SEC Modernizes BDC and Closed-End Offering Rules
The SEC has adopted rules that will facilitate offerings by business development companies and closed-end funds. Following up on a March 2019 proposal, the SEC adopted streamlined registration rules that allow BDCs and closed-end funds to utilize shelf registrations similar to operating companies. Issuers that qualify (public float of at least $75 Million) can utilize a shelf registration and a short-form registration statement, and issuers that qualify as Well-Known Seasoned Issuers (public float of $700 Million) will have even more latitude to register and communicate with prospective investors. Firms will be required to include a management discussion of fund performance in annual reports but can incorporate certain information by reference to website disclosure. The new rules go into effect as of August 1, 2020. The SEC also issued a temporary order through December 31, 2020 that allows BDCs to borrow and co-invest to meet asset coverage requirements.
These changes are long overdue. We agree with the SEC’s philosophy to facilitate private capital formation while ensuring SEC supervision without overburdensome registration and reporting requirements.