1 minute read 23 Jul 2020
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SEC actions and their impact to business development companies

By Eyal Seinfeld

EY US Financial Services BDC Markets Leader

Deep knowledge and experience with BDCs. Married father of two. Passionate about coaching my children in basketball.

1 minute read 23 Jul 2020

The SEC has proposed and finalized several rules and issued an exemptive order that impact business development companies (BDCs).

In the past, while certain rules were applicable to BDCs, they were not necessarily written with BDCs in mind or were written prior to the advent of BDCs. Application of the rules among BDCs was inconsistent. The recent proposed and adopted rules and the exemptive order deliberately address the unique issues that BDCs encounter in financial and regulatory reporting and should bring consistency in their application.

The author would like to thank Alyssa Erceg for her contribution to this article.

Summary

BDCs could now benefit from reduced financial reporting requirements as a result of the changes to the definitions of accelerated filer and large accelerated filer and the changes to the criteria for significant subsidiary tests. On the other hand, the proposed derivatives and fair value rules could place additional demand on management’s analysis and documentation related to unfunded commitments and Level 2 investments, and enhance board oversight requirements. It is critical that management monitors these proposed rules as they are finalized, and to ensure compliance, management continues to engage in discussions with its internal stakeholders, external auditors and advisors.

About this article

By Eyal Seinfeld

EY US Financial Services BDC Markets Leader

Deep knowledge and experience with BDCs. Married father of two. Passionate about coaching my children in basketball.