The Securities and Exchange Commission (SEC) has proposed a new rule to update the definition of a qualifying venture capital (VC) fund. The proposed rule would raise the dollar threshold for a fund to qualify as a qualifying VC fund from $10 million to $12 million aggregate capital contributions and uncalled committed capital. This increase is based on the Personal Consumption Expenditures Chain-Type Price Index. The SEC also plans to establish a process for future inflation adjustments every five years. Qualifying VC funds are currently excluded from the Investment Company Act’s definition of an “investment company.”
The proposed rule is part of the SEC’s efforts to modernize and simplify regulations to promote capital formation and investment opportunities. By raising the threshold for qualifying VC funds, the SEC aims to provide regulatory relief to VC funds while still maintaining investor protections.
This proposed change aligns with the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, which seeks to promote economic growth by reducing unnecessary regulatory burdens. The SEC’s proposed rule would implement this legislation by adjusting the threshold for qualifying VC funds.
The SEC is inviting public comments on the proposed rule, and the comment period will remain open for a specified period of time. The SEC will consider the feedback received in its final decision-making process.
It is important to note that the proposed rule is subject to change and may be modified based on feedback and further analysis. The SEC aims to strike a balance between facilitating capital formation and protecting investors, and it will carefully consider all comments received before finalizing the rule.
