SEC Small Business Forum Report-AFFE Exemption Recommendation

By BDC Council | July 8, 2019

The SEC hosted its annual Forum on Small Business Capital Formation in Dec 2018.  Working through the Office of Small Business Policy, the final report of 2018 Forum recommendations was published last week.

The Forum has assembled annually since 1982, as mandated by the Small Business Investment Incentive Act of 1980.  A major purpose of the Forum is to provide a platform to highlight perceived unnecessary impediments to small business capital formation and address whether they can be eliminated or reduced.  Each forum seeks to develop recommendations for government and private action to improve the environment for small business capital formation, consistent with other public policy goals, including investor protection.

With SBIA’s in person advocacy at the event, a formal recommendation to exempt BDCs from the Acquired Fund Fees and Expense rule (AFFE) was included. With 100 or so industry representatives in attendance, just 10 recommendations were accepted for inclusion.  We were successful in ensuring one of these 10 recommendations is to “exempt BDCs from the AFFE rule and remedy the ‘double counting’ disclosure issue.”

SEC Response to Forum Recommendation on Business Development Companies (see pg. 28)

Commission staff is considering a possible exemption from the AFFE rule for BDCs. As part of this consideration, the staff is seeking to better understand the challenges BDCs are experiencing with the AFFE disclosure requirements and to evaluate how well the disclosure rule achieves its policy goals.

In addition, in connection with a recent proposal to streamline and enhance the regulatory framework applicable to funds that invest in other funds (“fund of funds” arrangements), the Commission solicited public comment on the AFFE rule.27 The request for comment specifically notes concerns that have been raised regarding required disclosure of fees and expenses of acquired funds (including BDCs) by investing funds and seeks comment on whether the AFFE has been effective and whether the fees and expenses of certain acquired funds should be exempted. The Commission received several comments addressing this topic in response to the request for comment.

The Division of Investment Management will consider this Forum recommendation in its evaluation of the AFFE rule and its effectiveness.


Please visit to read the full report, 37th Annual Government-Business Forum on Small Business Capital Formation.

2019-07-08T15:17:37+00:00 July 8th, 2019|Featured, News|