I 

114TH CONGRESS 

1ST SESSION H. R. 3868 

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 

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. 

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


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1 SECTION 1. SHORT TITLE. 

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

3 Availability Act’’. 

4 SEC. 2. BUSINESS DEVELOPMENT COMPANY OWNERSHIP 

5 OF SECURITIES OF INVESTMENT ADVISERS 

6 AND CERTAIN FINANCIAL COMPANIES. 

7 (a) IN GENERAL.—Not later than 1 year after the 

8 date of enactment of this Act, the Securities and Ex9 change Commission shall promulgate regulations to codify 

10 the order in Investment Company Act Release No. 30024, 

11 dated March 30, 2012. If the Commission fails to com12 plete the regulations as required by this subsection, a busi13 ness development company shall be entitled to treat such 

14 regulations as having been completed in accordance with 

15 the actions required to be taken by the Commission until 

16 such time as such regulations are completed by the Com17 mission. 

18 (b) PERMISSIBLE ASSETS OF AN ELIGIBLE PORT19 FOLIO COMPANY.—Section 55 of the Investment Company 

20 Act of 1940 (15 U.S.C. 80a–54) is amended by adding 

21 at the end the following: 

22 ‘‘(c) SECURITIES DEEMED TO BE PERMISSIBLE AS23 SETS.—Notwithstanding subsection (a), securities that 

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

25 subsection except that the issuer is a company described 

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


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1 may be deemed to be assets described in paragraphs (1) 

2 through (6) of subsection (a) to the extent necessary for 

3 the sum of the assets to equal 70 percent of the value 

4 of a business development company’s total assets (other 

5 than assets described in paragraph (7) of subsection (a)), 

6 provided that the aggregate value of such securities count7 ing toward such 70 percent shall not exceed 20 percent 

8 of the value of the business development company’s total 

9 assets.’’. 

10 SEC. 3. EXPANDING ACCESS TO CAPITAL FOR BUSINESS DE11 VELOPMENT COMPANIES. 

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

13 Company Act of 1940 (15 U.S.C. 80a–60(a)) is amend14 ed— 

15 (1) by redesignating paragraphs (2) through 

16 (4) as paragraphs (3) through (5), respectively; 

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

18 following: 

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

20 asset coverage requirements of subparagraphs (A) 

21 and (B) of section 18(a)(1) (and any related rule 

22 promulgated under this Act) applicable to business 

23 development companies shall be 200 percent. 

24 ‘‘(2) The asset coverage requirements of sub25 paragraphs (A) and (B) of section 18(a)(1) and of 


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1 subparagraphs (A) and (B) of section 18(a)(2) (and 

2 any related rule promulgated under this Act) appli3 cable to a business development company shall be 

4 150 percent if— 

5 ‘‘(A) within five business days of the ap6 proval of the adoption of the asset coverage re7 quirements described in clause (ii), the business 

8 development company discloses such approval 

9 and the date of its effectiveness in a Form 8– 

10 K filed with the Commission and in a notice on 

11 its website and discloses in its periodic filings 

12 made under section 13 of the Securities Ex13 change Act of 1934 (15 U.S.C. 78m)— 

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

15 securities issued by such company and the 

16 asset coverage percentage as of the date of 

17 such company’s most recent financial 

18 statements; and 

19 ‘‘(ii) that such company has adopted 

20 the asset coverage requirements of this 

21 subparagraph and the effective date of 

22 such requirements; 

23 ‘‘(B) with respect to a business develop24 ment company that issues equity securities that 

25 are registered on a national securities exchange, 


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1 the periodic filings of the company under sec2 tion 13(a) of the Securities Exchange Act of 

3 1934 (15 U.S.C. 78m) include disclosures rea4 sonably designed to ensure that shareholders 

5 are informed of— 

6 ‘‘(i) the amount of indebtedness and 

7 asset coverage ratio of the company, deter8 mined as of the date of the financial state9 ments of the company dated on or most re10 cently before the date of such filing; and 

11 ‘‘(ii) the principal risk factors associ12 ated with such indebtedness, to the extent 

13 such risk is incurred by the company; and 

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

15 the company is approved by the required major16 ity (as defined in section 57(o)) of the directors 

17 of or general partners of such company who are 

18 not interested persons of the business develop19 ment company, which application shall become 

20 effective on the date that is 1 year after the 

21 date of the approval, and, with respect to a 

22 business development company that issues eq23 uity securities that are not registered on a na24 tional securities exchange, the company extends, 

25 to each person who is a shareholder as of the 


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1 date of the approval, an offer to repurchase the 

2 equity securities held by such person as of such 

3 approval date, with 25 percent of such securi4 ties to be repurchased in each of the four quar5 ters following such approval date; or 

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

7 annual meeting of shareholders or partners at 

8 which a quorum is present, the approval of 

9 more than 50 percent of the votes cast of the 

10 application of this paragraph to the company, 

11 which application shall become effective on the 

12 date immediately after the date of the ap13 proval.’’; 

14 (3) in paragraph (3) (as redesignated), by in15 serting ‘‘or which is a stock’’ after ‘‘indebtedness’’; 

16 (4) in subparagraph (A) of paragraph (4) (as 

17 redesignated)— 

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

19 striking ‘‘voting’’; and 

20 (B) by amending clause (iii) to read as fol21 lows: 

22 ‘‘(iii) the exercise or conversion price 

23 at the date of issuance of such warrants, 

24 options, or rights is not less than— 


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1 ‘‘(I) the market value of the se2 curities issuable upon the exercise of 

3 such warrants, options, or rights at 

4 the date of issuance of such warrants, 

5 options, or rights; or 

6 ‘‘(II) if no such market value ex7 ists, the net asset value of the securi8 ties issuable upon the exercise of such 

9 warrants, options, or rights at the 

10 date of issuance of such warrants, op11 tions, or rights; and’’; 

12 (5) in paragraph (2), by inserting ‘‘or which is 

13 a stock, provided that all such stock is issued in ac14 cordance with paragraph (6)’’ after ‘‘indebtedness’’; 

15 and 

16 (6) by adding at the end the following: 

17 ‘‘(6)(A) QUALIFIED INSTITUTIONAL BUYER.— 

18 Except as provided in subparagraph (B), the fol19 lowing shall not apply to a senior security which is 

20 a stock and which is issued to and held by a quali21 fied institutional buyer (as defined in section 

22 3(a)(64) of the Securities Exchange Act of 1934): 

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

24 18(a)(2). 


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

2 to the extent such subparagraph requires any 

3 priority over any other class of stock as to dis4 tribution of assets upon liquidation. 

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

6 which is a stock, subsections (c) and (i) of sec7 tion 18. 

8 ‘‘(B) INDIVIDUAL INVESTORS WHO ARE NOT

9 QUALIFIED INSTITUTIONAL BUYERS.—Subparagraph 

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

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

12 is not known by the business development company 

13 to be a qualified institutional buyer (as defined in 

14 section 3(a) of the Securities Exchange Act of 

15 1934). 

16 ‘‘(7) RULE OF CONSTRUCTION.—Notwith17 standing any other provision of law, any additional 

18 class of stock issued pursuant to this section must 

19 be issued in accordance with all investor protections 

20 contained in all applicable federal securities laws ad21 ministered by the Commission.’’. 

22 (b) CONFORMING AMENDMENTS.—The Investment 

23 Company Act of 1940 (15 U.S.C. 80a–1 et seq.) is amend24 ed— 

25 (1) in section 57— 


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1 (A) in subsection (j)(1), by striking ‘‘sec2 tion 61(a)(3)(B)’’ and inserting ‘‘section 

3 61(a)(4)(B)’’; and 

4 (B) in subsection (n)(2), by striking ‘‘sec5 tion 61(a)(3)(B)’’ and inserting ‘‘section 

6 61(a)(4)(B)’’; and 

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

8 61(a)(3)’’ and inserting ‘‘section 61(a)(4)’’. 

9 SEC. 4. PARITY FOR BUSINESS DEVELOPMENT COMPANIES 

10 REGARDING OFFERING AND PROXY RULES. 

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

12 after the date of enactment of this Act, the Securities and 

13 Exchange Commission shall revise any rules to the extent 

14 necessary to allow a business development company that 

15 has filed an election pursuant to section 54 of the Invest16 ment Company Act of 1940 (15 U.S.C. 80a–53) to use 

17 the securities offering and proxy rules that are available 

18 to other issuers that are required to file reports under sec19 tion 13 or section 15(d) of the Securities Exchange Act 

20 of 1934 (15 U.S.C. 78m; 78o(d)). Any action that the 

21 Commission takes pursuant to this subsection shall in22 clude 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 

2 development company from the definition of a 

3 well-known seasoned issuer provided by that 

4 rule; 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 devel16 opment company from the list of issuers that are in17 eligible to use the exemptions provided by those 

18 rules. 

19 (4) The Commission shall revise rule 134 under 

20 the Securities Act of 1933 (17 C.F.R. 230.134) to 

21 remove the exclusion of a business development com22 pany from that rule. 

23 (5) The Commission shall revise rules 138 and 

24 139 under the Securities Act of 1933 (17 C.F.R. 

25 230.138 and 230.139) to specifically include a busiVerDate Sep 11 2014 01:36 Nov 03, 2015 Jkt 059200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3868.IH H3868

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1 ness development company as an issuer to which 

2 those rules apply. 

3 (6) The Commission shall revise rule 164 under 

4 the Securities Act of 1933 (17 C.F.R. 230.164) to 

5 remove a business development company from the 

6 list 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 

9 specifically include a business development company 

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

11 which 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 secu15 rities provided by that rule includes securities 

16 registered by a business development company 

17 on Form N–2; and 

18 (B) to provide an exception for a business 

19 development company from the requirement 

20 that a Form N–2 registrant must furnish the 

21 undertakings required by item 34.4 of Form N– 

22 2. 

23 (9) The Commission shall revise rule 497 under 

24 the Securities Act of 1933 (17 C.F.R. 230.497) to 

25 include a process for a business development comVerDate Sep 11 2014 01:36 Nov 03, 2015 Jkt 059200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H3868.IH H3868

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1 pany to file a form of prospectus that is parallel to 

2 the process for filing a form of prospectus under 

3 rule 424(b). 

4 (10) The Commission shall revise rules 172 and 

5 173 under the Securities Act of 1933 (17 C.F.R. 

6 230.172 and 230.173) to remove the exclusion of an 

7 offering of a business development company from 

8 those rules. 

9 (11) The Commission shall revise rule 418 

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

11 230.418) to provide that a business development 

12 company that would otherwise meet the eligibility re13 quirements of General Instruction I.A of Form S–3 

14 shall be exempt from paragraph (a)(3) of that rule. 

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

16 under the Securities Exchange Act of 1934 (17 

17 C.F.R. 240.14a–101) to provide that a business de18 velopment company that would otherwise meet the 

19 requirements of General Instruction I.A of Form S– 

20 3 shall be deemed to meet the requirements of Form 

21 S–3 for purposes of Schedule 14A. 

22 (13) The Commission shall revise rule 103 

23 under Regulation FD (17 C.F.R. 243.103) to pro24 vide that paragraph (a) of that rule applies for pur25 poses of 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 

3 shall 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 incor8 porate by reference its reports and documents filed 

9 under the Securities Exchange Act of 1934 into its 

10 registration 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 

14 S–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 

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

20 time required by such subsections, a business development 

21 company shall be entitled to treat such revisions as having 

22 been completed in accordance with the actions required to 

23 be 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. 

Æ 


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