SEC ordered to loosen venture capital fund rules in 180 days
S. 3351 — Developing and Empowering our Aspiring Leaders Act of 2025 · Filed by Mike Rounds (R-SD) · 1 cosponsor · Introduced Dec 4, 2025 · Referred to committee
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What it does
This bill directs the SEC to expand what counts as a 'qualifying investment' for venture capital fund advisers who are exempt from certain registration requirements. It allows VC funds to count equity securities in their portfolio companies and investments in other VC funds as qualifying investments, and caps secondary acquisitions and fund-of-funds holdings at 49% of a VC fund's capital. The practical effect is to loosen regulatory constraints on how VC funds can structure their portfolios and invest in each other.
Why we flagged it
The bill's operative mechanism is a targeted deregulatory revision to SEC rules governing VC fund adviser registration exemptions. It does not create new rights or protections for citizens; it narrows regulatory definitions to permit VC funds greater portfolio flexibility.
What the text implies
- Allowing VC funds to invest up to 49% in other VC funds and secondary acquisitions may increase leverage and concentration risk in private markets, potentially amplifying losses during downturns without corresponding transparency to limited partners or regulators.
- Expansion of 'qualifying investment' definition may enable VC fund advisers to meet exemption thresholds more easily, reducing SEC oversight of fund operations, fee structures, and conflicts of interest.
The full analysis lists 4 implications of this text.
Who stands to gain
venture capital fund advisers; private equity secondary market participants; fund-of-funds managers