January 9, 2026
What Happened?
On January 7, 2026, the SEC proposed amendments to the rules defining small entities for purposes of the Regulatory Flexibility Act (“RFA”). The RFA requires agencies to evaluate the economic impact of federal rulemakings on small entities. Currently, investment advisers with less than $25 million of regulatory assets under management and investment companies with $50 million or less of net assets are “small entities” for RFA purposes. The proposed rule would raise this threshold to $1 billion for investment advisers and $10 billion for investment companies.
The proposed RFA threshold would cause 75% of advisers to be small entities for RFA evaluations. This is according to the SEC staff calculation in the adopting release (pg. 38). Chairman Atkins said the proposal would more accurately capture the types of investment advisers and investment companies that are small and would help the SEC “more appropriately promote the effectiveness and efficiency of its regulations, with the goal of minimizing the significant economic impact on small entities.” The proposal also includes a procedure for inflation adjustments to the RFA thresholds by order every ten years.
What does this mean for me?
I find it difficult to think “small” when I read “billion,” though, to be fair, the threshold has not changed since 1998 for advisers or since 1982 for investment companies. There has been significant growth in the industry since then, with thousands of new entrants and consolidation among the largest firms. The RFA was aimed at recognizing differences in the scale and resources of regulated entities to support competition, innovation, and productivity. This proposed rule raises the question of how best to measure a small entity for RFA purposes and is likely to receive a lot of public comments. The proposing release invites public comment, and submission is open at SEC.gov for the next 60 days from publication of the release.
We will continue to monitor regulatory updates and new developments that impact investment advisors and compliance programs. If you have questions, contact us. Fairview is here to help.
