Updating small entity definition will ensure new rules are fair for small firms
Washington, D.C. — MFA supported the Securities and Exchange Commission’s (SEC) proposal to update the definition of “small organization” for investment advisers in a comment letter submitted last Friday. Updating this threshold will ensure the SEC more accurately considers the impact of new rules on small investment advisers when conducting economic analysis.
The current definition of a small adviser—including a $25 million assets-under-management threshold—has not been updated since 1998, despite significant growth and structural change in the advisory industry. As a result, only a small fraction of SEC-registered advisers qualify as small entities under the Regulatory Flexibility Act, which requires the SEC to evaluate how new rules affect small businesses. Updating the threshold will strengthen the Commission’s rules by ensuring its cost-benefit analyses appropriately measure the effects on small managers.
“Economic analysis isn’t a box-checking exercise. It’s the backbone of smart regulation,” said Bryan Corbett, MFA President and CEO. “If regulators miss how compliance costs impact smaller firms, they reduce competition. Better analysis strengthens markets and expands opportunity for investors, including pensions.”
MFA supported the SEC’s proposal to introduce a mechanism for periodically updating the threshold but recommended using the same methodology used to establish the proposed threshold instead of relying solely on inflation adjustments. This approach would help prevent the definition from becoming outdated and ensure regulatory analysis remains relevant as the investment management industry evolves.
Read the full letter here.
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About the global alternative asset management industry
The global alternative asset management industry — including hedge funds, private credit funds, and hybrid funds — serves thousands of public and private pension funds, charitable endowments, foundations, and other global institutional investors. The industry provides portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets throughout the economic cycle.
About MFA
Managed Funds Association (MFA), based in Washington, D.C., New York City, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest it, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 fund manager members, including traditional hedge funds, private credit funds, and hybrid funds, that employ a diverse set of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors diversify their investments, manage risk, and generate attractive returns throughout the economic cycle.
