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Securities Offering Reform for Closed-End Investment Companies

June 1, 2020

A Small Entity Compliance Guide[1]

This compliance guide is divided into the following parts:


Who is covered by the rules?

Which rule and form amendments are applicable to small entities?

What new disclosure requirements apply?

Which rule and disclosure changes are not available to small entities?

What recordkeeping requirements apply?

Effective date

Other resources

Contacting the Commission


On April 8, 2020, the Securities and Exchange Commission (the “Commission”) adopted rule and form amendments (the “rules”) 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 (“BDCs”) and other registered closed-end funds (“CEFs”).

BDCs are a type of CEF established by statute that primarily invest in small and developing companies. As directed by Congress, the rules will allow BDCs and other registered CEFs (collectively, “affected funds”) to use the securities offering rules that are already available to operating companies. The amendments are designed to streamline the registration, offering and investor communications processes for BDCs and registered CEFs and will provide important benefits to market participants and investors, including advancing capital formation and modernizing and streamlining disclosures.

Who is covered by The Rules?

The rules affect different categories of affected funds differently. Some of the provisions apply to all affected funds (i.e., all BDCs and all registered CEFs). Many of the provisions, however, will apply only to “seasoned funds.” Some of the provisions will apply only to seasoned funds that also qualify as well-known seasoned issuers (“WKSIs”).

  • Affected Funds -- Affected funds include all BDCs and registered CEFs, including interval funds.
  • Seasoned Funds – Affected funds that are current and timely in their reporting, and have at least $75 million in “public float.”
  • WKSIs – Seasoned funds that generally have at least $700 million in “public float.”
  • Exchange-Traded Products (“ETPs”) – Issuers that are not registered investment companies and whose assets consist primarily of commodities, currencies or derivative instruments that reference commodities or currencies; whose securities are listed for trading on a national securities exchange; and that purchase or redeem securities for a ratable share of their assets at NAV.

Because of the size-based nature of some of the rules, there are provisions in the rule and form amendments that generally will not be applicable to smaller entities. See “Which Rule and Disclosure Changes Are Not Available To Small Entities,” below.

WHICH rule and Form amendments ARE APPLICABLE TO Small Entities?

The rule and form amendments allow affected funds to use the registration, offering, and communication rules that are already available to operating companies. These amendments are designed to reduce regulatory impediments to capital formation, particularly for funds that invest in small and mid-sized businesses, while modernizing disclosures to streamline the way in which affected funds provide valuable information to investors.

  • Immediate or Automatic Effectiveness of Certain Filings. The amendments expand the scope of rule 486 under the Securities Act of 1933 to unlisted affected funds that conduct continuous offerings of securities, as defined under Commission rules. The amendments 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 CEFs that operate as “interval funds,” and these amendments will provide parity for other non-listed closed-end funds.
  • Communication and Prospectus Delivery Reforms. The amendments allow affected funds to use many of the communication rules currently available to operating companies, including the use of a “free writing prospectus,” certain factual business information, forward-looking statements, and certain broker-dealer research reports. Like operating companies, affected funds will be able to satisfy their final prospectus delivery obligations by filing their prospectuses with the Commission. These amendments are designed to reduce regulatory costs while providing more timely information to investors.
  • New Method for Interval Funds and Certain ETPs to Pay Registration Fees. Instead of registering a specific amount of shares and paying registration fees at the time of filing, under the amendments, CEFs that operate as “interval funds” will register an indefinite number of shares and pay registration fees based on net issuance of shares. This approach is similar to that permitted for mutual funds and exchange-traded funds. The amendments also will allow certain continuously offered ETPs that are not registered under the Investment Company Act to use a similar approach.

What NEW disclosure requirements apply?

Several new disclosure requirements are intended to modernize and harmonize our periodic reporting disclosure requirements for affected funds with those applicable to operating companies, mutual funds and exchange-traded funds (“ETFs”).

  • MFDP for Registered CEFs. Registered CEFs 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 or ETFs. These disclosures help investors assess fund performance over the prior year and complements other information in the report, which may make the annual report disclosure more understandable as a whole.
  • Financial Highlights. All BDCs will be required to provide financial highlights in their registration statements and annual reports.This information is arranged to allow investors to trace the operating performance of a fund on a per share basis from the fund’s beginning NAV to its ending NAV so that investors may understand the sources of changes.
  • Online Availability of Information Incorporated by Reference. The registration form for affected funds currently requires a fund to provide new purchasers with a copy of all previously-filed materials that are incorporated by reference into the registration statement. The amendments will eliminate this requirement and instead require affected funds to make incorporated materials readily available on a website. Affected funds will also be required to provide incorporated materials upon request free of charge, in recognition that some investors may prefer to review these materials in paper
  • Amendments to Certain Registered CEFs’ Annual Report Disclosure. The amendments to rule 8b-16(b) under the Investment Company Act require a fund relying on that rule to describe in its annual report the fund’s current investment objectives, policies, and principal risks. The amendments also will require a fund to describe in its annual report certain key changes that occurred during the relevant year in enough detail to allow investors to understand each change and how it may affect the fund, and to preface such disclosures with a legend.
  • Structured Data Reporting Provisions. Affected funds will be required to tag certain registration statement information, similar to current tagging requirements for mutual funds and exchange-traded funds. BDCs also will be required to submit financial statement information, as operating companies currently do. Funds that file Form 24F-2 in connection with paying their registration fees, including mutual funds and exchange-traded funds (as well as interval funds under these amendments), will be required to submit the form in XML format.

WHICH Rule and disclosure changes are not available to small entities?

As a result of size, smaller affected funds may not be able to avail themselves of certain aspects of the adopted rule amendments. These include:

  • Making available the WKSI definition to affected funds.
  • Enhanced offering and communication benefits under our rules.
  • Amendments to the registration process for affected funds that create a short-form registration statement on Form N-2.

What recordkeeping requirements apply?

There will be a mandatory record retention period with respect to the communications and prospectus delivery information collections. If an affected fund uses a free writing prospectus under the adopted rules, the fund must file a free writing prospectus, or retain a record of the free writing prospectus for three years if it was not filed with the Commission.

Effective date

The rule and form amendments will become effective on August 1, 2020, with the exception of the amendments related to registration fee payments by interval funds and certain ETPs, which will become effective on August 1, 2021.

Compliance dates for certain requirements under the amendments provide a transition period after the effective date of the final rule:

  • The requirement for registered CEFs to provide MDFP in their annual reports to shareholders will have a compliance date of August 1, 2021.
  • Inline XBRL structured data reporting requirements for financial statement, registration statement information, and prospectus information will have a compliance date of August 1, 2022 for affected funds that are eligible to file a short-form registration statement. For all other affected funds subject to these structured data reporting requirements, the compliance date is February 1, 2023.
  • The requirement that Form 24F-2 filers (including existing filers) file reports on Form 24F-2 in an XML structured data format will have a compliance date of February 1, 2022.

 Other resources

The adopting release can be found on the Commission’s website at

The proposing release can be found on the Commission’s website at

Contacting the Commission

The Commission’s Division of Investment Management is happy to assist small entities with questions regarding BDC and registered CEF offering reform. You may submit a question by email to Additionally, you may contact the Division of Investment Management’s Office of Chief Counsel at (202) 551-6825.


[1] This guide was prepared by the staff of the U.S. Securities and Exchange Commission as a “small entity compliance guide” under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended. The guide summarizes and explains rules and form amendments adopted by the Commission, but is not a substitute for any rule or form itself. Only the rule or form itself can provide complete and definitive information regarding its requirements.

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