BDCs Holding Private Fund Managers Seek Exemptive Relief
Two private equity firms that use a business development company to hold underlying interests in managers of structured finance and private fund vehicles filed for exemptive relief because underlying entities must now register as investment advisers. Each BDC holds interests in private fund managers that were previously exempt from registration before Dodd-Frank. The structure allows the BDCs to retain their RIC tax status. Now that the fund sponsors must register as investment advisers, the BDCs, which are registered under the Investment Company Act, could not hold their ownership interests, because Section 12(d)(3) of the 1940 Act prohibits investments in any security issued by a securities-related business.