WASHINGTON, D.C. (January 7, 2021) — The SEC has released a number of updates to the targeted relief measures it has taken during the pandemic. One of these updates is related to the order issued last April regarding co-investment transactions. While the SEC is not technically extending the applicability date of that order, it has announced it will not recommend an enforcement action for BDCs that continue to engage in transactions covered by Section III of the order through March 31, 2021.
On December 4, 2020, the SBIA submitted a letter to the SEC requesting an extension of the co-investment order. The no-action announcement from the SEC should continue to help BDCs engage in co-investment transactions at least through the first quarter of this year. Additionally, as our letter indicated, we will continue to push the SEC to make the relief outlined in the April order permanent.
See below from the SEC announcement:
- Temporary Regulatory Flexibility to Assist BDCs in Fulfilling their Statutory Mandate. Closed-end investment companies that have elected to be regulated as BDCs were created to provide capital to smaller domestic operating companies that otherwise may not be able to readily access the capital markets. In April 2020, the Commission issued a conditional exemptive order that provides temporary flexibility for BDCs to issue and sell senior securities and participate in certain joint enterprises or other joint arrangements that would otherwise be prohibited by the Investment Company Act and Rule 17d-1 thereunder. This relief was available until the earlier of December 31, 2020, or the date by which the BDC ceased to rely on the order. This relief has not been extended. The Commission is now considering requests from individual firms for similar exemptive relief pertaining to existing co-investment orders. Until March 31, 2021, the Division will not recommend enforcement action to the Commission, to the extent that any BDC with an existing co-investment order continues to engage in transactions described in Section III of the conditional exemptive order, pursuant to the same terms and conditions described in that section.
Also, the SEC announcement regarding in-person board meetings remains in effect until termination by SEC staff:
- In-Person Board Meeting Requirements. At present, boards of directors of registered management investment companies and BDCs continue to face challenges traveling in order to meet the in-person voting requirements under the Investment Company Act and rules thereunder. For that reason, in June 2020, the Commission extended earlier exemptive relief facilitating, subject to certain conditions, remote board meetings and remote approval of certain agreements, plans or arrangements.  The relief will remain in effect until it is terminated by staff action. The termination date, which will be specified in a public notice, will be at least two weeks from the date of the notice. The Division recognizes that restrictions and concerns relating to travel are likely to continue for some time, and because directors and meeting participants will need significant lead time to make appropriate travel plans, the Division anticipates providing sufficient advance notice before setting any termination date for this relief.
About the Small Business Investor Alliance (SBIA)
The Small Business Investor Alliance (SBIA) is the premier organization of lower middle market private equity funds and investors. SBIA works on behalf of its members as a tireless advocate for policies that promote competitive markets and robust domestic investment for growing small businesses. SBIA has been playing a pivotal role in promoting the growth and vitality of the private equity industry for over 60 years. For more information, visit www.SBIA.org or call (202) 628-5055.