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By: U.S. law firm Anderson P.C.
On August 22, 2024, the Securities and Exchange Commission (SEC) adopted a new rule that updates the dollar threshold for a fund to be considered a "qualifying venture capital fund" under the Investment Company Act of 1940. The rule raises the threshold from $10 million to $12 million in aggregate capital contributions and uncalled committed capital, reflecting inflation adjustments mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.
This adjustment, which will become effective 30 days after its publication in the Federal Register, has implications for the venture capital (VC) industry and the funds operating within this space. Here's what it means for VC funds and investors.
Inflation Adjustments and Rule 3c-7
The updated threshold marks the first inflation-based adjustment under the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act. The Act requires the SEC to adjust the dollar threshold for venture capital funds every five years, accounting for inflation based on the Personal Consumption Expenditures Chain-Type Price Index. Rule 3c-7 now formalizes this process, ensuring that the threshold will be reviewed and adjusted periodically to reflect economic conditions.
The new $12 million threshold applies to a fund's aggregate capital contributions and uncalled committed capital. This adjustment aligns with broader inflationary trends and ensures ...................... To view our full article Click here
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