On January 7, 2026, the SEC issued proposed amendments (Proposal) to the definitions of “small business” and “small organization” under the Investment Company Act of 1940 and the Investment Advisers Act of 1940, respectively, as those terms apply to investment advisers, registered investment companies and business development companies. When conducting economic impact assessments pursuant to the Regulatory Flexibility Act (RFA), the Proposal would require the SEC to weigh the impact on a far broader swath of the private funds market than heretofore. Long defined as entities with up to $25 million in assets under management (AUM), the Proposal would categorize firms with up to $1 billion in AUM as small businesses for the purpose of RFA-based assessments. SEC Chair Paul S. Atkins described the Proposal as a step in the agency’s ongoing efforts to streamline financial sector regulations and ameliorate the regulatory burden under which small entities operate. It is notable, however, that the Commission declined to adopt an alternate definition that would use employee headcounts to classify small businesses. Further, the Proposal will have limited impact in the absence of formal rulemaking. This article summarizes the Proposal and provides insights from industry experts about how it could impact fund managers if enacted. See “Division of Investment Management Staff Discuss Staffing, Operations, Rulemaking and Other Developments” (Oct. 16, 2025).