have noted, leveraging data from an existing
definition does not impose an additional burden on registrants of
having to amend their filings. If we were to amend Form N-CEN as these
two commenters suggest, registrants would have to review and possibly
amend their filings, reducing or eliminating the benefit of using
existing data. Our final approach reflects a view that the burden on
other registrants of amending Form N-CEN would not provide commensurate
benefits in any incremental improvements to the Commission's analysis
of small entities. Further, the ``family of investment companies''
definition from Form N-CEN and associated data collection have long
been used in assisting the Commission's analysis of multiple funds
across the same family of investment companies.\68\
---------------------------------------------------------------------------
\68\ See Proposing Release, at n.71 and accompanying text
(explaining that this definition has been used by the Commission and
registrants since 1985).
---------------------------------------------------------------------------
B. Amendments To Rule 0-7 Under the Advisers Act
1. The RAUM Threshold
As proposed, the final amendments will raise the RAUM Threshold
from $25 million to $1 billion and add the Inflation Adjustment
Mechanism.\69\ Rule 0-7 currently provides that an adviser is a small
entity if it has assets under management of less than $25 million ``or
such higher amount as the Commission may by rule deem appropriate under
Section 203A(a)(1)(A) of the Act.'' \70\ As proposed, the final
amendments remove the phrase ``or such higher amount as the Commission
may by rule deem appropriate under Section 203A(a)(1)(A) of the Act (15
U.S.C. 80b-3a(a)(1)(A)).'' \71\ The final amendments are designed to
update the RAUM Threshold to reflect the growth of advisers' assets
under management over time.\72\
---------------------------------------------------------------------------
\69\ We discuss the Inflation Adjustment Mechanism in section
II.C; final 17 CFR 275.0-7(a)(1).
\70\ 17 CFR 275.0-7(a)(1).
\71\ In a change from the proposal, we are correcting an
erroneous cite in 17 CFR 275.0-7(a)(1), so instead of erroneously
citing to 15 U.S.C. 80b-3a(a)(2), it correctly cites to 15 U.S.C.
80b-3a(a)(3), which defines ``assets under management'' under the
Advisers Act.
\72\ Proposing Release at section II.B.1 for a discussion of the
growth of advisers' assets under management over time.
---------------------------------------------------------------------------
a. Consideration of Alternative Non-RAUM Thresholds
As proposed, the final amendments use an RAUM-based metric for
threshold purposes. In the Proposing Release, we discussed feedback the
Commission received suggesting alternatives to an asset-based approach
to identifying small advisers and requested comment on alternatives to
the RAUM Threshold.\73\ Some commenters suggested the Commission should
replace the RAUM Threshold with a non-RAUM threshold, such as a
threshold based on revenue,\74\ number of employees,\75\ officers,
owners, clients, non-accredited investors, or a combination
thereof.\76\ These commenters expressed concern that RAUM may not
reflect the breadth of compliance resources that advisers may or may
not have available.\77\ According to these commenters, certain other
non-RAUM-based thresholds would better evidence compliance burdens and
risks of small advisers.\78\ Other commenters opposed replacing the
RAUM Threshold with a non-RAUM-based threshold.\79\
---------------------------------------------------------------------------
\73\ Proposing Release at section II.B.1.
\74\ Garcia Hamilton Comment Letter (supporting a revenue-based
threshold); but see, e.g., IAA Comment Letter (opposing a revenue-
based threshold).
\75\ See e.g., CFP Board Comment Letter (supporting an employee-
based threshold), but see, e.g., Sharma Comment Letter (opposing an
employee-based threshold).
\76\ See e.g., Comment Letter of Neil Patrick Murphy (Feb. 8,
2026) (``Murphy Comment Letter'') (supporting a flexible non-RAUM-
based threshold), but see, e.g., Sharma Comment Letter (supporting
an RAUM-based threshold). A commenter recommended that the
Commission should consider ``risk-based threshold alternatives''
such as ``investor exposure,'' and appeared to define ``investor
exposure'' as ``total investor assets managed by firms.'' See
Scarborough Comment Letter. While it appears the commenter was
recommending an RAUM-based threshold, given that the commenter
suggested the Commission analyze investor exposure, which it defined
as ``total investor assets managed by firms,'' the Commission also
has considered a total assets based threshold, as well as other
types of investor exposure-based thresholds, and we continue to
believe that an RAUM-based threshold is the most reliable indicator
of whether an adviser is small, for the reasons discussed in this
release.
\77\ See e.g., CFP Board Comment Letter.
\78\ See e.g., CFP Board Comment Letter.
\79\ See e.g., Sharma Comment Letter.
---------------------------------------------------------------------------
After considering comments, we are not persuaded to replace the
RAUM Threshold with a non-RAUM-based threshold.\80\ The Commission has
long used RAUM to appropriately differentiate between small and other
advisers to identify a universe of entities that are not dominant in
the field, a principal element of the small entity status under the
RFA.\81\ As some commenters stated, RAUM is a meaningful proxy for
business scale and compliance capacity,\82\ and RAUM metrics directly
correlate to the financial resources available for compliance.\83\
---------------------------------------------------------------------------
\80\ Given that the Commission is maintaining an RAUM-based
threshold, we are not persuaded to impose additional reporting
requirements such as data concerning revenue, as one commenter
recommended. See Garcia Hamilton Comment Letter.
\81\ See Proposing Release at section II.B.1.
\82\ Proskauer Comment Letter (stating that for advisers, RAUM
is a much more meaningful proxy for business scale and compliance
capacity, not the amount of assets carried on the adviser's balance
sheet).
\83\ Sharma Comment Letter.
---------------------------------------------------------------------------
In contrast, a non-RAUM-based threshold would not be as reliable a
metric to determine whether an adviser is small for RFA purposes as an
RAUM-based threshold. An employee-based standard raises implementation
challenges in appropriately addressing the use of service providers and
outsourcing by investment advisers, which could distort the extent to
which the number of an adviser's own employees reflects its actual
resources and size. A commenter agreed, stating that an employee-based
metric would penalize operational efficiency and outsourcing.\84\ This
commenter cautioned that moving to an employee-based metric would
incentivize the misclassification of staff as contractors to maintain
``small entity'' status. Similarly, a threshold based on the number of
clients or non-accredited investors also would not necessarily reflect
an adviser's ability to devote resources towards compliance.\85\ For
example, while an adviser could have only one fund as a client, that
fund could be large both by RAUM and number of investors resulting in
the adviser maintaining the capacity to devote significant resources
towards compliance-related matters. Conversely, an adviser may have a
large number of clients, but those clients' assets could represent a
small amount of RAUM, so that the adviser would not have economies of
scale comparable to a larger adviser with significantly more RAUM.
Likewise, we are not persuaded
[[Page 69963]]
that a threshold based on the number of officers or owners would be a
meaningful measure of adviser size for RFA purposes, because those
metrics do not directly relate to how an adviser would scale resources
in connection with compliance. A revenue-based threshold also would not
provide as meaningful a measure of adviser size for RFA purposes as an
RAUM-based threshold. Advisers have diverse fee structures, and as a
result, annual receipts may not correlate with firm scale, operational
complexity, or available compliance resources. A commenter agreed,
stating that revenue recognition practices may differ among firms
depending on their accounting methods, further reducing comparability
and administrative simplicity.\86\
---------------------------------------------------------------------------
\84\ Sharma Comment Letter.
\85\ Murphy Comment Letter.
\86\ IAA Comment Letter.
---------------------------------------------------------------------------
The Commission has ready access to RAUM data for the types of
advisers that are generally subject to our rules, not just those
registered with us.\87\ Commenters agreed, with one commenter stating
that it supported the RAUM-based threshold, in part, because it was
readily available to the Commission.\88\ For example, while the
Commission collects RAUM information from both SEC-registered advisers
and exempt reporting advisers, it does not collect revenue information
from either type of adviser, and it does not collect employee counts
from exempt reporting advisers.\89\
---------------------------------------------------------------------------
\87\ See Proposing Release at section II.B.1.
\88\ See, e.g., ICI Comment Letter.
\89\ See Form ADV, General Instruction 3; Item 2 of Part 1A;
Item 5 of Part 1A; section 7.B. of Schedule D of Part 1A; Proposing
Release at n.82 (describing exempt reporting adviser reporting).
---------------------------------------------------------------------------
Using RAUM to distinguish between advisers is an approach that is
broadly consistent with size standards generally under the Advisers Act
and the rules thereunder, as well as advisers' existing reporting and
compliance obligations. Congress has repeatedly differentiated the
regulations to which an adviser is subject by using assets under
management thresholds as size standards under the Advisers Act. For
example, Advisers Act section 203(m) sets forth an assets under
management threshold for the private fund adviser exemption from
registration, and Advisers Act section 203A(a)(2) sets forth an assets
under management threshold for mid-sized advisers. Some commenters
agreed.\90\ For example, one commenter stated that it appreciated the
Commission's explanation for proposing to maintain an RAUM-based
threshold, including the view that RAUM aligns with existing regulatory
frameworks.\91\ Another commenter supported maintaining an RAUM metric,
in part, because it is well understood and widely used.\92\
---------------------------------------------------------------------------
\90\ See, e.g., IAA Comment Letter.
\91\ IAA Comment Letter.
\92\ ICI Comment Letter.
---------------------------------------------------------------------------
A commenter recommended that, no matter the approach, the
Commission should establish a structured methodology that grounds any
definition of ``small entity'' in empirical data.\93\ The final
amendments to the RAUM Threshold address this comment because they help
ensure that rule 0-7 continues to use a structured methodology that
grounds the definition of ``small entity'' in empirical data, namely
RAUM, as discussed more fully in section II.B.1.b.
---------------------------------------------------------------------------
\93\ See CFP Board Comment Letter.
---------------------------------------------------------------------------
b. The $1 Billion RAUM Threshold
As proposed, we are raising the RAUM Threshold from $25 million to
$1 billion. Commenters generally agreed that the current RAUM Threshold
is too low.\94\ Most commenters supported raising the RAUM Threshold to
correct the misalignment between the current threshold and the current
economic reality created by decades of industry growth,\95\ the fact
that capital has become concentrated among a small number of
advisers,\96\ and the structural changes in the investment management
industry since the 1998 amendments, including that in 2010, the Dodd-
Frank Act raised the SEC-registration threshold, resulting in fewer
smaller advisers registering with the Commission.\97\ In contrast, one
commenter asserted it is counterintuitive that advisers' significantly
increased RAUM supports their designation as small entities.\98\
Another commenter stated that the Commission should not base the RAUM
Threshold on the fact that there are some very large advisers.\99\
---------------------------------------------------------------------------
\94\ See, e.g., ASA Comment Letter. Some commenters appeared to
confuse the adviser RAUM Threshold with the SEC's adviser
registration threshold, and opposed the proposed increase on that
basis. See, e.g., Comment Letter of Gallatin & Company, LLC (Feb.
19, 2026) (``Gallatin Comment Letter''). Most commenters, however,
appeared to understand the distinction between the RAUM Threshold
and the SEC-registration threshold. See, e.g., SIFMA Comment Letter.
Some commenters also cautioned the Commission to not raise the SEC-
registration threshold. See, e.g., CFP Board Comment Letter. The
Commission did not propose to increase the SEC-registration
threshold in the Proposing Release, and the Commission is not
amending the SEC-registration threshold.
\95\ See, e.g., Comment Letter of Logos Research Centre (Mar.
13, 2026) (``Logos Comment Letter'').
\96\ See, e.g., NVCA Comment Letter.
\97\ See, e.g., MFA Comment Letter.
\98\ PIABA Comment Letter.
\99\ Better Markets Comment Letter.
---------------------------------------------------------------------------
We continue to believe that the current RAUM Threshold is too low.
The final RAUM Threshold is designed to capture the types and numbers
of investment advisers that the Commission now considers to be
``small'' in light of industry growth since the 1998 amendments.\100\
We disagree that industry asset growth or the presence of very large
advisers undermines basing ``small entity'' status on an RAUM Threshold
or the particular RAUM Threshold we are adopting.\101\ It is
appropriate to consider the size of the investment management industry
as a whole, as well as how the size is distributed across advisers, in
determining adviser size thresholds under the RFA, because it helps
ensure that such size thresholds are relevant to the adviser industry.
What is ``small'' is an inherently relative exercise, and in an
industry that ranges to very large advisers managing trillions of
dollars in assets, even small advisers may manage sizeable amounts of
assets. As discussed below, the distribution of advisory assets skewing
heavily towards large advisers only exacerbates this effect.
---------------------------------------------------------------------------
\100\ See Proposing Release at section II.B.1.
\101\ PIABA Comment Letter (stating that the Commission's
reasoning is circular); Better Markets Comment Letter (stating that
the Commission should not base its threshold for deeming entities
small on the fact that there are some very large investment
companies and investment advisers).
---------------------------------------------------------------------------
Most commenters supported raising the adviser RAUM Threshold
specifically from $25 million to $1 billion, saying that the proposed
threshold would better reflect current market realities.\102\ Others
expressed concern that the proposed threshold would be too high because
it would classify too many advisers as small.\103\ One commenter
cautioned that the Commission should not raise the adviser RAUM
Threshold any higher than the proposed $1 billion threshold because it
would obscure the impacts of rulemaking on small entities and deprive
the public of a clear articulation of, and opportunity to comment on,
those impacts.\104\
---------------------------------------------------------------------------
\102\ See, e.g., Sharma Comment Letter.
\103\ See, e.g., Better Markets Comment Letter.
\104\ MFA Comment Letter.
---------------------------------------------------------------------------
Some commenters recommended increasing the RAUM Threshold by a
lesser amount than proposed.\105\ For example, a commenter recommended
that the Commission should increase the current RAUM Threshold for
inflation since the 1998 amendments, instead, raising it to about $50
million.\106\ Another commenter recommended amending the RAUM Threshold
to align with the lowest 20th
[[Page 69964]]
percentile of advisers.\107\ We are not persuaded to increase the RAUM
Threshold by a lesser amount than proposed because we are concerned
that the commenters' recommended thresholds would not account for the
fact that the distribution of RAUM across all advisers is highly
uneven. As discussed in the Proposing Release, some advisers report
having virtually zero RAUM, while a significant amount of the total
RAUM is concentrated at the top 5 percent of advisers.\108\ As
discussed in the Proposing Release, the proposed $1 billion RAUM
Threshold would represent 75 percent of advisers, but only under 3
percent of the total RAUM in the industry.\109\ Therefore, we continue
to believe that in light of the significant concentration of RAUM with
the very largest advisers, the $1 billion RAUM Threshold will strike an
appropriate balance between the level of RAUM per small adviser and the
proportion of total RAUM in the industry.\110\
---------------------------------------------------------------------------
\105\ See, e.g., Better Markets Comment Letter, Dowell Comment
Letter.
\106\ Better Markets Comment Letter.
\107\ Dowell Comment Letter.
\108\ Proposing Release at Table 3, and accompanying text.
\109\ Proposing Release at section II.B.1.
\110\ Proposing Release at section II.B.1.
---------------------------------------------------------------------------
Some commenters recommended that the Commission provide certain
data to support its proposal.\111\ For example, a commenter recommended
the Commission provide data concerning investor exposure, which the
commenter appeared to define as total investor assets managed by firms
that would newly qualify as small entities.\112\ Another commenter
expressed concern that the proposal did not provide details about why
the RAUM Threshold should be $1 billion and not another number.\113\
This commenter expressed concern that the Commission described the
proposed amendment as seeking to separate those who are ``dominant in
their field'' from those who are ``not dominant in'' their field, but
did not explain the ``dominance'' test or why that test would be
appropriate in this circumstance.
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\111\ See, e.g., Scarborough Comment Letter.
\112\ Scarborough Comment Letter.
\113\ CFP Board Comment Letter.
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Other commenters, however, expressed appreciation that the
Commission chose the $1 billion figure based on data, which
demonstrated industry concentration.\114\ Another commenter stated that
it appreciated the Commission's thoughtful and well-reasoned analysis
supporting the proposed $1 billion RAUM Threshold.\115\ This commenter
discussed how the Proposing Release carefully considered both the
significant concentration of assets among the largest advisers and the
RFA's requirement that a small entity be one that is not ``dominant in
its field.'' The commenter stated that although the proposal would
classify a substantial proportion of advisers as small entities, the
Commission explained why this result would be appropriate given the
comparatively modest amount of assets managed by these firms relative
to the largest advisers.
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\114\ See, e.g., MFA Comment Letter (stating that MFA
appreciated the Commission's consideration of a threshold above that
75th percentile, given industry concentration).
\115\ IAA Comment Letter.
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The Commission proposed the $1 billion RAUM Threshold in light of
the RFA's default definitions of the terms ``small business'' and
``small organization,'' which define such entities as those that are
independently owned and operated and are not dominant in their
field.\116\ The RFA provides that an agency may establish its own
definitions of ``small business'' and ``small organization'' under
certain circumstances.\117\ Rule 0-7's Control Relationship Threshold
is designed to address the element of the RFA's default definitions
that require the ``small business'' or ``small organization'' to be
independently owned and operated,\118\ whereas the Commission proposed
the $1 billion RAUM Threshold to address the requirement that a ``small
business'' or ``small organization'' not be dominant in its field.\119\
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\116\ 5 U.S.C. 601(3); 5 U.S.C. 601(4); 15 U.S.C. 632(a)(1).
\117\ 5 U.S.C. 601(3); 5 U.S.C. 601(4).
\118\ Proposing Release at n.85.
\119\ Proposing Release at II.B.1.
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As discussed in the Proposing Release, the Commission used Form ADV
reporting data from SEC-registered advisers and exempt reporting
advisers to analyze the distribution of investment advisers and RAUM,
including data concerning the percentile of advisers, individual RAUM
of advisers at the percentile, the total number of all advisers at or
below the percentile, and the total RAUM of all advisers at or below
the percentile in millions and as a percent.\120\ The Commission
estimated that the proposed $1 billion RAUM Threshold would still
represent under 3 percent of total RAUM in the industry.\121\ The
Commission published these summary statistics in the Proposing Release,
showing the distribution of assets across firms, and the proportion of
entities that would qualify under the proposed and other potential
thresholds.\122\ As discussed in the Proposing Release, these data
revealed that the distribution of RAUM across all advisers is highly
uneven, in part due to some advisers reporting zero or virtually zero
RAUM, and more significantly because of the concentration of RAUM with
the very largest advisers in the industry. The Commission compared data
concerning the proposed RAUM Threshold to historical definitions,
noting that the proposed RAUM Threshold would not result in the same
proportion of advisers that were ``small entities'' as a result of the
1998 amendments.\123\
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\120\ See Proposing Release at n.82-83; Table 3 and accompanying
text. The data the Commission presented in the Proposing Release
continues to represent the distribution of investment advisers and
RAUM.
\121\ See Proposing Release at section II.B.1; Table 3 and
accompanying text; See Scarborough Comment Letter, which requested
such quantification and analysis. This commenter recommended the
Commission should quantify and analyze investor exposure, which the
commenter appeared to define as total investor assets managed by
firms that would newly qualify as small entities. Therefore, it
appears the commenter was recommending analysis of an RAUM-based
threshold, which the Proposing Release analyzed.
\122\ See Proposing Release at n.82-83; Table 3 and accompanying
text; see also Logos Comment Letter, which requested such summary
statistics.
\123\ See Proposing Release at n.82-83; Table 3 and accompanying
text; see also Logos Comment Letter, which requested such
comparative historical analysis.
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After considering comments, and in light of the RFA's default
definitions and our data analysis, we continue to believe that a $1
billion RAUM Threshold is appropriate, and we do not believe that the
final rules would inappropriately afford larger firms RFA
accommodations that are intended for small entities.\124\ A size
standard threshold that is set too high could inadvertently cause
Commission RFA analysis to mistakenly focus on issues of more general
concern to the industry, instead of on issues that particularly impact
smaller entities, as required by the RFA. Conversely, we are concerned
that setting the RAUM Threshold too low would not be consistent with
the RFA's default definition of ``small business'' and ``small
organization,'' because it would exclude advisers that are not dominant
in their field. We believe such advisers may have fewer compliance
resources, and therefore, would benefit from being considered a ``small
business'' or ``small organization'' under the RFA. Although using $1
billion as the RAUM Threshold would classify a large proportion of
investment advisers as small, this is a reasonable and appropriate
result for purposes of our analyses under the RFA, in part due to the
relative amount of
[[Page 69965]]
assets managed by these advisers compared to the largest advisers,
i.e., those dominant in their field. We continue to believe that a $1
billion RAUM Threshold strikes an appropriate balance between the level
of RAUM per small adviser and the proportion of total RAUM in the
industry captured by the new threshold.\125\
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\124\ Scarborough Comment Letter (requesting such analysis).
\125\ See Proposing Release at section II.B.1.
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A commenter recommended that ``exempt reporting advisers'' should
have a higher adviser RAUM Threshold than SEC-registered advisers.\126\
An ``exempt reporting adviser'' is an investment adviser that qualifies
for the exemption from registration under section 203(l) of the
Advisers Act because it is an adviser solely to one or more venture
capital funds, or under rule 203(m)-1 of the Advisers Act because it is
an adviser solely to private funds and has assets under management in
the United States of less than $150 million.\127\ According to this
commenter, Congress has chosen to subject exempt reporting advisers to
different and generally less burdensome regulatory obligations and it
would be inconsistent with the logic underlying the RFA and the
Advisers Act to not assess the burden on exempt reporting advisers
independently in recognition of Congress's intent to subject these
businesses to different regulatory regimes. We are not persuaded to
raise the RAUM Threshold higher for exempt reporting advisers than for
SEC-registered advisers, because, in our experience, we do not believe
exempt reporting advisers and SEC-registered advisers would be subject
to different economies of scale that should impact their status as a
small adviser. For example, in our experience, both types of advisers
could have similar business models or operational structures that could
allow them to achieve similar economies of scale to implement certain
rules. If a future rulemaking, however, would have a different impact
on exempt reporting advisers than on SEC-registered advisers, the
Commission could address that in the future rulemaking.
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\126\ See Proskauer Comment Letter.
\127\ Form ADV, Glossary of Terms.
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As discussed above, some commenters recommended aligning the
adviser and fund thresholds so that if either a fund complex or its
adviser qualifies as small, both would be treated as small for purposes
of the RFA.\128\ We are not persuaded to implement this recommendation,
for the reasons discussed above.
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\128\ See supra footnote 59 and accompanying text.
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The current rule provides that an adviser is a small entity if it
has assets under management of less than $25 million ``or such higher
amount as the Commission may by rule deem appropriate under Section
203A(a)(1)(A) of the Act.'' Advisers Act section 203A(a)(1)(A)
prohibits advisers from registering with the SEC if they have assets
under management below a certain amount. The Commission originally
adopted the phrase in 1998 so the RAUM Threshold could increase in
tandem with any increase in the minimum threshold for SEC
registration.\129\ That has not happened in practice, however, despite
the SEC registration threshold increasing in 2010.\130\ Accordingly, we
proposed to remove ``or such higher amount as the Commission may by
rule deem appropriate under Section 203A(a)(1)(A) of the Act (15 U.S.C.
80b-3a(a)(1)(A)),'' because the revised RAUM Threshold would exceed and
thus not align with the minimum threshold for adviser registration. The
Commission did not receive any comments on this proposed change and is
removing the phrase, as proposed.
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\129\ 1998 Adopting Release at n.48; Proposing Release at n.79.
\130\ Id.
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2. The Total Assets Threshold
The final amendments eliminate the Total Assets Threshold, which
currently excludes from the definition of small entity any adviser that
has total assets of $5 million or more.\131\ The Commission requested
comment on whether to adjust or eliminate the Total Assets Threshold
and proposed to amend the Total Assets Threshold to include an
Inflation Adjustment Mechanism.\132\
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\131\ To implement this amendment, the Commission is removing 17
CFR 275.0-7(a)(2), which sets forth the Total Assets Threshold. The
Commission is redesignating the Control Relationship Threshold from
17 CFR 275.0-7(a)(3) to 17 CFR 275.0-7(a)(2) and making conforming
amendments to remove references to total assets. The Commission also
is removing 17 CFR 275.0-7(b)(2), which defines ``total assets,''
and redesignating the subparagraphs of 17 CFR 275.0-7(b), to account
for that removal.
\132\ Proposed 17 CFR 275.0-7(a)(2); Proposing Release at
section II.B.2.
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The Total Assets Threshold was designed to enable the Commission to
differentiate between small advisers and non-small advisers that may
not have significant RAUM but do have significant assets related to a
non-advisory line or component of their business.\133\ The Total Assets
Threshold also worked in concert with the Control Relationship
Threshold in capturing common types of advisory industry
affiliations.\134\ The Commission had stated that an adviser in a
control relationship with a large broker-dealer or other large
financial services firm typically benefits from the financial and
technical resources of the large firm, and that the large firm may
handle much of the administrative and compliance needs of its
affiliated adviser using resources not reflected in the adviser's
client assets or business assets.\135\
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\133\ Proposing Release at section II.B.2.
\134\ Id.
\135\ Definitions of ``Small Business'' or ``Small
Organization'' Under the Investment Company Act of 1940, the
Investment Advisers Act of 1940, the Securities Exchange Act of
1934, and the Securities Act of 1933, Securities Act Release No.
7383 (Jan. 22, 1997), [62 FR 4106 (Jan. 28, 1997)] (``1997 Proposing
Release''), at text following n.51.
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Some commenters recommended eliminating the Total Assets Threshold,
stating that total assets are not a reliable indicator of whether an
adviser should be considered a small entity.\136\ A commenter stated
that total assets reflected on an adviser's balance sheet do not
necessarily correlate with operational complexity, staffing levels,
compliance capacity, or the scope of its advisory business.\137\ This
commenter stated that advisers may hold assets unrelated to their core
advisory operations, including assets tied to non-advisory activities,
temporary capital arrangements, or organizational structure, that do
not meaningfully reflect firm size for RFA purposes. Another commenter
stated that a balance sheet test can exclude advisers that are
operationally small, while failing to meaningfully differentiate among
advisers' ability to bear incremental compliance costs associated with
Commission rulemakings.\138\ According to this commenter, where an
adviser has de minimis RAUM but substantial non-advisory assets, the
adviser's investment advisory business is, by definition, not a
meaningful component of the firm as a whole. The commenter indicated
that in that circumstance, total assets may reflect the scale of the
firm, taken as a whole, but does not reflect the resources that the
firm is willing or able to allocate to an immaterial advisory business
line. This commenter stated that when new adviser-specific requirements
increase fixed compliance costs, an enterprise with substantial non-
advisory assets but minimal RAUM may rationally choose to exit the
advisory business rather than
[[Page 69966]]
devote incremental resources to comply with the rules affecting an
immaterial portion of its overall operations.
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\136\ Some commenters recommended that if the Commission retains
the Total Assets Threshold, it should raise it to be commensurate
with the proposed RAUM Threshold. See e.g., Proskauer Comment
Letter.
\137\ IAA Comment Letter.
\138\ Proskauer Comment Letter.
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After considering comments, we are eliminating the Total Assets
Threshold. It is not necessary to maintain the Total Assets Threshold,
because the RAUM Threshold and Control Relationship Threshold, as
amended, are more reliable indicators of whether an adviser is a small
entity for purposes of the RFA. Balance sheet assets, such as leases
and equipment, do not reflect the scope of an advisory business as well
as regulatory assets under management.\139\ Furthermore, we understand
an adviser that has de minimis RAUM, but significant assets related to
a non-advisory business may not be willing or able to allocate
resources from the non-advisory line to an immaterial advisory business
if the non-advisory line does not share comparable compliance
requirements. For example, while advisers and broker-dealers may have
some comparable compliance requirements under the Advisers Act and the
Exchange Act, respectively, other compliance requirements are not
easily scalable for both. For example, both advisers and broker-dealers
must deliver 17 CFR 279.1, Part 3 and 17 CFR 249.641, respectively
(``Form CRS'') to retail investors under the Advisers Act and the
Exchange Act, respectively,\140\ but only advisers must file Form ADV
Part 1A, as applicable.\141\ Therefore, a large broker-dealer under
common control with an adviser with de minimis RAUM may be able to
scale certain resources to the adviser concerning Form CRS, but not
Form ADV Part 1A, because that requirement only concerns the adviser.
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\139\ See 1998 Adopting Release at n.42 (stating that ``total
assets'' includes leases and equipment).
\140\ See 17 CFR 275.204-5 and 17 CFR 240.17a-14.
\141\ See 17 CFR 275.203-1 and 17 CFR 275.204-1.
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The RFA defines a ``small business'' and ``small organization'' as
entities that are ``not dominant in their field.'' \142\ The final
rules will continue to be consistent with the Commission's efforts to
take into account the structure of business concerns and organizations
in the securities industry when defining the terms ``small business''
and ``small organization'' and to preclude entities with significant
economic or financial resources from obtaining potential regulatory
benefits under the RFA.\143\ The Control Relationship Threshold will
continue to prevent affiliates of large advisers from obtaining
potential regulatory benefits under the RFA. Currently and under the
final rules, the Control Relationship Threshold precludes advisers from
being considered small if they have de minimis RAUM, but control, are
controlled by, or are under common control with another adviser that
has assets under management equal to or greater than the RAUM
Threshold. In such a case, the adviser with de minimis RAUM would
appropriately continue to be precluded from obtaining potential
regulatory benefits under the RFA.
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\142\ 5 U.S.C. 601(3); 5 U.S.C. 601(4); 15 U.S.C. 632.
\143\ Proposed Definitions of ``Small Business'' and ``Small
Organization'' for Purposes of the Regulatory Flexibility Act,
Securities Act Release No. 6302 (Mar. 20, 1981), 46 FR 19251 (Mar.
30, 1981) (``1981 Proposing Release'') (stating that the Commission
believes that it is appropriate to take into account the structure
of business concerns and organizations in the securities industry
when defining the terms ``small business'' and ``small
organization'' and to preclude entities with significant economic or
financial resources from obtaining potential regulatory benefits
under the RFA).
---------------------------------------------------------------------------
Although the Commission originally aligned the Total Assets
Threshold with the total assets test used in the ``small entity''
definition in 17 CFR 240.0-10 (``Exchange Act rule 0-10''), it is not
necessary to continue to align them through a total assets metric, as a
commenter discussed.\144\ Currently, Exchange Act rule 0-10(a)
provides, among other things, that when used with reference to an
``issuer'' or a ``person,'' other than an investment company, the term
``small business'' or ``small organization'' means an ``issuer'' or
``person'' that, on the last day of its most recent fiscal year, had
total assets of $5 million or less.\145\ The Commission stated that it
aligned the values of the ``small entity'' definitions under the
Advisers Act and the Exchange Act in view of financial industry
affiliations between advisers and other large financial services firms
to which the Exchange Act definition would apply.\146\ However, as
discussed above, the RAUM Threshold is a more reliable indicator of
whether an adviser is a small entity for purposes of the RFA. As
indicated by a commenter, RAUM is a more meaningful proxy for business
scale and compliance capacity for advisers, rather than the amount of
assets carried on the adviser's balance sheet.\147\ The ``small
entity'' definitions under the Advisers Act and the Exchange Act will
continue to be aligned in other ways, including by both having
thresholds that concern control relationships.\148\
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\144\ Proskauer Comment Letter.
\145\ In separate rulemaking, the Commission proposed to revise
Exchange Act rule 0-10 (17 CFR 240.0-10) to raise the total assets
threshold in the definition of small entity issuer (other than an
investment company) from $5 million to $35 million. See 2026 Filer
Status Release.
\146\ Proposing Release at section II.B.2.
\147\ Proskauer Comment Letter.
\148\ Final 17 CFR 275.0-7(a)(2) and 17 CFR 240.0-10(i).
---------------------------------------------------------------------------
The Commission receives limited information regarding advisers'
total assets that would allow it to analyze with specificity the impact
of potential changes to the Total Assets Threshold over the
distribution of investment advisers. The Commission only receives
information in Item 1.O. of Part 1A of Form ADV regarding investment
advisers with $1 billion or more in total assets as well as information
in Item 12 from registered investment advisers with less than $25
million in RAUM regarding whether they have less than $5 million in
total assets. Commenters did not support adopting additional reporting
requirements to preserve this element of the definition of ``small
entity.'' \149\ Given that the RAUM Threshold and Control Relationship
Threshold are more meaningful thresholds to determine whether an
adviser is small for purposes of the RFA than the Total Assets
Threshold, we are not persuaded that imposing new reporting burdens to
calibrate the Total Assets Threshold would be justified.
---------------------------------------------------------------------------
\149\ See e.g., Proskauer Comment Letter.
---------------------------------------------------------------------------
3. The Control Relationship Threshold
The Commission is amending the Control Relationship Threshold, with
modifications from the proposal. Currently, the Control Relationship
Threshold disqualifies an adviser from being considered small if it is
in a control relationship with an affiliated adviser exceeding an
assets under management test that mirrors the current RAUM Threshold of
$25 million.\150\ To continue to maintain a consistent threshold
between the Control Relationship Threshold and the RAUM Threshold, the
Commission is amending the value of the Control Relationship Threshold
to conform it to the revised $1 billion RAUM Threshold, including its
corresponding Inflation Adjustment Mechanism, as proposed.\151\ Also,
as proposed, the Commission is removing ``(or such higher amount as the
Commission may deem appropriate)'' to further conform the Control
Relationship Threshold with the revised RAUM Threshold, for which the
Commission removed a similar phrase.\152\ In a change from the
proposal, the Commission is removing from the Control Relationship
Threshold the elements that concern the Total Assets Threshold, namely
that an
[[Page 69967]]
adviser is disqualified from being considered a small entity if it has
a control relationship with any person (other than a natural person)
that had total assets of $5 million or more on the last day of the most
recent fiscal year (as well as the proposed inflation adjustment to
this amount).\153\ As discussed above, an RAUM threshold is a more
reliable indicator of whether an adviser is a small entity than a total
assets threshold.\154\ In another change from the proposal, the
Commission is further amending the Control Relationship Threshold,
after considering comments, to help advisers understand how to
calculate the assets under management referenced in the Control
Relationship Threshold, as discussed more fully below.\155\ As a
result, under the final amendments, an adviser would meet the Control
Relationship Threshold if it does not control, is not controlled by,
and is not under common control with another investment adviser that
has assets under management equal to or greater than the RAUM
Threshold.
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\150\ 17 CFR 275.0-7(a)(3).
\151\ Final 17 CFR 275.0-7(a)(2).
\152\ See section II.B.1.b of this release.
\153\ A commenter requested the Commission provide examples
illustrating the application of the Control Relationship Threshold
to common dual-registrant and holding company structures, stating
that it was concerned large broker-dealer operations of dual
registrants would cause an adviser to no longer be a small entity.
This request appears to concern the element of the current Control
Relationship Threshold that concerns total assets that we are
removing, because only the total asset analysis considered non-
advisory assets. Therefore, this request does not appear to be
applicable to the final rules. See ASA Comment Letter; 17 CFR 275.0-
7(a)(3); final 17 CFR 275.0-7(a).
\154\ See section II.B.2 of this release.
\155\ Final 17 CFR 275.0-7(a)(2).
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The Control Relationship Threshold is designed to preclude entities
with significant economic or financial resources from obtaining
potential regulatory benefits under the RFA.\156\ We continue to
believe that Congress did not intend affiliates of large businesses to
receive benefits under the RFA.\157\ Only those businesses and
organizations that are ``independently owned'' may qualify as small
entities pursuant to the definitions contained in the RFA.\158\ The
final amendments to the Control Relationship Threshold are designed to
help ensure the Control Relationship Threshold continues to preclude
entities with significant economic or financial resources from their
large business affiliates from obtaining potential regulatory benefits
under the RFA.
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\156\ Proposing Release at section II.B.3.
\157\ 1997 Proposing Release, at text accompanying n.52.
\158\ 1981 Proposing Release at text accompanying n.32;
Proposing Release at text accompanying n.111.
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Commenters supported the Commission's proposal to make conforming
amendments to the Control Relationship Threshold to reflect the revised
$1 billion RAUM Threshold, with its corresponding Inflation Adjustment
Mechanism.\159\ Commenters also offered recommendations concerning the
Control Relationship Threshold. A commenter requested that the
Commission confirm that RAUM as reported on Form ADV is the operative
metric for adviser small entity status.\160\ Under the current rule,
the RAUM Threshold sets forth how to calculate assets under management:
as defined under Advisers Act section 203A(a)(3) and reported on an
adviser's annual updating amendment to Form ADV.\161\ The current
Control Relationship Threshold, however, only discusses assets under
management, without detailing the calculation method.\162\
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\159\ See, e.g., ASA Comment Letter.
\160\ ASA Comment Letter.
\161\ 17 CFR 275.0-7(a)(1).
\162\ 17 CFR 275.0-7(a)(3).
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After considering the comments, the Commission is confirming that
advisers must calculate assets under management for the Control
Relationship Threshold using the same method as the RAUM Threshold: as
defined under Advisers Act section 203A(a)(3) and reported on the
adviser's annual updating amendment to Form ADV. In this regard, in a
change from the proposal, the Commission is amending the Control
Relationship Threshold so that instead of specifying the amount of
assets under management of an affiliated investment adviser to surpass
the threshold, as it currently does, it instead references rule 0-7
paragraph (a)(1), which sets forth the RAUM Threshold, including its
corresponding Inflation Adjustment Mechanism and the calculation
method.\163\ This amendment does not change how the Control
Relationship Threshold operates as compared to the current rule.
Instead, it is designed to ensure that advisers understand how to
calculate the assets under management in the Control Relationship
Threshold.
---------------------------------------------------------------------------
\163\ Final 17 CFR 275.0-7(a)(2).
---------------------------------------------------------------------------
A commenter recommended the Commission amend the Control
Relationship Threshold to provide a special rule for insurance
companies, so that an insurance company's affiliated institutional
advisers would not be cumulated with an insurance company's affiliated
retail advisers.\164\ This commenter stated that institutional advisers
and retail advisers involve substantially different infrastructures,
systems, and regulatory requirements, they do not share management or
advisory personnel, they have distinct costs and burdens, and there are
few opportunities for economies of scale between them. The commenter
expressed concern that a retail adviser may be disproportionately and
unfairly impacted by changes in Commission regulation if its assets
under management are cumulated with an institutional adviser merely due
to common control.
---------------------------------------------------------------------------
\164\ CAI Comment Letter.
---------------------------------------------------------------------------
We are not persuaded to provide a special rule for insurance
companies, so that an insurance company's affiliated institutional
advisers would not be cumulated with an insurance company's affiliated
retail advisers. Currently, the requirements in rule 0-7 do not
distinguish between retail advisers and institutional advisers. We are
not persuaded that advisers should be treated differently under rule 0-
7 solely based on the fact that they are affiliated with an insurance
company. We disagree with this commenter's assertion that an adviser's
retail and institutional advisory businesses involve substantially
different regulatory requirements. Retail and institutional advisory
businesses involve substantially similar regulatory requirements,
because both are subject to the Advisers Act, and the rules thereunder,
among other things which do not generally differentiate between the
type of client. Even if affiliated advisers choose different
infrastructures, systems, management, or advisory personnel, there
remain opportunities for economies of scale concerning compliance with
and operation under the Advisers Act and the rules thereunder, even if
some particular provisions do not apply to each adviser. Therefore, we
disagree with the commenter's assertion that a retail adviser would be
disproportionately or unfairly impacted by changes in Commission
regulation if its assets under management are cumulated with an
institutional adviser due to common control.
4. Conforming Amendments to Form ADV and the Adviser Hardship Exemption
Rule
The Commission is making conforming amendments to Form ADV, General
Instruction 17, and Item 12 of Part 1A, as well as Advisers Act rule
203-3(b), with modifications from the proposal. Form ADV is the uniform
application for investment adviser registration and report form by
exempt reporting advisers. General Instruction 17 summarizes the
conditions for certain small advisers to apply for an
[[Page 69968]]
exemption from filing Form ADV electronically with the IARD. Item 12 of
Part 1A requires an eligible SEC-registered adviser to report how it
qualifies as a ``small business'' or ``small organization'' under rule
0-7. It is designed to provide information to the public and the
Commission about advisers, including information that enables the
Commission to consider the effect of its regulations on small entities,
as required by the RFA.\165\ Rule 203-3(b) sets forth conditions for
certain small SEC-registered advisers to apply for a continuing
hardship exemption from the requirement to make Advisers Act filings
electronically with the IARD, among other things.
---------------------------------------------------------------------------
\165\ See Form ADV, Item 12 of Part 1A.
---------------------------------------------------------------------------
As proposed, the Commission is making conforming amendments to Form
ADV, including General Instruction 17 and Item 12, as well as rule 203-
3(b) to reflect the final amendments to the RAUM Threshold, the Control
Relationship Threshold, and their corresponding inflation adjustments.
Currently, General Instruction 17 states, in part, that an adviser is a
small business, and may be eligible for a continuing hardship
exemption, if it is required to answer Item 12 of Part 1A ``(because
you have assets under management of less than $25 million)'' and it is
able to respond ``no'' to each question in Item 12. As proposed, the
Commission is removing the parenthetical ``(because you have assets
under management of less than $25 million).'' This parenthetical is
implicit, given that the sentence also directs advisers to Item 12,
which provides the relevant instructions. Removing this phrase will
avoid requiring the Commission to update it periodically, as the
Commission adjusts the RAUM Threshold for inflation. Also, as proposed,
the Commission is revising General Instruction 17 and rule 203-3(b) so
they explicitly apply to an adviser that is either a ``small business''
or ``small organization,'' as Item 12 does, rather than just a ``small
business.''
In a change from the proposal, the Commission is making additional
conforming amendments to Form ADV, Item 12 of Part 1A to remove
references to the Total Assets Threshold, to reflect that the
Commission is eliminating the Total Assets Threshold from rule 0-7. In
connection with this change, the Commission also is amending rule 203-
3(b)(5) to remove the phrase ``that you were required to answer''
because it is no longer relevant in light of the amendments to Item 12.
In another change from the proposal, the Commission is revising the
language of Form ADV Item 12, so that it refers to rule 0-7, rather
than re-stating the threshold, as proposed. This amendment does not
change the substance of Item 12 as compared to the proposal. The
purpose of this amendment is to help ensure Item 12 remains operative,
without additional rulemaking, in light of future Commission orders
that may adjust rule 0-7's threshold for inflation.
One commenter supported the proposed amendments to Form ADV,
discussing that the proposed amendments would help ensure internal
consistency across Commission rules.\166\ This commenter, along with
another commenter, recommended not imposing any additional reporting
requirements.\167\ The Commission did not propose additional reporting
requirements, and is not adopting additional reporting requirements at
this time. A commenter requested the Commission quantify and analyze
regulatory relief consequences, which the commenter described as
Commission reporting, compliance, or procedural accommodations that
would become newly available once firms qualify as small entities.\168\
We are confirming that rule 203-3(b) provides such an accommodation and
its continuing hardship accommodation will become newly available once
firms qualify as small entities.\169\
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\166\ IAA Comment Letter.
\167\ IAA Comment Letter; Proskauer Comment Letter.
\168\ See Scarborough Comment Letter.
\169\ Currently, the Commission's definition of ``small entity''
under the RFA is incorporated into the Commission's other rules and
regulations only in connection with an adviser's responses to Form
ADV (and this release is implementing corresponding amendments to
the form) and rule 203-3(b). See infra footnote 189, and
accompanying text.
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C. Periodic Future Adjustments
The final amendments to rules 0-10 and 0-7 will, as proposed,
provide an Inflation Adjustment Mechanism for periodic future
adjustments of the asset-based thresholds used in these rules' small
entity definitions.\170\ Specifically, the amendments provide that the
Commission will issue an order every ten years adjusting: (i) the net
asset threshold in the investment company small entity definition; and
(ii) in the investment adviser small entity definition, the RAUM
Threshold (which will also now have the effect of adjusting the Control
Relationship Threshold). As proposed, the final amendments to rule 0-10
and rule 0-7 will require that the adjustment of the asset-based
thresholds be calculated by reference to the Personal Consumption
Expenditures Chain-Type Price Index (the ``PCE Index'').\171\ The final
amendments providing the Inflation Adjustment Mechanism will require
rounding the investment company small entity net asset threshold to the
nearest multiple of $1,000,000,000 and rounding the investment adviser
small entity RAUM Threshold (and thus the Control Relationship
Threshold) to the nearest multiple of $100,000,000.\172\
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\170\ Final 17 CFR 270.0-10(c); final 17 CFR 275.0-7(c).
\171\ See id.
\172\ Final 17 CFR 275.0-7(c)(2) and final 17 CFR 270.0-
10(c)(2). Final 17 CFR 270.0-10 will require the net asset threshold
for small entities be adjusted for inflation by dividing the year-
end value of the PCE Index for the calendar year preceding the
calendar year in which the order is being issued, by the year-end
value of the PCE Index for the calendar year in which any final rule
that is adopted becomes effective, multiplying $10 billion (i.e.,
the final amendments' net asset threshold) by that quotient, and
rounding the product to the nearest multiple of $1 billion. Final 17
CFR 275.0-7(c)(2) will adjust the RAUM Threshold (and thus the
Control Relationship Threshold) by starting with the same quotient
but will multiply that by $1 billion, rounded to the nearest
multiple of $100 million.
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In order to adjust the asset-based thresholds for the ``small
entity'' definitions as discussed above, the Commission considered an
analysis of the distribution of fund and adviser assets and the growth
in these assets over time. As described in the Proposing Release,
however, these amended thresholds may become less useful over time due
to growth in markets and any subsequent changes in the fund and adviser
industries. The proposed Inflation Adjustment Mechanism was designed to
ensure that the thresholds are adjusted every ten years, because the
adjustment would be required by rule and effected through a Commission
order.
Some commenters supported the proposed inflation adjustments.\173\
Other commenters supported the goal of periodic adjustments, but
expressed concern about the details of the proposal.\174\ For example,
some commenters recommended the Commission use a shorter cadence for
adjustments, such as five or seven years, to ensure that the thresholds
remain reasonable.\175\ Some commenters recommended using an adjustment
mechanism they consider more relevant than inflation, such as a broad-
based index of asset prices,\176\ or the proposal's own asset-based
distribution
[[Page 69969]]
analysis for RAUM and net asset percentiles.\177\
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\173\ See, e.g., NVCA Comment Letter.
\174\ See, e.g., Federated Hermes Comment Letter.
\175\ See, e.g., Sharma Comment Letter (recommending a five-year
cadence); Federated Hermes Comment Letter and ICI Comment Letter
(each recommending a seven-year cadence).
\176\ Proskauer Comment Letter.
\177\ See, e.g., Proskauer Comment Letter; ICI Comment Letter.
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After considering comments, we are adopting the Inflation
Adjustment Mechanism substantially as proposed.\178\ Adjustments that
the Commission makes mechanically by order could help maintain the
thresholds at levels that reflect the buying power of money over time,
without the need for Commission action through rulemaking.\179\ We
expect, as discussed in the Proposing Release and by commenters, that
the Inflation Adjustment Mechanism will prevent the thresholds in the
small entity definitions from becoming less meaningful over time on
account of anticipated changes in dollar value.\180\ Specifically,
because a fund's or adviser's size is related to its ability to bear
compliance costs, adjusting the asset-based thresholds is designed to
account for potential increases in those compliance costs.
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\178\ As discussed above, for advisers, we are removing the
Total Assets Threshold and its corresponding inflation adjustment,
and we are revising the Control Relationship Threshold to refer to
the RAUM Threshold and its inflation adjustment in establishing the
threshold under which an affiliated adviser may affect an adviser's
small entity status. See sections II.B.2 and II.B.3.
\179\ The Commission has historically incorporated periodic and
mechanical adjustments to certain dollar-based thresholds in
regulations affecting funds and investment advisers. These
adjustments reflect that some level of change in dollar value is
reasonably anticipated to occur in the future and help ensure that
the rules' intended application remains consistent and relevant over
time. See, e.g., 17 CFR 270.3c-7; 17 CFR 275.205-3; see also
Proposing Release, at n.128 (discussing Commission releases that
have used the PCE Index for inflation adjustment).
\180\ See Proposing Release at section II.C; see also, e.g., CAI
Comment Letter; IAA Comment Letter.
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While certain comments recommended a shorter adjustment cadence,
the final amendments' Inflation Adjustment Mechanism reflects the same
ten-year cadence as proposed. Given the distributions of different-
sized entities for funds and investment advisers, inflationary changes
over shorter periods would generally not result in a meaningfully
different set of funds and investment advisers being considered small
entities under their respective definitions.\181\
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\181\ See, e.g., supra footnotes 42-43 and 52 and accompanying
text; supra footnotes 108-110 and accompanying text.
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Likewise, after considering comments recommending an adjustment
mechanism based on a metric other than inflation, we are adopting this
aspect of the Inflation Adjustment Mechanism as proposed. We
acknowledge that inflation may not perfectly represent growth in the
fund and adviser industries. Nevertheless, as discussed above, our view
continues to be that inflation adjustment is the most appropriate
mechanism for periodically and mechanically adjusting the asset
thresholds and implementing the adjustments by order. Inflation, unlike
the asset-based distribution analysis mechanisms described by
commenters, is a known factor for which a precise value can reliably be
derived from a defined index. Periodically adjusting the thresholds to
a set percentile from a distribution analysis would similarly be
inappropriate. The percentile that resulted from the distribution
analysis performed in the Proposing Release is particular to that data
and set of facts and, therefore, is not necessarily indicative of the
proportion of funds or advisers that should be deemed small entities in
the future. In addition, performing the same or similar analysis to
determine a future percentile based on then-current data would involve
a level of analysis that would require a future rulemaking rather than
an adjustment by Commission order. Similarly, we do not consider using
a broad-based index of asset prices as the basis for adjustment as
suggested by commenters to be appropriate in light of the breadth of
fund and adviser strategies. Any one particular index of asset prices
would not be appropriate for certain strategies, and if multiple
indexes were used, this could result in different levels of adjustment
depending on the index, as well as operational complexity.
It is possible, but less predictable, that the asset-based
thresholds may become less useful over time even taking the Inflation
Adjustment Mechanism we are adopting into account (for example, with
the advent of market events, changes in the makeup or distribution of
size of the fund or adviser markets, or other industry changes). In
this case, the Commission could consider performing appropriate
analyses to propose amendments to the thresholds again in the future
independent of the Inflation Adjustment Mechanism. Similarly, in the
future, the Commission also could consider proposing a periodic
adjustment approach using analysis other than one based on the
Inflation Adjustment Mechanism.
D. Effective Date and Compliance Date
The effective dates and compliance dates are as follows:
<bullet> Final amendments to rule 0-10 and rule 0-7 are effective
February 4, 2027, which is 90 days from the date of publication in the
Federal Register.
<bullet> Final amendments to rule 203-3 and Form ADV are effective,
and have a compliance date of, February 4, 2027, which is 90 days from
the date of publication in the Federal Register.
One commenter recommended an implementation period of 180 days, so
advisers can reassess their ``small entity'' status, update internal
Form ADV filing procedures, train compliance and personnel on the
revised Form ADV Item 12 logic and hardship exemption eligibility, and
coordinate updates with third-party compliance vendors or filing
service providers where applicable.\182\ We are not persuaded to
provide an implementation period of 180 days. While additional SEC-
registered advisers will have to update their small entity status in
Item 12 of Form ADV and will be newly eligible for the hardship
exemption under rule 203-3(b), the information required to comply with
the final amendments is readily available to advisers and the
additional cost of the final amendments would be minimal. Also, as a
practical matter, most advisers will have additional time to update
their Form ADV because Form ADV does not require advisers to file an
other-than-annual amendment to update Item 12; most advisers will
update Item 12 as part of their regularly scheduled annual
amendments.\183\ The compliance period for rule 203-3 and Form ADV is
designed to provide the Financial Industry Regulatory Authority
(``FINRA'') sufficient time to update the IARD to reflect revised Item
12.\184\
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\182\ Comment Letter of Charles Schwab & Co. (Mar. 13, 2026)
(``Schwab Comment Letter'').
\183\ See Form ADV, General Instruction 4.
\184\ FINRA operates the IARD.
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In the event that FINRA is unable to update the IARD by the end of
the compliance period, until the IARD is updated, advisers should leave
Item 12 blank, and provide responses to revised Item 12 in the
miscellaneous section of Schedule D of Form ADV.
We are adopting an effective date for rule 0-7, rule 203-3, and
Form ADV that matches the compliance date for rule 203-3 and Form ADV,
because these rules and form are connected to each other. We are
adopting the same effective date for rule 0-10 for consistency.
III. Economic Analysis
The Commission is mindful of the economic effects, including the
costs and benefits, of its rules. The Commission has a long-held focus
on small entities when engaged in rulemaking. A purpose of the RFA is
to promote the effectiveness and efficiency of regulations, including
through consideration of alternative regulatory approaches, with the
goal of minimizing
[[Page 69970]]
the significant economic impact on small entities consistent with the
stated objectives of applicable statutes.\185\ The Commission is
required to determine if a rulemaking is likely to have a ``significant
economic impact on a substantial number of small entities'' under the
RFA.\186\ In applicable rulemakings, the Commission's definitions of
``small entities'' determine the scope of the regulatory flexibility
analyses conducted at the proposal and final stages. The updated
definitions are expected to better tailor the Commission's analyses of
the specific regulatory challenges faced by small entities by expanding
the scope of the analyses that the Commission conducts under the RFA.
These analyses, in turn, are expected to better inform the Commission
of the regulatory impacts faced by small entities so that it may
consider adapting its rulemaking accordingly.\187\ To the extent such
adaptations to future rulemakings will occur, the use of the amended
definitions of ``small entities'' in RFA analyses could result in
different benefits and costs of such rulemakings.\188\ For example, if
the Commission, informed by the more tailored RFA analyses, determined
to scope fewer small entities into future rulemakings or tailor
obligations imposed by such rulemakings differently for small entities,
there could be lower compliance costs imposed on such entities.
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\185\ See supra footnote 7.
\186\ See supra footnote 8.
\187\ Many commenters agreed that the updated definitions will
better inform the Commission of the regulatory impacts faced by
small entities. See, e.g., IAA Comment Letter, MFA Comment Letter,
Schwab Comment Letter. Other commenters stated that the updated
definitions, as proposed, would not better inform the Commission in
this regard. See, e.g., Better Markets Comment Letter and PIABA
Comment Letter. These and other comments received on the substance
of the proposed changes to the definitions are discussed throughout
supra section II.
\188\ One commenter argued that the revised definitions may
lengthen the rulemaking process. See Logos Comment Letter (stating
that ``[b]roader inclusion may also increase frequency with which
[RFA] analyses are required. This could lengthen the rulemaking
process and require administrative resources. While these procedural
costs are relatively modest compared to potential regulatory impacts
on smaller firms, they represent an operational trade off.'') Our
experience with conducting RFA analyses has been that they have not
significantly lengthened the rulemaking process.
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In addition to these indirect effects, the final rule will have
direct economic effects arising in situations where the updated small
entity definitions affect the application of existing Commission rules
and regulations. Currently, the Commission's definition of ``small
entity'' under the RFA is incorporated into the Commission's other
rules and regulations only in connection with an adviser's responses to
Form ADV (and this release is implementing corresponding amendments to
the form) and to rule 203-3(b). We thus consider the effects of the
updated definition as it relates to the use of that definition in Form
ADV, as well as the effects of the other associated changes to the form
and to rule 203-3(b).\189\
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\189\ The scope of the economic analysis therefore addresses the
request by one commenter stating that the Commission ``should
quantify and analyze [. . .] which SEC reporting, compliance, or
procedural accommodations become newly available once firms qualify
as small entities.'' See Scarborough Comment Letter.
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First, we are amending Form ADV to revise General Instruction 17,
which currently permits registered or registering investment advisers
to receive a continuing hardship exemption from Form ADV electronic
filing requirements, pursuant to rule 203-3(b), if such investment
adviser is a small business and can demonstrate that filing Form ADV
electronically would impose an undue hardship.\190\ As proposed, we are
revising General Instruction 17 to define an investment adviser as a
``small business'' or ``small organization'' if it is required to
answer Item 12 (which itself relies on the definition in rule 0-7) and
if it is able to respond ``no'' to each question in Item 12. Since the
amendments to Item 12, in conformity with rule 0-7, reflect the removal
of the Total Assets Threshold and that the RAUM Threshold is increasing
from $25 million to $1 billion, General Instruction 17 will similarly
reflect these changes for the availability of the continuing hardship
exemption.
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\190\ Also, as proposed, the Commission is revising General
Instruction 17 and rule 203-3(b) so they explicitly apply to an
adviser that is either a ``small business'' or ``small
organization,'' as Item 12 does, rather than just a ``small
business.''
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As a result, 10,180 \191\ additional registered investment advisers
may be eligible for the exemption under the revised definition, as
reflected in the amended General Instruction 17, before any future
adjustment for inflation. However, we expect that the increased
availability of the continuing hardship exemption to registered
investment advisers meeting the updated definition will have minimal
economic impact. Due to the ubiquity of inexpensive access to computers
and the internet--both to advisers themselves and to the service
providers they may employ--any newly eligible advisers are unlikely to
be able to demonstrate that filing Form ADV electronically would impose
an undue hardship.\192\ We therefore anticipate that few, if any,
additional advisers will be able to rely on the exemption.
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\191\ This estimate captures the number of registered investment
advisers with RAUM equal to or above $25 million but below $1
billion. The estimate does not account for the number of such
advisers in a control relationship with an affiliated adviser
managing $1 billion or more, who would be disqualified from being
eligible for the exemption. This estimate also excludes advisers
with RAUM below $25 million who may newly qualify as small entities
because the amendments eliminate the total-assets tests and increase
the RAUM threshold for affiliated advisers.
\192\ The Commission has not received applications for the
continuing hardship exemption in recent years. In addition,
registered advisers or advisers registering with the Commission may
still be eligible for the temporary hardship exemption under 17 CFR
275.203-3(a), regardless of whether they are a small business or
small organization, if they experience certain unanticipated
technical difficulties. However, we acknowledge that any advisers
that may consider applying for the exemption may incur costs to
train their compliance personnel on the revised exemption
eligibility. See Schwab Comment Letter (stating that ``the proposed
updates will require advisors to [. . .] [t]rain their compliance
and personnel on the revised [. . .] hardship exemption
eligibility.'').
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Second, as proposed, we are amending Item 12 of Part 1A of Form ADV
to align the RAUM threshold for completing the questions in that item
with the final amendments to the definitions of ``small business'' and
``small organization'' under rule 0-7.\193\ In a departure from the
proposal, we are revising Item 12 and rule 203-3(b)(5) to reflect that
the final amendments eliminate the Total Assets Threshold from rule 0-
7.
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\193\ See supra section II.B.4. In another change from the
proposal, the Commission is revising the language of Form ADV Item
12, so that it refers to rule 0-7, rather than re-stating the
threshold, as proposed. This amendment would help ensure Item 12
remains operative, without additional rulemaking, in light of future
Commission orders that may adjust rule 0-7's threshold for
inflation. This amendment thus does not have independent economic
effects.
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As a result of the final amendments, approximately 10,180 \194\
additional registered investment advisers will be required to complete
Item 12 of Part 1A (before any future adjustment for inflation). These
advisers may incur costs associated with training their compliance
personnel, updating internal procedures, and coordinating updates with
third-party service
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\194\ See supra footnote 191.
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[[Page 69971]]
providers,\195\ and will incur costs associated with preparing the
disclosure. Because the information needed to complete the
corresponding questions will be readily available to advisers, we
estimate the cost increase for each affected adviser will be minimal,
averaging approximately $91 per adviser per year,\196\ or $928,925 per
year for the industry as a whole.\197\
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\195\ See Schwab Comment Letter (stating that ``the proposed
updates will require advisors to: [r]eassess their `small entity'
status using new thresholds; [u]pdate internal form ADV filing
procedures; [t]rain their compliance and personnel on the revised
Item 12 logic [. . .]; and [c]oordinate updates with third-party
compliance vendors or filing service providers where applicable.'')
\196\ The $91 is based on the following calculations: hourly
rate of a Management Analyst in the securities industry at $365 for
0.25 hours [ap] $91. See infra Table PRA-1 and accompanying
footnotes 5 and 7.
\197\ $928,925 = $91.25 per adviser x 10,180 advisers.
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Consistent with the requirements of Executive Order 12866, the
Commission reports estimated total monetized benefits and costs for all
affected entities in two additional ways specified in OMB Circular A-
4.\198\ The two presentations are intended to address the fact that the
various benefits and costs of the final amendments will not accrue at
the same point in time; rather, benefits and costs that accrue sooner
are generally more valuable than those that occur later in time.\199\
The following discussion focuses on the monetized costs presented in
the Economic Analysis, given that the principal benefits of the final
rule depend on future Commission action and are thus impossible to
predict.
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\198\ See E.O. 12866 (Sept. 30, 1993), 58 FR 51735, 51741 (Oct.
4, 1993) (requiring agencies to provide an analysis of benefits,
costs, and regulatory alternatives to OIRA for significant
regulatory actions); OMB, Circular A-4, at 31-34, 45 (Sept. 17,
2003) (providing guidance to agencies regarding compliance with E.O.
12866); see also E.O. 14215 (Feb. 18, 2025), 90 FR 10447, 10448
(Feb. 24, 2025) (requiring all Federal agencies, including the
Securities and Exchange Commission to comply with E.O. 12866). In
addition, E.O. 14192 requires agencies to provide their best
approximation of the total costs or savings associated with each new
regulation or repealed regulation consistent with the analyses
required by E.O. 12866. See E.O. 14192 (Jan. 31, 2025), 90 FR 9065,
9066 (Feb. 6, 2025). For purposes of approximating the total cost
savings and costs under E.O. 14192, the Commission uses the
annualized monetized benefits and costs using a real discount rate
of 7 percent. See Table 3 and accompanying discussion.
\199\ See Circular A-4, at 32.
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We report (1) the present values of expected costs that are
monetized in our Economic Analysis, aggregated across all affected
entities, over a 10-year time horizon, starting in 2026, as well as (2)
the annualized values over the same time horizon that are derived from
the present values. This time horizon represents the period over which
the principal costs that are monetized in the Economic Analysis are
expected to accrue.\200\ The present values and annualized values
account for the timing of costs through discounting, which is a
procedure that accounts for the time value of money.\201\
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\200\ See id. at 31 (stating that ``[t]he ending point should be
far enough in the future to encompass all the significant benefits
and costs likely to result from the rule''). The analysis uses a
2026-2035 analytical horizon and expresses monetary amounts in
constant 2026 dollars. Present values are measured as of the
beginning of 2026. We assume that recurring monetized compliance
costs begin in 2027 and occur at mid-year in each year from 2027
through 2035. The analysis uses calendar years and accounts for the
compliance periods included in the release (see note a in Table 2).
\201\ See id. at 32 (``The Rationale for Discounting'') & 45
(``Treatment of Benefits and Costs over Time''); see also OIRA,
Regulatory Impact Analysis: A Primer, at 11 (Aug. 15, 2011),
available at <a href="https://www.reginfo.gov/public/jsp/Utilities/circular-a-4_regulatory-impact-analysis-a-primer.pdf">https://www.reginfo.gov/public/jsp/Utilities/circular-a-4_regulatory-impact-analysis-a-primer.pdf</a> (``To provide an
accurate assessment of benefits and costs that occur at different
points in time or over different time horizons, an agency should use
discounting. Agencies should provide benefit and cost estimates
using both 3 percent and 7 percent annual discount rates expressed
as a present value as well as annualized.''); Harvey S. Rosen & Ted
Gayer, Public Finance 151 (8th ed. 2008) (defining present value as
``the value today of a given amount of money to be paid or received
in the future'').
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Table 2 reports the present values of the aggregate monetized
annual costs described above.\202\ The analysis uses annual real
discount rates of 3 percent and 7 percent over a 10-year time horizon,
starting in 2026.\203\ We estimate that the present value of total
monetized costs is $7,126,602 using a 3 percent discount rate and
$5,850,846 using a 7 percent discount rate.
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\202\ See supra footnote 197 and accompanying text.
\203\ This approach is consistent with OMB Circular A-4. See
Circular A-4, at 31-34 (stating that, ``[f]or regulatory analysis,
[agencies] should provide estimates of net benefits using both 3
percent and 7 percent'' discount rates and discussing why those
rates are reasonable default rates). Also, we use a mid-year
discount rate. See OMB, Circular A-94, at 21-22 (Oct. 29, 1992)
(stating that, ``When costs and benefits occur in a steady stream,
applying mid-year discount factors is more appropriate.'').
[GRAPHIC] [TIFF OMITTED] TR06NO26.031
Table 3 reports annualized aggregate monetized costs using real
discount rates of 3 percent and 7 percent over a 10-year horizon.\204\
The lump sum present values of aggregate costs reported in Table 2 are
converted in Table 3 into a constant stream of annualized costs over a
10-year time horizon, starting in 2026.\205\ We estimate that
annualized total monetized costs are $823,198 per year using a 3
percent discount rate and $805,319 per year using a 7 percent discount
rate.
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\204\ This approach is consistent with the recommended treatment
of benefits and costs over time in Circular A-4. See Circular A-4 at
45 (``You should present annualized benefits and costs using real
discount rates of 3 and 7 percent'').
\205\ For each discount rate, the annualized monetized costs in
Table 3 represent the constant annual stream of costs whose present
value over the time horizon equals the corresponding present value
in Table 2. See note a, Table 3 for additional calculation details.
The annualized monetized costs present these values over the 10-year
time horizon, starting in the year 2026.
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[[Page 69972]]
[GRAPHIC] [TIFF OMITTED] TR06NO26.032
We do not anticipate that the amendments will have any significant
direct effects on efficiency, competition, or capital formation
because, as discussed above, they will have minimal direct economic
impact. But to the extent that the amended definitions of ``small
entities'' contribute to the Commission better tailoring its rulemaking
to account for the regulatory challenges faced by small entities, they
could have indirect effects on efficiency, competition, and capital
formation resulting from future rulemakings.\206\ For example, if the
Commission, informed by the more tailored RFA analyses, determined to
tailor future rulemakings to reduce compliance costs for small
entities, there could be benefits to competition.\207\
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\206\ Some commenters agreed that the updated definitions may
have indirect effects on competition and capital formation. See,
e.g., SBIA Comment Letter, IDC Comment Letter, and Logos Comment
Letter.
\207\ One commenter stated that `` . . . [T]he proposed
amendments prioritize the hypothetical efficiencies, capital
formation, and competitive benefits supposedly gained by mislabeling
large advisers as `small' entities. Historically, rules that focus
on reducing industry costs harm investors.'' See PIABA Comment
Letter. As noted above, we do not anticipate that the amendments
will have any direct effects on efficiency, competition, or capital
formation. Further, the Economic Analysis cannot predict the
economic impact, including the impact on efficiency, competition,
and capital formation, of any future rulemakings based on whether or
how the Commission may adapt its policy choices as a result of the
revised small entity definition; and thus such economic analysis of
any future rulemakings is outside of the scope of the analysis in
this rulemaking.
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Lastly, the Commission considered alternatives to the amendments to
Form ADV to align the form with the amended definition.\208\
Specifically, we considered replacing Item 12 of Part 1A of Form ADV
with a single question that would ask advisers to indicate whether they
fall under the amended small entity definition, instead of providing
the information in each question in Item 12 that would allow the
Commission to continue to make that determination, under the amended
definition. While the alternative may streamline the information
reported in that item, we expect that it would not materially reduce
costs for advisers because an adviser would still have to gather from
its own records the information needed to apply the small entity
definition.\209\ In addition, the alternative may impose some
transition costs for some advisers that would complete the item.\210\
Finally, maintaining the requirement for advisers to report the
information needed to apply the ``small entity'' definition will
continue to provide the Commission with insight into the class of small
entity advisers and how the individual parts of the definition affect
whether advisers qualify as a small entity.
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\208\ Given the scope and context for this rulemaking, the
Commission does not believe there are specific reasonable
alternatives to the final conforming changes to the instruction for
the continuing hardship exemption because these changes merely align
the language in the instruction with the amended small entity
definition and related changes to Item 12.
\209\ While we anticipate that advisers would generate the
necessary records in the ordinary course of their advisory
businesses, we acknowledge that the alternative would impose some
transition costs on advisers.
\210\ See IAA Comment Letter (stating that ``Even incremental
additions to Form ADV can require operational changes, compliance
review, and ongoing monitoring.'')
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IV. Paperwork Reduction Act
A. Introduction
The final amendments revise part of an existing ``collection of
information'' within the meaning of the Paperwork Reduction Act of 1995
(the ``PRA'').\211\ The title for the collection of information is
``Form ADV'' (OMB control number 3235-0049).\212\ An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid OMB
control number.
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\211\ 44 U.S.C. 3501 et seq.
\212\ The PRA is not applicable to the final amendments to 17
CFR 275.0-7, 17 CFR 270.0-10, or the amendments to 17 CFR 275.203-
3(b) because they do not contain a ``collection of information''
requirement within the meaning of the PRA; they do not create any
new filing, reporting, recordkeeping, or disclosure requirements. 44
U.S.C. 3502(3).
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The Commission solicited comments on the proposed revision to the
collection of information and submitted it to OMB for review, in
accordance with PRA requirements.\213\ The Commission did not receive
any comments on the PRA. The Commission is submitting the final
collection of information to the OMB for review and approval in
accordance with the PRA.\214\
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\213\ 44 U.S.C. 3507(d); 5 CFR 1320.11; Proposing Release at
section IV.
\214\ 44 U.S.C. 3507(d); 5 CFR 1320.12.
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B. Final Amendments
The final amendments in this release that will affect the
collection of information titled ``Form ADV'' are the conforming
amendments to Form ADV, Item 12 of Part 1A. Item 12 requires an SEC-
registered adviser that is a ``small business'' or ``small
organization'' to report how it qualifies as a ``small business'' or
``small organization'' under rule 0-7. Item 12 is designed to provide
information to the public and the Commission about advisers, including
information that enables the Commission to consider the effect of its
regulations on small entities, as required by the RFA.\215\ The final
amendments affect a sub-set of respondents of the ``Form ADV''
collection of information, namely SEC-registered advisers that qualify
as ``small businesses'' or ``small organizations'' under rule 0-7.
Responses are mandatory and are not kept confidential.
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\215\ See Form ADV, Item 12 of Part 1A.
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As proposed, the Commission is making conforming amendments to Item
12 to reflect the final amendments to rule 0-7 concerning the amended
RAUM Threshold, the amended Control Relationship Threshold, and their
[[Page 69973]]
corresponding inflation adjustments.\216\ In a change from the
proposal, the Commission is making conforming amendments to Item 12 to
reflect the removal of the Total Assets Threshold in final rule 0-7.
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\216\ See supra section II.B.4.
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C. Estimated Burdens
Below is a table explaining the Commission's estimated annual
burdens for the final amendments.
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BILLING CODE 8011-01-C
V. Regulatory Flexibility Act Certification
Pursuant to section 605(b) of the RFA, the Commission certified
that the proposed amendments to the rules would not, if adopted, have a
significant economic impact on a substantial number of small entities.
The Commission included this certification in section V of the
Proposing Release.
As discussed in the Proposing Release, for purposes of the Advisers
Act and the Regulatory Flexibility Act, currently an investment adviser
generally is a small entity if it: (1) has assets under management
having a total value of less than $25 million; (2) did not have total
assets of $5 million or more on the last day of the most recent fiscal
year; and (3) does not control, is not controlled by, and is not under
common control with another investment adviser that has assets under
management of $25 million or more, or any person (other than a natural
person) that had total assets of $5 million or more on the last day of
its most recent
[[Page 69975]]
fiscal year.\217\ Currently, for the purposes of the Investment Company
Act and the Regulatory Flexibility Act, funds are considered small
entities if they, together with other funds in the same group of
related funds, have net assets of $50 million or less as of the end of
their most recent fiscal year.\218\
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\217\ 17 CFR 275.0-7.
\218\ 17 CFR 270.0-10.
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The Commission stated that the proposed amendments would ultimately
affect its analyses under the RFA in future rulemakings but would not
themselves impose an economic impact on funds or advisers. The proposed
amendments to Advisers Act rule 203-3(b) are clarifying in nature and
would not impose a significant economic impact on advisers. While
additional advisers would have to complete Item 12 of Form ADV, the
information required by this Item is readily available to advisers and
the additional cost of this change would be minimal.\219\ The
Commission, therefore, stated that there would be no significant
economic impact on a substantial number of small entities as a result
of the proposed amendments.
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\219\ See Proposing Release at n.140, and accompanying text.
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The Commission requested comments on the certification, but did not
receive any comments on the certification. We are adopting the
amendments, with certain modifications from the proposal, as discussed
above in section II. Such changes do not alter the basis of the
Commission's certification in the Proposing Release. Accordingly, the
Commission certifies that the final amendments will not have a
significant economic impact on a substantial number of small
entities.\220\
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\220\ See 5 U.S.C. 605(b).
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VI. Congressional Review Act
For purposes of Subtitle E of the Small Business Regulatory
Enforcement Fairness Act of 1996 (also known as the Congressional
Review Act),\221\ the Commission must seek the determination of the
Office of Management and Budget (the ``OMB'') as to whether a final
regulation constitutes a ``major rule.'' OMB has determined the final
rule is not a ``major rule.''
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\221\ See 5 U.S.C. chapter 8.
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VII. Other Matters
The Office of Management and Budget has determined that this action
is not a significant regulatory action under Executive Order 12866, and
therefore it was not subject to Executive Order 12866 review. This rule
is not an Executive Order 14192 regulatory action because this rule is
not significant under Executive Order 12866.
Statutory Authority
The Commission is adopting the rule and form amendments contained
in this document under the authority set forth in chapter 6 of title 5
of the United States Code (particularly section 601 thereof [5 U.S.C.
601]), the Investment Company Act, particularly section 38 thereof [15
U.S.C. 80a-37], and the Advisers Act, particularly section 211 thereof
[15 U.S.C. 80b-11].
List of Subjects in 17 CFR Parts 270, 275, and 279
Investment companies, Investment advisers, Reporting and
recordkeeping requirements, Administrative practice and procedure.
Text of Rule and Form Amendments
For the reasons set out in the preamble, the Commission is amending
title 17, chapter II of the Code of Federal Regulations as follows:
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
0
1. The authority citation for part 270 continues to read, in part, as
follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
1681w(a)(1), 6801-6809, 6825, and Pub. L. 111-203, sec. 939A, 124
Stat. 1376 (2010), unless otherwise noted.
* * * * *
0
2. Revise Sec. 270.0-10 to read as follows:
Sec. 270.0-10 Small entities under the Investment Company Act for
purposes of the Regulatory Flexibility Act.
(a) General. For purposes of Commission rulemaking in accordance
with the provisions of Chapter Six of the Administrative Procedure Act
(5 U.S.C. 601 et seq.) and unless otherwise defined for purposes of a
particular rulemaking, the term small business or small organization
for purposes of the Investment Company Act of 1940 shall mean an
investment company that, together with other investment companies in
the same family of investment companies, has net assets of $10 billion
or less as of the end of its most recent fiscal year, or, following
March 1, 2037, the dollar amount specified in the most recent order
issued by the Commission in accordance with paragraph (c) of this
section and as published in the Federal Register. For purposes of this
section, family of investment companies has the same meaning and
conditions as in Item B.5 of Form N-CEN.
(b) Determination of net assets. The Commission may calculate its
determination of the net assets of a family of investment companies
based on the net assets of each investment company in the family of
investment companies as of the end of such company's fiscal year.
(c) Future inflation adjustments. The dollar amount specified in
paragraph (a) of this section shall be adjusted by order of the
Commission, issued on or about March 1, 2037, and approximately every
ten years thereafter. The adjusted dollar amount established in such
orders shall be computed by:
(1) Dividing the year-end value of the Personal Consumption
Expenditures Chain-Type Price Index (or any successor index thereto),
as published by the United States Department of Commerce, for the
calendar year preceding the calendar year in which the order is being
issued, by the year-end value of such index (or successor) for the
calendar year 2027; and
(2) Multiplying $10 billion times the quotient obtained in
paragraph (c)(1) of this section and rounding the product to the
nearest multiple of $1 billion.
PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940
0
3. The authority citation for part 275 continues to read, in part, as
follows:
Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-
2(a)(17), 80b-3, 80b-4, 80b-4a, 80b-6(4), 80b-6a, 80b-11,
1681w(a)(1), 6801-6809, and 6825, unless otherwise noted.
* * * * *
0
4. Revise Sec. 275.0-7 to read as follows:
Sec. 275.0-7 Small entities under the Investment Advisers Act for
purposes of the Regulatory Flexibility Act.
(a) For purposes of Commission rulemaking in accordance with the
provisions of Chapter Six of the Administrative Procedure Act (5 U.S.C.
601 et seq.) and unless otherwise defined for purposes of a particular
rulemaking proceeding, the term small business or small organization
for purposes of the Investment Advisers Act of 1940 shall mean an
investment adviser that:
(1) Has assets under management, as defined under Section
203A(a)(3) of the Act (15 U.S.C. 80b-3a(a)(3)) and reported on its
annual updating amendment to Form ADV (17 CFR 279.1), of less than $1
billion, or, following March 1, 2037, the dollar amount specified in
the most recent order issued by the Commission in accordance with
paragraph (c) of this
[[Page 69976]]
section and as published in the Federal Register; and
(2) Does not control, is not controlled by, and is not under common
control with another investment adviser that has assets under
management equal to or greater than the threshold in paragraph (a)(1)
of this section.
(b) For purposes of this section, control means the power, directly
or indirectly, to direct the management or policies of a person,
whether through ownership of securities, by contract, or otherwise.
(1) A person is presumed to control a corporation if the person:
(i) Directly or indirectly has the right to vote 25 percent or more
of a class of the corporation's voting securities; or
(ii) Has the power to sell or direct the sale of 25 percent or more
of a class of the corporation's voting securities.
(2) A person is presumed to control a partnership if the person has
the right to receive upon dissolution, or has contributed, 25 percent
or more of the capital of the partnership.
(3) A person is presumed to control a limited liability company
(LLC) if the person:
(i) Directly or indirectly has the right to vote 25 percent or more
of a class of the interests of the LLC;
(ii) Has the right to receive upon dissolution, or has contributed,
25 percent or more of the capital of the LLC; or
(iii) Is an elected manager of the LLC.
(4) A person is presumed to control a trust if the person is a
trustee or managing agent of the trust.
(c) The dollar amount specified in paragraph (a) of this section
shall be adjusted by order of the Commission, issued on or about March
1, 2037, and approximately every ten years thereafter. The adjusted
dollar amount established in such orders shall be computed by:
(1) Dividing the year-end value of the Personal Consumption
Expenditures Chain-Type Price Index (or any successor index thereto),
as published by the United States Department of Commerce, for the
calendar year preceding the calendar year in which the order is being
issued, by the year-end value of such index (or successor) for the
calendar year 2027; and
(2) Multiplying $1 billion times the quotient obtained in paragraph
(c)(1) of this section and rounding the product to the nearest multiple
of $100 million.
0
5. Amend Sec. 275.203-3 by revising paragraphs (b)(1) and (5) to read
as follows:
Sec. 275.203-3 Hardship exemptions.
* * * * *
(b) * * *
(1) Eligibility for exemption. If you are a ``small business'' or
``small organization'' (as described in paragraph (b)(5) of this
section), you may apply for a continuing hardship exemption. The period
of the exemption may be no longer than one year after the date on which
you apply for the exemption.
* * * * *
(5) Small business or small organization. You are a ``small
business'' or ``small organization'' for purposes of this section if
you are required to answer Item 12 of Form ADV (17 CFR 279.1) and
checked ``no'' to each question in Item 12.
* * * * *
PART 279--FORMS PRESCRIBED UNDER THE INVESTMENT ADVISERS ACT OF
1940
0
6. The authority citation for part 279 continues to read as follows:
Authority: The Investment Advisers Act of 1940, 15 U.S.C. 80b-1,
et seq., Pub. L. 111-203, 124 Stat. 1376.
0
7. Amend Form ADV (referenced in Sec. 279.1) by:
0
a. In the General Instructions, revising the second bullet point
paragraph of Instruction 17 related to continuing hardship exemptions;
and
0
b. In Part 1A, revising Item 12.
Note: Form ADV is attached as Appendix A to this document. The
text of Form ADV does not, and this amendment will not, appear in
the Code of Federal Regulations.
By the Commission.
Dated: November 4, 2026.
Sherry R. Haywood,
Assistant Secretary.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix A
FORM ADV (Paper Version)
Uniform Application for Investment Adviser Registration and Report by
Exempt Reporting Advisers
Form ADV General Instructions
* * * * *
17. What if I am not able to file electronically?
If you are required to file electronically but cannot do so, you
may be eligible for one of two types of hardship exemptions from the
electronic filing requirements.
* * * * *
<bullet> A continuing hardship exemption may be granted if you
are a small business or small organization and you can demonstrate
that filing electronically would impose an undue hardship. You are a
small business or small organization, and may be eligible for a
continuing hardship exemption, if you are required to answer Item 12
of Part 1A and you are able to respond ``no'' to each question in
Item 12. See SEC rule 0-7.
If you have been granted a continuing hardship exemption, you
must complete and submit the paper version of Form ADV to FINRA.
FINRA will enter your responses into the IARD. As discussed in
General Instruction 16, FINRA will charge you a fee to reimburse it
for the expense of data entry.
* * * * *
Part 1A
* * * * *
Item 12 Small Businesses
The SEC is required by the Regulatory Flexibility Act to
consider the effect of its regulations on small entities. In order
to do this, we need to determine whether you meet the definition of
``small business'' or ``small organization'' under rule 0-7.
Answer this Item 12 only if you are registered or registering
with the SEC and you indicated in response to Item 5.F.(2)(c) that
you have regulatory assets under management of the thresholds
provided in rule 0-7. You are not required to answer this Item 12 if
you are filing for initial registration as a state adviser, amending
a current state registration, or switching from SEC to state
registration.
For purposes of this Item 12 only, control means the power to
direct or cause the direction of the management or policies of a
person, whether through ownership of securities, by contract, or
otherwise. Any person that directly or indirectly has the right to
vote 25 percent or more of the voting securities, or is entitled to
25 percent or more of the profits, of another person is presumed to
control the other person.
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Yes No
----------------------------------------------------------------------------------------------------------------
A. Do you control another investment adviser that had regulatory assets under management [ballot] [ballot]
equal to or greater than the threshold provided in rule 0-7(a)(1) on the last day of its
most recent fiscal year?
B. Are you controlled by or under common control with another investment adviser that had [ballot] [ballot]
regulatory assets under management equal to or greater than the threshold provided in rule
0-7(a)(1) on the last day of its most recent fiscal year?
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[[Page 69977]]
* * * * *
[FR Doc. 2026-22741 Filed 11-5-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on November 6, 2026.
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