U.S. House approves INVEST Act to overhaul venture capital regulations and boost secondary market participation

The U.S. House of Representatives advanced a major package of capital‑formation reforms on 11 December 2025 when it approved the Incentivizing New Ventures and Economic Strength Through Capital Formation Act by 302 to 123. The bill, known as the INVEST Act, would alter longstanding securities‑regulation structures affecting venture capital funds, business development companies and smaller private funds if it wins Senate approval and is signed by the President.

At the centre of the proposal are adjustments to exemptions under the Investment Company Act of 1940 that many fund managers say have constrained fundraising and limited participation in a fast‑growing secondaries market for private company stakes. According to the bill’s text on Congress.gov, the legislation would broaden the scope of the existing “qualifying” venture capital fund safe harbour by increasing both the permitted number of beneficial owners and the aggregate amount a fund may raise without registering as an investment company. The proposal would also permit a larger share of a fund’s assets to be invested in other venture vehicles and in secondary‑market purchases of private equity interests.

Those changes respond to practical pressures identified by market participants: funds that pursue venture strategies have often been unable to expand under the current caps, which have curtailed their ability to write larger checks and to participate in private secondaries trading. Industry advocates argue the bill would enable more capital to flow into early‑stage companies while keeping many fund managers outside the SEC’s registration regime that applies to registered investment companies and, in some cases, to registered investment advisers.

The INVEST Act is not a single, narrow measure. According to Congress.gov, it bundles more than 20 provisions and incorporates other bipartisan initiatives aimed at reducing regulatory friction for growing businesses. The bill includes Representative Zach Nunn’s ELEVATE Act, which seeks to ease procedures for small and mid‑sized companies to pursue initial public offerings,and Representative Vicente Gonzalez’s Advocating for Small Business Act,which would establish Offices of Small Business within each of the SEC’s rulemaking divisions to improve regulator outreach to local entrepreneurs. The House report and bill text are publicly available on Congress.gov.

The legislative package also contemplates changes to who may access private fund offerings. The INVEST Act would direct the SEC to expand the accredited investor definition to encompass certain licensed financial professionals and individuals who pass a new competency examination the regulator would be required to develop. Proponents say that change would widen retail participation in private funds while adding a competency gate; sceptics fear it could blur the line between sophisticated accredited investors and the broader public.

Not all proposed amendments survived House floor debate. An amendment offered by Representative Maxine Waters on 10 December,which would have required investment advisers and hedge funds to carry out know‑your‑customer checks and anti‑money‑laundering procedures for foreign clients,was rejected by the House. The recorded vote and amendment text are available on Congress.gov.

Industry groups were quick to endorse the House action. The Small Business Investor Alliance celebrated passage, saying the bill contains measures to expand investment opportunities and bolster financing for the lower middle market. The SBIA characterised reforms to Business Development Companies and smaller private funds as central to unlocking capital for entrepreneurs. Those views reflect a broader lobbying effort from investor‑side trade associations that have pressed Congress for relief from rules they say unintentionally constrain financing for private companies.

While the bill’s backers highlight potential benefits for capital formation and secondary market liquidity, the proposed relaxations of registration and investor‑eligibility rules will draw scrutiny in the Senate and from regulators and consumer‑protection groups. Questions likely to surface include whether the expanded exemptions reduce investor protections, how the SEC would implement a new competency exam and expanded accredited‑investor categories, and whether allowing larger allocations to secondary transactions might change risk profiles for otherwise traditional venture funds.

The INVEST Act’s future hinges on action in the Senate. Congress.gov shows the measure was introduced in the House in May 2025 and advanced through multiple amendments and additions before the December vote. If the Senate passes the bill without substantive change and the President signs it, the statutory adjustments would trigger rulemaking at the SEC to implement new thresholds and definitions. Until then industry participants, regulators and lawmakers will continue to debate the trade‑offs between easing capital access for private companies and preserving safeguards for investors.