SEC Adopts Closed-End Fund Reforms, Provides Temporary BDC Relief

The SEC adopted rule amendments spurred by Congressional action that will allow business development companies and other closed-end funds to use the securities offering rules that are already available to operating companies. The SEC said the rule amendments are designed to streamline the registration, offering and investor communications processes for BDCs and registered closed-end funds and will advance capital formation and modernize and streamline disclosures. The SEC said that as a result of the reforms, BDCs and closed-end funds will be better able to respond to market opportunities. Earlier, the SEC announced that it was providing temporary, conditional exemptive relief for BDCs to enable them to make additional investments in small and medium-sized businesses, including those with operations affected by COVID-19.  The relief will provide additional flexibility for BDCs to issue and sell senior securities in order to provide capital to such companies, and to participate in investments in these companies alongside certain private funds that are affiliated with the BDC.  The temporary relief is subject to investor protection conditions, including approval by a majority of a BDC’s independent board members, the SEC said.