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SECURITIES AND EXCHANGE COM MISSION

17 CFR Parts 229, 230, 232, 239, 240, 243, 249, 270, and 274

[Release Nos. 33–10771; 34–88606; IC–33836; File No. S7–03–19]

RIN 3235–AM31

Securities Offering Reform for Closed-End Investment Companies

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

SUM M ARY: The Securities and Exchange Commission (the “Commission”) is

adopting rules that will modify the registration, communications, and offering processes

for business development companies (“BDCs”) and other closed-end investment

companies under the Securities Act of 1933. As directed by Congress, we are adopting

rules that will allow these investment companies to use the securities offering rules that

are already available to operating companies. These rules will extend to closed-end

investment companies offering reforms currently available to operating company issuers

by expanding the definition of “well-known seasoned issuer” to allow these investment

companies to qualify; streamlining the registration process for these investment

companies, including the process for shelf registration; permitting these investment

companies to satisfy their final prospectus delivery requirements by filing the prospectus

with the Commission; and permitting additional communications by and about these

investment companies during a registered public offering. In addition, we are amending

certain rules and forms to tailor the disclosure and regulatory framework to these

investment companies. These amendments also will modernize our approach to securities

registration fee payment by requiring closed-end investment companies that operate as

“interval funds” to pay securities registration fees using the same method as mutual funds

and exchange-traded funds and extend the ability to use this payment method to issuers of

certain continuously offered, exchange-traded products (“ETPs”). Additionally, we are

expanding the ability of certain registered closed-end funds or BDCs that conduct

continuous offerings to make changes to their registration statements on an immediately

effective basis or on an automatically effective basis a set period of time after filing.

Lastly, we are adopting certain structured data reporting requirements, including for

filings on the form providing annual notice of securities sold pursuant to the rule under

the Investment Company Act of 1940 that prescribes the method by which certain

investment companies (including mutual funds) calculate and pay registration fees.

DATES: Effective Dates: This rule is effective August 1, 2020, except for amendatory

instructions 21, 22, 30, 31, 33, 34, 41, 42, and 45 which are effective August 1, 2021.

Compliance Dates: The applicable compliance dates are discussed below in

section II.J.

FOR FURTHER INFORMATION CONTACT: Asaf Barouk, Attorney-Adviser;

Joel Cavanaugh, Senior Counsel; Terri G. Jordan, Senior Counsel; Amy Miller, Senior

Counsel; Angela Mokodean, Senior Counsel; Amanda Hollander Wagner, Branch Chief;

David J. Marcinkus, Branch Chief; Jacob D. Krawitz, Branch Chief; or Brian

McLaughlin Johnson, Assistant Director, at (202) 551-6792, Investment Company

Regulation Office, Division of Investment Management; Charles Kwon, Senior Counsel,

Office of Rulemaking, at (202) 551-3430, Division of Corporation Finance; U.S.

Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549.

SUPPLEM ENTARY INFORMATION: The Commission is adopting amendments

to:

CFR Citation

(17 CFR)

Commission Reference

S EC U RI T I ES AC T OF 1 9 3 3 ( “ SEC URI T IES ACT ”) 1

Rule 134

§230.134

Rule 138

§230.138

Rule 156

§230.156

Rule 163

§230.163

Rule 163A

§230.163A

Rule 164

§230.164

Rule 168

§230.168

Rule 169

§230.169

Rule 172

§230.172

Rule 173

§230.173

Rule 405

§230.405

Rule 415

§230.415

Rule 418

§230.418

Rule 424

§230.424

Rule 430A

§230.430A

Rule 430B

§230.430B

Rule 433

§230.433

Rule 456

§230.456

Rule 457

§230.457

Rule 462

§230.462

Rule 486

§230.486

Rule 497

§230.497

Form S-1

§239.11

Form S-3

§239.13

Form N-14

§239.23

Form F-1

§239.31

Form F-3

§239.33

REGULATION S-T [17 CFR 232.10 THROUGH 232.903]

Rule 11

§232.11

Rule 405

§232.405

S EC U RI T I ES EXC HAN GE ACT OF 1 9 34 ( “EXC HAN GE ACT ” ) 2

Schedule 14A

15 U.S.C. 77a et seq.

15 U.S.C. 78a et seq.

§240.14a-101

Commission Reference

CFR Citation

(17 CFR)

Rule 103 of Regulation FD

§243.103

I N VES T MEN T COMP ANY AC T OF 1 94 0 (“ IN VEST MENT

C OMP AN Y AC T ” ) 3

Rule 8b-16

§270.8b-16

Rule 23c-3

§270.23c-3

Rule 24f-2

§270.24f-2

Form 24F-2

§274.24

S EC U RI T I ES AC T AND IN VEST MENT COMP ANY AC T

Form N-2

§§239.14 and 274.11a-1

EXC HAN GE AC T AN D I NVES T MEN T C OMP AN Y ACT

Form N-CSR

§§249.331 and 274.128

15 U.S.C. 80a-1 et seq.

TAB LE OF CONTENTS

I. Introduction .............................................................................................7

II. Discussion ...............................................................................................17

Scope of Closed-End Investment Companies Affected by the Final Rule 17

Registration Process ............................................................................. 18

1. Current Shelf Offering Process for Affected Funds............................. 19

2. Amendments to the Registration Process for Affected Funds .............. 21

3. Short-Form Registration on Form N-2 ............................................... 23

Well-Known Seasoned Issuer Status ..................................................... 39

1. WKSI Definition............................................................................... 40

2. WKSI Eligibility ............................................................................... 40

3. Ineligible Issuer Definition ................................................................ 50

Automatic or Immediate Effectiveness for Filings by Affected Funds

Conducting Certain Continuous Offerings ............................................. 53

Final Prospectus Delivery Reforms ....................................................... 59

Communications Reforms..................................................................... 61

1. Offering Communications ................................................................. 61

2. Broker-Dealer Research Reports........................................................ 67

Other Rule Amendments....................................................................... 70

1. Rule 418 Supplemental Information................................................... 70

2. Amendments to Incorporation by Reference into Proxy Statements..... 71

3. Rule 103 of Regulation FD ................................................................ 72

New Registration Fee Payment Method for Interval Funds and Issuers of

Certain Exchange-Traded Products ....................................................... 73

Disclosure and Reporting Parity Proposals ............................................ 76

1. Structured Data Requirements ........................................................... 77

2. Periodic Reporting Requirements ...................................................... 89

3. Current Reporting Requirements for Affected Funds ........................ 100

4. Online Availability of Information Incorporated by Reference.......... 106

5. Amendments to Certain Registered CEFs’ Annual Report

Disclosure....................................................................................... 107

Effective and Compliance Dates ......................................................... 111

III. Economic Analysis................................................................................114

Introduction and Baseline ................................................................... 115

1. Number of Affected Funds .............................................................. 116

2. Current Securities Offering Requirements for Affected Funds .......... 119

3. Current Disclosure Obligations of Affected Funds............................ 120

Potential Benefits Resulting from the Proposed Implementation of the

Statutory Mandates ............................................................................. 121

1. Improved Access to Capital and Lower Cost of Capital .................... 121

2. Facilitated Communication with Investors ....................................... 132

Potential Costs Resulting from the Proposed Implementation of the

Statutory Mandates ............................................................................. 134

1. Compliance Costs ........................................................................... 134

2. Other Costs ..................................................................................... 137

Alternatives to Adopted Approach to Implementing Statutory

Mandates............................................................................................ 140

Discussion of Discretionary Choices ................................................... 143

1. New Registration Fee Payment Method for Interval Funds and Issuers

of Certain Exchange-Traded Products .............................................. 143

2. Structured Data Requirements ......................................................... 146

3. Periodic Reporting Requirements .................................................... 155

4. Discretionary Amendments to Incorporation by Reference

Requirements .................................................................................. 160

5. Automatic or Immediate Effectiveness of Filings by Affected Funds

Conducting Certain Continuous Offerings........................................ 164

IV. Paperwork Reduction Act Analysis......................................................165

Background ........................................................................................ 165

Summary of the Amendments and Impact on Information Collections .. 168

1. Amendments to Form N-2 Registration Statement............................ 170

2. Structured Data Reporting Requirements ......................................... 177

3. New Annual Reporting Requirements under Rule 30e-1 and Exchange

Act Periodic Reporting Requirements for BDCs............................... 180

4. Securities Offering Communications ............................................... 185

5. Prospectus Delivery Requirements................................................... 188

6. Form 24F-2..................................................................................... 190

7. Amendments Permitting the Registration of Offerings of an

Indeterminate Number of Exchange-Traded Vehicle Securities and the

Payment of Registration Fees for Such Offerings on an Annual Net

Basis .............................................................................................. 192

8. Amendments to Form N-14 ............................................................. 195

V. Final Regulatory Flexibility Analysis ...................................................198

Need and Objectives of the Final Rule................................................. 198

Significant Issues Raised by Public Comments .................................... 199

Small Entities Subject to the Rule ....................................................... 202

Projected Reporting, Recordkeeping, and Other Compliance

Requirements ..................................................................................... 204

1. Registration Process and Final Prospectus Delivery.......................... 204

2. Communications Rules.................................................................... 207

3. New Registration Fee Payment Method for Interval Funds ............... 211

4. Disclosure and Reporting Requirements........................................... 212

5. Automatic or Immediate Effectiveness for Filings by Affected Funds

Conducting Certain Continuous Offerings........................................ 216

Agency Action to Minimize Effect on Small Entities ........................... 218

1. Alternatives to the Adopted Approach to Implementing Statutory

Mandates ........................................................................................ 219

2. Alternative Approaches to Discretionary Choices............................. 220

VI. Other Matters.......................................................................................222

VII. Statutory Authority ..............................................................................222

INTRODUCTION

We are adopting rules that will modify the registration, communications, and

offering processes for business development companies (“BDCs”) and registered closedend investment companies (“registered CEFs”), including interval funds (collectively,

“affected funds”) under the Securities Act. 4 In 2005, the Commission adopted securities

offering reforms for operating companies to modernize the securities offering and

communication processes while maintaining the protection of investors under the

Securities Act. 5 At that time, the Commission specifically excluded all investment

companies—including affected funds—from the scope of the reforms. 6 Now, as directed

by Congress, we are adopting rules that will allow affected funds to use the securities

offering rules that are already available to operating companies.

BDCs are a category of closed-end investment companies that do not register under the

Investment Company Act, but rather elect to be subject to the provisions of sections 55

through 65 of the Investment Company Act. See section 2(a)(48) of the Investment

Company Act [15 U.S.C. 80a-2(a)(48)]. Congress established BDCs for the purpose of

making capital more readily available to small, developing and financially troubled

companies that do not have ready access to the public capital markets or other forms of

conventional financing. See H.R. Rep. No. 1341, 96th Cong., 2d Sess. 21 (1980). See

infra section II.A for additional discussion of the definition of “affected funds.”

“Interval funds” are a type of registered CEF or BDC that make periodic repurchase

offers pursuant to rule 23c-3 under the Investment Company Act. See 17 CFR 270.23c-3

(“rule 23c-3”).

Securities Offering Reform, Securities Act Release No. 8591 (July 19, 2005) [70 FR

44721 (Aug. 3, 2005)] (“Securities Offering Reform Adopting Release”). In this release

we generally use the term “operating company” to refer to issuers that are not investment

companies and that are currently eligible to rely on the rules we are amending.

See, e.g., id. at 44727 (discussing the exclusion of investment companies registered under

the Investment Company Act and BDCs from the definition of “well-known seasoned

issuer”); id. at 44735 (discussing the exclusion of such companies from the safe harbors

for factual business information and forward-looking information); id. at 44784

(discussing the exclusion of such companies from final prospectus delivery reforms).

The Small Business Credit Availability Act (the “BDC Act”) directs us to allow a

BDC to use the securities offering rules that are available to other issuers required to file

reports under section 13(a) or section 15(d) of the Exchange Act. 7 As discussed in detail

below, the BDC Act identifies with specificity the required revisions. 8 The Economic

Growth, Regulatory Relief, and Consumer Protection Act (the “Registered CEF Act”)

(and, together with the BDC Act, the “Acts”) directs us to adopt rules to allow any

registered CEF that is listed on a national securities exchange (a “listed registered CEF”)

or that makes periodic repurchase offers under rule 23c-3 to use the securities offering

rules that are available to other issuers that are required to file reports under section 13(a)

or section 15(d) of the Exchange Act, subject to appropriate conditions. 9 Unlike the BDC

Act, the Registered CEF Act does not identify with specificity the revisions that are

required.

In 2019, we proposed rules that would modify the registration, communications,

and offering processes for affected funds under the Securities Act. 10 As discussed in

Section 803(b) of Small Business Credit Availability Act, Pub. L. 115–141, 132 Stat. 348

(2018) (“BDC Act”). This section also directs us to make specified revisions to allow a

BDC to use the proxy rules that are available to such other issuers. Id. Affected funds

generally use the proxy rules that are available to operating companies already. One

current difference applicable to these entities, however, is a more limited ability to

incorporate information into their proxy statements by reference. The BDC Act directs

that we eliminate this difference by providing these entities parity with operating

companies. Section 803(b)(2)(N) of the BDC Act; see also infra section II.G.2.

See section 803(b)(2) of the BDC Act.

Section 509(a) of Economic Growth, Regulatory Relief, and Consumer Protection Act,

Pub. L. 115–174, 132 Stat. 1296 (2018) (“Registered CEF Act”). The Registered CEF

Act also refers to proxy rules, as does the BDC Act. See supra footnote 7.

Securities Offering Reform for Closed-End Investment Companies, Investment Company

Act Release No. 33427 (Mar. 20, 2019) [84 FR 14448 (Apr. 10, 2019)] (“Proposing

Release”).

greater detail below, most commenters supported the proposal. 11 Many of the

commenters who supported the proposal generally also recommended modifications to

some of the proposed rules. 12 For example, some commenters recommended further

expanding the scope of issuers that would qualify as “well-known seasoned issuers” to

include smaller issuers or those without public float. 13 Commenters also recommended

eliminating or modifying the proposed requirement that certain additional affected funds

file current reports on Form 8-K. 14 Other commenters recommended that the Commission

expand the scope of issuers permitted to file certain immediately effective registration

statements. 15 Several commenters that are sponsors to exchange-traded products

recommended that the Commission expand the scope of issuers permitted to pay

registration fees on an annual net basis. 16 Finally, one commenter expressed concern with

the proposal, recommending that large BDCs and registered CEFs be subject to

See, e.g., Comment Letter of the Federal Regulation of Securities Committee of the

Business Law Section of the American Bar Association (July 3, 2019) (“ABA Comment

Letter”); Comment Letter of Alternative Credit Council (June 10, 2019) (“ACC

Comment Letter”); Comment Letter of Coalition for Business Development (June 10,

2019) (“CBD Comment Letter”). The comment letters on the Proposing Release (File No.

S7-03-19) are available at https://www.sec.gov/comments/s7-03-19.htm.

See, e.g., Comment Letter of Calcbench, Inc. (May 13, 2019) (“Calcbench Comment

Letter”); Comment Letter of GraniteShares LLC (June 26, 2019) (“GraniteShares

Comment Letter”); Comment Letter of Institute for Portfolio Alternatives (June 10, 2019)

(“IPA Comment Letter”).

See infra section II.C.

See infra section II.I.3.

See ABA Comment Letter; Comment Letter of Investment Company Institute (June 10,

2019) (“ICI Comment Letter”).

See, e.g., Comment Letter of United States Commodity Funds LLC (June 10, 2019)

(“USCF Comment Letter”); Comment Letter of World Gold Council (June 10, 2019)

(“WGC Comment Letter”).

additional scrutiny. 17 As discussed in detail below, we are adopting the proposed rules

with certain modifications, after consideration of comments received.

Our action will institute a number of reforms:

•

First, it will streamline the registration process to allow eligible affected funds to

use a short-form shelf registration statement to sell securities “off the shelf” more

quickly and efficiently in response to market opportunities.

•

Second, the final rule will allow affected funds to qualify as “well-known

seasoned issuers” (“WKSIs”) under rule 405 under the Securities Act.

•

Third, it will allow affected funds to satisfy final prospectus delivery requirements

using the same method as operating companies.

•

Fourth, it will allow affected funds to use certain rules currently available to

operating companies, such as communications safe harbors for certain factual

business information and forward-looking information, “free writing

prospectuses,” and broker-dealer research reports (referred throughout this release

as the “communications rules”).

•

Fifth, the final rule will allow certain continuously-offered affected 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.

•

Finally, it will tailor the disclosure and regulatory framework for affected funds in

light of the amendments to the offering rules applicable to them. These

amendments include structured data requirements to make it easier for investors

and others to analyze fund data; new annual report disclosure requirements to

Comment Letter of Dale White (Apr. 3, 2019) (“White Comment Letter”).

provide key information in annual reports; a requirement that interval funds pay

securities registration fees using the same method that mutual funds and

exchange-traded funds (“ETFs”) use today; and a provision that will allow certain

ETPs that are not registered under the Investment Company Act to elect to pay

securities registration fees in the same manner.

As discussed in detail below, the final rule will affect different categories of

affected funds differently, just as different categories of operating companies are treated

differently under these rules currently. For example, some of the provisions will apply to

all affected funds, that is, all BDCs and registered CEFs. Many of the provisions,

however, will apply only to “seasoned funds.” These are listed affected funds that are

current and timely in their reporting and therefore generally eligible to file a short-form

registration statement under the proposal if they have at least $75 million in “public

float.” 18 Some of the provisions will apply only to seasoned funds that also qualify as

WKSIs, that is, listed affected funds that qualify as seasoned funds and generally have at

least $700 million in public float. 19 Additionally, the final rule provides unlisted affected

funds with the flexibility to make certain filings that become effective either immediately

See General Instruction I.B.1 of Form S-3 (defining “aggregate market value”). In this

release, we use “public float” to mean the aggregate market value of the voting and nonvoting common equity held by non-affiliates of the registrant. See General Instruction

I.B.1 of Form S-3. Certain issuers with less than $75 million in public float also are

eligible to use Form S-3 to register a primary offering but are limited as to the amount of

securities they can register. See General Instruction I.B.6 of Form S-3. The Commission

has stated that the calculations of an issuer’s public float for the purpose of determining

an issuer’s eligibility to use Form S-3 and for determining WKSI status under rule 405

are the same. See Securities Offering Reform Adopting Release, supra footnote 5, at

n.50.

See rule 405 (defining WKSI).

upon filing or automatically after 60 days. 20 The final rule therefore will provide

additional flexibilities to both listed and unlisted affected funds. Tables 1 and 2 below

summarize these different impacts.

See amended rules 486(a) and 486(b) under the Securities Act. See also supra section

II.D.

TABLE 1

Entity

Summary Definition

Affected funds

Affected funds include all BDCs and registered

CEFs, including interval funds.

Seasoned funds are affected funds that are

current and timely in their reporting and

therefore generally eligible to file a short-form

registration statement if they have at least $75

million in “public float.” See supra footnote 18.

WKSIs are seasoned funds that generally have

at least $700 million in “public float.”

ETPs are 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.

Seasoned funds1

W KSIs

ETPs

Notes:

1. Some of the rule changes that are shown below as affecting “seasoned funds” will only affect those seasoned funds that

elect to file a registration statement on Form N-2 using an instruction permitting funds to use the form to file a short-form

registration statement.

TABLE 2

Rule

Summary Description of

Entities Affected

Rule

by Changes

Affected Funds (including BDCs, Registered CEFs, and Interval Funds)

Registration Provisions

General Instruction F.4.a

Requires online posting of

Affected Funds

of Form N-2

information incorporated by

reference.

Securities Act

Provide the processes for

Affected Funds

Rules 424 and 497

filing prospectus

supplements.

Investment Company Act

Subjects interval funds to

Interval Funds

Rule 23c-3

the registration fee payment

system based on annual net

sales.

Securities Act Rule 486

Allows continuously-offered

Continuously-offered

unlisted affected funds to

unlisted affected funds

make certain filings that are not relying on rule 23c-3

immediately effective upon

filing or automatically

effective 60 days after filing.

Discussed Below In

Section II.I.4

Section II.B.3.d

Section II.H

Section II.D

General Instruction G of

Form N-14

Permits certain registrants

to incorporate by reference.

C ommunication Provisions

Securities Act

Permits issuers to publish

Rule 134

factual information about

the issuer or the offering,

including “tombstone ads.”

Securities Act

Permits issuers to

Rule 163A

communicate without risk of

violating the gun-jumping

provisions until 30 days

prior to filing a registration

statement.

Securities Act

Permit the publication and

Rules 168 and 169

dissemination of regularly

released factual and

forward-looking information.

Securities Act

Permit use of a “free writing

Rules 164 and 433

prospectus.”

Prospectus Delivery Provisions

Securities Act

Permit issuers, brokers, and

Rules 172 and 173

dealers to satisfy final

prospectus delivery

obligations if certain

conditions are satisfied.

Periodic Reporting Provisions

Investment Company Act

A requirement that funds

Rule 8b-16

that rely on paragraph (b) of

the rule describe in the

annual report the fund’s

current investment

objectives, policies and

risks, and certain key

changes in enough detail to

allow investors to

understand each change

and how it may affect the

fund.

Instruction 4.g to Item

A requirement for narrative

24 of Form N-2

disclosure about the fund’s

performance in the fund’s

annual report.

Item 4 of Form N-2;

Requires disclosure of

Instruction 10 to Item

certain financial

24 of Form N-2

information.

Structured Data Reporting Requirements

BDCs

Section II.B.3.b

Affected Funds

Section II.F.1

Affected Funds

Section II.F.1

Affected Funds

Section II.F.1

Affected Funds

Section II.F.1

Affected Funds

Section II.E

Registered CEFs

Section II.I.5

Registered CEFs

Section II.I.2.b

BDCs

Section II.I.2.c

Structured Financial

Statement Data

Prospectus Structured

Data Requirements

Form 24F-2 Structured

Format

Seasoned Funds

Registration Provisions

Securities Act

Rule 415

General Instructions A.2

and F.3 of Form N-2

Securities Act

Rule 430B

Securities Act

Rule 418

Regulation FD

Rule 103

A requirement that BDCs tag

their financial statements

using Inline eXtensible

Business Reporting

Language (“Inline XBRL”)

format.

A requirement that

registrants tag certain

information required by

Form N-2 using Inline XBRL.

A requirement that filings on

Form 24F-2 be submitted in

a structured format.

Permits registration of

securities to be offered on a

delayed or a continuous

basis.

Provide for backward and

forward incorporation by

reference.

Permits certain issuers to

omit certain information

from their prospectuses at

effectiveness.

Exempts some registrants

from an obligation

to furnish certain

engineering, management,

or similar reports.

Provides that a failure to

make a public disclosure

required solely by 17 CFR

243.100 (rule 100 of

Regulation FD) will not

disqualify a “seasoned”

issuer from use of certain

forms.

C ommunication Provisions

Securities Act

Permits a broker or dealer to

Rule 138

publish or distribute certain

research reports about

securities other than those it

is distributing.

Proxy Statements

BDCs

Section II.I.1.a

Affected Funds

Sections II.I.1.b and

II.I.1.c

Form 24F-2 Filers,

including open-end

funds and unit

investment trusts

Section II.I.1.d

Seasoned Funds

Section II.B.3

Seasoned Funds

Section II.B.3.b

Seasoned Funds

Section II.B.3.d

Seasoned Funds

Section II.G.1

Seasoned Funds

Section II.G.3

Seasoned Funds

Section II.F.2

Item 13 of

Schedule 14A

Permits certain registrants

to use incorporation by

reference to provide

information that otherwise

must be furnished with

certain types of proxy

statements.

Periodic Reporting Provisions

Instruction 4.h.(2) to

A requirement for

Item 24 of Form N-2

information about the

investor’s costs and

expenses in the registrant’s

annual report.

Instruction 4.h.(3) to

A requirement for

Item 24 of Form N-2

information about the share

price of the registrant’s

stock and any premium or

discount in the registrant’s

annual report.

Instruction 4.h.(1) to

A requirement for

Item 24 of Form N-2

information about each of a

fund’s classes of senior

securities in the registrant’s

annual report.

Instruction 4.h.(4) to

A requirement to disclose

Item 24 of Form N-2

outstanding material

unresolved staff comments

that remain unresolved for a

substantial period of time.

W KSIs

Registration Provisions

Securities Act

Rule 462

Provides for effectiveness of

registration statements

immediately upon filing with

the Commission.

C ommunication Provisions

Securities Act

Permits oral and written

Rule 163

communications by or on

behalf of WKSIs at any time.

ETPs

Registration Provisions

Securities Act

Permits ETPs to register an

Rules 415, 424, 456

indeterminate amount of

and 457; Forms S-1, S-3, certain securities and pay

F-1 and F-3

registration fees based on

annual net sales.

Seasoned Funds

Section II.G.2

Seasoned Funds

Section II.I.2.a

Seasoned Funds

Section II.I.2.a

Seasoned Funds

Section II.I.2.a

Seasoned Funds

Section II.I.2.d

WKSIs

Section II.B.3.c

WKSIs

Section II.F.1

ETPs

Section II.H

II.

DISCUSSION

Rule

Scope of Closed-End Investment Companies Affected by the Final

As we proposed, the final rule will apply to all BDCs and registered CEFs, with

certain conditions and exceptions discussed below and generally illustrated in Tables 1

and 2 above. The BDC Act applies to all BDCs, including BDCs that are listed on a

securities exchange and those that are unlisted. 21 In contrast, the Registered CEF Act

extends to all registered CEFs listed on a securities exchange, as well as interval funds,

but excludes other unlisted registered CEFs. 22

Although the Registered CEF Act only requires us to allow interval funds and

listed registered CEFs to use the securities offering rules available to operating

companies, that Act does not preclude us from exercising our discretion to extend these

rules to all registered CEFs. The Commission therefore proposed to apply the rules to all

BDCs and all registered CEFs, including unlisted registered CEFs, with certain

conditions and exceptions. 23 We believed that this approach would benefit unlisted

registered CEFs and their investors by avoiding the adverse consequences that could

result from treating unlisted registered CEFs differently from all other registered CEFs

and unlisted BDCs.

Listed BDCs are publicly traded BDCs that are listed on a stock exchange. Unlisted

BDCs include non-traded BDCs, which are offered via a continuous offering up to a

preset maximum amount, and private BDCs, which are offered via a private placement

offering.

See section 509(a) of the Registered CEF Act. Similar to BDCs, registered CEFs include

listed and unlisted funds, including publicly traded CEFs that are listed on a stock

exchange, non-traded CEFs, and interval funds.

Proposing Release, supra footnote 10, at section II.

We believed that applying such a distinction is unnecessary because, for purposes

of these rules, unlisted registered CEFs are not distinguishable from unlisted BDCs,

which the rule amendments must cover. Unlisted registered CEFs, like unlisted BDCs,

also would benefit from parity of treatment. 24 We did not receive comment on this aspect

of the proposal. Because we continue to believe that this approach will benefit unlisted

registered CEFs and their investors by providing new investor protections and avoiding

adverse consequences from differential treatment, the final rule will apply to all BDCs

and registered CEFs as proposed.

The Commission proposed to generally apply the specific requirements of the

BDC Act to both BDCs and registered CEFs because it believed that, except where

dictated by meaningful differences between BDCs and registered CEFs, consistent

application of the proposed rules across affected funds would result in more efficient

offering processes and more consistent investor protections. 25 We continue to believe that

both Acts share the overall purpose of providing offering and communication rule parity

to the investment companies covered by each Act. 26 We did not receive public comment

on this aspect of the proposal, and, for the reasons stated above, we are adopting it as

proposed.

Registration Process

We are adopting, substantially as proposed, amendments to our rules and forms to

streamline the registration process for affected funds by permitting them to use the more

Id.

Id. (explaining the similarity of the BDC Act’s and the Registered CEF Act’s broad

mandates).

flexible registration process available to operating companies. These amendments

collectively will allow affected funds to offer and sell securities “off the shelf” more

quickly and efficiently in response to market opportunities.

Current Shelf Offering Process for Affected Funds

Issuers, including affected funds, whose offerings are registered or qualified to be

registered on Form S-3 may conduct primary offerings “off the shelf” under Securities

Act rule 415(a)(1)(x), the provision for offerings made on a delayed or continuous

basis. 27 In a rule 415(a)(1)(x) shelf offering, a seasoned issuer can register an unallocated

dollar amount of securities for sale at a later time. 28 The issuer can then take down

securities “off the shelf” for sale in a public offering as market conditions warrant. This

allows seasoned issuers to quickly access the public securities markets from time to time

to take advantage of favorable market conditions. 29

Affected funds currently can make shelf offerings under rule 415(a)(1)(x) if they

meet the eligibility criteria for Form S-3, even though affected funds register their

securities offerings on Form N-2. 30 Our rules for operating companies, however, are

more flexible and efficient than for affected funds. In particular, seasoned operating

See Proposing Release, supra footnote 10, at n.17 (discussing rule 415(a)(1)).

In this release we use the term “seasoned” to refer generally to an issuer that meets the

registrant requirements in General Instruction I.A of Form S-3 and, when referring to

seasoned funds, a fund that meets these Form S-3 registrant requirements as well as

certain modifications for registered CEFs. See Proposing Release, supra footnote 10, at

n.18 (explaining the requirements under General Instruction I.A. of Form S-3).

Issuers that rely on rule 415(a)(1)(x) must file a new registration statement every three

years, with unsold securities and fees paid thereon carried forward to the new registration

statement. See Securities Act rule 415(a)(5) and (6). If the new registration statement is

an automatic shelf registration statement filed by a WKSI, it will be effective

immediately upon filing.

See Proposing Release, supra footnote 10, at n.20.

companies can use a short-form registration statement on Form S-3. Certain seasoned

operating companies also can rely on Securities Act rule 430B to omit certain

information from the “base” prospectus when the registration statement becomes

effective and later provide that information in a subsequent Exchange Act report

incorporated by reference, a prospectus supplement, or a post-effective amendment. 31

The ability to “forward incorporate” information in Exchange Act reports filed after the

registration statement becomes effective allows operating companies to efficiently update

their prospectuses and access capital markets without the expense and delay of filing

post-effective amendments in most cases.

Affected funds, on the other hand, currently have limited ability to incorporate

information by reference into their registration statements and cannot forward incorporate

information from subsequently-filed Exchange Act reports. 32 When an affected fund sells

securities, including as part of a takedown “off the shelf,” its registration statement must

include all required information. 33 In particular, the affected fund’s registration statement

must include current financial information, including any annual update required by

section 10(a)(3) of the Securities Act. 34 Affected funds provide any section 10(a)(3)

update to the registration statement by filing a post-effective amendment, which involves

the expense and potential delay associated with the fund’s preparation of the amendment

The base prospectus of a shelf registration statement will generally describe in broad

terms the types of securities and offerings that the issuer may conduct at some later time.

See Proposing Release, supra footnote 10, at n.22 (discussing “backward incorporation”).

The fund’s registration statement must include all required information to avoid liability

from selling securities from an out-of-date prospectus and to satisfy section 10(a) of the

Securities Act. See infra footnotes 83–84 and accompanying text.

See Proposing Release, supra footnote 10, at n.24.

and also provides our staff with time to review the amendment for compliance with the

applicable disclosure and accounting requirements and to provide comments where

appropriate. 35

Affected funds also cannot currently rely on rule 430B, which allows certain

issuers to omit information from a prospectus, or the process that operating companies

follow to file prospectus supplements. 36 In addition, affected funds cannot currently file

automatic shelf registration statements because only WKSIs can file these registration

statements. These differences can result in additional expense or delay for affected funds

relative to operating companies and can affect the timing of an affected fund’s capital

raising. 37

Amendments to the Registration Process for Affected Funds

The amendments we are adopting are designed to streamline the registration

process for affected funds in parity with operating companies. Specifically, and as

discussed in more detail below, the amendments will permit affected funds to:

These post-effective amendments become effective pursuant to section 8(c) of the

Securities Act on such date as the Commission may determine and are typically declared

effective by the staff acting pursuant to delegated authority. In contrast, Form S-3 is

updated through the filing of an annual report on Form 10-K, which contains the issuer’s

audited financial statements for its most recently completed fiscal year. See Securities

Offering Reform Adopting Release, supra footnote 5, at n.61; see also Proposing

Release, supra footnote 10, at n.25.

See id. at n.26.

The final rule will give certain affected funds greater flexibility to control the timing of

their capital raising. As discussed in the Proposing Release, section 23(b) of the

Investment Company Act generally prohibits a registered CEF from issuing its shares at a

price below the fund’s current net asset value (“NAV”) without shareholder approval

(this provision applies to BDCs as well with certain modifications). See id. at n.27.

Because the shares of affected funds often trade at a discount to NAV, by allowing

certain affected funds to sell securities “off the shelf,” the final rule will avoid potential

delays associated with updating the funds’ registration statements if they seek to access

the markets when their shares are trading at a premium.

•

File a short-form registration statement on Form N-2 that will function like a

Form S-3 registration statement. An affected fund that files this short-form

registration statement can use it to register shelf offerings, including shelf

registration statements that are filed by affected funds that qualify as WKSIs and

become effective automatically, and can satisfy Form N-2’s disclosure

requirements by incorporating by reference information from the fund’s Exchange

Act reports;

•

Rely on rule 430B to omit information from their base prospectuses, and to use

the process operating companies follow to file prospectus supplements; and

•

Include additional information in periodic reports to update their registration

statements.

Commenters generally supported our general approach to streamlining the

registration process for affected funds. Commenters stated that the proposed amendments

would allow affected funds to raise capital more efficiently and cost-effectively and

would provide affected funds with greater flexibility to manage the timing of their

offerings in response to market opportunities. 38 One commenter stated that affected funds

will benefit from the proposed amendments because they no longer will have to file posteffective amendments to shelf registration statements to update their financial statements.

Instead, that information will be in annual reports and incorporated by reference into their

registration statements. 39

See, e.g., ACC Comment Letter; ICI Comment Letter; Comment Letter of Securities

Industry and Financial Markets Association (June 5, 2019) (“SIFMA Comment Letter”).

See ICI Comment Letter.

Short-Form Registration on Form N-2

We are adopting, as proposed, new General Instruction A.2 in Form N-2, which

will allow affected funds to file a short-form registration statement on Form N-2 that will

function like a registration statement filed on Form S-3. 40 If a fund files a registration

statement under this new instruction, the fund’s registration statement will incorporate

certain past and future Exchange Act reports by reference, allowing the fund to use a

short-form registration statement and avoid the need to make post-effective amendments

in most cases. An affected fund may use the new instruction to register a shelf offering

under rule 415(a)(1)(x), and we are adopting conforming amendments to that rule to

make this clear. 41 The new instruction, however, is not limited to offerings under rule

415(a)(1)(x). Rather, an affected fund may use the new instruction to register any of the

securities offerings that operating companies are permitted to register on Form S-3. 42

Throughout this release, we refer to General Instruction A.2 as the “short-form

registration instruction” and refer to funds relying on this instruction as filing a “shortform registration statement” on amended Form N-2. Some of the required amendments

and the conditions in our current rules are available only to issuers that meet the

eligibility and transaction requirements of Form S-3 and therefore are eligible to file a

short-form registration statement on that form. The short-form registration instruction in

Form N-2 is designed to facilitate these amendments, as directed in the BDC Act and the

Registered CEF Act.

See amended rule 415(a)(1)(x) (conforming amendments for affected funds); see also

supra section II.B.3.c.

See General Instruction I.B of Form S-3 (identifying transactions that can be registered

on the form); see also General Instruction A.2.c of amended Form N-2. Form S-3, and

therefore the short-form registration instruction, also is available to a majority-owned

subsidiary that is a closed-end management investment company eligible to register a

securities offering on Form N-2 if it meets certain conditions. See Proposing Release,

supra footnote 10, at n.29 (describing the conditions necessary for majority-owned

subsidiaries of closed-end management companies to register a securities offering on

Form N-2).

Eligibility to File a Short-Form Registration Statement

As proposed, we are adopting amendments to permit an affected fund to file a

short-form registration statement under the short-form registration instruction on Form N2 if:

•

for either a BDC or a registered CEF, the fund meets both the registrant

requirements and the transaction requirements of Form S-3 (i.e., the fund could

•

for registered CEFs only, the fund also has been registered under the Investment

Company Act for at least 12 calendar months immediately preceding the filing of

the registration statement and has timely filed all reports required to be filed under

section 30 of the Investment Company Act during that time. 44

An affected fund generally will meet the registrant requirements of Form S-3 if it

has timely filed all reports and other materials required under the Exchange Act during

the prior year. 45 An affected fund will generally meet the transaction requirements of

Form S-3 for a primary offering if the fund’s public float is $75 million or more. 46

Requiring affected funds to satisfy the requirements of Form S-3 in order to file a shortform registration statement provides parity between affected funds and operating

See General Instructions A.2.a and A.2.c of amended Form N-2; General Instructions I.A

(registrant requirements) and I.B (transaction requirements) of Form S-3.

Under this amendment to Form N-2, the fund also must have timely filed all reports

required to be filed under section 30 of the Investment Company Act during any portion

of a month immediately preceding the filing of the registration statement. See new

General Instruction A.2.b of amended Form N-2.

See General Instruction I.A.3 of Form S-3.

See General Instruction I.B of Form S-3.

companies, consistent with Congress’s mandates in the BDC Act and Registered CEF

Act.

Commenters generally supported the proposal to permit affected funds to file

short-form registration statements. 47 Several commenters, however, urged that we

provide additional bases other than public float for an affected fund to be eligible to file a

short-form registration statement (or to qualify as a WKSI). 48 While the arguments

advanced by commenters apply to our proposed short-form registration requirement,

commenters focused primarily on our proposed public float threshold for WKSI status. 49

Accordingly, we discuss these comments below in section II.C.2. For the reasons

discussed in that section, we are not changing the public float requirement or adopting

new requirements for affected funds to file a short-form registration statement. We are

adopting the proposed $75 million public float requirement for an affected fund to file a

short-form registration statement on Form N-2 to provide affected funds parity with

operating companies.

Certain affected funds, including most interval funds,50 do not list their securities

on an exchange and thus do not have public float. As a result, these affected funds

generally would not be able to satisfy the transaction requirement necessary to file a

See, e.g., SIFMA Comment Letter; Comment Letter of Mutual Fund Directors Forum

(June 12, 2019) (“MFDF Comment Letter”).

See, e.g., ICI Comment Letter; ABA Comment Letter.

See infra section II.C.2 (discussing comments on public float requirement for WKSI

eligibility).

Only one interval fund is currently exchange-listed.

short-form registration statement. 51 In addition, as we noted in the Proposing Release,

because interval funds make continuous offerings, they (as well as other continuously

offered, non-listed affected funds) would not be able to file a short-form registration

statement that omits information required to be in an issuer’s prospectus when it is

offering its securities. 52

Interval funds also have their own offering provision, Securities Act rule

415(a)(1)(xi),53 and post-effective amendments to their registration statements are

immediately effective upon filing or automatically effective 60 days after filing under

rule 486 under the Securities Act, depending on the substance of the amendments. 54 As a

result, interval funds currently have a tailored registration process that, although different

in certain respects from that of operating companies, may provide many of the same

efficiencies, including the ability to raise capital as the opportunity arises. As discussed

below in section II.D, we are adopting amendments to rule 486 to allow any affected fund

that conducts continuous offerings under rule 415(a)(1)(ix), such as continuously-offered

tender offer funds, to rely on rule 486. We believe these amendments will benefit such

We intend for the short-form registration instruction to provide affected funds parity with

operating companies so that affected funds can register the same transactions as operating

companies register on Form S-3. To register a primary offering of equity securities on

Form S-3, an issuer must meet the applicable eligibility and registrant requirements. For

example, an issuer with the requisite public float may register a primary offering of

securities to be offered for cash. See General Instruction I.B.1 of Form S-3. Alternatively,

an issuer may register a primary offering if it has common equity securities listed on an

exchange, limits the amount sold over a twelve-month period to no more than one-third

of the aggregate value of voting and non-voting common equity held by non-affiliates,

and meets certain other requirements. See General Instruction I.B.6 of Form S-3. Interval

funds that are not exchange-listed and without public float would not be qualified to

See Proposing Release, supra footnote 10, at text following n.37.

17 CFR 230.415(a)(1)(xi).

See 17 CFR 230.486.

continuously-offered affected funds by allowing them to maintain effective registration

statements in a more efficient, cost-effective manner, similar to the benefits that the rules

we are adopting will provide to affected funds that file short-form registration statements.

As proposed, in addition to satisfying the registrant requirements of Form S-3, a

registered CEF also must have timely filed all reports required under section 30 of the

Investment Company Act for the preceding 12 months in order to register an offering

under the short-form registration instruction. A registered CEF therefore must have

timely filed during the prior year all required Exchange Act reports, such as annual and

semi-annual reports to shareholders filed with the Commission on Form N-CSR, as well

as reports required only under section 30 of the Act, such as reports on Forms N-CEN

and N-PORT.

As we stated in the Proposing Release, an issuer’s Exchange Act filings provide

the basic source of information to the market and to potential purchasers, and investors in

the secondary market use that information in making their investment decisions. 55

Although all affected funds file reports under the Exchange Act, registered CEFs also file

reports under the Investment Company Act. These Investment Company Act reports also

provide important information to the market and investors, including information about

an affected fund’s portfolio holdings that will be publicly reported on a quarterly basis on

Form N-PORT. We believe that the market will analyze this portfolio holdings

information in a similar manner to how it analyzes financial statements for operating

companies to determine changes in prospects for growth and performance. Portfolio

holdings disclosure on Form N-PORT, for example, provides important information that

See Proposing Release, supra footnote 10, at text accompanying nn.42–46.

is comparable to information BDCs include in Exchange Act reports for purposes of

providing a quarterly flow of key information to the market. Moreover, requiring

registered CEFs to have timely filed their Investment Company Act reports also will

provide parity among BDCs, registered CEFs, and operating companies. This is because

once Form N-PORT fully replaces Form N-Q, registered CEFs will only file Exchange

Act reports semi-annually on Form N-CSR, whereas BDCs and operating companies file

Exchange Act reports on Forms 10-K, 10-Q and 8-K. 56 As such, all issuers will be

required to have filed their quarterly and other required reports in order to file a shortform registration statement.

We received one comment on this particular aspect of the proposal. This

commenter expressed support for this aspect of the proposal, stating that it provides

parity between registered CEFs and operating companies. 57

Information Incorporated by Reference

As proposed, the same rules on incorporation by reference that apply to Form S-3

registration statements also will apply to a short-form registration statement filed on

Form N-2. 58 We did not receive comments on these amendments and are adopting them

Because Form N-PORT will render reports on Form N-Q unnecessarily duplicative, once

a registered fund begins filing reports on Form N-PORT, it will no longer be required to

file reports on Form N-Q. See Investment Company Reporting Modernization,

Investment Company Act Release No. 32936 (Dec. 8, 2017) [82 FR 58731 (Dec. 14,

2017)] (delaying the requirement for registered funds to submit reports on Form N-PORT

through the EDGAR system until April 2019 for larger fund groups, and April 2020 for

smaller fund groups). Form N-Q will be rescinded on May 1, 2020. See id.

See Comment Letter of Teachers Insurance and Annuity Association of America (June

13, 2019) (“TIAA Comment Letter”).

See section 803(c)(1) of the BDC Act (directing us to include an item or instruction that

is similar to item 12 on Form S-3 to provide that a BDC that would otherwise meet the

requirements of Form S-3 shall incorporate by reference the reports and documents filed

by the BDC under the Exchange Act into the registration statement of the BDC filed on

as proposed. Specifically, an affected fund relying on the short-form registration

instruction will be required to:

•

Specifically incorporate by reference into the prospectus and statement of

additional information (“SAI”): (1) its latest annual report filed pursuant to

section 13(a) or section 15(d) of the Exchange Act that contains financial

statements for the registrant’s latest fiscal year for which a Form N-CSR or Form

10-K was required to be filed; and (2) all other reports filed pursuant to section

13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the

annual report (backward incorporation by reference); 59 and

•

State that all documents subsequently filed pursuant to section 13(a), 13(c), 14, or

15(d) of the Exchange Act prior to the termination of the offering shall be deemed

to be incorporated by reference into the prospectus and SAI (forward

incorporation by reference). 60

We also are adopting, as proposed, an instruction to Form N-2 that will permit an

affected fund filing a short-form registration statement on Form N-2 to satisfy the

disclosure requirements for its prospectus or SAI by incorporating the information by

Form N-2). We are amending General Instruction F.3 of current Form N-2 in its entirety

and replacing it with a new General Instruction F.3. In these provisions and others that

are substantively identical to parallel provisions in Form S-3, we have included

conforming references to a fund’s SAI.

See new General Instruction F.3.a.(1)–(2) of amended Form N-2; cf. Item 12(a)(1)–(2) of

Form S-3. In addition, if sales of a class of capital stock are to be registered on Form N-2

and the same class is registered under section 12 of the Exchange Act, the affected fund

must incorporate by reference the description of the class contained in the Exchange Act

registration statement with respect to that class (including any amendment or reports filed

for the purpose of updating such description). See new General Instruction F.3.a.(3) of

amended Form N-2; cf. Item 12(a)(3) of Form S-3.

See new General Instruction F.3.b of amended Form N-2; cf. Item 12(b) of Form S-3.

reference from Exchange Act reports. 61 This provision, which is substantively identical to

a parallel item in Form S-3, will give affected funds filing a short-form registration

statement on Form N-2 the option to either provide required disclosure directly in the

prospectus or SAI or to satisfy Form N-2’s disclosure requirements with information

incorporated by reference. 62 We did not receive any comments on these particular

amendments to Form N-2.

We also are adopting, as proposed, conforming changes to Form N-2’s

undertakings. 63 Form N-2 currently requires an undertaking that would prevent seasoned

funds that file a short-form shelf registration statement from incorporating information by

reference as proposed, because it requires funds to file post-effective amendments in

See new General Instruction F.3 of amended Form N-2. The amendments will permit a

fund to use this incorporated information to provide the disclosure required by Items 3–

12 and Items 16–24 of Form N-2. See new General Instruction F.3.c of amended Form N2; cf. Item 12(d) of Form S-3.

The BDC Act directed us to extend this parallel item in Form S-3 (Item 12) to BDCs that

meet Form S-3’s requirements. See supra footnote 58; Item 12(d) of Form S-3; see also

section 509(a) of the Registered CEF Act.

See section 803(b)(2)(P) of the BDC Act (directing us to revise Item 34 of Form N-2 to

require a BDC to provide undertakings “that are no more restrictive than the undertakings

that are required of a registrant under [Item 512 of Regulation S-K],” which sets forth the

undertakings an operating company must include in its registration statement for certain

offerings).

Commenters suggested that the Item 34.1 undertaking to suspend an offering if a fund’s

NAV declines more than 10% from its NAV on its registration statement effective date

until the fund amends the prospectus should not apply to continuous or delayed shelf

offerings conducted by affected funds pursuant to proposed General Instruction A.2 of

Form N-2. See Comment Letter of Dechert LLP (June 10, 2019) (“Dechert Comment

Letter”); IPA Comment Letter; see also Item 34.1 of current Form N-2. Commenters

urged that the undertaking should not apply in these circumstances because the shelf

offering could extend over 3-1/2 years, and the undertaking did not seem necessary

because the fund would amend its prospectus by incorporating by reference the

information from its Exchange Act reports. See Dechert Comment Letter; IPA comment

Letter. We agree, and are amending Item 34.1 to clarify that this undertaking is not

applicable in the circumstance described by commenters. See Item 34.1 of amended Form

N-2.

certain circumstances without providing an exception that would allow the required

information to be supplied via incorporation by reference. 64 In contrast, operating

companies registering an offering on Form S-3 are not required under the applicable

undertaking to file post-effective amendments if the required information is included in

an Exchange Act report incorporated by reference or a prospectus supplement that is part

of the registration statement. 65 To implement the statutory mandates and provide parity

for affected funds, we are adopting amendments to Form N-2’s undertakings to provide

the same approach for affected funds filing a short-form registration statement on that

form that applies to operating companies that file on Form S-3. 66

Form N-2 currently requires an affected fund registering an offering under rule 415 to

undertake to file, during any period in which offers or sales are being made, a posteffective amendment to the registration statement under certain circumstances, including

to provide any prospectus required by section 10(a)(3) of the Securities Act. See Item

34.4.a of current Form N-2.

See 17 CFR 229.512(a)(1)(iii)(B) (Item 512(a)(1)(iii)(B) of Regulation S-K).

Specifically, our amendments add a new provision to the relevant undertaking stating that

the requirement to undertake to file a post-effective amendment does not apply if the

registration statement is filed under the short-form registration instruction and the

information required to be included in a post-effective amendment is contained in

Exchange Act reports that are incorporated by reference into the fund’s registration

statement or is contained in a form of prospectus that is part of the registration statement.

See Item 34.3.a of amended Form N-2; cf. Item 512(a) of Regulation S-K.

We also are amending Item 34 to make conforming changes to mirror parallel

undertakings in Item 512 of Regulation S-K. See, e.g., Item 34.3.a(2) of amended Form

N-2; cf. Item 512(a)(1)(ii) of Regulation S-K; Item 34.3.d(1) of amended Form N-2; cf.

Item 512(a)(5)(i) of Regulation S-K; Item 34.3.e(2)-(3) of amended Form N-2; cf. Item

512(a)(6)(ii)–(iii) of Regulation S-K; Item 34.5 of amended Form N-2; cf. Item 512(b) of

Regulation S-K; and Item 34.6 of amended Form N-2; cf. Item 512(h) of Regulation S-K.

Additionally, in response to comments, we are eliminating the undertaking in Item 34.3

of current Form N-2, which requires affected funds to undertake to supplement the

prospectus or file a post-effective amendment to disclose certain information if the

securities being registered are to be offered to existing shareholders, and if not taken, to

be reoffered to the public. See Dechert Comment Letter; IPA Comment. The Commission

recently eliminated a parallel undertaking from Regulation S-K because other

requirements make the undertaking duplicative and unnecessary. See FAST Act

Modernization and Simplification of Regulation S-K, Investment Company Act Release

The Proposing Release requested comment on whether we should modify

incorporation by reference provisions in other registration forms filed by affected funds

to provide parity or consistency across registration statements. In particular, we asked if

we should amend Form N-14 to provide that BDCs may incorporate by reference to the

same extent as registered CEFs. 67 Commenters supported this approach,68 which would

provide for more consistent treatment between registered CEFs and BDCs.

We are modifying Form N-14 to allow BDCs to incorporate by reference to the

same extent as registered CEFs. As commenters observed, this change will provide

consistent treatment for BDCs and registered CEFs. This change also will reduce the

length of a BDC’s Form N-14 prospectus, which in some cases can exceed 1,000 pages,

because BDCs cannot currently incorporate information by reference. To effectuate this

change, we are amending the instruction in Form N-14 that governs incorporation by

reference to specifically include BDCs and clarify that current reports include those filed

pursuant to section 13(a) or 15(d) of the Exchange Act. 69 Additionally, in response to

No. 33426 (Mar. 20, 2019) [84 FR 12674 (Apr. 2, 2019)] (“FAST Act Modernization

Adopting Release”), at n.171. We are eliminating this undertaking from Form N-2 for the

same reasons, and renumbering Item 34’s sub-items accordingly.

Form N-14 currently permits a registered CEF—but not a BDC—to incorporate by

reference certain information about the registrant and the company being acquired that is

required by Items 5, 6 and 11–14 of Form N-14 from its prospectus, SAI, or Investment

Company Act reports into the Form N-14 prospectus. See General Instruction G of

current Form N-14.

See Dechert Comment Letter; IPA Comment Letter.

See General Instruction G of amended Form N-14. We also are eliminating the

instruction’s reference to sub-paragraph (d) of Section 30, and will instead reference

Section 30 (no sub-part specified). This change will have the effect of requiring a Form

N-14 registrant that seeks to incorporate by reference to be current in filing all Section 30

reports, including reports filed on Forms N-PORT and N-CEN. Commenters also

suggested that we further amend Form N-14 to provide that a seasoned affected fund that

incorporates by reference information about the registrant into the prospectus need not

comments,70 we are eliminating the requirement that registrants file with the Form N-14

registration statement the documents that contain information that is incorporated by

reference into the prospectus or SAI. 71 Such documents are filed on EDGAR and readily

available to Commission staff.

Affected Funds’ Use of Rule 415(a)(1)(x) and Automatic

Shelf Registration Statements72

We are adopting, as proposed, two additional amendments to allow affected funds

to use the shelf registration system in parity with operating companies. First, we are

amending rule 415(a)(1)(x) to clarify that affected funds may use that rule by adding

references to a registration statement filed under the short-form registration instruction. 73

deliver copies of the documents containing such information with the prospectus. See,

e.g., Dechert Comment Letter. Because the delivery requirement applies to funds

generally and not just affected funds, we believe that any changes to the requirement

should be considered on a broader basis that is beyond the scope of this rulemaking.

See Dechert Comment Letter; IPA Comment Letter.

See General Instruction G of amended Form N-14. The requirement to file with the

registration statement the documents that contain the information that is incorporated by

reference is no longer necessary given the availability of such documents on EDGAR.

We are similarly eliminating the requirement to file with the registration statement each

document from which information is incorporated by reference into the SAI.

As proposed, amended Form N-2 will become effective on August 1, 2020. The

Commission also will need time to modify its systems to automatically reflect that

automatic shelf registration statements are effective upon filing and process “pay-as-yougo” payments for affected funds that are WKSIs. See infra section II.J. Until such

modifications are complete, which is anticipated to be September 2020, affected funds

should contact the staff of the Division of Investment Management’s Disclosure Review

and Accounting Office if they are filing an automatic shelf registration statement.

See rule 415(a)(1)(x) (amended to include securities registered pursuant to General

Instruction A.2 of Form N-2). See also section 803(b)(2)(J) of the BDC Act (directing us

to revise rule 415(a)(1)(x) to provide that a BDC that would otherwise meet the eligibility

requirements of Form S-3 can register its securities under that provision). Our

amendments also add a reference to a Form N-2 registration statement filed pursuant to

General Instruction A.2 to rule 415(a)(2) to make clear that affected funds registering

offerings pursuant to rule 415(a)(1)(ix), like other issuers relying on that provision, will

not be subject to the limitation that they register an amount of securities that the issuer

reasonably expected would be offered or sold within two years from the date that the

Second, we are adopting a new general instruction to permit affected funds that qualify as

WKSIs to file an automatic shelf registration statement. 74 A WKSI can register

unspecified amounts of different types or classes of securities on an automatic shelf

registration statement. 75 An automatic shelf registration statement and any amendments

to the registration statement will be effective immediately upon filing. 76 Automatic shelf

registration provides WKSIs with significant flexibility to take advantage of market

windows, structure terms of securities on a real-time basis to accommodate investor

demand, and determine or change the plan of distribution in response to changing market

conditions. WKSIs using an automatic shelf registration statement further benefit by

being able to pay filing fees at any time in advance of a shelf takedown or on a “pay-asyou-go” basis at the time of each takedown off the shelf registration statement in an

amount calculated for that takedown. 77 Our amendments will extend these same benefits

registration statement became effective. Cf. Securities Offering Reform Adopting

Release, supra footnote 5, at 44774–44775.

See General Instruction B of amended Form N-2; section 803(c)(2) of the BDC Act

(directing that we amend Form N-2 to include an instruction that is similar to the

instruction regarding automatic shelf registration offerings by WKSIs on Form S-3 to

provide that a BDC that is a WKSI may file automatic shelf offerings on Form N-2). This

instruction will provide that an affected fund that is a WKSI may use the form as an

automatic shelf registration statement only for the transactions that are described in, and

consistent with the requirements of, General Instruction I.D of Form S-3. This provides

parity with operating companies because General Instruction I.D of Form S-3 specifies

the transactions and requirements for an automatic shelf registration statement filed on

Form S-3. Consistent with General Instruction I.D of Form S-3, General Instruction B

specifies that the form could not be used as an automatic shelf registration statement for

securities offerings under rule 415(a)(1)(vii) or (viii).

See 17 CFR 230.430B(a) (Securities Act rule 430B(a)).

See 17 CFR 230.462(e) and (f) (Securities Act rule 462(e) and (f)).

See 17 CFR 230.457(r) and 17 CFR 230.456(b) (Securities Act rule 457(r) and rule

456(b)).

to affected funds that qualify as WKSIs, as directed by the BDC Act and the Registered

CEF Act. 78 We did not receive any comments on these particular amendments. 79

Omitting Information from a Base Prospectus and

Prospectus Supplements

The BDC Act directed us to include a process for a BDC to file a prospectus in

the same manner as under rule 424(b). 80 Consistent with this directive and with the

Registered CEF Act, we are amending, as proposed, rule 424(f) to allow affected funds to

file a prospectus under rule 424. 81 As discussed in the Proposing Release, affected funds

registering shelf offerings under Securities Act rule 415 generally can omit required

information from the base prospectus that is unknown or not reasonably available to the

fund when the registration statement becomes effective. 82 WKSIs and certain issuers

eligible to use Form S-3 for primary offerings are permitted under rule 430B to omit

certain additional information. A base prospectus that omits statutorily-required

information is not a final prospectus under section 10(a) of the Securities Act. 83 Filing a

As proposed, we are making conforming amendments to Securities Act rule 462(f) and to

the registration fee table in Form N-2 to enhance consistency with Form S-3 and to allow

affected funds that file as WKSIs to use the pay-as-you-go registration fee process. See

section II.J for a discussion of applicable effective dates for pay-as-you-go registration

fees.

While we did not receive any comments specifically on the proposed general instruction

to permit affected funds that qualify as WKSIs to file an automatic shelf registration

statement, we did receive comments on the proposed WKSI standard for affected funds.

Those comments are addressed in section II.C below.

See section 803(b)(2)(K) of the BDC Act.

These amendments will not apply to open-end funds or other registered investment

companies. Accordingly, those investment companies would continue to file prospectuses

pursuant to rule 497. See amended rule 424(f). We also are amending rule 424(f) to state

that references to the term “form of prospectus” in the rule include the SAI.

See 17 CFR 230.409 (Securities Act rule 409).

15 U.S.C.77j(a).

prospectus supplement pursuant to rule 424 is one way to provide information required

for a prospectus to satisfy the requirements of section 10(a). 84

Our rules, however, provide different processes for operating companies and

investment companies to file prospectuses. Operating companies currently follow rule

424 to file prospectus supplements, whereas investment companies follow rule 497.

Although these rules provide similar processes, they have certain key differences. For

example, rule 424(b) is designed to work together with rule 415(a)(1)(x), and provides

additional time for an issuer to file a prospectus. Rule 497 does not contain provisions

specifically related to offerings under rule 415(a)(1)(x) and requires the fund to file a

prospectus with the Commission before using it. Rule 424 also requires an issuer to file a

prospectus when the issuer makes changes from or additions to a previously-filed

prospectus that are substantive, whereas rule 497 requires funds to file every prospectus

that varies from any previously-filed prospectus.

Under the amendment to rule 424(f), an affected fund will be able to file any type

of prospectus enumerated in rule 424(b) to update, or to include information omitted

from, a prospectus or in connection with a shelf takedown. 85 We also are amending rule

497 to provide that rule 424 would be the exclusive rule for affected funds to file a

Omitted information also may be provided in a post-effective amendment or, where

permitted, through Exchange Act filings that are incorporated by reference.

An affected fund that seeks to file a rule 424(b)(1) or 424(b)(4) prospectus supplement to

provide pricing information omitted pursuant to rule 430A must be able to satisfy the

conditions of rule 430A, which include the requirement to furnish the “undertakings

required by Item 512(i) of Regulation S-K.” See rule 430A(a)(2) under the Securities Act.

To facilitate an affected fund’s ability to rely on the rule, we are amending rule 430A to

require affected funds to provide the parallel undertaking required by Item 34.4 of

amended Form N-2.

prospectus supplement other than an advertisement that is deemed to be a prospectus

under 17 CFR 230.482 (rule 482). 86 This will avoid any confusion that might result if

affected funds were permitted to file prospectuses under both rule 424 and rule 497,

while also continuing to require affected funds to file rule 482 advertisements as they and

other investment companies do today.

We also are adopting, as proposed, an amendment to permit affected funds to use

rule 430B in parity with operating companies. 87 We received no comments on this aspect

of the proposal. Thus an affected fund may omit certain information from its prospectus

in two circumstances:

•

A WKSI filing an automatic shelf registration statement may omit the plan

of distribution and information as to whether the offering is a primary one

or an offering on behalf of selling security holders.

•

If an issuer is eligible to file a registration statement on Form S-3 to

S-3, and is registering the resale of securities on behalf of selling security

holders, it may omit the identities of selling security holders and the

amount of securities to be registered on their behalf, subject to certain

conditions. 88

See amended Securities Act rule 497(l).

See Proposing Release, supra footnote 10, at text preceding n.72.

See amended rule 430B (allowing affected funds eligible to register a primary offering

under the short-form registration instruction to rely on rule 430B). We also are amending

the undertakings in Form N-2 to require affected funds relying on rule 430B to make the

same undertakings required of operating companies that rely on the rule. See Item

34.3.d(1) of amended Form N-2; cf. Item 512(a)(5)(i) of Regulation S-K. See also supra

footnotes 63–66 and accompanying text. Rules 430B and 424 and 17 CFR 230.158 (rule

Additional Information in Periodic Reports

As discussed above, the amendments we are adopting will permit certain affected

funds to forward incorporate information from their Exchange Act reports. These funds

may wish to include information in their periodic reports that is not required to be

included in these reports in order to update their registration statements. We therefore

proposed to include a new instruction to Form N-2 that would allow a fund to include

additional information so as long as the fund included a statement in the report

identifying information that it included for this purpose to provide context for investors. 89

After considering comments we received, we are not adopting this proposed instruction.

The commenters that addressed this proposed new instruction to Form N-2

recommended against requiring this identifying statement in periodic reports on the

grounds that it unnecessarily emphasized information included to update the fund’s

registration statement and could potentially distract investors from other information that

may be more material to their investment decisions. 90 These commenters also stated that

requiring funds to identify this information would not be consistent with an integrated

disclosure regime in which the information is incorporated by reference. We have

determined not to adopt the identification requirement. After considering comments, we

158) specify when information contained in a prospectus supplement will be deemed part

of and included in the registration statement and circumstances that will trigger a new

effective date of the registration statement for purposes of section 11(a) of the Securities

Act. These rules apply to affected funds just as they apply to operating companies.

See Proposing Release, supra footnote 10, at n.73 and accompanying text (discussing

proposed Instruction 6.i to Item 24 of Form N-2).

See Dechert Comment Letter; IPA Comment Letter.

are persuaded that requiring an affected fund to highlight information just because it

updates the fund’s registration statement could unnecessarily emphasize it.

Well-Known Seasoned Issuer Status

We are adopting, as proposed, amendments that will allow certain affected funds

to qualify as WKSIs. Issuers that qualify as WKSIs are permitted to receive the greatest

degree of benefits from the modifications to the communications and registration rules

that the Commission adopted in 2005. 91 A WKSI, for example, can file a registration

statement or amendment that becomes effective automatically in a broader variety of

contexts than a non-WKSI. In addition, subject to certain conditions, a WKSI may

communicate at any time, including through a free writing prospectus, without violating

the “gun-jumping” provisions of the Securities Act. 92

To qualify as a WKSI, the issuer must meet the registrant requirements of Form

S-3, i.e., it must be “seasoned” 93 and generally must have at least $700 million in public

float. 94 An issuer is not eligible for WKSI status if, among other bases: (1) it is not

current and timely in its Exchange Act reports, or (2) it is the subject of a judicial or

administrative decree or order arising out of a governmental action involving violations

Securities Offering Reform Adopting Release, supra footnote 5, at 44727.

See infra section II.F.

See supra footnote 28.

See paragraph (1)(i)(A) of the WKSI definition in rule 405. See also supra footnote 19.

See also Proposing Release, supra footnote 10, at n.77 (identifying alternative bases for

an issuer to qualify as a WKSI, including that an issuer may qualify if it has issued, for

cash, within the last three years, at least $1 billion in aggregate principal amount of nonconvertible securities, other than common equity, in primary offerings registered under

the Securities Act).

of the anti-fraud provisions of the Federal securities laws (the “anti-fraud prong” of the

ineligible issuer definition). 95

WKSI Definition

As proposed, we are amending rule 405 to delete the exclusion of affected funds

from the definition of WKSI. 96 In addition, we are adopting, as proposed, an amendment

to the WKSI definition to include a reference to the registrant requirements of the

proposed short-form registration instruction on Form N-2. 97 We received no comments

on our proposal to make these particular amendments to rule 405. Commenters generally

supported permitting affected funds to qualify as WKSIs. 98

WKSI Eligibility

The BDC Act directed us to amend Securities Act rule 405 to allow a BDC to

qualify as a WKSI, and the Registered CEF Act directed us to allow a registered CEF

covered by the Act to use the securities offering rules that are available to operating

See paragraphs (1)(i) and (vi) of the definition of ineligible issuer in Securities Act rule

405.

See amended paragraph (1)(v) of rule 405.

See amended paragraph (1)(i) of the WKSI definition in rule 405. In addition, we are

adopting, as proposed, amendments to the definition of WKSI to make conforming

references to a registration statement filed under new General Instruction A.2 of amended

Form N-2. See paragraphs (1)(i) introductory text and (1)(i)(B)(2) of the definition of

WKSI in amended rule 405; new General Instruction A.2 of amended Form N-2. We also

are making a conforming amendment, as proposed, to paragraph (2) of the definition of

WKSI to add a reference to Form N-CSR, the form on which registered CEFs file their

shareholder reports with the Commission. See amendment to paragraph (2) of the

definition of WKSI in amended rule 405. We did not receive any comments on our

proposal to make these conforming amendments to the WKSI definition in rule 405.

See, e.g., ICI Comment Letter; ACC Comment Letter; SIFMA Comment Letter; MFDF

Comment Letter.

companies. 99 Consistent with these directives, and to provide parity in the offering rules

for affected funds and operating companies, we are adopting, as proposed, amendments

to allow affected funds to qualify as WKSIs if they satisfy the same $700 million public

float requirement that applies to operating companies.

Our securities offering rules provide WKSIs with certain registration and

communication flexibilities because, among other reasons, they have a demonstrated

market following (i.e., they are “well-known”). 100 The Commission has used public float

as an approximate measure of an issuer’s market following and the extent to which the

market absorbs information about the issuer that is ultimately reflected in the price of the

issuer’s securities. 101 The $700 million public float requirement is meant to encompass

issuers that are presumptively the most widely followed in the marketplace and whose

See section 803(b)(2)(A)(i) of the BDC Act and section 509(a) of the Registered CEF

Act.

100

See Securities Offering Reform Adopting Release, supra footnote 5, at n.49 and

accompanying text. In establishing the WKSI category of issuers for operating

companies, the Commission stated that issuers that meet the $700 million public float

threshold or the alternative $1 billion registered offering of non-convertible securities

threshold have a wide following by market participants, the media, and institutional

investors. See id. at section II.A.

101

See, e.g., id. at n.50 (stating that the determination of public float is based on a public

trading market, such as an exchange or certain over-the-counter markets). See also Shelf

Registration, Securities Act Release No. 6499, at 5 (Nov. 17, 1983) [48 FR 52889]

(“Forms S-3 and F-3 recognize the applicability of the efficient market theory to those

companies which provide a steady stream of high quality corporate information to the

marketplace and whose corporate information is broadly disseminated. Information about

these companies is constantly digested and synthesized by financial analysts, who act as

essential conduits in the continuous flow of information to investors, and is broadly

disseminated on a timely basis by the financial press and other participants in the

marketplace.”); see also Covered Investment Fund Research Reports, Investment

Company Act Release No. 33311 (Nov. 30, 2018) [83 FR 64180 (Dec. 13, 2018)]

(“Covered Investment Fund Research Reports Adopting Release”).

disclosures and other communications therefore are subject to market scrutiny by

investors, the financial press, analysts, and others. 102

Although the comments we received generally supported permitting affected

funds to qualify as WKSIs, commenters also suggested specific modifications to the

proposed amendments to permit certain additional affected funds to qualify. Several

commenters recommended that we eliminate the public float requirement for affected

funds. 103 Other commenters recommended that we adopt a substantially lower public

float threshold for affected funds, among other reasons, to make WKSI status available to

a greater percentage of affected funds that have listed securities. 104 One such commenter

offered a specific suggestion: that we reduce the public float threshold for affected funds

from $700 million to $480 million. 105 This commenter stated that the $700 million public

float requirement adopted in 2005 for operating companies permitted approximately 30%

of operating companies to qualify as WKSIs, and stated that we should seek to achieve a

102

See Securities Offering Reform Adopting Release, supra footnote 5, at text

accompanying n.40.

103

See ICI Comment Letter (suggesting that we permit affected funds to qualify as WKSIs

solely based on the other proposed requirements for WKSI status, such as meeting other

registrant and transaction requirements of Form S-3); see also Comment Letter of

Invesco Ltd. (June 10, 2019) (“Invesco Comment Letter”) (same). See also TIAA

Comment Letter (recommending that we eliminate the public float requirement and adopt

a standard for WKSI qualification for registered CEFs based on whether certain

information about the fund is available to the public, such as information about the fund’s

holdings, total return performance, and daily NAV).

104

See ABA Comment Letter. See also TIAA Comment Letter (recommending that we

adopt a $480 million public float requirement for registered CEFs in order to permit

approximately 30% of registered CEFs to qualify as WKSIs, which would be consistent

with the percentage of operating companies that were permitted to qualify as WKSIs

under the Commission’s 2005 securities offering reforms).

105

See TIAA Comment Letter (recommending that we reduce the public float threshold to

$480 million as an alternative to its recommendation that we eliminate the public float

requirement for affected funds). See supra footnote 103.

similar 30% “target” by adopting a $480 million public float requirement for affected

funds.

As the basis for the recommended elimination of or modification to the $700

million public float requirement for affected funds, these commenters stated that while

affected funds may not have the same level of market following as operating companies

with the requisite public float, market following is a less relevant standard for affected

funds than it is for operating companies. These commenters suggested that certain

distinguishing characteristics of affected funds compensate for their relative lack of

market following and corresponding market scrutiny. For example, commenters stated

that affected funds, as pass-through investment vehicles, have a less complex business

than traditional operating companies, and thus require less market scrutiny. 106

Commenters also stated that market scrutiny is less relevant for affected funds because,

unlike operating companies, affected funds must satisfy the investor protection

requirements of the Investment Company Act and related Commission rules, including

requirements relating to financial transparency, valuation of portfolio securities,

transactions with affiliates, and board oversight, among others. 107

106

See, e.g., ICI Comment Letter; see also ABA Comment Letter (stating that, unlike

operating companies, affected funds “generally describe their operations in terms of a

stated investment objective and investment strategies that tend to remain constant over

time”). The ABA Comment Letter further asserted that the proposed $700 million public

float requirement would be burdensome for affected funds relative to operating

companies because, unlike operating companies, affected funds have a relatively fixed

asset base (and therefore a relatively fixed public float) that would be unlikely to increase

over time to a level that would satisfy the public float requirement.

107

See, e.g., ABA Comment Letter (stating that the “operating limitations, oversight

requirements and investor protection provisions” that apply to affected funds under the

Investment Company Act “more than compensate for Affected Funds’ lower level of

research analyst coverage relative to large operating companies”); ICI Comment Letter

(stating that affected funds “are subject to important requirements under the Investment

Similarly, on the basis that public float is not a suitable criterion for determining

WKSI status for affected funds, commenters also urged that we permit unlisted affected

funds (which do not have public float) to qualify for WKSI status on the basis of their

aggregate NAVs. 108 In addition to the reasons provided by commenters, discussed above,

for eliminating or modifying the public float requirement,109 these commenters stated that

the intermediaries and distribution platforms through which unlisted affected funds are

sold perform extensive due diligence on unlisted affected funds, resulting in these funds

being subject to scrutiny “equal” to the market scrutiny indicated by a large public

float. 110 Commenters also stated that technological advancements have made unlisted

affected funds’ financial disclosures directly accessible to investors, and that, particularly

in light of the extensive disclosure funds provide, investors are less dependent on market

analysts for financial information. 111

After considering these comments, we are adopting, as proposed, WKSI

requirements for affected funds that are in parity with the requirements for operating

companies. We are not eliminating or modifying the $700 million public float

Company Act, including valuing their investments under board-approved valuation

procedures and ongoing board oversight”); TIAA Comment Letter (stating that market

following is less relevant to affected funds because, among other reasons, they are subject

to “the valuation framework of the 1940 Act”).

108

See, e.g., ABA Comment Letter; Dechert Comment Letter; ICI Comment Letter.

109

Similar to the comments discussed above recommending that we eliminate or reduce the

$700 million public float requirement, these commenters stated, among other things, that

unlisted affected funds are subject to the Investment Company Act’s investor protection,

board oversight, and disclosure requirements, and that unlisted affected funds are

structurally and operationally less complex than operating companies. See supra

footnotes 106–107 and accompanying text.

110

See Dechert Comment Letter; ABA Comment Letter.

111

See, e.g., Dechert Comment Letter. See section 509(a) of the Registered CEF Act.

requirement for affected funds, or permitting affected funds to qualify as WKSIs based

on their aggregate NAVs. Our amendments will implement the BDC Act and Registered

CEF Act, and are designed to provide parity in the offering rules for affected funds and

operating companies.

As discussed above, commenters stated that there are certain distinctions between

affected funds and operating companies that suggest that the $700 million public float

requirement is not an appropriate criterion for determining WKSI status for affected

funds. For example, commenters noted that affected funds generally have less complex

businesses than operating companies, are subject to the requirements of the Investment

Company Act, and provide extensive financial information to the market. We agree with

commenters that the WKSI framework, which the Commission designed specifically for

operating companies, is not well-tailored to the specific characteristics of affected funds.

However, these rules are designed to provide WKSI status to issuers with a demonstrated

market following, and the Commission has for many years used public float, based on a

public trading market, as an approximate measure of a stock’s market following and,

consequently, the degree of efficiency with which the market absorbs information and

reflects it in the price of a security. 112 Moreover, the offering rules for operating

companies, which Congress specifically directed the Commission to extend to certain

affected funds, are not premised on the characteristics of specific types of issuers, such as

112

See Revisions to the Eligibility Requirements for Primary Securities Offerings on Forms

S-3 and F-3, Securities Act Release No. 8878 (Dec. 19, 2007) [72 FR 73534 (Dec. 27,

2007)], at text accompanying n.25; See also Securities Offering Reform Adopting

Release, supra footnote 5, at text accompanying n.52 (“High levels of analyst coverage,

institutional ownership, and trading volume are useful indicators of the scrutiny that an

issuer receives from the market, although no one statistic can fully capture the extent to

which an issuer is followed by the market.”).

whether an issuer’s business is less complex than other issuers’ businesses or whether an

issuer is subject to different regulatory requirements. Further, the market following for

closed-end funds is significantly less robust than is the case for operating companies. As

a result, in our view, it would not be appropriate to select a public float figure that is

below the figure used to determine WKSI status for operating companies.

We also are not persuaded by commenters that allowing an affected fund,

including an unlisted affected fund, to qualify on the basis of its aggregate NAV would

be consistent with the requirements for an issuer to qualify as a WKSI, which Congress

directed us to extend to affected funds. 113 In addition, permitting unlisted affected funds

to qualify as WKSIs based on their aggregate NAVs would result in disparate treatment

between unlisted affected funds and similarly situated operating companies under these

rules. For example, unlisted real estate investment trusts (“unlisted REITs”) do not have a

public float and therefore generally cannot qualify as WKSIs under the rules for

113

As discussed above, the Registered CEF Act, as enacted, requires us to allow only

interval funds and listed registered CEFs to use the securities offering rules available to

operating companies See supra section II.A. To provide parity of treatment for similarly

situated affected funds, we are exercising our discretion to extend certain of these rules to

unlisted registered CEFs that are not interval funds. We do not believe, however, that it

would be consistent with the Registered CEF Act to provide these unlisted registered

CEFs with new criteria for qualifying as WKSIs. Indeed, legislative language that

preceded the passage of the Registered CEF Act would have applied to all registered

closed-end investment companies, but the legislation enacted as the Registered CEF Act

was subsequently narrowed in scope to apply only to listed closed-end funds and interval

funds. Compare the Financial CHOICE Act of 2017, H.R. 10, 115th Cong. section

499A(a) (June 8, 2017) (directing us to revise rules to the extent necessary to allow a

closed-end company, as defined in section 5(a)(2) of the Investment Company Act, that is

registered as an investment company under the Act to use the securities offering and

proxy rules that are available to other issuers that are required to file reports under section

13(a) or section 15(d) of the Exchange Act) with section 509(a) of Registered CEF Act.

See also 163 Cong. Rec. H4791, H4792 (2017) (daily ed. June 8, 2017) (statement of

Rep. Ellison) (stating that the prior bill would “allow even illiquid, nontraded funds to

claim multiple exemptions,” making it “harder for the … Commission … to police these

products for investors”).

operating companies. Unlisted REITs, however, have many of the characteristics that

commenters cited in support of permitting unlisted affected funds to use their aggregate

NAVs to qualify as WKSIs. 114 Nonetheless, unlisted REITs and other unlisted operating

companies may not qualify as WKSIs unless they have the requisite public float or satisfy

one of the alternative bases (which we also are adopting for affected funds).

Moreover, many of the distinctions between affected funds and operating

companies that commenters raised are based on the characteristics of registered funds and

BDCs generally, and are not unique to affected funds. We believe that the particular

characteristics of registered funds, including affected funds, may be appropriate for the

Commission to examine as part of a more comprehensive consideration of whether the

securities offering rules for funds should be modified rather than in this rulemaking

related to affected funds specifically. 115

We do not agree with the commenters who stated that changing or eliminating the

WKSI requirements for affected funds would be consistent with the intent of the Acts.

We do not believe, as commenters suggested, that the BDC Act and Registered CEF Act

were designed to result in a higher percentage of affected funds qualifying for WKSI

114

For example, both unlisted REITS and unlisted affected funds sell their shares through

intermediaries and both types of entities’ financial disclosures have been made directly

accessible to investors through advances in technology.

115

As discussed at infra section III.A.1, affected funds represent approximately 5.1% of all

registered investment companies by number of funds and approximately 2% by assets. In

addition, as discussed at infra section III.D, we believe that providing affected funds with

specific WKSI-eligibility criteria would not provide affected funds parity with similarlysituated operating companies that do not have public float or do not meet the $700

million public float requirement and thus cannot qualify as WKSIs under the rules for

operating companies.

status. 116 Rather, as discussed above, the Acts directed us to extend to affected funds the

benefits of our securities offering rules that are available to operating companies. We

believe that designing specific WKSI requirements for affected funds to permit a

particular percentage of those funds to qualify as WKSIs would not provide parity of

treatment. Moreover, the $700 million public float requirement for operating companies

was not designed to result in a certain percentage of operating companies qualifying as

WKSIs, as suggested by the commenter who recommended that the public float

requirement for affected funds be lowered to $480 million. 117 In describing the $700

million public float threshold for operating companies, the Commission observed that the

threshold would make the WKSI provisions available to approximately 30% of listed

issuers, but this was describing the effect of the provision and not its intent. 118

We also do not agree with commenters that the Registered CEF Act, by referring

to interval funds, requires us to permit affected funds to qualify as WKSIs based on

criteria other than the criteria that apply to operating companies. 119 The Registered CEF

116

See, e.g., Invesco Comment Letter (stating that the percentage of listed BDCs and

registered CEFs that would meet the $700 million public float requirement, as set forth in

the proposing release, were lower percentages than the Acts were designed to permit

(citing Proposing Release, supra footnote 10, at section IV.A.1.); ABA Comment Letter

(same); Dechert Comment Letter (stating that a goal of the BDC Act was to improve the

flow of funds to middle-market companies, which would be furthered by permitting

unlisted funds to qualify as WKSIs based on their aggregate NAVs).

117

See TIAA Comment Letter.

118

See Securities Offering Reform Adopting Release, supra footnote 5, at text following

n.48.

119

See, e.g., ICI Comment Letter (stating that the Registered CEF Act effectively requires

the Commission to proceed without a public float standard to enable interval funds to

qualify as seasoned funds and WKSI funds); Dechert Comment Letter (stating that

adoption of a public float requirement for affected funds effectively would frustrate the

intent of the Registered CEF Act).

Act directed us to allow interval funds (in addition to listed CEFs) to use the securities

offering rules that are available to other issuers required to file reports under section 13 or

15(d) of the Exchange Act. 120 As discussed throughout this release and summarized in

Tables 1 and 2 above, the rules that we are amending in this release are available to all

affected funds, including interval funds, that satisfy the relevant conditions of those rules.

In addition, many of the rules we are amending are not conditioned on an issuer’s public

float, such as the amendments to permit affected funds to use the “access equals delivery”

prospectus delivery framework available to operating companies.

We are adopting certain targeted amendments to permit certain non-interval

affected funds to rely on rule 486 under the Securities Act. Unlike the WKSI

requirements, rule 486 is specifically designed to apply to funds. These amendments to

rule 486 will permit certain registered CEFs and BDCs that conduct continuous

offerings—regardless of whether they qualify as WKSIs—to file post-effective

amendments and certain registration statements that become either effective immediately

upon filing under rule 486(b) or automatically effective after 60 days under rule

486(a). 121 Similar to the benefits the final rule will provide to affected funds that qualify

as WKSIs or that are eligible to file short-form registration statements, these amendments

will facilitate certain unlisted affected funds’ ability to raise capital without delay by

allowing the funds to more efficiently maintain effective registration statements while

they engage in continuous offerings. The final rule, therefore, will provide certain listed

120

See section 509(a) of the Registered CEF Act.

121

See infra section II.D (discussing the Commission’s request for comment on broadening

rule 486(b) in the Proposing Release and comments received in response to this request,

as well as the amendments we are adopting to rule 486).

affected funds with the flexibility to use a short-form registration statement and to file

registration statements and amendments that become effective automatically.

Additionally, unlisted affected funds generally will have the flexibility to make filings

that become effective either immediately upon filing or automatically after 60 days. Thus

the final rule will provide additional flexibilities to both listed and unlisted affected

funds.

Ineligible Issuer Definition

We are adopting, as proposed, amendments to the definition of ineligible issuer in

rule 405. Although all of the provisions in the ineligible issuer definition would apply to

affected funds, our amendments are designed to tailor certain of these provisions for

affected funds specifically. First, we are amending the definition of “ineligible issuer” to

provide that a registered CEF would be ineligible if it has failed to file all reports and

materials required to be filed under section 30 of the Investment Company Act during the

preceding 12 months. This provision is consistent with the proposed short-form

registration instruction and would mirror the current Exchange Act reporting provision in

the ineligible issuer definition. 122 We did not receive any comments on this particular

proposed amendment.

Second, we are adopting, as proposed, an amendment to the definition of

ineligible issuer to give effect to the definition’s anti-fraud prong in the context of

affected funds. Specifically, we are adopting a parallel anti-fraud prong for affected

funds, which provides that an affected fund is an ineligible issuer if within the past three

years its investment adviser, including any sub-adviser, was the subject of any judicial or

122

See amended paragraph (1)(i) of the ineligible issuer definition in rule 405.

administrative decree or order arising out of a governmental action that determines the

investment adviser aided or abetted or caused the affected fund to have violated the antifraud provisions of the Federal securities laws. 123 We believe this amendment is

appropriate because investment companies typically are externally managed by an

investment adviser, which is primarily responsible for the day-to-day management of the

fund and the preparation of the fund’s disclosures. 124

We received several comments requesting that we clarify or modify certain

aspects of the proposed amendments. Commenters suggested that we clarify that a

violation of section 206(4) of the Advisers Act, or the rules adopted under section 206(4)

(except for 17 CFR 275.206(4)-8 (rule 206(4)-8)), by an affected fund's investment

adviser or sub-adviser would not give rise to WKSI ineligibility for the affected fund. 125

These commenters also recommended that we modify the proposed anti-fraud provision

so that an affected fund would not be an ineligible issuer if the investment adviser (or

sub-adviser) that was the subject of a judicial or administrative decree or order as

described in the proposed rule no longer advises the affected fund at the time the affected

fund seeks WKSI status. 126

Under the anti-fraud prong for affected funds, an affected fund is ineligible for

WKSI status if the affected fund’s adviser or sub-adviser is determined to have aided or

abetted or caused a violation by the fund of the anti-fraud provisions of the Federal

securities laws. As such, only the anti-fraud provisions of the securities laws that apply to

123

See amended paragraph (1)(ix) of the ineligible issuer definition in rule 405.

124

See Proposing Release, supra footnote 10, at text following n.84.

125

See ACC Comment Letter; CBD Comment Letter.

126

Id.

the affected fund itself can give rise to WKSI ineligibility. There could not be a violation

of section 206(4) or the rules adopted thereunder by an affected fund, because the fund is

not itself an adviser.

We also do not believe it would be appropriate, as commenters suggested, to

modify the proposed amendments to permit an affected fund whose adviser or subadviser was determined to have aided or abetted or caused a violation by the fund of the

anti-fraud provisions of the securities laws to preserve its WKSI eligibility by terminating

the adviser or sub-adviser. 127 An operating company currently will be an ineligible issuer

under the anti-fraud prong even if the operating company terminates all of the employees

who aided or abetted the underlying violation of the Federal securities laws, and our

amendments will provide comparable treatment if an affected fund were to terminate its

adviser. The affected fund also may have the same board of directors that was in place

when the affected fund violated the anti-fraud provisions. The specific facts and

circumstances relating to a particular issuer’s WKSI status under the ineligible issuer

definition may, however, be considered through the Commission’s process under rule

405 for granting waivers of ineligible issuer status. 128

For these reasons, we are adopting the amendments to the ineligible issuer

definition as proposed.

127

See ACC Comment Letter; CBD Comment Letter;

128

See paragraph (2) of the ineligible issuer definition in rule 405 (providing that the

Commission may grant waivers of ineligible issuer status upon a good-cause showing

that it is not necessary under the circumstances for the issuer to be considered an

ineligible issuer).

Automatic or Immediate Effectiveness for Filings by Affected Funds

Conducting Certain Continuous Offerings

Based on comments that we received, we are expanding the scope of rule 486 to

permit any registered CEF or BDC that conducts continuous offerings under rule

415(a)(1)(ix) (e.g., a continuously-offered tender offer fund) to rely on the rule. Rule 486

under the Securities Act currently permits interval funds to file post-effective

amendments and certain registration statements that are either immediately effective upon

filing under rule 486(b) or automatically effective 60 days after filing under rule

486(a). 129

As discussed in the Proposing Release, our staff has previously stated that it

would not recommend that the Commission take enforcement action under certain

provisions of the Securities Act if, on a case-by-case basis, specific listed registered CEFs

that conduct offerings under rule 415(a)(1)(x) use rule 486(b) to file certain post-effective

amendments that are immediately effective upon filing. 130 The Proposing Release noted

that staff in the Division of Investment Management were reviewing these no-action

letters to determine if they should be withdrawn in connection with any final rules. The

Commission also requested comment on whether it should make rule 486(b) available to

129

Filings under rule 486(a) are generally effective on the sixtieth day after filing, but a

registrant may designate a later date for effectiveness (which must not be later than eighty

days after filing). In addition, the Commission, having due regard to the public interest

and the protection of investors, may declare an amendment or registration statement

effective under rule 486(a) on an earlier date. See rule 486(a).

130

See, e.g., Nuveen California Select Tax-Free Income Portfolio, SEC Staff No-Action

Letter (Nov. 21, 2017); PIMCO Dynamic Income Fund, SEC Staff No-Action Letter

(Dec. 12, 2017); Eagle Point Credit Company, Inc., SEC Staff No-Action Letter (Feb. 14,

2018); PIMCO Corporate & Income Opportunity Fund and PIMCO Income Opportunity

Fund, SEC Staff No-Action Letter (Sep. 13, 2018); and DNP Select Income Fund, Inc.,

SEC Staff No-Action Letter (Oct. 4, 2018).

all or a broader group of registered CEFs and BDCs. 131 In response to this request,

several commenters asked that we allow certain non-interval funds that conduct delayed

or continuous offerings under rule 415 to rely on rule 486, in whole or in part. 132 For

example, one commenter suggested that the existing no-action letters be retained or

codified. This commenter stated that withdrawing the no-action letters would be

disruptive to relevant non-WKSI funds and their ability to update their registration

statements and receive automatic effectiveness. 133 Additionally, two commenters

recommended that we permit affected funds that are continuously-offered unlisted funds

to rely on rule 486 in its entirety, including rule 486(a) and rule 486(b). The commenters

suggested that, like interval funds, these unlisted funds are continuously offered and

would benefit if their filings could become immediately effective or automatically

effective 60 days after filing. 134 One of these commenters stated that, for example,

allowing continuously-offered unlisted affected funds to rely on rule 486 would benefit

investors in these funds by allowing the funds to avoid the time and expense of an annual

staff review of registration statements where no changes are made beyond immaterial

updates and updates to audited financial information. 135

In response to these comments, we are amending rule 486 to allow any registered

CEF or BDC that conducts a continuous offering under rule 415(a)(1)(ix) to rely on rule

131

See Proposing Release, supra footnote 10, at section II.I.

132

See ABA Comment Letter and ICI Comment Letter.

133

See ICI Comment Letter.

134

See ABA Comment Letter and ICI Comment Letter.

135

See ABA Comment Letter.

486. 136 We believe this rule amendment will allow these continuously-offered affected

funds to maintain effective registration statements in a more efficient, cost-effective

manner. For example, under rule 486(a), these funds will be able to make material

changes to their registration statements on an automatically effective basis 60 days after

filing. In addition, under rule 486(b), continuously-offered unlisted affected funds will be

able, for example, to update their financial statements under section 10(a)(3) or make

non-material changes to their registration statements on an immediately effective basis.

The rule amendment will allow these funds to more efficiently maintain effective

registration statements while they engage in continuous offerings. This is similar to the

benefits the final rule will provide to affected funds that file short-form registration

statements or qualify as WKSIs, as those funds also will be able to make certain updates

to their registration statements more efficiently (i.e., through forward incorporation by

reference or automatically effective registration statements and post-effective

amendments). 137 We believe it is appropriate for any affected fund that conducts delayed

or continuous offerings under rule 415(a)(1)(ix), (x), or (xi) to have a mechanism for

136

We also are making a technical amendment to rule 486(b)(1)(iv) to provide a more

accurate cross reference to Item 9.1.c of Form N-2. Moreover, we are amending Form N2 to recognize the broader scope of affected funds that may rely on rule 486. See General

Instruction E.4 of amended Form N-2 and cover page of amended Form N-2.

137

See supra sections II.B.3.b and II.B.3.c. Although affected funds that file short-form

registration statements or qualify as WKSIs will be able to use forward incorporation by

reference and automatically effective filings to make a broader range of updates to their

registration statements on an immediate basis than those specified in rule 486(b), the

majority of post-effective amendments that affected funds currently file are solely for one

or more purposes described in rule 486(b). Moreover, interval funds, and affected funds

that make continuous offerings under rule 415(a)(1)(ix), will be able to make other,

material amendments that are automatically effective 60 days after filing.

bringing its financial statements up to date under section 10(a)(3) without delay. 138

Together, the amendments we are adopting in this release and current rule 486 will

achieve this objective.

Continuously-offered unlisted affected funds relying on rule 486 will continue to

be subject to applicable provisions in rule 415. 139 Moreover, these funds will need to

comply with relevant conditions in rule 486. 140 If it appears to the Commission that a

post-effective amendment or registration statement filed under rule 486(a) may be

incomplete or inaccurate in any material respect, the Commission may suspend the

effective date of that filing. Further, if it appears to the Commission that the fund has not

complied with the conditions in rule 486(b), the Commission may suspend the fund’s

ability to rely on rule 486(b). 141

In addition to allowing an affected fund to rely on rule 486 if the fund makes

continuous offerings under rule 415(a)(1)(ix), we are also amending the scope of

registration statements that rule 486 covers. Currently, rule 486 is available for post-

138

Rule 415(a)(1)(ix), (x), and (xi) are the provisions affected funds primarily use to conduct

delayed or continuous offerings of their securities. Rule 415(a)(1)(ix) allows nontraded

affected funds to engage in continuous offerings but does not allow delayed (or “shelf”)

offerings. Rule 415(a)(1)(x) allows affected funds that are eligible to file short-form

registration statements on Form N-2 to engage in delayed or continuous offerings. Rule

415(a)(1)(xi) allows interval funds to engage in delayed or continuous offerings.

139

For example, rule 415 limits the amount of securities that can be registered in a

continuous offering under rule 415(a)(1)(ix) and generally requires an issuer relying on

rule 415(a)(1)(ix) to file a new registration statement every three years. See rule

415(a)(2), (5), and (6).

140

See rule 486(b)(2) (requiring certain written representations that a post-effective

amendment filed under rule 486(b) is filed solely for one or more of the permissible

purposes covered by the provision); rule 486(e) (requiring a fund to have filed a posteffective amendment or registration statement relating to its common stock that became

effective within two years prior to the filing made under rule 486(a) or (b)).

141

See rule 486(c).

effective amendments and for registration statements filed for purposes of registering

additional shares of common stock for which a Form N-2 registration statement is

effective. This generally reflects the scope of amendments and registration statement

filings interval funds make after their initial registration statements are effective.

However, unlike interval funds, the affected funds that will newly be eligible to rely on

rule 486 generally are required to file new registration statements every three years under

rule 415(a)(5) and (6). We are amending rule 486 to allow these registration statements to

be immediately or automatically effective under the rule, depending on the substance of

the disclosure. 142 Specifically, a registration statement a fund files to comply with rule

415(a)(5) and (6) could be immediately effective upon filing if it is filed for no purpose

other than to comply with those provisions of rule 415 or for other purposes listed in rule

486(b), such as making non-material changes or updating the fund’s financial statements

under section 10(a)(3). If the registration statement does not qualify under rule 486(b)

because, for example, it includes material changes to the fund’s disclosure, the

registration statement could be automatically effective 60 days after filing under rule

486(a). As a result of the amendments, affected funds that make continuous offerings

under rule 415(a)(1)(ix) will be able to rely on rule 486 for registration statements filed to

comply with rule 415(a)(5) and (6), regardless of whether they choose to register

additional shares at the time these provisions requires them to file new registration

statements. This will promote consistent treatment of these funds’ filings under the rule.

142

See amended rule 486(a), (b)(1)(vi), and (g).

Although one commenter suggested that we retain or codify the staff no-action

letters discussed above to allow affected funds that conduct delayed or continuous

offerings under rule 415(a)(1)(x) to file post-effective amendments that are immediately

effective under rule 486(b), we believe the final rule makes such relief unnecessary. 143

For example, while these funds will need to file new registration statements every three

years under rule 415, during the interim period they will be able to update their

registration statements through the forward incorporation by reference provisions

applicable to short-form registration statement filers. 144 The forward incorporation by

reference provisions allow these funds to avoid filing the types of post-effective

amendments that rule 486(b) covers, as well as other types of post-effective amendments

(e.g., those making material changes to the fund’s disclosure). Thus, we do not believe

that affected funds that make delayed or continuous offerings under rule 415(a)(1)(x) will

need to file the types of post-effective amendments rule 486(b) covers.

Moreover, while the commenter only referred to post-effective amendments, rule

486(b) also covers new registration statements under certain circumstances. For instance,

when an eligible fund has an effective registration statement and wants to register

additional shares without making material amendments to its existing disclosure, rule

486(b) allows that new registration statement to be immediately effective. 145 If we were

to permit a fund that makes delayed or continuous offerings under rule 415(a)(1)(x) to

rely on rule 486(b) in its entirety, then the new registration statement the fund must file

143

See ICI Comment Letter.

144

See rule 415(a)(5) and (6); General Instructions A.2 and F.3 of amended Form N-2.

145

See rule 486(b)(1)(i) and (v).

every three years could effectively become an automatic shelf registration statement,

even though the fund does not qualify as a WKSI (e.g., it does not have $700 million in

public float). 146 As a result of these considerations, the no-action letters stating that the

staff would not recommend an enforcement action if specific listed, registered CEFs

conducted offerings under rule 415(a)(1)(x) using rule 486(b) will be withdrawn effective

August 1, 2021 (one year from the effective date of the final rule). 147 Importantly, as

recognized above, the final amendments provide a mechanism for these funds to

efficiently update their registration statements.

Final Prospectus Delivery Reforms

We are adopting, as proposed, rule amendments that will allow an affected fund

to satisfy its final prospectus delivery obligations by filing its final prospectus with the

Commission.

The Securities Act requires registrants to deliver to each investor in a registered

offering a prospectus meeting the requirements of section 10(a) (known as a “final

prospectus”). 148 Section 5(b)(2) makes it unlawful to deliver a security for the purpose of

sale or for delivery after sale unless accompanied or preceded by a final prospectus. After

146

Under these circumstances, a non-WKSI fund potentially could combine its ability to

forward incorporate by reference and its ability to rely on rule 486(b) to achieve a WKSIlike status, with registration statements that would always be immediately effective upon

filing. This could occur if, for example, a fund made material changes to its registration

statement by forward incorporating information into its registration statement and then, to

satisfy the requirement to file a new registration statement every three years, it filed a

new registration statement under rule 486(b). In contrast, when an affected fund that may

rely on rule 486 makes a material change to its registration statement, the relevant filing

is not effective immediately. See rule 486(a).

147

See supra footnote 130.

148

15 U.S.C. 77j(a).

the effectiveness of a registration statement, a written communication that offers a

security for sale, or confirms the sale of a security, may be provided to investors if a final

prospectus is sent or given previously or at the same time. Otherwise, such a

communication may not be provided unless it is otherwise permitted under Commission

rules or meets the requirements of section 10(a). 149

Rule 172 allows issuers, brokers, and dealers to satisfy final prospectus delivery

obligations if a final prospectus is or will be on file with the Commission within the time

required by the rules and other conditions are satisfied. 150 For example, rule 172 provides

that a final prospectus will be deemed to precede or accompany a security for sale for

purposes of section 5(b)(2) as long as the final prospectus is filed with the Commission or

it will be filed as part of the registration statement. 151 Rule 172 applies only to final

prospectuses and not to other documents. 152 Rule 173 requires the delivery of a copy of

the final prospectus or, in lieu of a final prospectus, a notice to purchasers stating that a

sale of securities was made pursuant to a registration statement or in a transaction in

which a final prospectus would have been required to have been delivered in the absence

of rule 172. 153

149

15 U.S.C. 77e(b)(2).

150

17 CFR 230.172 (Securities Act rule 172); see also Securities Offering Reform Adopting

Release, supra footnote 5, at nn.560–562 and accompanying text.

151

See Securities Act rule 172. In the event that the issuer fails to file such a prospectus in a

timely manner, the issuer must file the prospectus as soon as practicable thereafter.

Securities Act rule 172(c)(3); see also Securities Offering Reform Adopting Release,

supra footnote 5, at n.568 and preceding text (describing this “cure” provision).

152

See, e.g., Securities Offering Reform Adopting Release, supra footnote 5, at text

following n.567.

153

17 CFR 230.173 (Securities Act rule 173). See also Proposing Release, supra footnote

10, at n.109. Rule 173(d) provides that a purchaser who receives a notification may

request a copy of the final prospectus. We proposed a change to Item 34.6 of Form N-2,

Rules 172 and 173 do not apply to offerings of affected funds. 154 The BDC Act

directs us to remove the exclusion for BDC offerings. 155 To implement the BDC Act, and

to provide parity for registered CEFs consistent with the Registered CEF Act, we

proposed to amend rules 172 and 173 to remove the exclusion for offerings of all affected

funds. Commenters supported this approach, stating that the proposed amendments would

reduce prospectus printing and delivery costs and provide parity for affected funds,

consistent with the BDC Act and the Registered CEF Act. 156 We are adopting the

amendments to rules 172 and 173 as proposed. 157

Communications Reforms

Offering Communications

We are adopting amendments to the communications rules, as proposed, to extend

to affected funds the rules that currently provide operating companies and other parties

(such as underwriters) increased flexibility in their communications. 158 The amendments

permit these communications notwithstanding the “gun-jumping provisions” in the

under which funds currently undertake to provide an SAI upon request, to require an

affected fund to also undertake to provide a prospectus upon request. We received no

comments regarding this aspect of the proposal and are making the change as proposed.

See Item 34.7 of amended Form N-2.

154

See Securities Act rule 172(d)(1)–(2); Securities Act rule 173(f)(2)–(3).

155

Section 803(b)(2)(L) of the BDC Act; see also section 509(a) of Registered CEF Act

(requiring parity of securities offering rules with operating companies for listed registered

CEFs and interval funds).

156

See, e.g., SIFMA Comment Letter; ICI Comment Letter; Invesco Comment Letter; TIAA

Comment Letter.

157

See amended Securities Act rule 172(d); amended Securities Act rule 173(f).

158

See, Proposing Release, supra footnote 10 at section II.E.1; see also Securities Act rule

134; Securities Act rule 168; Securities Act rule 156; Securities Act rule 163; Securities

Act rule 163A; Securities Act rule 164; Securities Act rule 168; Securities Act rule 169;

and Securities Act rule 433.

Securities Act, which restrict the types of offering communications that issuers or other

parties subject to the Act’s provisions may use in connection with a registered public

offering. 159 The gun-jumping provisions were designed to make the statutorily mandated

prospectus the primary means for investors to obtain information regarding a registered

securities offering. 160 Accordingly, the statute provides that unless otherwise permitted:

•

Before an issuer files a registration statement, all offers, in whatever form, are

prohibited; 161

•

After the issuer files a registration statement but before it has become effective,

the only written offers that are permitted are those made using a preliminary

prospectus that meets the requirements of section 10 of the Securities Act, which

must be filed with the Commission; 162 and

159

Unless otherwise noted, offering communications generally refer to written

communications. Rule 405 provides that “[e]xcept as otherwise specifically provided or

the context otherwise requires, a written communication is any communication that is

written, printed, a radio or television broadcast, or a graphic communication as defined in

[rule 405].”

160

See Securities Offering Reform Adopting Release, supra footnote 5, at 44731. But see

section 5(d) of the Securities Act [15 U.S.C. 77e(d)], which permits an emerging growth

company, or any person authorized to act on its behalf, to engage in oral or written

communications with potential investors that are qualified institutional buyers, as defined

in 17 CFR 230.144A (Securities Act rule 144A), or institutions that are accredited

investors, as defined in 17 CFR 230.501(a) (Securities Act rule 501(a)), either prior to or

after the filing of a registration statement, to determine their interest in a contemplated

registered offering. These communications are often referred to as “testing the waters.”

17 CFR 230.163B (Securities Act rule 163B), recently adopted by the Commission,

extends this accommodation to all issuers. Solicitations of Interest Prior to a Registered

Public Offering, Securities Act Release No. 10699 (Sept. 25, 2019) [84 FR 53011 (Oct. 4,

2019)] (“Rule 163B Adopting Release”).

161

See section 5(c) of the Securities Act [15 U.S.C. 77e(c)].

162

This is because after the filing of the registration statement but before its effectiveness,

offers made in writing (including electronically), by radio, or by television are limited to

a “statutory prospectus” that conforms to the information requirements section 10 of the

•

Even after the registration statement is declared effective, offering participants

still may make written offers only through a statutory prospectus, except that they

may use additional written offering materials if a final prospectus that meets the

requirements of Securities Act section 10(a) is sent or given prior to or with those

materials. 163

Since the adoption of the Securities Act, the Commission has recognized that

certain communications before, during, and after the filing of a registration statement do

not raise the investor protection concerns that the gun jumping provisions aim to address.

For this reason, the Commission has adopted several rules to provide clarity to issuers on

the types of communications that are permissible and how to communicate with investors

without violating the gun jumping provisions. We proposed to extend those rules to

affected funds in the Proposing Release. Commenters generally supported the proposed

amendments to the communications rules. 164 Two commenters stated that the

amendments would allow increased flexibility in communications and provide parity with

operating companies. 165 One commenter added that the amendments would make it easier

to execute offerings by affected funds and would decrease costs, leading to lower offering

Securities Act. See sections 5(b)(1) and 10 of the Securities Act [15 U.S.C. 77e(b)(1) and

77(j)].

163

See section 2(a)(10) and section 5(b)(1) of the Securities Act [15 U.S.C. 77b(a)(10) and

77e(b)(1)].

164

See, e.g., SIFMA Comment Letter; Comment Letter of Sidley Austin LLP (June 10,

2019); ICI Comment Letter; ACC Comment Letter; CBD Comment Letter; MFDF

Comment Letter; TIAA Comment Letter.

165

See, e.g., SIFMA Comment Letter; ICI Comment Letter.

costs and potentially enhance capital formation while not negatively impacting investor

protections. 166

The Commission continues to believe that investors and the market will benefit

from access to greater communications under conditions that preserve investor

protections. To implement the BDC Act, and to provide parity for registered CEFs

consistent with the Registered CEF Act, we are extending, as proposed, the

communications rules currently available to operating companies to affected funds by

removing the exclusions for affected funds and making other conforming changes. 167

Specifically, the amended rules will:

•

Permit affected funds to use rule 134 to publish factual information about the

issuer or the offering, including “tombstone ads.” 168

•

Permit affected funds to rely on rule 163A, which provides issuers a bright-line

time period, ending 30 days prior to filing a registration statement, during which

they may communicate without risk of violating the gun-jumping provisions. 169

166

See, e.g., SIFMA Comment Letter.

167

See amended rules 134(g), 163(b)(3), 163A(b)(4), 164(f), 168(d)(3), and 169(d)(4)

(removing references to BDCs and limiting the rules’ exclusion of registered investment

companies from the safe harbor to exclude registered funds other than registered CEFs).

See also amended rule 168 (adding to paragraphs (b)(1) and (2) references to the

Investment Company Act to parallel current references to the Exchange Act to provide

that forward-looking information and factual business information may be included in

materials filed under the Investment Company Act); amended rule 433 (adding to

paragraphs (a)(1)(i) and (iv) references to registration statements filed on Form N-2 under

adopted General Instruction A.2 to parallel current references to Form S-3; adding to

paragraph (c)(1)(ii) a reference to reports filed under section 30 of the Investment

Company Act as reports with which a free-writing prospectus may not conflict). See also

amended rule 156(d); infra footnote 172.

168

See Proposing Release, supra footnote 10, at n.122 (discussing rule 134).

169

See id. at n.123 (discussing rule 163A).

•

Permit affected funds that are reporting companies to rely on rule 168 to publish

or disseminate regularly released factual business information and forwardlooking information at any time, including around the time of a registered

offering. 170 The amendments to rule 169 will also permit affected funds’

continued publication or dissemination of regularly released factual business

information that is intended for use by persons other than in their capacity as

investors or potential investors. 171 We also are adopting amendments to rule 156

to state that nothing in that rule may be construed to prevent an affected fund

from qualifying for an exemption under rule 168 or 169. 172 The contents of any

rule 168 or 169 communication remain subject to the anti-fraud provisions of the

Federal securities laws.

•

Permit affected funds to rely on rules 164 and 433 to use a “free writing

prospectus.” 173

•

Permit affected funds that are WKSIs to engage at any time in oral and written

communications, including use at any time of a free writing prospectus (before or

after a registration statement is filed), subject to the same conditions applicable to

other WKSIs. 174

170

See id. at n.124 (discussing rule 168).

171

Rule 169 is also a safe harbor from the definition of “prospectus” in section 2(a)(10) of

the Securities Act.

172

See amended rule 156(d); section 803(b)(2)(G) of the BDC Act; section 509(a) of

Registered CEF Act.

173

See Proposing Release, supra footnote 10, at n.127 (discussing rules 164 and 433).

174

See id. at n.128 (discussing how communications rules apply to WKSIs).

As we discussed in the Proposing Release, investment company communications

currently are subject to rule 482. 175 Rule 482 communications can only be used by a fund

that is selling or is proposing to sell its securities pursuant to a filed registration

statement, and are prospectuses subject to prospectus liability under section 12 of the

Securities Act. 176 The amendments to the communications rules provide affected funds

with incremental flexibility in their communications, including additional flexibility to

communicate before filing a registration statement, and some additional flexibility in

using communications that are not subject to prospectus liability under section 12 of the

Securities Act. 177 Moreover, as we discussed in the Proposing Release, both the BDC Act

and Registered CEF Act direct the Commission to continue to make available Securities

Act rule 482 communications, or “ads,” notwithstanding the amendments to the

communications rules. 178 Affected funds therefore can now take advantage of additional

flexibility under the communications rules as amended or continue to rely on rule 482

and other rules currently applicable to investment company communications.

In addition to comments on the proposed amendments to the communications

rules, two commenters urged us to adopt rules that would extend the safe harbors for

175

See id. at section II.E.1.

176

17 CFR 230.482 (Securities Act rule 482); see also 17 CFR 230.497(i) (Securities Act

rule 497).

177

See Proposing Release, supra footnote 10, at section II.E.1.

178

See id. at text following n.128; see also sections 803(e)(2) of the BDC Act (prohibiting

the Commission from interpreting the amendments directed by the BDC Act in a manner

that would prevent BDCs from distributing sales material pursuant to rule 482 under the

Securities Act ); and 509(c)(1) of the Registered CEF Act (prohibiting the Commission

from interpreting the amendments directed by the Registered CEF Act to impair or limit

in any way a registered closed-end company from using rule 482 communications, under

the Investment Company Act, to distribute sales material).

liability in private actions for certain forward looking statements under section 27A of the

Securities Act and section 21E of the Exchange Act to affected funds. 179 Those

commenters did not specify what the conditions or requirements of such a rule might be,

and the public has not had the opportunity to comment on whether or how to extend safe

harbors for forward-looking statements to affected funds. For these reasons, we believe

commenters’ request requires more extensive consideration beyond the scope of this

rulemaking.

Broker-Dealer Research Reports

We are adopting the amendments to Securities Act rule 138 as proposed. Rule 138

permits a broker-dealer participating in the registered offering of an eligible issuer’s

common stock and similar securities to publish or distribute research reports about that

issuer’s fixed income securities, and vice versa, if it publishes or distributes that research

in the regular course of its business.

Although rule 138 does not currently exclude affected funds from coverage, it

does include references to Form S-3 but not Form N-2. We therefore proposed to amend

the rule’s references to shelf registration statements filed on Form S-3 to include a

parallel reference to a registration statement filed on Form N-2 under the proposed shortform registration instruction. Rule 138 also currently provides that an issuer covered in a

research report published in reliance on the rule must be required to file reports, and must

have filed all periodic reports required during the preceding 12 months (or such shorter

179

See Dechert Comment Letter; IPA Comment Letter; see also sections 27A(b)(2)(B) and

27A(g) of the Securities Act [15 U.S.C. 77z-2(b)(2)(B) and 15 U.S.C. 77z-2(g)] and

sections 21E(b)(2)(B) and 21E(g) of the Exchange Act [15 U.S.C. 78u-5(b)(2)(B) and 15

U.S.C. 78u-5(g)].

time that the issuer was required to file such reports), on Forms 10-K and 10-Q. 180

Because registered CEFs do not file the periodic reports currently specified in rule 138,

we proposed to include parallel references to the reports that registered CEFs are required

to file, i.e., reports on Forms N-CSR, N-Q, N-CEN, and N-PORT. 181 We did not receive

any comments on these amendments and are adopting them as proposed.

We are not adopting changes to 17 CFR 230.139 (rule 139). 182 That rule provides

a safe harbor for a broker-dealer’s publication or distribution of research reports where

the broker-dealer is participating in the registered offering of the issuer’s securities and,

unlike rule 138, permits the research report to cover any class of the issuer’s securities.

As we stated in the Proposing Release, in 2018 the Commission adopted new 17

CFR 230.139b (Securities Act rule 139b) to implement the Fair Access to Investment

Research Act of 2017 (the “FAIR Act”). 183 The FAIR Act directed that the Commission

extend rule 139 to cover broker-dealers’ publication or distribution of “covered

investment fund research reports.” These include research reports about affected funds. 184

Rule 139b includes specific provisions mandated by Congress for covered

investment fund research reports. For example, rule 139b excludes from the rule’s safe

180

See 17 CFR 230.138(a)(2)(i) (Securities Act rule 138(a)(2)(i)).

181

See supra section II.B.3.a (Form N-Q will be rescinded on May 1, 2020).

182

See Proposing Release, supra footnote 10, at section II.E.2.

183

See Fair Access to Investment Research Act of 2017, Pub. L. 115-66, 131 Stat. 1196

(2017); see also Covered Investment Fund Research Reports Adopting Release, supra

footnote 101.

184

17 CFR 230.139b; see also Covered Investment Fund Research Reports Adopting

Release, supra footnote 101, at 64183 (providing that under rule 139b, the term “covered

investment fund” includes, among other things, registered investment companies and

BDCs).

harbor research reports published or distributed by the covered investment fund itself,

any affiliate of the covered investment fund, or any broker-dealer that is an investment

adviser (or an affiliated person of an investment adviser) for the covered investment

fund. 185 The Commission did not propose changes to rule 139 because it believed that

rule 139b satisfies the directives of the BDC Act and Registered CEF Act by extending

rule 139’s safe harbor to research reports on BDCs and registered CEFs and is consistent

with Congress’s core objective regarding research reports covering these funds. 186 The

Commission observed that, if it were to amend rule 139 to cover research reports on

BDCs, or on affected funds generally, exactly the same conduct would be subject to

different standards based on the rule a broker-dealer chose to use. 187 The Commission

believed that it would be more appropriate to provide a consistent approach for affected

fund research reports under rule 139b. 188

One commenter suggested that we amend rule 139 and repeal rule 139b, in order

to provide the same requirements for broker-dealer research reports on affected funds and

operating companies. 189 The commenter raised concerns regarding differences between

these two rules’ requirements, such as rule 139b’s “affiliate exclusion.” That provision

makes rule 139b’s safe harbor inapplicable to research reports by a broker-dealer that is

185

See Covered Investment Fund Research Reports Adopting Release, supra footnote 101 at

sections II.A.1 and II.E.2; see also section 2(f)(3) of the FAIR Act.

186

See Covered Investment Fund Research Reports Adopting Release, supra footnote 101,

at nn.144-145 and accompanying paragraph.

187

Id.

188

Id.

189

See ABA Comment Letter.

an investment adviser (or an affiliated person of an investment adviser) to the covered

investment fund.

We acknowledged the differences between rule 139b and rule 139 in the

Proposing Release. Indeed, the different requirements in rule 139b—which were

mandated by Congress in the FAIR Act—are why we did not propose amendments to

rule 139. We continue to believe that rule 139b already satisfies the directives of the BDC

Act and Registered CEF Act by extending rule 139’s safe harbor to research reports on

BDCs and registered CEFs and is consistent with Congress’s core objective regarding

research reports covering these funds. If we were to amend rule 139 and rescind rule

139b as urged by this commenter, this would not give effect to Congress’s more specific

directives in the FAIR Act. Moreover, rule 139b, as directed by the FAIR Act, provides a

consistent framework for research reports on “covered investment funds,” which are not

limited to the affected funds covered in this rulemaking. Maintaining rule 139b therefore

provides a consistent approach for all “covered investment fund research reports.”

Other Rule Amendments

Rule 418 Supplemental Information

As proposed, we are adopting amendments to rule 418 to exempt affected funds

that are eligible to file a short-form registration statement on Form N-2 from the

requirement to furnish certain supplemental information to the Commission or staff on

request under paragraph (a)(3) of the rule. As discussed in the Proposing Release,

operating companies that are eligible to use Form S-3 are already exempt from having to

furnish certain information under rule 418(a)(3). 190 Commenters did not address the

amendments to rule 418, which we proposed to implement the BDC Act and to provide

parity for registered CEFs consistent with the Registered CEF Act. 191 Consistent with the

proposal, affected funds that are eligible to file a short-form registration statement on

Form N-2 will not be required to furnish, on request, recent engineering, management, or

similar reports or memoranda relating to broad aspects of the business, operations, or

products of the registrant under amended rule 418(a)(3). 192

Amendments to Incorporation by Reference into Proxy Statements

We are adopting amendments to Schedule 14A under the Exchange Act as

proposed, consistent with the BDC Act and the Registered CEF Act. 193 We did not

receive comments on the proposed amendments to Schedule 14A. The amendments will

allow affected funds that meet the requirements of the short-form registration instruction

in Form N-2, as further described in Note E to Schedule 14A, to incorporate certain

information by reference to previously-filed documents for proxy statements containing

specific proposals under Item 13 of Schedule 14A. 194 The amendments allow eligible

funds to incorporate by reference certain required information for relevant proxy

190

See Proposing Release, supra footnote 10, at text accompanying n.147.

191

See section 803(b)(2)(M) of the BDC Act.

192

See Proposing Release, supra footnote 10, at n.148.

193

Section 803(b)(2)(N) of the BDC Act (directing us to amend Item 13(b)(1) of Schedule

14A to include as an issuer to which Item 13(b)(1) applies a BDC that would otherwise

meet the requirements of Note E of the Schedule); section 509(a) of the Registered CEF

Act (requiring us to provide certain registered CEFs with the same flexibility under the

proxy rules, subject to appropriate conditions, as is available to other issuers required to

file reports under section 13 or section 15(d) of the Exchange Act).

194

Item 13 applies to proxy statements seeking security holder approval to authorize, issue,

modify, or exchange securities as described in Items 11 or 12 of Schedule 14A.

proposals to the same extent that operating companies meeting the requirements of Form

S-3 (as defined in Note E to Schedule 14A) may use incorporation by reference under the

same circumstances. 195

Rule 103 of Regulation FD

We are adopting amendments to rule 103(a) of Regulation FD, as proposed, to

provide that an affected fund’s failure to make a public disclosure required solely by rule

100 of Regulation FD will not affect the fund’s eligibility under the short-form

registration instruction of Form N-2. 196 We did not receive comments on the proposed

amendments to rule 103(a). The final amendments to rule 103(a) will enhance parity

between affected funds and operating companies, consistent with the BDC Act and the

Registered CEF Act, as rule 103(a) already provides that an operating company’s failure

to make a public disclosure required solely by rule 100 of Regulation FD will not affect

its eligibility to use Form S-3. 197

195

The proposed definition in Note E of Schedule 14A of an affected fund that “meets the

requirements of General Instruction A.2 of Form N-2” included certain conditions

relating to the transaction requirements in General Instruction I.B or I.C of Form S-3,

consistent with the conditions in the definition in Note E of an operating company that

“meets the requirements of Form S-3.” We are adopting the definition in Note E as

proposed to provide parity between affected funds and operating companies although, as

discussed in the Proposing Release, we believe these conditions are less likely to be

relevant to affected funds. See Proposing Release, supra footnote 10, at n.152.

196

Rule 100 of Regulation FD generally requires an issuer to make either simultaneous or

prompt public disclosure of any material nonpublic information regarding the issuer or its

securities that the issuer or a person acting on its behalf has selectively disclosed to

certain parties. See 17 CFR 243.100 (requiring simultaneous public disclosure in the case

of an intentional selective disclosure or prompt public disclosure in the case of a nonintentional selective disclosure).

197

See section 803(b)(2)(O) of the BDC Act; 17 CFR 243.103(a) (rule 103(a) of Regulation

FD).

New Registration Fee Payment Method for Interval Funds and

Issuers of Certain Exchange-Traded Products

We are adopting a modernized approach to registration fee payment that will

require interval funds to pay securities registration fees using the same method that

mutual funds and ETFs use today. 198 Specifically, for interval funds, the final rule will

provide that such funds register an indefinite amount of securities upon their registration

statements’ effectiveness. 199 Like mutual funds and ETFs, interval funds will be required

to pay registration fees based on their net issuance of shares, no later than 90 days after

the funds’ fiscal year ends. 200 These issuers will be required to file information about the

computation of this registration fee and other information on Form 24F-2 under the

198

In general, issuers today—including interval funds—are required under the Securities Act

to pay a registration fee to the Commission at the time of filing a registration statement.

See sections 6(b)(1) (requiring applicants to pay a fee to the Commission at the time of

filing a registration statement) and (c) (providing that a registration statement shall not be

deemed to have taken place without payment of a registration fee) of the Securities Act

[15 U.S.C. 77f(b)(1)]. This means that they pay registration fees at the time they register

the offering of securities, regardless of when (or if) they sell them. WKSIs using

automatic shelf registration statements have additional flexibility to pay filing fees at or

prior to the time of a securities offering. See supra footnote 78; see also Securities

Offering Reform Adopting Release, supra footnote 5, at 44780. This arrangement is

commonly known as “pay-as-you-go.” Id. As a result, these filers may defer payment

until a future takedown of shares off a shelf registration statement. Affected funds that

become WKSIs as a result of our final rule will also gain that flexibility, but other

affected funds will not. See supra section II.C.

199

The final rule applies to interval funds the same treatment provided by rule 24f-2 to openend funds and UITs. See amended rule 23c-3(e) (providing that an interval fund would be

deemed to have registered an indefinite amount of securities under section 24(f) upon the

effective date of its registration statement); see also amended rule 24f-2 (providing for

interval funds to pay their registration fees on the same annual net basis as mutual funds,

other open-end funds, and UITs). See section 4(e) of the Exchange Act [15 U.S.C. 78d4(e)]; section 28 of the Securities Act [15 U.S.C. 77z-3)].

200

See section 24(f)(2) of the Investment Company Act [15 U.S.C. 80a-24(f)(2)].

Specifically, mutual funds and ETFs currently are required to pay fees on a net basis,

based upon the sales price for securities sold during the fiscal year and reduced based on

the price of shares redeemed or repurchased that year.

Investment Company Act when paying the fee. 201 In response to comments that we

received, we also are extending similar treatment to certain ETPs that are not registered

under the Investment Company Act.

We proposed to amend rules 23c-3 and 24f-2 so that interval funds would pay

registration fees on this same annual net basis. 202 The commenters who addressed this

aspect of the proposal supported it. 203 Two commenters suggested expanding the scope of

this aspect of our proposal to include additional types of issuers. 204 One commenter

recommended extending the scope of the provision to “all other funds” to confer the same

benefits to those additional funds, such as eliminating the need to predict the number of

shares the fund expects to sell. 205 Another commenter suggested extending the scope to

“tender offer funds”—those that make repurchase offers but that are not, like interval

funds, required to periodically repurchase shares or to have a fundamental policy

regarding its repurchase offers that can be changed only by a shareholder vote. 206 We are

adopting this provision as proposed. Of the categories of investment companies

contemplated by commenters, only interval funds routinely repurchase shares at NAV

and are required to periodically offer to repurchase their shares, making these funds more

like mutual funds and ETFs, which are required to use this method.

201

17 CFR 274.24.

202

Proposing Release, supra footnote 10, at section II.G (discussing how and why interval

funds are currently not permitted to pay registration fees on an annual net basis).

203

ICI Comment Letter; Invesco Comment Letter. No commenter expressed opposition to

the proposed provision.

204

ABA Comment Letter; ICI Comment Letter.

205

ICI Comment Letter.

206

ABA Comment Letter.

In response to a request for comment in the Proposing Release, a number of

commenters also recommended that certain ETPs that are not registered under the

Investment Company Act be permitted to register offerings of an indefinite number of

securities and pay registration fees in a manner equivalent to that under rule 24f-2. 207

These commenters stated that these ETPs operate in a manner substantially similar to that

of ETFs and would similarly benefit from paying registration fees on an annual net basis

and from registering offerings of an indefinite number of securities. 208 Some of these

commenters also noted that the attributes cited in the Proposing Release for extending the

ability to pay registration fees on an annual net basis to interval funds (routine

repurchases of shares at NAV and avoiding the possibility that an interval fund would

inadvertently sell more shares than it had registered) would also apply to these ETPs. 209

After considering these comments, we have determined to adopt amendments to

enable certain ETPs that are not registered under the Investment Company Act to elect to

207

GraniteShares Comment Letter; Invesco Comment Letter; ProShares Comment Letter;

Comment Letter of State Street Global Advisors (June 21, 2019) (“SSGA Comment

Letter”); USCF Comment Letter; WGC Comment Letter; Comment Letter of Morgan,

Lewis & Bockius LLP (Jan. 15, 2020).

208

Invesco Comment Letter (stating that the provision would assist ETPs); ProShares

Comment Letter (same); SSGA Comment Letter (same); GraniteShares Comment Letter

(stating that the provision would assist ETPs, and would eliminate a competitive

difference between ETPs and mutual funds); USCF Comment Letter (stating that the

provision would provide ETPs with cost savings and efficiencies that would benefit

investors); WGC Comment Letter (same). One commenter noted that the securities of

these ETPs are issued and redeemed in large blocks called “creation units” through either

in-kind transactions with brokerage firms and institutional investors or on a cash basis

when the ETPs invest in futures contracts and other investments that cannot be

transferred in-kind. GraniteShares Comment Letter.

209

USCF Comment Letter; SSGA Comment Letter; WGC Comment Letter.

for such an offering in a manner equivalent to that for mutual funds and ETFs (i.e., in

arrears on an annual net basis). In view of the concerns raised by commenters as well as

the similarities between these ETPs and ETFs, we agree that it is appropriate to extend

the availability of this treatment to these ETPs under the Securities Act. Accordingly,

issuers that offer exchange-traded vehicle securities, as the term will now be defined in

amended rule 405,210 will be eligible under new Securities Act rule 456(d) to elect to

pay registration fees for such an offering on an annual net basis no later than 90 days

after the end of the fiscal year when making this election. We are also adopting Securities

Act rule 457(u), which sets forth the calculation method for paying registration fees in

this manner and is consistent with the fee calculation provisions of Form 24F-2. 211

Finally, we are adopting rule 424(i) pursuant to which issuers that elect to register an

offering of an indeterminate amount of securities pursuant to rule 456(d) will be required

to file a prospectus supplement when paying registration fees on an annual net basis. 212

Disclosure and Reporting Parity Proposals

We are adopting amendments to our rules and forms, substantially as proposed,

intended to tailor the disclosure and regulatory framework for affected funds in light of

210

We believe that the scope of this definition properly limits the availability of this

treatment to offerings of securities that share substantially similar attributes with those

issued by ETFs, such as being listed on a national securities exchange and routine

purchases and redemptions of the securities in “creation units” at NAV. The reference to

“ratable share” in the definition encompasses repurchases or redemptions of securities

that occur at NAV on an in-kind basis or cash basis.

211

We are amending a number of Securities Act registration statement forms (Forms S-1,

S-3, F-1 and F-3) to provide that an issuer may elect to register an indeterminate amount

of exchange-traded vehicle securities on these registration statement forms.

212

Rule 424(i) also includes certain disclosure requirements modeled after Form 24F-2.

our amendments to the offering rules. Many of these amendments are not required by the

BDC Act or the Registered CEF Act, but we believe are consistent with the respective

Acts’ requirements to increase regulatory parity of affected funds with otherwise

similarly-situated issuers. 213 As discussed in detail below, these amendments include

structured data requirements; new annual reporting requirements; amendments to provide

all affected funds additional flexibility to incorporate information by reference; and

enhancements to the disclosures that registered CEFs make to investors when the funds

are not updating their registration statements.

Structured Data Requirements

We are adopting, substantially as proposed, certain new structure

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