COALITION FOR BUSINESS DEVELOPMENT FILES EXEMPTIVE RELIEF APPLICATION ON EXCHANGE-TRADED BDCs

Washington, D.C. (9/4/18) — The Coalition for Business Development (the “Coalition”), a national advocacy group focused on protecting and expanding access to capital for America’s small and mid-sized businesses, submitted today a request to the Securities and Exchange Commission (SEC) to address the inadvertent and harmful consequences resulting from the application of the SEC’s “Acquired Fund Fee and Expense” (AFFE) rule to exchange-traded business development companies (BDCs).  Specifically, the Coalition submitted an application for an exemption for exchange-traded BDCs from the meaning of the term “acquired fund” in the SEC’s Form N-1A, Form N-2, Form N-3, Form N-4 and Form N-6 .

The Coalition, formerly known as the Coalition for Small Business Growth, previously submitted a white paper to the SEC’s staff explaining why the AFFE rule should not include fund investments in exchange-traded BDCs.  The rule results in harm to mutual fund investors and results in a double-counting of BDC operating expenses.  Further, index providers, such as MSCI, Russell and S&P, removed BDCs from the indices primarily as a result of the AFFE.  The removal of BDCs from indices resulted in a dramatic reduction in institutional ownership in BDCs and consequently limited the ability of BDCs to support their Congressional mandate to support the funding needs of businesses.

A copy of the Coalition’s application is available here

For additional information or press inquiries, please contact:

Joseph Glatt, 212-515-3200

Josh Bloomstein, 212-750-7300

 

HOUSE FINANCIAL SERVICES COMMITTEE PASSES SMALL BUSINESS CREDIT AVAILABILITY ACT WITH OVERWHELMING BIPARTISAN VOTE OF 58-2

Coalition For Small Business Growth Urges House Leadership to Schedule Floor Vote ASAP

(Washington, D.C.) — The Coalition for Small Business Growth (CSBG), a national advocacy group focused on protecting and expanding access to capital for America’s small and mid-sized businesses, issued the following statement in response to the House Financial Services Committee’s approval of the Small Business Credit Availability Act:

“Today’s overwhelmingly bipartisan vote is a win for small and mid-sized businesses in America and our overall economy,” said Joseph Glatt, co-founding member of CSBG. “We applaud Reps. Stivers, Moore, Sherman and McHenry for their leadership on legislation that will modernize outdated business development company (BDC) regulations and unleash more investment capital for small and mid-sized businesses, who continue to struggle to obtain financing from traditional lenders.”  

“We commend the House Financial Services Committee for supporting these commonsense reforms and encourage House leadership to schedule this bill for consideration by the full House as soon as possible,” said Sabrina Rusnak-Carlson, a member of CSBG. “Small and mid-sized businesses are the lifeblood of our economy and the largest employer in the country, so we look forward to working with the Senate to pass this bipartisan, job-creating legislation.”

H.R. 4267, which was introduced November 7th by Reps. Steve Stivers and Gwen Moore, was passed November 15, 2017 by the House Financial Services Committee on a vote of 58-2.

 

Statement on the Introduction of the Small Business Credit Availability Act

(Washington, D.C.) — The Coalition for Small Business Growth (CSBG), a national advocacy group focused on protecting and expanding access to capital for America’s small and mid-sized businesses, issued the following statement in response to introduction of the Small Business Credit Availability Act in the U.S. House of Representatives:

“This bill includes common-sense reforms that will unleash economic potential and deliver major benefits to small and mid-sized businesses across the country,” said Joseph Glatt, Chief Legal Officer at Apollo Investment Corporation and co-founding member of CSBG. “Congress first created business development companies (BDCs) to invest in small and medium businesses struggling to obtain capital from traditional lending institutions, and this regulatory update will allow BDCs to continue to fulfill their congressional mandate to help emerging companies grow.”

“By allowing BDCs to lend at a similar leverage ratio as other small business investment vehicles, the legislation will immediately free up billions of dollars in investment capital for small and mid-sized businesses that need it most. Importantly, the bill acknowledges that — after 36 years of operation — BDCs have become an important source of capital for Main Street America, and updates regulatory requirements to support the role they play in job creation, job preservation and in the overall economy,” said Sabrina Rusnak-Carlson, General Counsel for THL Credit, Inc., a member of CSBG.

The legislation was introduced by Congressman Steve Stivers and Congresswoman Gwen Moore in the U.S. House of Representatives on November 7th.

“This legislation will allow BDCs to safely help more of their mid-sized business clients grow and prosper. It will lead directly to economic growth and jobs,” said Congresswoman Moore.

Last week, the House Financial Service Committee’s Capital Markets Subcommittee held a hearing on BDCs, where Congressman MacArthur noted that the use of a BDCs was “really essential” for growing his own small business. 

“That company with one office and 100 people grew over 15 years to 6,000 people and 100 offices,” Rep. MacArthur said. “You can’t do that without capital.”

 

AFFE Rule Whitepaper

The Coalition for Small Business Growth submitted a white paper to the Securities and Exchange Commission (SEC) laying out reasons why the SEC's “acquired fund fees and expenses” (“AFFE”) rule should not apply to fund investments in business development companies (BDCs). 

CSBG is calling on the SEC to treat investments in BDCs the same as investments in real estate investment trusts (REITs) and other non-traditional investment vehicles, which are exempted from the AFFE rule.

A copy of the white paper can be downloaded here

 

Statement on Appointment of Dalia Blass as Director of SEC’s Division of Investment Management

(Washington, D.C.) —  The Coalition for Small Business Growth (CSBG), a national advocacy group focused on protecting and expanding access to capital for America’s small and mid-sized businesses, issued the following statement in response to the appointment of Dalia Blass as Director of the Division of Investment Management at the Securities and Exchange Commission (SEC):

“We congratulate Ms. Blass for being named Director of the Division of Investment Management, a vitally important role to Main Street America,” said Joseph Glatt, founding member of CSBG. “She has extensive knowledge of the regulation of asset management and of how regulations impact the small business sector’s ability to access capital.

“As Congress considers modernizing the 35-year-old statutes governing business development companies (BDCs), we are hopeful that the SEC will also revisit regulations like the Acquired Fund Fees and Expenses (AFFE) rule. By including BDCs in the AFFE rule, regulators are inadvertently misinforming investors and deterring investment in America’s small and mid-sized enterprises.

“Appropriate regulation is critical to protecting American investors, but we must ensure it does not have unintended and harmful consequences. CSBG looks forward to working with Chairman Clayton and Ms. Blass to encourage greater investment in Main Street America.” 

CSBG plans to submit a white paper to the SEC next week recommending a simple fix to the problems associated with the AFFE rule.