[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3868 Reported in House (RH)]
<DOC>
Union Calendar No. 388
114th CONGRESS
2d Session
H. R. 3868
[Report No. 114-508]
To amend the Investment Company Act of 1940 to remove certain
restrictions on the ability of business development companies to own
securities of investment advisers and certain financial companies, to
change certain requirements relating to the capital structure of
business development companies, to direct the Securities and Exchange
Commission to revise certain rules relating to business development
companies, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 2, 2015
Mr. Mulvaney introduced the following bill; which was referred to the
Committee on Financial Services
April 19, 2016
Additional sponsors: Mr. Stivers, Mr. Sherman, Mr. Schweikert, Mr.
Pittenger, Mr. Kildee, and Mr. Dold
April 19, 2016
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on
November 2, 2015]
_______________________________________________________________________
A BILL
To amend the Investment Company Act of 1940 to remove certain
restrictions on the ability of business development companies to own
securities of investment advisers and certain financial companies, to
change certain requirements relating to the capital structure of
business development companies, to direct the Securities and Exchange
Commission to revise certain rules relating to business development
companies, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Credit Availability
Act''.
SEC. 2. BUSINESS DEVELOPMENT COMPANY OWNERSHIP OF SECURITIES OF
INVESTMENT ADVISERS AND CERTAIN FINANCIAL COMPANIES.
(a) In General.--
(1) In general.--Not later than 1 year after the date of
enactment of this Act, the Securities and Exchange Commission
shall promulgate regulations to codify the order in Investment
Company Act Release No. 30024, dated March 30, 2012. If the
Commission fails to complete the regulations as required by
this subsection, a business development company shall be
entitled to treat such regulations as having been completed in
accordance with the actions required to be taken by the
Commission until such time as such regulations are completed by
the Commission.
(2) Rule of construction.--Nothing in this subsection shall
prevent the Commission from issuing rules to address potential
conflicts of interest between business development companies
and investment advisers.
(b) Permissible Assets of an Eligible Portfolio Company.--Section
55 of the Investment Company Act of 1940 (15 U.S.C. 80a-54) is amended
by adding at the end the following:
``(c) Securities Deemed To Be Permissible Assets.--Notwithstanding
subsection (a), securities that would be described in paragraphs (1)
through (6) of such subsection except that the issuer is a company
described in paragraph (2), (3), (4), (5), (6), or (9) of section 3(c)
may be deemed to be assets described in paragraphs (1) through (6) of
subsection (a) to the extent necessary for the sum of the assets to
equal 70 percent of the value of a business development company's total
assets (other than assets described in paragraph (7) of subsection
(a)), provided that the aggregate value of such securities counting
toward such 70 percent shall not exceed 20 percent of the value of the
business development company's total assets.''.
SEC. 3. EXPANDING ACCESS TO CAPITAL FOR BUSINESS DEVELOPMENT COMPANIES.
(a) In General.--Section 61(a) of the Investment Company Act of
1940 (15 U.S.C. 80a-60(a)) is amended--
(1) by redesignating paragraphs (2) through (4) as
paragraphs (3) through (5), respectively;
(2) by striking paragraph (1) and inserting the following:
``(1) Except as provided in paragraph (2), the asset
coverage requirements of subparagraphs (A) and (B) of section
18(a)(1) (and any related rule promulgated under this Act)
applicable to business development companies shall be 200
percent.
``(2) The asset coverage requirements of subparagraphs (A)
and (B) of section 18(a)(1) and of subparagraphs (A) and (B) of
section 18(a)(2) (and any related rule promulgated under this
Act) applicable to a business development company shall be 150
percent if--
``(A) within five business days of the approval of
the adoption of the asset coverage requirements
described in clause (ii), the business development
company discloses such approval and the date of its
effectiveness in a Form 8-K filed with the Commission
and in a notice on its website and discloses in its
periodic filings made under section 13 of the
Securities Exchange Act of 1934 (15 U.S.C. 78m)--
``(i) the aggregate value of the senior
securities issued by such company and the asset
coverage percentage as of the date of such
company's most recent financial statements; and
``(ii) that such company has adopted the
asset coverage requirements of this
subparagraph and the effective date of such
requirements;
``(B) with respect to a business development
company that issues equity securities that are
registered on a national securities exchange, the
periodic filings of the company under section 13(a) of
the Securities Exchange Act of 1934 (15 U.S.C. 78m)
include disclosures reasonably designed to ensure that
shareholders are informed of--
``(i) the amount of indebtedness and asset
coverage ratio of the company, determined as of
the date of the financial statements of the
company dated on or most recently before the
date of such filing; and
``(ii) the principal risk factors
associated with such indebtedness, to the
extent such risk is incurred by the company;
and
``(C)(i) the application of this paragraph to the
company is approved by the required majority (as
defined in section 57(o)) of the directors of or
general partners of such company who are not interested
persons of the business development company, which
application shall become effective on the date that is
1 year after the date of the approval, and, with
respect to a business development company that issues
equity securities that are not registered on a national
securities exchange, the company extends, to each
person who is a shareholder as of the date of the
approval, an offer to repurchase the equity securities
held by such person as of such approval date, with 25
percent of such securities to be repurchased in each of
the four quarters following such approval date; or
``(ii) the company obtains, at a special or annual
meeting of shareholders or partners at which a quorum
is present, the approval of more than 50 percent of the
votes cast of the application of this paragraph to the
company, which application shall become effective on
the date immediately after the date of the approval.'';
(3) in paragraph (3) (as redesignated), by inserting ``or
which is a stock, provided that all such stock is issued in
accordance with paragraph (6)'' after ``indebtedness'';
(4) in subparagraph (A) of paragraph (4) (as
redesignated)--
(A) in the matter preceding clause (i), by striking
``voting''; and
(B) by amending clause (iii) to read as follows:
``(iii) the exercise or conversion price at
the date of issuance of such warrants, options,
or rights is not less than--
``(I) the market value of the
securities issuable upon the exercise
of such warrants, options, or rights at
the date of issuance of such warrants,
options, or rights; or
``(II) if no such market value
exists, the net asset value of the
securities issuable upon the exercise
of such warrants, options, or rights at
the date of issuance of such warrants,
options, or rights; and''; and
(5) by adding at the end the following:
``(6)(A) Qualified institutional buyer.--Except as provided
in subparagraph (B), the following shall not apply to a senior
security which is a stock and which is issued to and held by a
qualified institutional buyer (as defined in section 3(a)(64)
of the Securities Exchange Act of 1934):
``(i) Subparagraphs (C) and (D) of section
18(a)(2).
``(ii) Subparagraph (E) of section 18(a)(2), to the
extent such subparagraph requires any priority over any
other class of stock as to distribution of assets upon
liquidation.
``(iii) With respect to a senior security which is
a stock, subsections (c) and (i) of section 18.
``(B) Individual investors who are not qualified
institutional buyers.--Subparagraph (A) shall not apply with
respect to a senior security which is a stock and which is
issued to a person who is not known by the business development
company to be a qualified institutional buyer (as defined in
section 3(a) of the Securities Exchange Act of 1934).
``(7) Rule of construction.--Notwithstanding any other
provision of law, any additional class of stock issued pursuant
to this section must be issued in accordance with all investor
protections contained in all applicable federal securities laws
administered by the Commission.''.
(b) Conforming Amendments.--The Investment Company Act of 1940 (15
U.S.C. 80a-1 et seq.) is amended--
(1) in section 57--
(A) in subsection (j)(1), by striking ``section
61(a)(3)(B)'' and inserting ``section 61(a)(4)(B)'';
and
(B) in subsection (n)(2), by striking ``section
61(a)(3)(B)'' and inserting ``section 61(a)(4)(B)'';
and
(2) in section 63(3), by striking ``section 61(a)(3)'' and
inserting ``section 61(a)(4)''.
SEC. 4. PARITY FOR BUSINESS DEVELOPMENT COMPANIES REGARDING OFFERING
AND PROXY RULES.
(a) Revision to Rules.--Not later than 1 year after the date of
enactment of this Act, the Securities and Exchange Commission shall
revise any rules to the extent necessary to allow a business
development company that has filed an election pursuant to section 54
of the Investment Company Act of 1940 (15 U.S.C. 80a-53) to use the
securities offering and proxy rules that are available to other issuers
that are required to file reports under section 13 or section 15(d) of
the Securities Exchange Act of 1934 (15 U.S.C. 78m; 78o(d)). Any action
that the Commission takes pursuant to this subsection shall include the
following:
(1) The Commission shall revise rule 405 under the
Securities Act of 1933 (17 C.F.R. 230.405)--
(A) to remove the exclusion of a business
development company from the definition of a well-known
seasoned issuer provided by that rule; and
(B) to add registration statements filed on Form N-
2 to the definition of automatic shelf registration
statement provided by that rule.
(2) The Commission shall revise rules 168 and 169 under the
Securities Act of 1933 (17 C.F.R. 230.168 and 230.169) to
remove the exclusion of a business development company from an
issuer that can use the exemptions provided by those rules.
(3) The Commission shall revise rules 163 and 163A under
the Securities Act of 1933 (17 C.F.R. 230.163 and 230.163A) to
remove a business development company from the list of issuers
that are ineligible to use the exemptions provided by those
rules.
(4) The Commission shall revise rule 134 under the
Securities Act of 1933 (17 C.F.R. 230.134) to remove the
exclusion of a business development company from that rule.
(5) The Commission shall revise rules 138 and 139 under the
Securities Act of 1933 (17 C.F.R. 230.138 and 230.139) to
specifically include a business development company as an
issuer to which those rules apply.
(6) The Commission shall revise rule 164 under the
Securities Act of 1933 (17 C.F.R. 230.164) to remove a business
development company from the list of issuers that are excluded
from that rule.
(7) The Commission shall revise rule 433 under the
Securities Act of 1933 (17 C.F.R. 230.433) to specifically
include a business development company that is a well-known
seasoned issuer as an issuer to which that rule applies.
(8) The Commission shall revise rule 415 under the
Securities Act of 1933 (17 C.F.R. 230.415)--
(A) to state that the registration for securities
provided by that rule includes securities registered by
a business development company on Form N-2; and
(B) to provide an exception for a business
development company from the requirement that a Form N-
2 registrant must furnish the undertakings required by
item 34.4 of Form N-2.
(9) The Commission shall revise rule 497 under the
Securities Act of 1933 (17 C.F.R. 230.497) to include a process
for a business development company to file a form of prospectus
that is parallel to the process for filing a form of prospectus
under rule 424(b).
(10) The Commission shall revise rules 172 and 173 under
the Securities Act of 1933 (17 C.F.R. 230.172 and 230.173) to
remove the exclusion of an offering of a business development
company from those rules.
(11) The Commission shall revise rule 418 under the
Securities Act of 1933 (17 C.F.R. 230.418) to provide that a
business development company that would otherwise meet the
eligibility requirements of General Instruction I.A of Form S-3
shall be exempt from paragraph (a)(3) of that rule.
(12) The Commission shall revise rule 14a-101 under the
Securities Exchange Act of 1934 (17 C.F.R. 240.14a-101) to
provide that a business development company that would
otherwise meet the requirements of General Instruction I.A of
Form S-3 shall be deemed to meet the requirements of Form S-3
for purposes of Schedule 14A.
(13) The Commission shall revise rule 103 under Regulation
FD (17 C.F.R. 243.103) to provide that paragraph (a) of that
rule applies for purposes of Form N-2.
(b) Revision to Form N-2.--Not later than 1 year after the date of
enactment of this Act, the Commission shall revise Form N-2--
(1) to include an item or instruction that is similar to
item 12 on Form S-3 to provide that a business development
company that would otherwise meet the requirements of Form S-3
shall incorporate by reference its reports and documents filed
under the Securities Exchange Act of 1934 into its registration
statement filed on Form N-2; and
(2) to include an item or instruction that is similar to
the instruction regarding automatic shelf offerings by well-
known seasoned issuers on Form S-3 to provide that a business
development company that is a well-known seasoned issuer may
file automatic shelf offerings on Form N-2.
(c) Treatment if Revisions Not Completed in Timely Manner.--If the
Commission fails to complete the revisions required by subsections (a)
and (b) by the time required by such subsections, a business
development company shall be entitled to treat such revisions as having
been completed in accordance with the actions required to be taken by
the Commission by such subsections until such time as such revisions
are completed by the Commission.
(d) Rule of Construction.--Any reference in this section to a rule
or form means such rule or form or any successor rule or form.
Union Calendar No. 388
114th CONGRESS
2d Session
H. R. 3868
[Report No. 114-508]
_______________________________________________________________________
A BILL
To amend the Investment Company Act of 1940 to remove certain
restrictions on the ability of business development companies to own
securities of investment advisers and certain financial companies, to
change certain requirements relating to the capital structure of
business development companies, to direct the Securities and Exchange
Commission to revise certain rules relating to business development
companies, and for other purposes.
_______________________________________________________________________
April 19, 2016
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed