By: Gena Dirani
In July 2025, the House Financial Services Committee advanced three bipartisan bills designed to ease compliance obligations for private-fund advisers and expand the scope of venture-capital exemptions. While the measures remain in the early stages of the legislative process, they reflect a broader effort in Congress to modernize rules that many argue have not kept pace with inflation, evolving fund structures, and the growing importance of early-stage capital formation.
The first proposal, the Small Business Investor Capital Access Act (H.R. 3673), would raise the private-fund adviser exemption threshold from $150 million to $175 million in regulatory assets under management (RAUM). Importantly, the bill also introduces automatic inflation adjustments every five years, preventing the threshold from becoming outdated. For exempt reporting advisers (ERAs), this change would provide additional breathing room before being required to register as a full SEC-registered adviser, reducing compliance costs for mid-sized firms operating just below the current limit.
The second bill, the Developing and Empowering our Aspiring Leaders (DEAL) Act (H.R. 4429), directs the SEC to broaden the definition of “qualifying investment” under the venture-capital exemption. Under the proposal, certain secondary transactions and fund-of-fund investments would count toward the exemption so long as at least 51% of a fund’s portfolio continues to be invested directly in qualifying portfolio companies. This shift reflects the realities of today’s venture market, where secondaries and more complex structures are common, and would provide venture managers with greater flexibility in fund construction without jeopardizing their exempt status.
Finally, the Improving Capital Allocation for Newcomers (ICAN) Act (H.R. 4431) seeks to expand the 3(c)(1) exemption available to smaller venture funds. It would increase the maximum number of investors allowed from 250 to 500 and raise the cap on fund size from $10 million to $50 million. These changes could significantly ease the fundraising path for emerging managers who often struggle to scale under the current limitations.
Implications for RIAs and ERAs
For ERAs, the most immediate benefit lies in the higher exemption threshold under the Small Business Investor Capital Access Act. Firms hovering near the $150 million mark could delay full SEC registration, with the added comfort of knowing that inflation will no longer erode this threshold over time.
Venture-capital managers stand to gain even more. The DEAL Act would allow them to structure portfolios in ways that better reflect market practice, incorporating secondaries and fund-of-fund exposures without losing their exemption. Meanwhile, the ICAN Act would offer emerging managers room to grow, both by enabling them to raise larger pools of capital and by opening their doors to more investors before hitting regulatory ceilings.
Registered investment advisers (RIAs), while already subject to SEC oversight, should still pay attention. Expanded exemptions for ERAs and venture funds may shift competitive dynamics in the marketplace, especially if smaller managers can scale more efficiently. In addition, RIAs co-investing or transacting alongside VC funds should ensure their Form ADV disclosures and fund documents remain consistent with any new structures permitted under the legislation.
Practical Compliance Takeaways
Even though the current rules remain unchanged, firms should begin scenario planning now. ERAs close to the $150 million threshold should model how the proposed $175 million cap might affect their registration timeline and compliance planning. Venture managers would be wise to consider how expanded definitions of “qualifying investment” could alter their investment strategies and whether offering documents and compliance manuals would need updating if the rules shift. Emerging managers, in particular, should revisit fundraising strategies to determine whether higher investor limits and fund-size caps could allow for simpler structures or fewer parallel funds.
The bottom line is that these proposals, if enacted, could meaningfully reduce compliance burdens and expand flexibility for private-fund advisers. RIAs and ERAs alike should monitor developments closely, ensuring they are well-positioned to adapt quickly if and when the changes are finalized.