The U.S. Securities and Exchange Commission (SEC) voted two years ago to adopt rule amendments to implement certain provisions of the Small Business Credit Availability Act and the Economic Growth, Regulatory Relief, and Consumer Protection Act relating to Business Development Companies and other Closed-End Funds. What this means is that these eligible funds can use the securities offering methods that have long been available to operating companies.
These SEC amendments apply to Business Development Companies (BDCs), which are a type of Closed-End Fund that is regulated under the Investment Act of 1940. BDC’s primarily invest in small and mid-size companies, and distressed companies with a goal to regain financial stability for the invested company. The final rules were designed to help streamline the registration process, as well as the offering and investor communications processes for BDCs and CEFs and registered Closed-End Funds. In addition, they help provide important benefits to market participants and investors, including advancing capital formation and modernizing and streamlining disclosures.
Updates for 2022
Much has happened since the amendments were first adopted. Effective, August 1, 2022, BDCs and CEFs will be required to update the way they submit their financial statement information by tagging all financials in Inline XBRL (iXBRL). Tagging with iXBRL will enable organizations to better respond to market opportunities faster, more efficiently, and do business more effectively.
Here is what you need to know:
Short Form Registration Statement
- Short forms registration statements on Forms N-2 must begin compliance on August 1, 2022.
- All other affected forms will be required to comply with the rules and begin filing with Inline XBRL on February 1, 2023.
Inline XBRL Requirement
- BDCs, like other operating companies, can submit cover page and financial statement information using the US Generally Accepted Accounting Principles (GAAP) taxonomy, for annual, quarterly, and current reports filed on Forms 10-K, 10-Q, and 8-K
- BDCs and CEFs can submit Form N-2 cover page information and certain information in the prospectus using the new Inline XBRL Closed-End Funds taxonomy.
- The SEC recently released draft Closed-End Funds taxonomy with a comment period ending August 30, 2020.
As your trusted resource on regulatory changes, DFIN will continue to provide you with the latest updates to ensure that you are prepared and ready for whatever comes next. Continue to watch this space.