IB 

Union Calendar No. 388 

114TH CONGRESS 

2D SESSION H. R. 3868 

[Report No. 114–508] 

To amend the Investment Company Act of 1940 to remove certain restrictions 

on the ability of business development companies to own securities of 

investment advisers and certain financial companies, to change certain 

requirements relating to the capital structure of business development 

companies, to direct the Securities and Exchange Commission to revise 

certain rules relating to business development companies, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 2, 2015 

Mr. MULVANEY introduced the following bill; which was referred to the 

Committee on Financial Services 

APRIL 19, 2016 

Additional sponsors: Mr. STIVERS, Mr. SHERMAN, Mr. SCHWEIKERT, Mr. 

PITTENGER, Mr. KILDEE, and Mr. DOLD

APRIL 19, 2016 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on November 2, 2015] 


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A BILL 

To amend the Investment Company Act of 1940 to remove 

certain restrictions on the ability of business development 

companies to own securities of investment advisers and 

certain financial companies, to change certain requirements relating to the capital structure of business development companies, to direct the Securities and Exchange 

Commission to revise certain rules relating to business 

development companies, and for other purposes. 


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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Credit 

5 Availability Act’’. 

6 SEC. 2. BUSINESS DEVELOPMENT COMPANY OWNERSHIP 

7 OF SECURITIES OF INVESTMENT ADVISERS 

8 AND CERTAIN FINANCIAL COMPANIES. 

9 (a) IN GENERAL.— 

10 (1) IN GENERAL.—Not later than 1 year after 

11 the date of enactment of this Act, the Securities and 

12 Exchange Commission shall promulgate regulations to 

13 codify the order in Investment Company Act Release 

14 No. 30024, dated March 30, 2012. If the Commission 

15 fails to complete the regulations as required by this 

16 subsection, a business development company shall be 

17 entitled to treat such regulations as having been com18 pleted in accordance with the actions required to be 

19 taken by the Commission until such time as such reg20 ulations are completed by the Commission. 

21 (2) RULE OF CONSTRUCTION.—Nothing in this 

22 subsection shall prevent the Commission from issuing 

23 rules to address potential conflicts of interest between 

24 business development companies and investment ad25 visers. 


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1 (b) PERMISSIBLE ASSETS OF AN ELIGIBLE PORTFOLIO

2 COMPANY.—Section 55 of the Investment Company Act of 

3 1940 (15 U.S.C. 80a–54) is amended by adding at the end 

4 the following: 

5 ‘‘(c) SECURITIES DEEMED TO BE PERMISSIBLE AS6 SETS.—Notwithstanding subsection (a), securities that 

7 would be described in paragraphs (1) through (6) of such 

8 subsection except that the issuer is a company described in 

9 paragraph (2), (3), (4), (5), (6), or (9) of section 3(c) may 

10 be deemed to be assets described in paragraphs (1) through 

11 (6) of subsection (a) to the extent necessary for the sum of 

12 the assets to equal 70 percent of the value of a business de13 velopment company’s total assets (other than assets de14 scribed in paragraph (7) of subsection (a)), provided that 

15 the aggregate value of such securities counting toward such 

16 70 percent shall not exceed 20 percent of the value of the 

17 business development company’s total assets.’’. 

18 SEC. 3. EXPANDING ACCESS TO CAPITAL FOR BUSINESS DE19 VELOPMENT COMPANIES. 

20 (a) IN GENERAL.—Section 61(a) of the Investment 

21 Company Act of 1940 (15 U.S.C. 80a–60(a)) is amended— 

22 (1) by redesignating paragraphs (2) through (4) 

23 as paragraphs (3) through (5), respectively; 

24 (2) by striking paragraph (1) and inserting the 

25 following: 


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1 ‘‘(1) Except as provided in paragraph (2), the 

2 asset coverage requirements of subparagraphs (A) and 

3 (B) of section 18(a)(1) (and any related rule promul4 gated under this Act) applicable to business develop5 ment companies shall be 200 percent. 

6 ‘‘(2) The asset coverage requirements of subpara7 graphs (A) and (B) of section 18(a)(1) and of sub8 paragraphs (A) and (B) of section 18(a)(2) (and any 

9 related rule promulgated under this Act) applicable to 

10 a business development company shall be 150 percent 

11 if— 

12 ‘‘(A) within five business days of the ap13 proval of the adoption of the asset coverage re14 quirements described in clause (ii), the business 

15 development company discloses such approval 

16 and the date of its effectiveness in a Form 8–K 

17 filed with the Commission and in a notice on its 

18 website and discloses in its periodic filings made 

19 under section 13 of the Securities Exchange Act 

20 of 1934 (15 U.S.C. 78m)— 

21 ‘‘(i) the aggregate value of the senior 

22 securities issued by such company and the 

23 asset coverage percentage as of the date of 

24 such company’s most recent financial state25 ments; and 


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1 ‘‘(ii) that such company has adopted 

2 the asset coverage requirements of this sub3 paragraph and the effective date of such re4 quirements; 

5 ‘‘(B) with respect to a business development 

6 company that issues equity securities that are 

7 registered on a national securities exchange, the 

8 periodic filings of the company under section 

9 13(a) of the Securities Exchange Act of 1934 (15 

10 U.S.C. 78m) include disclosures reasonably de11 signed to ensure that shareholders are informed 

12 of— 

13 ‘‘(i) the amount of indebtedness and 

14 asset coverage ratio of the company, deter15 mined as of the date of the financial state16 ments of the company dated on or most re17 cently before the date of such filing; and 

18 ‘‘(ii) the principal risk factors associ19 ated with such indebtedness, to the extent 

20 such risk is incurred by the company; and 

21 ‘‘(C)(i) the application of this paragraph to 

22 the company is approved by the required major23 ity (as defined in section 57(o)) of the directors 

24 of or general partners of such company who are 

25 not interested persons of the business developVerDate Sep 11 2014 21:11 Apr 19, 2016 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H3868.RH H3868

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1 ment company, which application shall become 

2 effective on the date that is 1 year after the date 

3 of the approval, and, with respect to a business 

4 development company that issues equity securi5 ties that are not registered on a national securi6 ties exchange, the company extends, to each per7 son who is a shareholder as of the date of the ap8 proval, an offer to repurchase the equity securi9 ties held by such person as of such approval date, 

10 with 25 percent of such securities to be repur11 chased in each of the four quarters following such 

12 approval date; or 

13 ‘‘(ii) the company obtains, at a special or 

14 annual meeting of shareholders or partners at 

15 which a quorum is present, the approval of more 

16 than 50 percent of the votes cast of the applica17 tion of this paragraph to the company, which 

18 application shall become effective on the date im19 mediately after the date of the approval.’’; 

20 (3) in paragraph (3) (as redesignated), by in21 serting ‘‘or which is a stock, provided that all such 

22 stock is issued in accordance with paragraph (6)’’ 

23 after ‘‘indebtedness’’; 

24 (4) in subparagraph (A) of paragraph (4) (as re25 designated)— 


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1 (A) in the matter preceding clause (i), by 

2 striking ‘‘voting’’; and 

3 (B) by amending clause (iii) to read as fol4 lows: 

5 ‘‘(iii) the exercise or conversion price 

6 at the date of issuance of such warrants, op7 tions, or rights is not less than— 

8 ‘‘(I) the market value of the secu9 rities issuable upon the exercise of such 

10 warrants, options, or rights at the date 

11 of issuance of such warrants, options, 

12 or rights; or 

13 ‘‘(II) if no such market value ex14 ists, the net asset value of the securities 

15 issuable upon the exercise of such war16 rants, options, or rights at the date of 

17 issuance of such warrants, options, or 

18 rights; and’’; and 

19 (5) by adding at the end the following: 

20 ‘‘(6)(A) QUALIFIED INSTITUTIONAL BUYER.—Ex21 cept as provided in subparagraph (B), the following 

22 shall not apply to a senior security which is a stock 

23 and which is issued to and held by a qualified insti24 tutional buyer (as defined in section 3(a)(64) of the 

25 Securities Exchange Act of 1934): 


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1 ‘‘(i) Subparagraphs (C) and (D) of section 

2 18(a)(2). 

3 ‘‘(ii) Subparagraph (E) of section 18(a)(2), 

4 to the extent such subparagraph requires any 

5 priority over any other class of stock as to dis6 tribution of assets upon liquidation. 

7 ‘‘(iii) With respect to a senior security 

8 which is a stock, subsections (c) and (i) of sec9 tion 18. 

10 ‘‘(B) INDIVIDUAL INVESTORS WHO ARE NOT

11 QUALIFIED INSTITUTIONAL BUYERS.—Subparagraph 

12 (A) shall not apply with respect to a senior security 

13 which is a stock and which is issued to a person who 

14 is not known by the business development company to 

15 be a qualified institutional buyer (as defined in sec16 tion 3(a) of the Securities Exchange Act of 1934). 

17 ‘‘(7) RULE OF CONSTRUCTION.—Notwithstanding 

18 any other provision of law, any additional class of 

19 stock issued pursuant to this section must be issued 

20 in accordance with all investor protections contained 

21 in all applicable federal securities laws administered 

22 by the Commission.’’. 

23 (b) CONFORMING AMENDMENTS.—The Investment 

24 Company Act of 1940 (15 U.S.C. 80a–1 et seq.) is amend25 ed— 


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1 (1) in section 57— 

2 (A) in subsection (j)(1), by striking ‘‘section 

3 61(a)(3)(B)’’ and inserting ‘‘section 

4 61(a)(4)(B)’’; and 

5 (B) in subsection (n)(2), by striking ‘‘sec6 tion 61(a)(3)(B)’’ and inserting ‘‘section 

7 61(a)(4)(B)’’; and 

8 (2) in section 63(3), by striking ‘‘section 

9 61(a)(3)’’ and inserting ‘‘section 61(a)(4)’’. 

10 SEC. 4. PARITY FOR BUSINESS DEVELOPMENT COMPANIES 

11 REGARDING OFFERING AND PROXY RULES. 

12 (a) REVISION TO RULES.—Not later than 1 year after 

13 the date of enactment of this Act, the Securities and Ex14 change Commission shall revise any rules to the extent nec15 essary to allow a business development company that has 

16 filed an election pursuant to section 54 of the Investment 

17 Company Act of 1940 (15 U.S.C. 80a–53) to use the securi18 ties offering and proxy rules that are available to other 

19 issuers that are required to file reports under section 13 

20 or section 15(d) of the Securities Exchange Act of 1934 (15 

21 U.S.C. 78m; 78o(d)). Any action that the Commission takes 

22 pursuant to this subsection shall include the following: 

23 (1) The Commission shall revise rule 405 under 

24 the Securities Act of 1933 (17 C.F.R. 230.405)— 


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1 (A) to remove the exclusion of a business de2 velopment company from the definition of a 

3 well-known seasoned issuer provided by that rule; 

4 and 

5 (B) to add registration statements filed on 

6 Form N–2 to the definition of automatic shelf 

7 registration statement provided by that rule. 

8 (2) The Commission shall revise rules 168 and 

9 169 under the Securities Act of 1933 (17 C.F.R. 

10 230.168 and 230.169) to remove the exclusion of a 

11 business development company from an issuer that 

12 can use the exemptions provided by those rules. 

13 (3) The Commission shall revise rules 163 and 

14 163A under the Securities Act of 1933 (17 C.F.R. 

15 230.163 and 230.163A) to remove a business develop16 ment company from the list of issuers that are ineli17 gible to use the exemptions provided by those rules. 

18 (4) The Commission shall revise rule 134 under 

19 the Securities Act of 1933 (17 C.F.R. 230.134) to re20 move the exclusion of a business development com21 pany from that rule. 

22 (5) The Commission shall revise rules 138 and 

23 139 under the Securities Act of 1933 (17 C.F.R. 

24 230.138 and 230.139) to specifically include a busiVerDate Sep 11 2014 21:11 Apr 19, 2016 Jkt 059200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H3868.RH H3868

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1 ness development company as an issuer to which those 

2 rules apply. 

3 (6) The Commission shall revise rule 164 under 

4 the Securities Act of 1933 (17 C.F.R. 230.164) to re5 move a business development company from the list 

6 of issuers that are excluded from that rule. 

7 (7) The Commission shall revise rule 433 under 

8 the Securities Act of 1933 (17 C.F.R. 230.433) to spe9 cifically include a business development company that 

10 is a well-known seasoned issuer as an issuer to which 

11 that rule applies. 

12 (8) The Commission shall revise rule 415 under 

13 the Securities Act of 1933 (17 C.F.R. 230.415)— 

14 (A) to state that the registration for securi15 ties provided by that rule includes securities reg16 istered by a business development company on 

17 Form N–2; and 

18 (B) to provide an exception for a business 

19 development company from the requirement that 

20 a Form N–2 registrant must furnish the under21 takings required by item 34.4 of Form N–2. 

22 (9) The Commission shall revise rule 497 under 

23 the Securities Act of 1933 (17 C.F.R. 230.497) to in24 clude a process for a business development company 

25 to file a form of prospectus that is parallel to the 


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1 process for filing a form of prospectus under rule 

2 424(b). 

3 (10) The Commission shall revise rules 172 and 

4 173 under the Securities Act of 1933 (17 C.F.R. 

5 230.172 and 230.173) to remove the exclusion of an 

6 offering of a business development company from 

7 those rules. 

8 (11) The Commission shall revise rule 418 under 

9 the Securities Act of 1933 (17 C.F.R. 230.418) to pro10 vide that a business development company that would 

11 otherwise meet the eligibility requirements of General 

12 Instruction I.A of Form S–3 shall be exempt from 

13 paragraph (a)(3) of that rule. 

14 (12) The Commission shall revise rule 14a–101 

15 under the Securities Exchange Act of 1934 (17 C.F.R. 

16 240.14a–101) to provide that a business development 

17 company that would otherwise meet the requirements 

18 of General Instruction I.A of Form S–3 shall be 

19 deemed to meet the requirements of Form S–3 for 

20 purposes of Schedule 14A. 

21 (13) The Commission shall revise rule 103 under 

22 Regulation FD (17 C.F.R. 243.103) to provide that 

23 paragraph (a) of that rule applies for purposes of 

24 Form N–2. 


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1 (b) REVISION TO FORM N–2.—Not later than 1 year 

2 after the date of enactment of this Act, the Commission shall 

3 revise Form N–2— 

4 (1) to include an item or instruction that is 

5 similar to item 12 on Form S–3 to provide that a 

6 business development company that would otherwise 

7 meet the requirements of Form S–3 shall incorporate 

8 by reference its reports and documents filed under the 

9 Securities Exchange Act of 1934 into its registration 

10 statement filed on Form N–2; and 

11 (2) to include an item or instruction that is 

12 similar to the instruction regarding automatic shelf 

13 offerings by well-known seasoned issuers on Form S– 

14 3 to provide that a business development company 

15 that is a well-known seasoned issuer may file auto16 matic shelf offerings on Form N–2. 

17 (c) TREATMENT IF REVISIONS NOT COMPLETED IN

18 TIMELY MANNER.—If the Commission fails to complete the 

19 revisions required by subsections (a) and (b) by the time 

20 required by such subsections, a business development com21 pany shall be entitled to treat such revisions as having been 

22 completed in accordance with the actions required to be 

23 taken by the Commission by such subsections until such 

24 time as such revisions are completed by the Commission. 


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1 (d) RULE OF CONSTRUCTION.—Any reference in this 

2 section to a rule or form means such rule or form or any 

3 successor rule or form. 


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Union Calendar No. 388 

114TH CONGRESS 

2D SESSION H. R. 3868 

[Report No. 114–508] 

A BILL 

To amend the Investment Company Act of 1940 to 

purposes. business development companies, and for other Commission to revise certain rules relating to companies, to direct the Securities and Exchange the capital structure of business development nies, to change certain requirements relating to investment advisers and certain financial companess development companies to own securities of remove certain restrictions on the ability of busiAPRIL 19, 2016 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


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