The Securities and Exchange Commission (SEC) proposed a rule this week that would update the dollar threshold for a fund to qualify as a “qualifying venture capital fund.”
Specifically, the rule would update the dollar threshold to $12 million aggregate capital contributions and uncalled committed capital, up from the current standard of $10 million.
It should be noted that qualifying venture capital funds are excluded from the Investment Company Act of 1940’s definition of an “investment company.” Further, 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 proposed rule is designed to implement this statutory directive. In addition, it would adjust the dollar amount to $12 million, based on the Personal Consumption Expenditures Chain-Type Price Index (PCE Index). Also, the SEC’s proposed rule would establish a process for future inflation adjustments every five years.
“We are proposing to use the PCE Index to calculate inflation adjustments for this rulemaking because the methodology and scope of the PCE Index (which considers both urban and rural households and expenditures made on their behalf by third parties) reflects a broad sector of the U.S. economy,” the rule said.
The proposal will be published on SEC.gov and in the Federal Register. The comment period will remain open for 30 days after publication in the Federal Register.