The U.S. Securities and Exchange Commission has raised the asset thresholds it uses to identify smaller investment funds and advisers when assessing the cost of new rules. The final rule published in the Federal Register on November 6, 2026 raises the fund threshold from $50 million to $10 billion in net assets and the adviser threshold from $25 million to $1 billion in regulatory assets under management. Both changes take effect February 4, 2027.
Key facts
- The fund threshold applies to combined net assets for the relevant family of investment companies.
- The adviser threshold measures assets under management. A separate $5 million test of the advisory firm’s own assets will be removed.
- The definitions apply to SEC rulemaking under the Regulatory Flexibility Act. The SEC also amended Form ADV and its continuing hardship rule for certain electronic filings.
- The rule provides for inflation adjustments to the asset thresholds by SEC order every ten years.
Why can a $10 billion fund family count as small?
The classification helps the commission decide whose compliance costs to examine when it writes rules. Under the Regulatory Flexibility Act, the commission considers whether a rule could have a significant economic impact on a substantial number of small entities. It can consider alternatives that meet the policy objective with a smaller impact on those firms. The new thresholds change which funds and advisers count for that analysis. They do not establish a general exemption from securities regulation.
The existing investment company rule treats a fund as small if it and the other investment companies in its related group have combined net assets of $50 million or less at the end of the most recent fiscal year. For management companies, the current definition looks at whether they present themselves to investors as related and share an administrator or have a common adviser or affiliated advisers. The adopted rule changes both the size threshold and the way related funds are identified. For aggregation, it uses the family of investment companies definition already used in Item B.5 of Form N-CEN.
According to the commission’s analysis, 62.4% of funds were classified as small when the $50 million threshold was set in 1982. By 2024, 85 out of 13,630 registered investment companies and business development companies qualified, or about 0.6%. The commission cited that decline in explaining why the old figure no longer captured many funds that lack the advantages of large families, such as the ability to run compliance functions in-house or bargain for outside services.
The commission’s December 2025 data also show why the number of firms and their share of the market are different measures. In that dataset, families at or below the 80th percentile, about $10.59 billion in net assets, represented 22.6% of individual funds and 2.1% of fund assets. Those figures describe the commission’s analytical cutoff in the dataset. The adopted threshold is $10 billion.
Which tests change for investment advisers?
The existing adviser rule generally requires less than $25 million in assets under management and less than $5 million in total assets on the advisory firm’s own balance sheet at the end of its latest fiscal year. It also looks at control relationships with other advisers and certain other entities. Assets under management measure portfolios the firm manages. Its own total assets measure a different financial position.
| Classification test | Existing rule | Final rule from February 4, 2027 |
|---|---|---|
| Fund net assets | $50 million or less across the related group | $10 billion threshold using the Form N-CEN fund family |
| Adviser regulatory assets under management | Below $25 million | Below $1 billion |
| Adviser’s own total assets | Below $5 million at fiscal year-end | Separate test removed |
The final rule also changes the control-relationship test to reflect the higher adviser threshold and removal of the separate total-assets test. An adviser looking only at the amount it manages would therefore be checking one part of the definition. In its adopting release, the SEC said it had considered other measures, including headcount. It kept assets under management as its measure of scale, citing the difficulty of comparing firms that do similar work with different levels of outsourcing.
Where will the change show up first?
The amendments to Form ADV, the adviser registration and reporting form, and the rule that lets certain small SEC-registered advisers apply for a continuing hardship exemption from electronic filing have the same February 4 effective and compliance date. The hardship provision remains an application process. Its relevance is narrower than the use of the small-entity definition in future rulemaking analyses.
The commission also set out a mechanism to revise the monetary thresholds by order every ten years. The immediate change is the February classification and the related filing amendments. When the SEC next analyzes the effect of a proposed fund or adviser rule on small entities, it will have a different set of firms to count and different fund-family information to use.
