II 115th CONGRESS 2d Session S. 2324 IN THE SENATE OF THE UNITED STATES January 18, 2018 Mr. Heller (for himself and Mr. Manchin ) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Investment Company Act of 1940 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. Short title This Act may be cited as the Small Business Credit Availability Act . 2. Expanding access to capital for business development companies (a) In general Section 61(a) of the Investment Company Act of 1940 ( 15 U.S.C. 80a–60(a) ) is amended— (1) by redesignating paragraphs (2) through (4) as paragraphs (3) through (5), respectively; and (2) by striking paragraph (1) and inserting the following: (1) Except as provided in paragraph (2), the asset coverage requirements of subparagraphs (A) and (B) of section 18(a)(1) (and any related rule promulgated under this Act) applicable to business development companies shall be 200 percent. (2) The asset coverage requirements of subparagraphs (A) and (B) of section 18(a)(1) and of subparagraphs (A) and (B) of section 18(a)(2) (and any related rule promulgated under this Act) applicable to a business development company shall be 150 percent if— (A) not later than 5 business days after the date on which those asset coverage requirements are approved under subparagraph (D) of this paragraph, the business development company discloses that the requirements were approved, and the effective date of the approval, in— (i) any filing submitted to the Commission under section 13(a) or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) ; 78o(d)); and (ii) a notice on the website of the business development company; (B) the business development company discloses, in each periodic filing required under section 13(a) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) )— (i) the aggregate outstanding principal amount or liquidation preference, as applicable, of the senior securities issued by the business development company and the asset coverage percentage as of the date of the business development company’s most recent financial statements included in that filing; (ii) that the business development company, under subparagraph (D), has approved the asset coverage requirements under this paragraph; and (iii) the effective date of the approval described in clause (ii); (C) with respect to a business development company that is an issuer of common equity securities, each periodic filing of the company required under section 13(a) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) ) includes disclosures that are reasonably designed to ensure that shareholders are informed of— (i) the amount of senior securities (and the associated asset coverage ratios) of the company, determined as of the date of the most recent financial statements of the company included in that filing; and (ii) the principal risk factors associated with the senior securities described in clause (i), to the extent that risk is incurred by the company; and (D) the company— (i) (I) through a vote of the required majority (as defined in section 57(o)), approves the application of this paragraph to the company, to become effective on the date that is 1 year after the date of the approval; or (II) obtains, at a special or annual meeting of shareholders or partners at which a quorum is present, the approval of more than 50 percent of the votes cast for the application of this paragraph to the company, to become effective on the first day after the date of the approval; and (ii) if the company is not an issuer of common equity securities that are listed on a national securities exchange, extends, to each person that is a shareholder as of the date of an approval described in subclause (I) or (II) of clause (i), as applicable, the opportunity (which may include a tender offer) to sell the securities held by that shareholder as of that applicable approval date, with 25 percent of those securities to be repurchased in each of the 4 calendar quarters following the calendar quarter in which that applicable approval date takes place. . (b) Conforming amendments (1) Investment Advisers Act of 1940 Section 205(b)(3) of the Investment Advisers Act of 1940 ( 15 U.S.C. 80b–5(b)(3) ) is amended— (A) by striking section 61(a)(3)(B)(iii) and inserting section 61(a)(4)(B)(iii) ; and (B) by striking section 61(a)(3)(B) and inserting section 61(a)(4)(B) . (2) Investment Company Act of 1940 The Investment Company Act of 1940 ( 15 U.S.C. 80a–1 et seq.) is amended— (A) in section 57 ( 15 U.S.C. 80a–56 )— (i) in subsection (j)(1), by striking section 61(a)(3)(B) and inserting section 61(a)(4)(B) ; and (ii) in subsection (n)(2), by striking section 61(a)(3)(B) and inserting section 61(a)(4)(B) ; and (B) in section 63(3) ( 15 U.S.C. 80a–62(3) ), by striking section 61(a)(3) and inserting section 61(a)(4) . 3. Parity for business development companies regarding offering and proxy rules (a) Definitions In this section— (1) the term business development company has the meaning given the term in section 2(a) of the Investment Company Act of 1940 ( 15 U.S.C. 80a–2(a) ); (2) the term Commission means the Securities and Exchange Commission; (3) the term Form N–2 means the form described in section 239.14 of title 17, Code of Federal Regulations; (4) the term Form S–3 means the form described in section 239.13 of title 17, Code of Federal Regulations; and (5) the term Schedule 14A means the information required under section 240.14a–101 of title 17, Code of Federal Regulations. (b) Revision to rules (1) In general Not later than 1 year after the date of enactment of this Act, the Commission shall make the revisions described in paragraph (2) to allow a business development company that has filed an election under section 54 of the Investment Company Act of 1940 ( 15 U.S.C. 80a–53 ) to use the securities offering and proxy rules that are available to other issuers that are required to file reports under section 13(a) or section 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) ; 78o(d)). (2) Required revisions The revisions described in this paragraph are revisions to— (A) section 230.405 of title 17, Code of Federal Regulations— (i) to remove the exclusion of a business development company from the definition of the term well-known seasoned issuer under that section; and (ii) to add a registration statement filed on Form N–2 to the definition of the term automatic shelf registration statement under that section; (B) sections 230.168 and 230.169 of title 17, Code of Federal Regulations, to remove the exclusion of a business development company from an issuer that is eligible for the exemptions under those sections; (C) section 230.163 of title 17, Code of Federal Regulations, to remove a business development company from the list of issuers that are ineligible for the exemption under that section; (D) section 230.163A of title 17, Code of Federal Regulations, to remove the communications made by a business development company from the list of communications that are ineligible for the exemption under that section; (E) section 230.134 of title 17, Code of Federal Regulations, to remove the exclusion of a communication relating to a business development company from the application of that section; (F) sections 230.138 and 230.139 of title 17, Code of Federal Regulations, to specifically include a business development company as an issuer to which those sections apply; (G) section 230.156 of title 17, Code of Federal Regulations, to provide that nothing in that section may be construed to prevent a business development company from qualifying for an exemption under section 230.168 or 230.169 of title 17, Code of Federal Regulations, as amended by the Commission in accordance with the requirements of this section; (H) section 230.164 of title 17, Code of Federal Regulations, to remove a business development company from the list of issuers that are excluded under that section; (I) section 230.433 of title 17, Code of Federal Regulations, to specifically include a business development company that is a well-known seasoned issuer as an issuer to which that section applies; (J) section 230.415 of title 17, Code of Federal Regulations to state that the registration for securities under section 230.415(a)(1)(x) of title 17, Code of Federal Regulations, includes securities registered on Form N–2 by a business development company that would otherwise meet the eligibility requirements of Form S–3; (K) section 230.497 of title 17, Code of Federal Regulations, to include a process for a business development company to file a form of prospectus in the same manner as the process for filing a form of prospectus under section 230.424(b) of title 17, Code of Federal Regulations; (L) sections 230.172 and 230.173 of title 17, Code of Federal Regulations, to remove the exclusion of an offering of a business development company from the application of those sections; (M) section 230.418 of title 17, Code of Federal Regulations, to provide that a business development company that would otherwise meet the eligibility requirements of Form S–3 shall be exempt from paragraph (a)(3) of that section; (N) Schedule 14A to revise item 13(b)(1) of that Schedule to include a business development company that would otherwise meet the requirements of note E of that Schedule as an issuer to which that item applies; (O) section 243.103 of title 17, Code of Federal Regulations, to provide that paragraph (a) of that section applies for the purposes of Form N–2; and (P) item 34 on Form N–2 to require a business development company to provide undertakings that are no more restrictive than the undertakings that are required of a registrant under section 229.512 of title 17, Code of Federal Regulations. (c) Revision to form N–2 Not later than 1 year after the date of enactment of this Act, the Commission shall revise Form N–2— (1) to include an item or instruction that is similar to item 12 on Form S–3 to provide that a business development company that would otherwise meet the requirements of Form S–3 shall incorporate by reference the reports and documents filed by the business development company under the Securities Exchange Act of 1934 ( 15 U.S.C. 78a et seq.) into the registration statement of the business development company filed on Form N–2; and (2) to include an item or instruction that is similar to the instruction regarding automatic shelf offerings by well-known seasoned issuers on Form S–3 to provide that a business development company that is a well-known seasoned issuer may file automatic shelf offerings on Form N–2. (d) Treatment if revisions not completed in timely manner If the Commission fails to complete the revisions required under subsections (b) and (c) by the dates described in those subsections, a business development company, during the period beginning on the date that is 1 day after 1 year after the date of enactment of this Act and ending on the date that the Commission completes those revisions, may deem those revisions to have been completed in accordance with the actions required to be taken by the Commission under those subsections. (e) Rules of construction (1) Treatment of successor regulations and forms Any reference in this section to a regulation or form shall be construed as a reference to— (A) that regulation or form, as in effect on the day before the date of enactment of this Act; or (B) any successor to that regulation or form. (2) Distribution of sales material Nothing in this section, or in the amendments made pursuant to the requirements of this section, may be construed to prevent a business development company from distributing sales material under section 230.482 of title 17, Code of Federal Regulations.