The U.S. Securities and Exchange Commission (SEC) adopted a rule last week that updates the dollar threshold for a fund to qualify as a “qualifying venture capital fund.”
The rule updates the dollar threshold to $12 million in aggregate capital contributions and uncalled committed capital. This was boosted up from the original threshold of $10 million.
Qualifying venture capital funds are excluded from the Investment Company Act of 1940’s definition of an “investment company.” The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 requires the SEC to index the dollar amount for this threshold for inflation once every five years.
The new rule, 3c-7, implements this statutory directive and adjusts the dollar amount to $12 million dollars, based on the Personal Consumption Expenditures Chain-Type Price Index.
In addition, the rule also establishes a process for the commission to make future inflation adjustments to the threshold every five years.
The rule will take effect 30 days after it is published in the Federal Register.
The Investment Company Act of 1940 regulates investment companies and the activities that they are engaged in. It requires investment companies to provide information about investment objectives, their policies, and their financial condition, among other requirements.