The Securities and Exchange Commission has established a procedure for commenting on rule proposals even before the proposals have been made. I've already taken advantage of this procedure to submit this comment on with respect to the definition of "venture capital fund". This process didn't go well for me as the SEC somehow lost my comment. However, I'm pleased to say that the people running the website at the SEC were very helpful and quick to respond.
It seems to me that while most people have an idea about how to distinguish a venture capital fund from a hedge fund or private equity fund, it is going to be tricky to nail down the differences.
A few years ago, the Securities and Exchange Commission proposed a rule defining "venture capital fund" under the Securities Act of 1933. Under the proposed rule, the term "venture capital fund" would have the same meaning as the term "business development company" in Section 202(a)(22) of the Investment Advisers Act of 1940. In my view, that was a very cumbersome definition. In part because Section 202(a)(22) refers to Section 2(a)(48) of the Investment Company Act of 1940. That meant that anyone who read the proposed definition in the '33 Act rule would have to also read definitions in both of the '40 Acts. It also meant that someone would need to be a '40 Act lawyer times two to determine whether a fund was a "venture capital fund".
In any event, I don't think the SEC should go down this rabbit hole again. If Congress had intended that "venture capital fund" have the same meaning as "business development company" in Section 202(a)(22), it could have simply exempted advisers to business development funds in Section 407 of the Dodd-Frank Act rather than requiring the SEC to adopt rules defining "venture capital fund". Thus, I think Congress intended for the SEC to do some original thinking on the question of what constitutes a "venture capital fund".