At an open meeting held today the Securities and Exchange Commission adopted amendments modernizing the offering and communications related rules applicable to business development companies (BDCs) and closed end funds (CEFs). The amendments implement the rulemaking mandate in the Small Business Credit Availability Act and the Economic Growth, Regulatory Relief, and Consumer Protection Act. Most of the amendments will become effective on August 1, 2020.
The SEC’s fact sheet highlights the principal changes, which include:
- Shelf Offering Process and New Short-Form Registration Statement: The ability to use a shelf registration and subject to eligibility criteria comparable to those applicable to operating companies.
- WKSI Status: BDCs and CEFs may be able to qualify as WKSIs and enjoy the benefits available to WKSIs.
- Immediate or Automatic Effectiveness of Certain Filings: The amendments will expand the scope of rule 486 under the Securities Act of 1933 to registered closed-end funds or BDCs that conduct continuous offerings of securities, as defined under SEC rules. The amendments will permit these funds to make certain changes to their registration statements on an immediately-effective basis or on an automatically effective basis a set period of time after filing. Rule 486 currently applies only to closed-end funds that operate as “interval funds,” and these amendments will provide parity for other non-listed closed-end funds.
- Communications and Prospectus Delivery Reforms: BDCs and CEFs will benefit from access equals delivery as well as from communications safe harbors now available only to operating companies.
- Periodic Reporting Requirements: Funds will be required to include certain key prospectus disclosure in their annual reports. In addition, affected funds filing a short-form registration statement will be required to disclose material unresolved staff comments. Registered closed-end funds also will be required to provide management’s discussion of fund performance (or MDFP) in their annual reports, similar to requirements that currently apply to mutual funds, exchange-traded funds, and BDCs.