[Federal Register Volume 89, Number 169 (Friday, August 30, 2024)]
[Rules and Regulations]
[Pages 70479-70483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19229]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 270
[Release No. IC-35305; File No. S7-2024-01]
RIN 3235-AN33
Qualifying Venture Capital Funds Inflation Adjustment
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Securities and Exchange Commission (``Commission'') is
adopting a rule that adjusts for inflation the dollar threshold used in
defining a ``qualifying venture capital fund'' under the Investment
Company Act of 1940 (``Investment Company Act'' or ``Act''). The final
rule also allows the Commission to adjust for inflation this threshold
amount by order every five years and specifies how those adjustments
will be determined. This rule implements the inflation adjustment
requirements of the Economic Growth, Regulatory Relief, and Consumer
Protection Act of 2018 (``EGRRCPA'') relating to qualifying venture
capital funds.
DATES: This rule is effective September 30, 2024.
FOR FURTHER INFORMATION CONTACT: Michael Khalil, Senior Counsel, Frank
Buda, Senior Special Counsel, or Brian McLaughlin Johnson, Assistant
Director, Investment Company Regulation Office, at (202) 551-6792,
Division of Investment Management, Securities and Exchange Commission,
100 F Street NE, Washington, DC 20549-8549.
SUPPLEMENTARY INFORMATION: The Commission is adopting new 17 CFR
270.3c-7 (``rule 3c-7'') under the Investment Company Act.
I. Introduction
The Commission is adopting final rule 3c-7 to adjust for inflation
the dollar threshold used in defining a ``qualifying venture capital
fund'' under the Investment Company Act and to allow the Commission to
make subsequent inflation adjustments by order according to the rule.
Section 3(a) of the Investment Company Act defines the term
``investment company'' for purposes of the Act, and section 3(c)(1)
provides certain exclusions from that definition.\1\ Section 504 of
EGRRCPA amended section 3(c)(1) of the Investment Company Act by
excluding ``qualifying venture capital funds'' from the investment
company definition.\2\ Section 504 of EGRRCPA also added new Investment
Company Act section 3(c)(1)(C), defining a ``qualifying venture capital
fund'' as ``a venture capital fund that has not more than $10,000,000
in aggregate capital contributions and uncalled committed capital.''
\3\ The statutory definition requires this $10,000,000 threshold ``be
indexed for inflation once every five
[[Page 70480]]
years by the Commission, beginning from a measurement made by the
Commission on a date selected by the Commission, rounded to the nearest
$1,000,000.'' \4\
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\1\ See 15 U.S.C. 80a-3(a) and 80a-3(c)(1).
\2\ Public Law 115-174, section 504 (May 24, 2018); 15 U.S.C.
80a-3(c)(1). In order to meet this statutory exclusion, a qualifying
venture capital fund's outstanding securities cannot be beneficially
owned by more than 250 persons, and the fund must not be making, or
presently proposing to make, a public offering of its securities.
Id.
\3\ Public Law 115-174, section 504 (May 24, 2018); 15 U.S.C.
80a-3(c)(1)(C)(i). For purposes of section 3(c)(1), a ``venture
capital fund'' has the meaning given the term in 17 CFR 275.203(l)-
1. 15 U.S.C. 80a-3(c)(1)(C)(ii).
\4\ Public Law 115-174, section 504 (May 24, 2018); 15 U.S.C.
80a-3(c)(1)(C)(i).
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Accordingly, in February 2024, the Commission proposed new rule 3c-
7 under the Investment Company Act to implement these requirements.\5\
The Commission proposed to use December 2023 as the current measurement
date and proposed adjusting the current dollar threshold for
determining what constitutes a qualifying venture capital fund under
section 3(c)(1)(C) of the Act to $12,000,000. Additionally, to
implement the future statutorily required inflation adjustments, the
proposed rule included provisions that would allow the Commission to
make future inflation adjustments by order, according to the
methodology described in the rule.
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\5\ Qualifying Venture Capital Funds Inflation Adjustment,
Investment Company Act Release No. 35129 (Feb. 14, 2024) [89 FR
12995 (Feb. 21, 2024)] (``Proposing Release''). The comment letters
on the proposal are available at https://www.sec.gov/comments/s7-2024-01/s7202401.htm.
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We received two comment letters that addressed the specifics of the
proposal.\6\ Those commenters were generally supportive.\7\ They
described the importance of implementing inflation adjustments for
determining the financial thresholds applicable to qualifying venture
capital funds and supported the proposed procedures for implementing
future inflation adjustments.
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\6\ See Comment Letter of Joel Wresh (Mar. 16, 2024) (``Wresh
Comment Letter''); Comment Letter of Arushi Mehra (Feb. 15, 2024)
(``Mehra Comment Letter'').
\7\ Two other commenters broadly opposed the proposal but did
not address the substance of the proposed rule. See Comment Letter
of Benjamin Nisly (May 15, 2024); Comment Letter of Joseph (Feb. 22,
2024). The other commenters addressed matters not relevant to the
proposal.
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II. Discussion
Pursuant to section 3(c)(1)(C) of the Act and section 504 of
EGRRCPA, we are adopting as proposed rule 3c-7 to update for inflation
the dollar threshold for defining a ``qualifying venture capital fund''
under section 3(c)(1)(C) of the Act. As proposed, the final rule also
provides that the Commission will make future inflation adjustments by
order every five years and specifies how those adjustments will be
determined.
A. Current Inflation-Adjusted Definition of Qualifying Venture Capital
Fund
Pursuant to EGRRCPA, final rule 3c-7(a) adjusts for inflation the
dollar threshold for purposes of defining a qualifying venture capital
fund under section 3(c)(1)(C) of the Investment Company Act.\8\
Substantially as proposed, final rule 3c-7(a) uses December 2023 as the
current measurement date and adjusts the dollar threshold to
$12,000,000 or, following November 1, 2029 (i.e., approximately five
years after the effective date of this rule), the dollar amount
specified in the most recent order issued by the Commission in
accordance with this final rule and as published in the Federal
Register.\9\
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\8\ Final rule 3c-7's definition of qualifying venture capital
fund is expressly limited to construing the term for purposes of
section 3(c)(1) of the Act. Under 12 CFR 351.10, the term qualifying
venture capital fund has a different meaning.
\9\ The final rule differs from the proposal only in that it
specifies Nov. 1, 2029, as the date after which the Commission would
issue the next inflation adjustment order, rather than instructing
the Federal Register to insert the date that is five years after the
effective date of the final rule. This approach is consistent with
the proposal in that Nov. 1, 2029, is approximately five years after
the estimated effective date of this rule and eliminates the need
for the Federal Register to have to perform the calculation. Such
orders will also be available on the Commission's website.
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As proposed, this revised dollar threshold takes into account the
effects of inflation by reference to the historic and current levels of
the Personal Consumption Expenditures Chain-Type Price Index (``PCE
Index''),\10\ which is published by the Department of Commerce.\11\ The
PCE Index is often used as an indicator of inflation in the personal
sector of the U.S. economy,\12\ and the Commission routinely has used
the PCE Index in similar contexts in Commission rules, and it is also
used in provisions of the federal securities laws.\13\ We are using 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 and in
light of the additional considerations discussed in the Economic
Analysis. As discussed below, the scope of the PCE Index, covering all
households in America, is more relevant to the affected parties of this
final rule than is the scope of the CPI-U, which only reflects urban
households, because persons in both rural and urban areas in America
can invest in venture capital funds and can be stakeholders in firms
that receive venture capital funding.\14\ Additionally, the PCE Index
incorporates category weights on a quarterly basis, and incorporates
multiple surveys of businesses, some of which are government mandated
and carry fines
[[Page 70481]]
for nonresponse. No commenters disagreed with the use of the PCE Index.
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\10\ The revised dollar threshold reflects inflation as of Dec.
2023, and is rounded to the nearest $1,000,000 as required by
section 3(c)(1)(C) of the Act. The Dec. 2023 PCE Index was 121.421,
and the May 2018 PCE Index was 101.941. 121.421/101.941 x
$10,000,000 = $11,910,909; $11,910,909 rounded to the nearest
multiple of $1,000,000 = $12,000,0000. As described in the Proposing
Release, we also considered using the Consumer Price Index for all
Urban Consumers (``CPI-U'') to conduct this inflation adjustment.
See Proposing Release at nn.13-14. After rounding to the nearest
$1,000,000 as required by EGRRCPA, both indexes yielded an adjusted
inflation threshold of $12,000,000, or an increase of $2,000,000.
Id. at nn.15-16. We did not receive any comments on our proposed use
of the PCE Index to conduct inflation adjustments under proposed
rule 3c-7, or on the use of CPI-U as an alternative.
\11\ The values of the PCE Index are available from the Bureau
of Economic Analysis, a bureau of the Department of Commerce. See
https://www.bea.gov. The PCE Index measures the prices that people
living in the United States, or those buying on their behalf, pay
for goods and services. The PCE Index is known for capturing
inflation (or deflation) across a wide range of consumer expenses
and reflecting changes in consumer behavior. See https://www.bea.gov/data/personal-consumption-expenditures-price-index.
\12\ See Clinton P. McCully, Brian C. Moyer & Kenneth J.
Stewart, Comparing the Consumer Price Index and the Personal
Consumption Expenditures Price Index, Survey of Current Bus., Nov.
2007, at 26 n.1 (PCE Index measures changes in ``prices paid for
goods and services by the personal sector in the U.S. national
income and product accounts'' and is primarily used for
macroeconomic analysis and forecasting). See also Federal Reserve
Board, Monetary Policy Report to the Congress, at n.1 (Feb. 17,
2000), available at https://www.federalreserve.gov/boarddocs/hh/2000/february/ReportSection1.htm#FN1 (noting the reasons for using
the PCE Index rather than the consumer price index).
\13\ See, e.g., Investment Adviser Performance Compensation,
Investment Advisers Act Release No. 3372 (Feb. 15, 2012) [77 FR
10358, 10367 (Feb. 22, 2012)] (using the PCE Index in connection
with required inflation adjustments to the dollar thresholds in the
definition of ``qualified client'' appearing in 17 CFR 275.205-3
(``rule 205-3'') under the Investment Advisers Act of 1940
(``Advisers Act''), and stating that the PCE Index is widely used as
a broad indicator of inflation in the economy, and that the
Commission has used it in other contexts); Definitions of Terms and
Exemptions Relating to the ``Broker'' Exceptions for Banks,
Securities Exchange Act Release No. 56501 (Sept. 24, 2007) [72 FR
56514 (Oct. 3, 2007)] (using PCE Index in adopting periodic
inflation adjustments to the fixed-dollar thresholds for both
``institutional customers'' and ``high net worth customers'' under
Rule 701 of Regulation R ``because it is a widely used and broad
indicator of inflation in the U.S. economy''); see also Amendments
to Form ADV, Investment Advisers Act Release No. 3060 (July 28,
2010) [75 FR 49234 (Aug. 12, 2010)] (using PCE Index in increasing
for inflation the threshold amount for prepayment of advisory fees
that triggers an adviser's duty to provide clients with an audited
balance sheet and the dollar threshold triggering the exception to
the delivery of brochures to advisory clients receiving only
impersonal advice). The Dodd-Frank Act also requires the use of the
PCE Index to calculate inflation adjustments for the cash limit
protection of each investor under the Securities Investor Protection
Act of 1970. See section 929H(a) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010, Public Law 111-203, 124
Stat. 1376 (2010), codified at 15 U.S.C. 78fff-3.
\14\ See infra section IV.
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B. Future Inflation Adjustments to the Definition of Qualifying Venture
Capital Fund
As proposed, final rule 3c-7(b) provides that the dollar threshold
for qualifying venture capital funds shall be adjusted for inflation by
order of the Commission every five years.\15\ Also as proposed, final
rule 3c-7(b) specifies the PCE Index (or any successor index thereto)
as the inflation index used to calculate future inflation adjustment of
the dollar threshold in the rule.\16\ We are using the PCE Index for
these updates for the same reasons we are using the PCE Index for the
proposed initial adjustment.\17\ One commenter supported the proposal's
establishment of clear criteria for future inflation adjustments.\18\
Another commenter observed that the proposal's provisions regarding
future inflation adjustments were helpful because they would allow for
simple recalculations going forward without the need for a burdensome
rule-making process.\19\
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\15\ Final rule 3c-7 states that the Commission will issue an
order on or about Nov. 1, 2029, and approximately every five years
thereafter, adjusting for inflation the dollar threshold necessary
to be a qualifying venture capital fund for purposes of section
3(c)(1) of the Act. This aspect of the final rule differs from the
proposal only in that it specifies Nov. 1, 2029 (which is
approximately five years after the estimated effective date of the
final rule) as the date on or about which the Commission will issue
the next inflation adjustment order, rather than instructing the
Federal Register to insert the date five years after the effective
date of the rule as that date.
\16\ Final rule 3c-7 provides that the dollar threshold for
qualifying venture capital funds will be adjusted for inflation by
dividing the year-end value of the PCE Index for the calendar year
preceding the calendar year in which the order is being issued, by
the year-end value of the PCE Index for the calendar year 2018,
multiplying $10,000,000 (i.e., the original 2018 statutory threshold
for a qualifying venture capital fund) by that quotient, and
rounding the product to the nearest multiple of $1,000,000.
\17\ See supra footnotes 12-14 and accompanying text and infra
section IV.
\18\ See Mehra Comment Letter.
\19\ See Wresh Comment Letter.
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C. Effective Date
As proposed, because the rule implements a required inflation
adjustment to an existing statutory exclusion from regulation, we are
not including a compliance period or extended effective date for final
rule 3c-7.\20\ Reliance on section 3(c)(1) is voluntary and a fund that
newly meets the definition of a qualifying venture capital fund under
rule 3c-7 can choose whether to rely on the exclusion provided by
section 3(c)(1) for such funds. Final rule 3c-7 will be effective
September 30, 2024.
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\20\ No commenters addressed this aspect of the proposal.
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III. Other Matters
Pursuant to the Congressional Review Act,\21\ the Office of
Information and Regulatory Affairs has designated final rule 3c-7 as
not a ``major rule'' as defined by U.S.C. 804(2). If any of the
provisions of this rule, or the application thereof to any person or
circumstance, is held to be invalid, such invalidity shall not affect
other provisions or application of such provisions to other persons or
circumstances that can be given effect without the invalid provision or
application.
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\21\ 5 U.S.C. 801 et seq.
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IV. Economic Analysis
The Commission is sensitive to the economic effects of final rule
3c-7. To comply with the inflation adjustment required under EGRRCPA,
we are adopting rule 3c-7 to state the current threshold for qualifying
venture capital funds as indexed for inflation. This rule adjusts the
threshold in the definition of the term ``qualifying venture capital
fund'' from $10,000,000 to $12,000,000 in response to inflation as
measured by the PCE Index and allows the Commission to perform future
statutorily required inflation adjustments using the same methodology.
For purposes of analyzing the economic effects of the rule, we use
as our baseline the current venture capital fund market and the current
regulatory framework. To be excepted from registration under section
3(c)(1) of the Act, an issuer (including a venture capital fund) must,
among other things, either have no more than 100 beneficial owners, or
in the case of a qualifying venture capital fund, which currently is
defined as having no more than $10,000,000 in aggregate capital
contributions and uncalled committed capital, have no more than 250
beneficial owners.
An adviser to a venture capital fund that is either registered with
the Commission or is an ``exempt reporting adviser'' is required to
file reports on Form ADV.\22\ Based on this data, there are at least
36,819 venture capital funds, of which at least 25,822 are qualifying
venture capital funds as of June 2024.\23\ Of the qualifying venture
capital funds, 989 have more than 100 beneficial owners and so could
not use the section 3(c)(1) exclusion absent meeting the current
$10,000,000 asset threshold. Increasing the asset threshold in the
definition of the term ``qualifying venture capital fund'' will
increase the number of venture capital funds that can be qualifying
venture capital funds. Specifically, we estimate that there are
approximately five venture capital funds that are not currently
excluded from registration under section 3(c)(1) but that could be
defined as a qualifying venture capital fund after the threshold is
adjusted for inflation to $12,000,000.\24\
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\22\ An adviser to a venture capital fund may or may not be
required to register with the Commission depending on its specific
facts and circumstances including the adviser's total regulatory
assets under management, the state of its principal office, and
whether it solely manages private funds or venture capital funds.
Many of the advisers to qualifying venture capital funds are
``exempt reporting advisers.'' See, e.g., Exemptions for Advisers to
Venture Capital Funds, Private Fund Advisers with Less Than $150
Million in Assets Under Management, and Foreign Private Advisers,
Investment Advisers Act Release No. 3222 (June 22, 2011) [76 FR
39645 (July 6, 2011)], at n.20 and accompanying text. Exempt
reporting advisers are not subject to the investment adviser
registration requirements under the Advisers Act. They are, however,
subject to certain other requirements under the Advisers Act and its
rules that also apply to registered advisers, including the
requirement to file reports on Form ADV and the Advisers Act's
antifraud provisions. See 17 U.S.C. 80b-3(l).
\23\ Based on Form ADV data between July 1, 2023, and June 30,
2024. These estimates encompass all private funds reported on Form
ADV that advisers indicated are venture capital funds. The estimate
of qualifying venture capital funds includes only these funds that
qualify for the exclusion from the definition of investment company
under section 3(c)(1) of the Act, have no more than 250 beneficial
owners, and report gross assets of no more than $10,000,000. These
numbers somewhat underestimate the total number of relevant funds.
First, gross assets may include assets that are not considered
aggregate capital contributions or uncalled capital commitments.
Second, with certain exceptions, advisers with less than $25 million
in regulatory assets under management are prohibited from
registering with the Commission and must instead register with state
regulators. Some states require these advisers to file Form ADV
under state registration, while other states do not. Accordingly,
these estimates do not capture funds managed by advisers registered
in states that do not require filing Form ADV.
\24\ This estimate is based on the number of venture capital
funds reported on Form ADV between July 1, 2023, and June 30, 2024,
that have gross asset value between $10,000,000 and $12,000,000,
between 100 and 250 beneficial owners, and currently do not qualify
for an exception under section 3(c)(1).
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Incentives for funds to change their behaviors to stay within the
regulatory definition of a ``qualifying venture capital fund'' will
strengthen or be mitigated depending on the specific circumstances of
the fund. When the threshold is increased to $12,000,000, a fund near
the current $10,000,000 threshold in aggregate capital contributions
and uncalled capital commitments, and a number of beneficial owners
above 100 but well below 250, will have additional room to raise
capital while remaining a
[[Page 70482]]
qualifying venture capital fund. Accordingly, it will have weaker
incentives to prevent growth until its aggregate capital contributions
and uncalled capital commitments approach the new threshold. Funds near
an anticipated future adjusted threshold of aggregate capital
contributions and uncalled capital commitments could have a greater
incentive to maintain a balance below this future threshold and
maintain fewer than 250 beneficial owners.
While the immediate impacts described above are likely to be
meaningful for funds near the existing and future adjusted thresholds,
the overall effect of the rule on the venture capital fund market will
be minimal. Commenters who discussed the effects of inflation agreed
that the inflation adjustment should maintain the scope of funds that
can be defined as a qualifying venture capital fund, thereby preserving
the economic effects associated with the original provision.\25\
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\25\ See Wresh Comment Letter and Mehra Comment Letter.
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Relatively few funds will be directly impacted by the adopted
change in the asset threshold. Accordingly, the rule will not
substantively impact efficiency, competition, or capital formation in
the near term. In addition, over time, as future inflation adjustments
are made, the rule will preserve the costs and benefits associated with
the original provision by maintaining a consistent threshold standard.
At the margin, the rule may encourage market competition by lowering
barriers to entry for emerging venture capital managers. Specifically,
it could lower compliance costs for eligible funds by exempting them
from certain regulatory requirements such as registration as an
investment company and make it easier for their managers to raise
smaller amounts of capital from a larger number of accredited
investors.
Absent the periodic inflation adjustments that the rule will
implement, the capital threshold for qualifying venture capital funds
would have, over time, shrunk in real terms. This could have either
resulted in higher compliance costs for these types of funds--because
these funds would be newly required to register under the Act--or
caused the managers of these funds to change how they operate to avoid
or mitigate these costs.\26\ Whether managers changed their behavior or
not, the amount of money invested in qualifying venture capital funds
would likely have decreased, and at least some of the capital that
would otherwise have been allocated to these funds would likely have
gone to funds that are not excluded from the Act and thus would have
received the investor protection benefits provided by the Act.
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\26\ For example, such funds may have decided to merge with
other funds to spread out any fixed costs from registration or stop
operating these types of funds altogether. They may have also chosen
to limit the number of investors to be under the conventional
section 3(c)(1) limit of no more than 100 beneficial owners.
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Because the rule will implement the statutory inflation adjustments
mandated by EGRRCPA, the only reasonable alternative to be considered
relates to the choice of inflation index to be used. As discussed in
the proposal,\27\ two indexes were considered--the PCE Index and CPI-U.
These measures differ because of different scopes and different
methodologies. CPI-U reflects only expenditures made directly by urban
households, whereas the PCE Index considers both urban and rural
households and considers expenditures made on their behalf by third
parties, such as employer-paid health insurance. The scope of the PCE
Index, covering all American households, is more relevant to the
affected parties of this final rule than is the scope of the CPI-U,
which only reflects urban households, because all Americans, not just
those in urban areas, can invest in venture capital funds and can be
stakeholders in firms that receive venture capital funding. The PCE
Index also better captures substitution effects since its category
weights update quarterly whereas those of the CPI-U update annually.
Category weights reflect the quantity of goods and services purchased
in a particular category. As some determinants of prices change,
consumers will substitute purchases between categories. Category
weights that change less frequently will less accurately capture these
substitution effects. The indexes' survey methodologies also differ:
CPI-U relies on two voluntary consumer surveys whereas the PCE Index
incorporates multiple surveys of businesses, some of which are
government mandated and carry fines for nonresponse. No commenters
suggested that the CPI-U or any other index would be a more appropriate
choice.
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\27\ See Proposing Release at nn.13-16 and accompanying text.
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V. Paperwork Reduction Act
Final rule 3c-7 does not contain a ``collection of information''
requirement within the meaning of the Paperwork Reduction Act of 1995
(``PRA''), nor does it create any new filing, reporting, recordkeeping,
or disclosure reporting requirements.\28\ Accordingly, the PRA is not
applicable.\29\
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\28\ 44 U.S.C. 3502(3).
\29\ 44 U.S.C. 3501 et seq. The Proposing Release requested
comment on our conclusion that proposed rule 3c-7 did not contain a
``collection of information.'' We did not receive any comments
regarding PRA issues.
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VI. Regulatory Flexibility Act Certification
The Commission certified, pursuant to section 605(b) of the
Regulatory Flexibility Act of 1980 (``RFA'') \30\ that proposed rule
3c-7 would not, if adopted, have a significant economic impact on a
substantial number of small entities. The Commission included this
certification in section V of the Proposing Release. Commenters did not
respond to the Commission's requests for comment regarding the
Commission's certification, and we continue to believe that final rule
3c-7 will not have a significant economic impact on a substantial
number of small entities.\31\ As discussed in the Proposing Release,
based on a review of Form ADV filings, we expect few small entities
would be affected by rule 3c-7's inflation adjustment provisions.\32\
Accordingly, we certify that the final rule will not have a significant
impact on a substantial number of small entities.
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\30\ 5 U.S.C. 605(b).
\31\ Generally, for purposes of the Investment Company Act and
the RFA, an investment company is a small entity if, together with
other investment companies in the same group of related investment
companies, it has net assets of $50 million or less as of the end of
its most recent fiscal year. 17 CFR 270.0-10(a).
\32\ To qualify for a section 3(c)(1) exclusion, an issuer must
(among other things) have no more than 100 beneficial owners, or in
the case of a qualifying venture capital fund, no more than 250
beneficial owners. 15 U.S.C. 80a-3(c)(1). A review of Form ADV
filings suggests that, as of June 2024, there are approximately five
venture capital funds that are not currently relying on the
exclusion in section 3(c)(1) of the Investment Company Act but that
also have between $10,0000 and $12,000,000 in aggregate capital
contributions and uncalled committed capital, and between 100 and
250 beneficial owners, such that they could meet the definition of a
qualifying venture capital fund under final rule 3c-7. See supra
footnote 28. We do not believe that five funds represent a
``substantial number'' of small entities.
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Statutory Authority
The Commission is adopting new rule 3c-7 under the authority set
forth in the Investment Company Act, particularly sections 3 and 38
thereof [15 U.S.C. 80a et seq.] and the Economic Growth, Regulatory
Relief, and Consumer Protection Act of 2018, particularly section 504
thereof [Pub. L. 115-174, 132 Stat. 1296].
List of Subjects in 17 CFR Part 270
Investment companies, Securities.
[[Page 70483]]
Text of Rule Amendments
For reasons set forth in the preamble, we are amending title 17,
chapter II of the Code of Federal Regulations as follows:
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
0
1. The general authority citation for part 270 continues to read as
follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
1681w(a)(1), 6801-6809, 6825, and Pub. L. 111-203, sec. 939A, 124
Stat. 1376 (2010), unless otherwise noted.
* * * * *
0
2. Add Sec. 270.3c-7 to read as follows:
Sec. 270.3c-7 Inflation-adjusted definition of qualifying venture
capital fund.
(a) Inflation-adjusted definition of qualifying venture capital
fund. For purposes of section 3(c)(1)(C)(i) of the Act (15 U.S.C. 80a-
3(c)(1)(C)(i)), the term qualifying venture capital fund means a
venture capital fund (as that term is defined in 17 CFR 275.203(l)-1)
that has not more than $12,000,000 in aggregate capital contributions
and uncalled committed capital, or, following November 1, 2029, the
dollar amount specified in the most recent order issued by the
Commission in accordance with paragraph (b) of this section and as
published in the Federal Register.
(b) Future inflation adjustments. Pursuant to section 3(c)(1)(C)(i)
of the Act (15 U.S.C. 80a-3(c)(1)(C)(i)), the dollar amount specified
in paragraph (a) of this section shall be adjusted by order of the
Commission, issued on or about November 1, 2029, and approximately
every five years thereafter. The adjusted dollar amount established in
such orders shall be computed by:
(1) Dividing the year-end value of the Personal Consumption
Expenditures Chain-Type Price Index (or any successor index thereto),
as published by the United States Department of Commerce, for the
calendar year preceding the calendar year in which the order is being
issued, by the year-end value of such index (or successor) for the
calendar year 2018; and
(2) Multiplying $10,000,000 times the quotient obtained in
paragraph (b)(1) of this section and rounding the product to the
nearest multiple of $1,000,000.
By the Commission.
Dated: August 21, 2024.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-19229 Filed 8-29-24; 8:45 am]
BILLING CODE 8011-01-P