IM Guidance Update

September 2013 | No. 2013-07

US Securities and Exchange Commission

 Division of Investment Management

business Development Companies—SEPARATE Financial Statements 

or Summarized Financial Information of Certain Subsidiaries 

Applicability of Regulation S-X Rules 3-09 and 4-08(g) to Business Development 

Companies (BDCs). In reviewing registration statements filed by BDCs, the staff has 

observed that some BDCs that have certain significant subsidiaries do not provide 

separate financial statements or summarized financial information for those subsidiaries as required by Regulation S-X. This written guidance reflects the comments that 

the staff has provided to these BDCs. The bases of the staff’s comments are Regulation 

S-X Rules 3-09 and 4-08(g), which apply to BDCs. Rule 3-09 describes, among other 

things, the circumstances under which separate financial statements of an unconsolidated 

majority-owned subsidiary are required to be filed. Rule 4-08(g) describes, among 

other things, the circumstances under which summarized financial information must be 

presented in the notes to the financial statements for subsidiaries not consolidated.

BDCs register their securities under the Securities Act of 1933 on Form N-2. For purposes 

of Form N-2, “[a] business development company should comply with the provisions of 

Regulation S-X generally applicable to registered management investment companies. 

(See . . . Sections 210.6-01 through 210.6-10 of Regulation S-X . . .).”1

 Under Regulation 

S-X, in turn, “[t]he financial statements filed for persons to which [rules 6-01 to 6-10] are 

applicable shall be prepared in accordance with the . . . special rules [6-01 to 6-10] in 

addition to the general rules [1-01 to 4-10] (Articles 1, 2, 3, and 4). Where the requirements 

of a special rule differ from those prescribed in a general rule, the requirements of the 

special rule shall be met.”2 Rules 3-09 and 4-08(g) apply to BDCs because they are 

general rules and there are no special rules in Rules 6-01 through 6-10 that differ from 

the requirements in Rules 3-09 and 4-08(g) related to whether, and for what periods, 

financial statements and financial information are required to be presented.

Rule 4-08(g) generally requires registrants to present in the notes to their financial 

statements summarized financial information for all unconsolidated subsidiaries when 

any unconsolidated subsidiary, or combination of unconsolidated subsidiaries, meets 

the definition of a “significant subsidiary” in Regulation S-X Rule 1-02(w). If a BDC is 

required to present summarized financial information, the Division generally would not 
object if the BDC presents summarized financial information in the notes to the financial 

statements only for each unconsolidated subsidiary which individually meets the definition of a “significant subsidiary” in Rule 1-02(w) but does not present summarized financial information in the notes to the financial statements for all unconsolidated subsidiaries.

If a BDC believes the application of Rule 3-09 or Rule 4-08(g) results in the presentation 

of either financial statements or summarized financial information of an unconsolidated 

subsidiary that is not necessary to reasonably inform investors, the BDC should contact 

the Division’s Chief Accountant’s Office at 202-551-6918 or imoca@sec.gov.

BDCs are also encouraged to contact the Division’s Chief Accountant’s Office with 

any other questions or concerns about the application of these requirements to their 

particular situations. 

Endnotes

1 Instruction 1.a to Item 8.6.c of Form N-2.

2 Regulation S-X Rule 6-03.

This IM Guidance Update summarizes the views of the Division of Investment Management 

regarding various requirements of the federal securities laws. Future changes in laws or 

regulations may supersede some of the discussion or issues raised herein. This IM Guidance 

Update is not a rule, regulation or statement of the Commission, and the Commission has 

neither approved nor disapproved of this IM Guidance Update.

The Investment Management Division works to:

s protect investors

s promote informed investment decisions and 

s facilitate appropriate innovation in investment products and services 

through regulating the asset management industry.

If you have any questions about this IM Guidance Update, please contact:

Chief Accountant’s Office

Phone: 202.551.6918

Email: IMOCA@sec.gov

IM g u i da n c e up date 2