The Securities and Exchange Commission (SEC) has adopted a new rule adjusting the dollar threshold for a fund to qualify as a "qualifying venture capital fund" under the Investment Company Act of 1940. The updated rule raises the threshold to $12 million in aggregate capital contributions and uncalled committed capital, up from the previous $10 million limit. This adjustment follows the mandate of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, which requires the SEC to index this threshold for inflation every five years.
The new rule, known as Rule 3c-7, bases the adjustment on the Personal Consumption Expenditures Chain-Type Price Index and establishes a framework for future inflation-related updates. Qualifying venture capital funds are exempt from being categorized as "investment companies" under the Act, allowing them to operate with fewer regulatory restrictions. The rule will become effective 30 days after its publication in the Federal Register.
