The Securities and Exchange Commission (SEC) has proposed a new rule that would update the dollar threshold for a fund to qualify as a “qualifying venture capital fund” under the Investment Company Act of 1940.
The proposed rule would increase the threshold to $12 million in aggregate capital contributions and unsolicited committed capital, up from the current standard of $10 million.
Qualifying venture capital funds are excluded from the definition of “investment company” under the Act. The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 requires the SEC to index the dollar figure for this threshold to inflation once every five years.
The SEC’s proposed new rule is designed to implement this statutory directive and would adjust the dollar amount to $12 million, based on the PCE Index. In addition, the rule would establish a process for future inflation adjustments every five years.
According to the SEC, the proposed rule is intended to provide greater flexibility for venture capital funds and promote capital formation. The rule would also ensure that the definition of a qualifying venture capital fund remains up-to-date and relevant in the face of inflation. By adjusting the dollar threshold to $12 million, the SEC aims to provide greater clarity and certainty for funds seeking to qualify as venture capital funds.
The proposal will be published on the SEC’s website and in the Federal Register, and the comment period will remain open for 30 days after publication in the Federal Register.
Interested parties are encouraged to submit comments on the proposed rule, which will be taken into consideration by the SEC before making a final decision. The SEC’s proposed rule is an important development for the venture capital industry, and stakeholders are encouraged to stay informed and engaged in the rulemaking process, the press released ends.
