SEC Adopts Inflation Adjustment to Definition of "Qualifying Venture Capital Fund"

The SEC adopted a final rule under which the dollar threshold used to define a "qualifying venture capital fund" under the Investment Company Act ("ICA") would be adjusted for inflation. The final rule raised the dollar threshold for defining a "qualifying venture capital fund" from $10 million to $12 million of "aggregate capital contributions and uncalled committed capital." 

Under ICA Section 3(c)(1) ("Investment Company Exemptions: Definitions") qualifying venture capital funds are excluded from the definition of an "investment company." According to the SEC, new Rule 3c-7 ("Certain transfers of interests"), also establishes a process for the SEC to make future inflation adjustments. The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 mandated that the SEC adjust this exclusion threshold for inflation every five years.

The rule will be effective 30 days after publication in the Federal Register.