What is a venture capital fund for the SEC?

Qualifying investments are, in the main, equity bought directly from private operating companies; shares bought from other holders do not count. Non-qualifying assets, apart from short-term holdings, may be no more than 20% of capital contributions plus uncalled commitments. Borrowing is capped at 15% of that amount, for a non-renewable term of no more than 120 days, and investors may not withdraw except in extraordinary circumstances. An adviser solely to such funds can file as an exempt reporting adviser instead of registering.

Say a fund has $100 million of contributions and uncalled commitments. It may hold up to $20 million in non-qualifying assets, such as shares bought from other investors, and borrow up to $15 million for no more than 120 days. Simple example. Terms vary by fund.

Whether a fund meets the definition decides whether its manager can stay out of SEC registration, which changes the rules that apply to the manager.