[Federal Register Volume 85, Number 105 (Monday, June 1, 2020)]
[Rules and Regulations]
[Pages 33290-33394]
[FR Doc No: 2020-07790]

Vol. 85

Monday,

No. 105

June 1, 2020

Part II

Securities and Exchange Commission

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17 CFR Parts 229, 230, 232, et al.

Securities Offering Reform for Closed-End Investment Companies; Final
Rule

Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules
and Regulations

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 230, 232, 239, 240, 243, 249, 270, and 274

[Release Nos. 33-10771; 34-88606; IC-33836; File No. S7-03-19]
RIN 3235-AM31

Securities Offering Reform for Closed-End Investment Companies

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
adopting rules that will modify the registration, communications, and
offering processes for business development companies (``BDCs'') and
other closed-end investment companies under the Securities Act of 1933.
As directed by Congress, we are adopting rules that will allow these
investment companies to use the securities offering rules that are
already available to operating companies. These rules will extend to
closed-end investment companies offering reforms currently available to
operating company issuers by expanding the definition of ``well-known
seasoned issuer'' to allow these investment companies to qualify;
streamlining the registration process for these investment companies,
including the process for shelf registration; permitting these
investment companies to satisfy their final prospectus delivery
requirements by filing the prospectus with the Commission; and
permitting additional communications by and about these investment
companies during a registered public offering. In addition, we are
amending certain rules and forms to tailor the disclosure and
regulatory framework to these investment companies. These amendments
also will modernize our approach to securities registration fee payment
by requiring closed-end investment companies that operate as ``interval
funds'' to pay securities registration fees using the same method as
mutual funds and exchange-traded funds and extend the ability to use
this payment method to issuers of certain continuously offered,
exchange-traded products (``ETPs''). Additionally, we are expanding the
ability of certain registered closed-end funds or BDCs that conduct
continuous offerings to make changes to their registration statements
on an immediately effective basis or on an automatically effective
basis a set period of time after filing. Lastly, we are adopting
certain structured data reporting requirements, including for filings
on the form providing annual notice of securities sold pursuant to the
rule under the Investment Company Act of 1940 that prescribes the
method by which certain investment companies (including mutual funds)
calculate and pay registration fees.

DATES:
    Effective Dates: This rule is effective August 1, 2020, except for
amendatory instructions 21, 22, 30, 31, 33, 34, 41, 42, and 45 which
are effective August 1, 2021.
    Compliance Dates: The applicable compliance dates are discussed
below in section II.J.

FOR FURTHER INFORMATION CONTACT: Asaf Barouk, Attorney-Adviser; Joel
Cavanaugh, Senior Counsel; Terri G. Jordan, Senior Counsel; Amy Miller,
Senior Counsel; Angela Mokodean, Senior Counsel; Amanda Hollander
Wagner, Branch Chief; David J. Marcinkus, Branch Chief; Jacob D.
Krawitz, Branch Chief; or Brian McLaughlin Johnson, Assistant Director,
at<PHONE_NUMBER>, Investment Company Regulation Office, Division of
Investment Management; Charles Kwon, Senior Counsel, Office of
Rulemaking, at<PHONE_NUMBER>, Division of Corporation Finance; U.S.
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549.

SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to:
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    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 15 U.S.C. 80a-1 et seq.

------------------------------------------------------------------------
           Commission reference                 CFR citation (17 CFR)
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             SECURITIES ACT OF 1933 (``SECURITIES ACT'') \1\
------------------------------------------------------------------------
Rule 134..................................  Sec.   230.134
Rule 138..................................  Sec.   230.138
Rule 156..................................  Sec.   230.156
Rule 163..................................  Sec.   230.163
Rule 163A.................................  Sec.   230.163A
Rule 164..................................  Sec.   230.164
Rule 168..................................  Sec.   230.168
Rule 169..................................  Sec.   230.169
Rule 172..................................  Sec.   230.172
Rule 173..................................  Sec.   230.173
Rule 405..................................  Sec.   230.405
Rule 415..................................  Sec.   230.415
Rule 418..................................  Sec.   230.418
Rule 424..................................  Sec.   230.424
Rule 430A.................................  Sec.   230.430A
Rule 430B.................................  Sec.   230.430B
Rule 433..................................  Sec.   230.433
Rule 456..................................  Sec.   230.456
Rule 457..................................  Sec.   230.457
Rule 462..................................  Sec.   230.462
Rule 486..................................  Sec.   230.486
Rule 497..................................  Sec.   230.497
Form S-1..................................  Sec.   239.11
Form S-3..................................  Sec.   239.13
Form N-14.................................  Sec.   239.23
Form F-1..................................  Sec.   239.31
Form F-3..................................  Sec.   239.33
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             REGULATION S-T [17 CFR 232.10 THROUGH 232.903]
------------------------------------------------------------------------
Rule 11...................................  Sec.   232.11
Rule 405..................................  Sec.   232.405
------------------------------------------------------------------------
         SECURITIES EXCHANGE ACT OF 1934 (``EXCHANGE ACT'') \2\
------------------------------------------------------------------------
Schedule 14A..............................  Sec.   240.14a-101
Rule 103 of Regulation FD.................  Sec.   243.103
------------------------------------------------------------------------
     INVESTMENT COMPANY ACT OF 1940 (``INVESTMENT COMPANY ACT'') \3\
------------------------------------------------------------------------
Rule 8b-16................................  Sec.   270.8b-16
Rule 23c-3................................  Sec.   270.23c-3
Rule 24f-2................................  Sec.   270.24f-2
Form 24F-2................................  Sec.   274.24
------------------------------------------------------------------------
                SECURITIES ACT AND INVESTMENT COMPANY ACT
------------------------------------------------------------------------
Form N-2..................................  Sec.  Sec.   239.14 and
                                             274.11a-1
------------------------------------------------------------------------
                 EXCHANGE ACT AND INVESTMENT COMPANY ACT
------------------------------------------------------------------------
Form N-CSR................................  Sec.  Sec.   249.331 and
                                             274.128
------------------------------------------------------------------------

Table of Contents

I. Introduction
II. Discussion
    A. Scope of Closed-End Investment Companies Affected by the
Final Rule
    B. Registration Process
    1. Current Shelf Offering Process for Affected Funds
    2. Amendments to the Registration Process for Affected Funds
    3. Short-Form Registration on Form N-2
    C. Well-Known Seasoned Issuer Status
    1. WKSI Definition
    2. WKSI Eligibility
    3. Ineligible Issuer Definition
    D. Automatic or Immediate Effectiveness for Filings by Affected
Funds Conducting Certain Continuous Offerings
    E. Final Prospectus Delivery Reforms
    F. Communications Reforms
    1. Offering Communications
    2. Broker-Dealer Research Reports
    G. Other Rule Amendments
    1. Rule 418 Supplemental Information
    2. Amendments to Incorporation by Reference Into Proxy
Statements
    3. Rule 103 of Regulation FD
    H. New Registration Fee Payment Method for Interval Funds and
Issuers of Certain Exchange-Traded Products
    I. Disclosure and Reporting Parity Proposals

    1. Structured Data Requirements
    2. Periodic Reporting Requirements
    3. Current Reporting Requirements for Affected Funds
    4. Online Availability of Information Incorporated by Reference
    5. Amendments to Certain Registered CEFs' Annual Report
Disclosure
    J. Effective and Compliance Dates
III. Economic Analysis
    A. Introduction and Baseline
    1. Number of Affected Funds
    2. Current Securities Offering Requirements for Affected Funds
    3. Current Disclosure Obligations of Affected Funds
    B. Potential Benefits Resulting From the Proposed Implementation
of the Statutory Mandates
    1. Improved Access to Capital and Lower Cost of Capital
    2. Facilitated Communication With Investors
    C. Potential Costs Resulting From the Proposed Implementation of
the Statutory Mandates
    1. Compliance Costs
    2. Other Costs
    D. Alternatives to Adopted Approach To Implementing Statutory
Mandates
    E. Discussion of Discretionary Choices
    1. New Registration Fee Payment Method for Interval Funds and
Issuers of Certain Exchange-Traded Products
    2. Structured Data Requirements
    3. Periodic Reporting Requirements
    4. Discretionary Amendments to Incorporation by Reference
Requirements
    5. Automatic or Immediate Effectiveness of Filings by Affected
Funds Conducting Certain Continuous Offerings
IV. Paperwork Reduction Act Analysis
    A. Background
    B. Summary of the Amendments and Impact on Information
Collections
    1. Amendments to Form N-2 Registration Statement
    2. Structured Data Reporting Requirements
    3. New Annual Reporting Requirements Under 17 CFR 270.30e-1
(Rule 30e-1) and Exchange Act Periodic Reporting Requirements for
BDCs
    4. Securities Offering Communications
    5. Prospectus Delivery Requirements
    6. Form 24F-2
    7. Amendments Permitting the Registration of Offerings of an
Indeterminate Number of Exchange-Traded Vehicle Securities and the
Payment of Registration Fees for Such Offerings on an Annual Net
Basis
    8. Amendments to Form N-14
V. Final Regulatory Flexibility Analysis
    A. Need and Objectives of the Final Rule
    B. Significant Issues Raised by Public Comments
    C. Small Entities Subject to the Rule
    D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
    1. Registration Process and Final Prospectus Delivery
    2. Communications Rules
    3. New Registration Fee Payment Method for Interval Funds
    4. Disclosure and Reporting Requirements
    5. Automatic or Immediate Effectiveness for Filings by Affected
Funds Conducting Certain Continuous Offerings
    E. Agency Action To Minimize Effect on Small Entities
    1. Alternatives to the Adopted Approach To Implementing
Statutory Mandates
    2. Alternative Approaches to Discretionary Choices
VI. Other Matters
VII. Statutory Authority

I. Introduction

    We are adopting rules that will modify the registration,
communications, and offering processes for business development
companies (``BDCs'') and registered closed-end investment companies
(``registered CEFs''), including interval funds (collectively,
``affected funds'') under the Securities Act.\4\ In 2005, the
Commission adopted securities offering reforms for operating companies
to modernize the securities offering and communication processes while
maintaining the protection of investors under the Securities Act.\5\ At
that time, the Commission specifically excluded all investment
companies--including affected funds--from the scope of the reforms.\6\
Now, as directed by Congress, we are adopting rules that will allow
affected funds to use the securities offering rules that are already
available to operating companies.
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    \4\ BDCs are a category of closed-end investment companies that
do not register under the Investment Company Act, but rather elect
to be subject to the provisions of sections 55 through 65 of the
Investment Company Act. See section 2(a)(48) of the Investment
Company Act [15 U.S.C. 80a-2(a)(48)]. Congress established BDCs for
the purpose of making capital more readily available to small,
developing and financially troubled companies that do not have ready
access to the public capital markets or other forms of conventional
financing. See H.R. Rep. No. 1341, 96th Cong., 2d Sess. 21 (1980).
See infra section II.A for additional discussion of the definition
of ``affected funds.''
    ``Interval funds'' are a type of registered CEF or BDC that make
periodic repurchase offers pursuant to rule 23c-3 under the
Investment Company Act. See 17 CFR 270.23c-3 (``rule 23c-3'').
    \5\ Securities Offering Reform, Securities Act Release No. 8591
(July 19, 2005) [70 FR 44721 (Aug. 3, 2005)] (``Securities Offering
Reform Adopting Release''). In this release we generally use the
term ``operating company'' to refer to issuers that are not
investment companies and that are currently eligible to rely on the
rules we are amending.
    \6\ See, e.g., id. at 44727 (discussing the exclusion of
investment companies registered under the Investment Company Act and
BDCs from the definition of ``well-known seasoned issuer''); id. at
44735 (discussing the exclusion of such companies from the safe
harbors for factual business information and forward-looking
information); id. at 44784 (discussing the exclusion of such
companies from final prospectus delivery reforms).
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    The Small Business Credit Availability Act (the ``BDC Act'')
directs us to allow a BDC to use the securities offering rules that are
available to other issuers required to file reports under section 13(a)
or section 15(d) of the Exchange Act.\7\ As discussed in detail below,
the BDC Act identifies with specificity the required revisions.\8\ The
Economic Growth, Regulatory Relief, and Consumer Protection Act (the
``Registered CEF Act'') (and, together with the BDC Act, the ``Acts'')
directs us to adopt rules to allow any registered CEF that is listed on
a national securities exchange (a ``listed registered CEF'') or that
makes periodic repurchase offers under rule 23c-3 to use the securities
offering rules that are available to other issuers that are required to
file reports under section 13(a) or section 15(d) of the Exchange Act,
subject to appropriate conditions.\9\ Unlike the BDC Act, the
Registered CEF Act does not identify with specificity the revisions
that are required.
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    \7\ Section 803(b) of Small Business Credit Availability Act,
Public Law 115-141, 132 Stat. 348 (2018) (``BDC Act''). This section
also directs us to make specified revisions to allow a BDC to use
the proxy rules that are available to such other issuers. Id.
Affected funds generally use the proxy rules that are available to
operating companies already. One current difference applicable to
these entities, however, is a more limited ability to incorporate
information into their proxy statements by reference. The BDC Act
directs that we eliminate this difference by providing these
entities parity with operating companies. Section 803(b)(2)(N) of
the BDC Act; see also infra section II.G.2.
    \8\ See section 803(b)(2) of the BDC Act.
    \9\ Section 509(a) of Economic Growth, Regulatory Relief, and
Consumer Protection Act, Public Law 115-174, 132 Stat. 1296 (2018)
(``Registered CEF Act''). The Registered CEF Act also refers to
proxy rules, as does the BDC Act. See supra footnote 7.
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    In 2019, we proposed rules that would modify the registration,
communications, and offering processes for affected funds under the
Securities Act.\10\ As discussed in greater detail below, most
commenters supported the proposal.\11\ Many of the commenters who
supported the proposal generally also recommended modifications to some
of the proposed rules.\12\ For example, some commenters recommended
further expanding the scope of issuers that would qualify as ``well-
known seasoned issuers'' to include smaller issuers or those without

public float.\13\ Commenters also recommended eliminating or modifying
the proposed requirement that certain additional affected funds file
current reports on Form 8-K.\14\ Other commenters recommended that the
Commission expand the scope of issuers permitted to file certain
immediately effective registration statements.\15\ Several commenters
that are sponsors to exchange-traded products recommended that the
Commission expand the scope of issuers permitted to pay registration
fees on an annual net basis.\16\ Finally, one commenter expressed
concern with the proposal, recommending that large BDCs and registered
CEFs be subject to additional scrutiny.\17\ As discussed in detail
below, we are adopting the proposed rules with certain modifications,
after consideration of comments received.
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    \10\ Securities Offering Reform for Closed-End Investment
Companies, Investment Company Act Release No. 33427 (Mar. 20, 2019)
[84 FR 14448 (Apr. 10, 2019)] (``Proposing Release'').
    \11\ See, e.g., Comment Letter of the Federal Regulation of
Securities Committee of the Business Law Section of the American Bar
Association (July 3, 2019) (``ABA Comment Letter''); Comment Letter
of Alternative Credit Council (June 10, 2019) (``ACC Comment
Letter''); Comment Letter of Coalition for Business Development
(June 10, 2019) (``CBD Comment Letter''). The comment letters on the
Proposing Release (File No. S7-03-19) are available at https://www.sec.gov/comments/s7-03-19.htm.
    \12\ See, e.g., Comment Letter of Calcbench, Inc. (May 13, 2019)
(``Calcbench Comment Letter''); Comment Letter of GraniteShares LLC
(June 26, 2019) (``GraniteShares Comment Letter''); Comment Letter
of Institute for Portfolio Alternatives (June 10, 2019) (``IPA
Comment Letter'').
    \13\ See infra section II.C.
    \14\ See infra section II.I.3.
    \15\ See ABA Comment Letter; Comment Letter of Investment
Company Institute (June 10, 2019) (``ICI Comment Letter'').
    \16\ See, e.g., Comment Letter of United States Commodity Funds
LLC (June 10, 2019) (``USCF Comment Letter''); Comment Letter of
World Gold Council (June 10, 2019) (``WGC Comment Letter'').
    \17\ Comment Letter of Dale White (Apr. 3, 2019) (``White
Comment Letter'').
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    Our action will institute a number of reforms:
     First, it will streamline the registration process to
allow eligible affected funds to use a short-form shelf registration
statement to sell securities ``off the shelf'' more quickly and
efficiently in response to market opportunities.
     Second, the final rule will allow affected funds to
qualify as ``well-known seasoned issuers'' (``WKSIs'') under rule 405
under the Securities Act.
     Third, it will allow affected funds to satisfy final
prospectus delivery requirements using the same method as operating
companies.
     Fourth, it will allow affected funds to use certain rules
currently available to operating companies, such as communications safe
harbors for certain factual business information and forward-looking
information, ``free writing prospectuses,'' and broker-dealer research
reports (referred throughout this release as the ``communications
rules'').
     Fifth, the final rule will allow certain continuously-
offered affected funds to make certain changes to their registration
statements on an immediately-effective basis or on an automatically
effective basis a set period of time after filing.
     Finally, it will tailor the disclosure and regulatory
framework for affected funds in light of the amendments to the offering
rules applicable to them. These amendments include structured data
requirements to make it easier for investors and others to analyze fund
data; new annual report disclosure requirements to provide key
information in annual reports; a requirement that interval funds pay
securities registration fees using the same method that mutual funds
and exchange-traded funds (``ETFs'') use today; and a provision that
will allow certain ETPs that are not registered under the Investment
Company Act to elect to pay securities registration fees in the same
manner.
    As discussed in detail below, the final rule will affect different
categories of affected funds differently, just as different categories
of operating companies are treated differently under these rules
currently. For example, some of the provisions will apply to all
affected funds, that is, all BDCs and registered CEFs. Many of the
provisions, however, will apply only to ``seasoned funds.'' These are
listed affected funds that are current and timely in their reporting
and therefore generally eligible to file a short-form registration
statement under the proposal if they have at least $75 million in
``public float.'' \18\ Some of the provisions will apply only to
seasoned funds that also qualify as WKSIs, that is, listed affected
funds that qualify as seasoned funds and generally have at least $700
million in public float.\19\ Additionally, the final rule provides
unlisted affected funds with the flexibility to make certain filings
that become effective either immediately upon filing or automatically
after 60 days.\20\ The final rule therefore will provide additional
flexibilities to both listed and unlisted affected funds. Tables 1 and
2 below summarize these different impacts.
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    \18\ See General Instruction I.B.1 of Form S-3 (defining
``aggregate market value''). In this release, we use ``public
float'' to mean the aggregate market value of the voting and non-
voting common equity held by non-affiliates of the registrant. See
General Instruction I.B.1 of Form S-3. Certain issuers with less
than $75 million in public float also are eligible to use Form S-3
to register a primary offering but are limited as to the amount of
securities they can register. See General Instruction I.B.6 of Form
S-3. The Commission has stated that the calculations of an issuer's
public float for the purpose of determining an issuer's eligibility
to use Form S-3 and for determining WKSI status under rule 405 are
the same. See Securities Offering Reform Adopting Release, supra
footnote 5, at n.50.
    \19\ See rule 405 (defining WKSI).
    \20\ See amended rules 486(a) and 486(b) under the Securities
Act. See also supra section II.D.

                                 Table 1
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                 Entity                         Summary definition
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Affected funds.........................  Affected funds include all BDCs
                                          and registered CEFs, including
                                          interval funds.
Seasoned funds \1\.....................  Seasoned funds are affected
                                          funds that are current and
                                          timely in their reporting and
                                          therefore generally eligible
                                          to file a short-form
                                          registration statement if they
                                          have at least $75 million in
                                          ``public float.'' See supra
                                          footnote 18.
WKSIs..................................  WKSIs are seasoned funds that
                                          generally have at least $700
                                          million in ``public float.''
ETPs...................................  ETPs are issuers that are not
                                          registered investment
                                          companies and whose assets
                                          consist primarily of
                                          commodities, currencies or
                                          derivative instruments that
                                          reference commodities or
                                          currencies; whose securities
                                          are listed for trading on a
                                          national securities exchange;
                                          and that purchase or redeem
                                          securities for a ratable share
                                          of their assets at NAV.
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Notes:
\1.\ Some of the rule changes that are shown below as affecting
  ``seasoned funds'' will only affect those seasoned funds that elect to
  file a registration statement on Form N-2 using an instruction
  permitting funds to use the form to file a short-form registration
  statement.

                                                     Table 2
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                                        Summary description of    Entities affected by
                 Rule                            rule                   changes             Discussed below in
----------------------------------------------------------------------------------------------------------------
                      Affected Funds (Including BDCs, Registered CEFs, and Interval Funds)
----------------------------------------------------------------------------------------------------------------
Registration Provisions:
    General Instruction F.4.a of Form  Requires online posting  Affected Funds.........  Section II.I.4.
     N-2.                               of information
                                        incorporated by
                                        reference.
    Securities Act Rules 424 and 497.  Provide the processes    Affected Funds.........  Section II.B.3.d.
                                        for filing prospectus
                                        supplements.
    Investment Company Act Rule 23c-3  Subjects interval funds  Interval Funds.........  Section II.H.
                                        to the registration
                                        fee payment system
                                        based on annual net
                                        sales.
    Securities Act Rule 486..........  Allows continuously-     Continuously-offered     Section II.D.
                                        offered unlisted         unlisted affected
                                        affected funds to make   funds not relying on
                                        certain filings that     rule 23c-3.
                                        are immediately
                                        effective upon filing
                                        or automatically
                                        effective 60 days
                                        after filing.
    General Instruction G of Form N-   Permits certain          BDCs...................  Section II.B.3.b.
     14.                                registrants to
                                        incorporate by
                                        reference.
Communication Provisions:
    Securities Act Rule 134..........  Permits issuers to       Affected Funds.........  Section II.F.1.
                                        publish factual
                                        information about the
                                        issuer or the
                                        offering, including
                                        ``tombstone ads.''.
    Securities Act Rule 163A.........  Permits issuers to       Affected Funds.........  Section II.F.1.
                                        communicate without
                                        risk of violating the
                                        gun-jumping provisions
                                        until 30 days prior to
                                        filing a registration
                                        statement.
    Securities Act Rules 168 and 169.  Permit the publication   Affected Funds.........  Section II.F.1.
                                        and dissemination of
                                        regularly released
                                        factual and forward-
                                        looking information.
    Securities Act Rules 164 and 433.  Permit use of a ``free   Affected Funds.........  Section II.F.1.
                                        writing prospectus.''.
Prospectus Delivery Provisions:
    Securities Act Rules 172 and 173.  Permit issuers,          Affected Funds.........  Section II.E.
                                        brokers, and dealers
                                        to satisfy final
                                        prospectus delivery
                                        obligations if certain
                                        conditions are
                                        satisfied.
Periodic Reporting Provisions:
    Investment Company Act Rule 8b-16  A requirement that       Registered CEFs........  Section II.I.5.
                                        funds that rely on
                                        paragraph (b) of the
                                        rule describe in the
                                        annual report the
                                        fund's current
                                        investment objectives,
                                        policies and risks,
                                        and certain key
                                        changes in enough
                                        detail to allow
                                        investors to
                                        understand each change
                                        and how it may affect
                                        the fund.
    Instruction 4.g to Item 24 of      A requirement for        Registered CEFs........  Section II.I.2.b.
     Form N-2.                          narrative disclosure
                                        about the fund's
                                        performance in the
                                        fund's annual report.
    Item 4 of Form N-2; Instruction    Requires disclosure of   BDCs...................  Section II.I.2.c.
     10 to Item 24 of Form N-2.         certain financial
                                        information.
Structured Data Reporting
 Requirements:
    Structured Financial Statement     A requirement that BDCs  BDCs...................  Section II.I.1.a.
     Data.                              tag their financial
                                        statements using
                                        Inline eXtensible
                                        Business Reporting
                                        Language (``Inline
                                        XBRL'') format.
    Prospectus Structured Data         A requirement that       Affected Funds.........  Sections II.I.1.b and
     Requirements.                      registrants tag                                   II.I.1.c.
                                        certain information
                                        required by Form N-2
                                        using Inline XBRL.
    Form 24F-2 Structured Format.....  A requirement that       Form 24F-2 Filers,       Section II.I.1.d.
                                        filings on Form 24F-2    including open-end
                                        be submitted in a        funds and unit
                                        structured format.       investment trusts.
----------------------------------------------------------------------------------------------------------------
                                                 Seasoned Funds
----------------------------------------------------------------------------------------------------------------
Registration Provisions:
    Securities Act Rule 415..........  Permits registration of  Seasoned Funds.........  Section II.B.3.
                                        securities to be
                                        offered on a delayed
                                        or a continuous basis.
    General Instructions A.2 and F.3   Provide for backward     Seasoned Funds.........  Section II.B.3.b.
     of Form N-2.                       and forward
                                        incorporation by
                                        reference.
    Securities Act Rule 430B.........  Permits certain issuers  Seasoned Funds.........  Section II.B.3.d.
                                        to omit certain
                                        information from their
                                        prospectuses at
                                        effectiveness.

    Securities Act Rule 418..........  Exempts some             Seasoned Funds.........  Section II.G.1.
                                        registrants from an
                                        obligation to furnish
                                        certain engineering,
                                        management, or similar
                                        reports.
    Regulation FD Rule 103...........  Provides that a failure  Seasoned Funds.........  Section II.G.3.
                                        to make a public
                                        disclosure required
                                        solely by 17 CFR
                                        243.100 (rule 100 of
                                        Regulation FD) will
                                        not disqualify a
                                        ``seasoned'' issuer
                                        from use of certain
                                        forms.
Communication Provisions:
    Securities Act Rule 138..........  Permits a broker or      Seasoned Funds.........  Section II.F.2.
                                        dealer to publish or
                                        distribute certain
                                        research reports about
                                        securities other than
                                        those it is
                                        distributing.
Proxy Statements:
    Item 13 of Schedule 14A..........  Permits certain          Seasoned Funds.........  Section II.G.2.
                                        registrants to use
                                        incorporation by
                                        reference to provide
                                        information that
                                        otherwise must be
                                        furnished with certain
                                        types of proxy
                                        statements.
Periodic Reporting Provisions:
    Instruction 4.h.(2) to Item 24 of  A requirement for        Seasoned Funds.........  Section II.I.2.a.
     Form N-2.                          information about the
                                        investor's costs and
                                        expenses in the
                                        registrant's annual
                                        report.
    Instruction 4.h.(3) to Item 24 of  A requirement for        Seasoned Funds.........  Section II.I.2.a.
     Form N-2.                          information about the
                                        share price of the
                                        registrant's stock and
                                        any premium or
                                        discount in the
                                        registrant's annual
                                        report.
    Instruction 4.h.(1) to Item 24 of  A requirement for        Seasoned Funds.........  Section II.I.2.a.
     Form N-2.                          information about each
                                        of a fund's classes of
                                        senior securities in
                                        the registrant's
                                        annual report.
    Instruction 4.h.(4) to Item 24 of  A requirement to         Seasoned Funds.........  Section II.I.2.d.
     Form N-2.                          disclose outstanding
                                        material unresolved
                                        staff comments that
                                        remain unresolved for
                                        a substantial period
                                        of time.
----------------------------------------------------------------------------------------------------------------
                                                      WKSIs
----------------------------------------------------------------------------------------------------------------
Registration Provisions:
    Securities Act Rule 462..........  Provides for             WKSIs..................  Section II.B.3.c.
                                        effectiveness of
                                        registration
                                        statements immediately
                                        upon filing with the
                                        Commission.
Communication Provisions:
    Securities Act Rule 163..........  Permits oral and         WKSIs..................  Section II.F.1.
                                        written communications
                                        by or on behalf of
                                        WKSIs at any time.
----------------------------------------------------------------------------------------------------------------
                                                      ETPs
----------------------------------------------------------------------------------------------------------------
Registration Provisions:
    Securities Act Rules 415, 424,     Permits ETPs to          ETPs...................  Section II.H.
     456 and 457; Forms S-1, S-3, F-1   register an
     and F-3.                           indeterminate amount
                                        of certain securities
                                        and pay registration
                                        fees based on annual
                                        net sales.
----------------------------------------------------------------------------------------------------------------

II. Discussion

A. Scope of Closed-End Investment Companies Affected by the Final Rule

    As we proposed, the final rule will apply to all BDCs and
registered CEFs, with certain conditions and exceptions discussed below
and generally illustrated in Tables 1 and 2 above. The BDC Act applies
to all BDCs, including BDCs that are listed on a securities exchange
and those that are unlisted.\21\ In contrast, the Registered CEF Act
extends to all registered CEFs listed on a securities exchange, as well
as interval funds, but excludes other unlisted registered CEFs.\22\
---------------------------------------------------------------------------

    \21\ Listed BDCs are publicly traded BDCs that are listed on a
stock exchange. Unlisted BDCs include non-traded BDCs, which are
offered via a continuous offering up to a preset maximum amount, and
private BDCs, which are offered via a private placement offering.
    \22\ See section 509(a) of the Registered CEF Act. Similar to
BDCs, registered CEFs include listed and unlisted funds, including
publicly traded CEFs that are listed on a stock exchange, non-traded
CEFs, and interval funds.
---------------------------------------------------------------------------

    Although the Registered CEF Act only requires us to allow interval
funds and listed registered CEFs to use the securities offering rules
available to operating companies, that Act does not preclude us from
exercising our discretion to extend these rules to all registered CEFs.
The Commission therefore proposed to apply the rules to all BDCs and
all registered CEFs, including unlisted registered CEFs, with certain
conditions and exceptions.\23\ We believed that this approach would
benefit unlisted registered CEFs and their investors by avoiding the
adverse consequences that could result from treating unlisted
registered CEFs differently from all other registered CEFs and unlisted
BDCs.
---------------------------------------------------------------------------

    \23\ Proposing Release, supra footnote 10, at section II.
---------------------------------------------------------------------------

    We believed that applying such a distinction is unnecessary
because, for purposes of these rules, unlisted registered CEFs are not
distinguishable

from unlisted BDCs, which the rule amendments must cover. Unlisted
registered CEFs, like unlisted BDCs, also would benefit from parity of
treatment.\24\ We did not receive comment on this aspect of the
proposal. Because we continue to believe that this approach will
benefit unlisted registered CEFs and their investors by providing new
investor protections and avoiding adverse consequences from
differential treatment, the final rule will apply to all BDCs and
registered CEFs as proposed.
---------------------------------------------------------------------------

    \24\ Id.
---------------------------------------------------------------------------

    The Commission proposed to generally apply the specific
requirements of the BDC Act to both BDCs and registered CEFs because it
believed that, except where dictated by meaningful differences between
BDCs and registered CEFs, consistent application of the proposed rules
across affected funds would result in more efficient offering processes
and more consistent investor protections.\25\ We continue to believe
that both Acts share the overall purpose of providing offering and
communication rule parity to the investment companies covered by each
Act.\26\ We did not receive public comment on this aspect of the
proposal, and, for the reasons stated above, we are adopting it as
proposed.
---------------------------------------------------------------------------

    \25\ Id.
    \26\ Id. (explaining the similarity of the BDC Act's and the
Registered CEF Act's broad mandates).
---------------------------------------------------------------------------

B. Registration Process

    We are adopting, substantially as proposed, amendments to our rules
and forms to streamline the registration process for affected funds by
permitting them to use the more flexible registration process available
to operating companies. These amendments collectively will allow
affected funds to offer and sell securities ``off the shelf'' more
quickly and efficiently in response to market opportunities.
1. Current Shelf Offering Process for Affected Funds
    Issuers, including affected funds, whose offerings are registered
or qualified to be registered on Form S-3 may conduct primary offerings
``off the shelf'' under Securities Act rule 415(a)(1)(x), the provision
for offerings made on a delayed or continuous basis.\27\ In a rule
415(a)(1)(x) shelf offering, a seasoned issuer can register an
unallocated dollar amount of securities for sale at a later time.\28\
The issuer can then take down securities ``off the shelf'' for sale in
a public offering as market conditions warrant. This allows seasoned
issuers to quickly access the public securities markets from time to
time to take advantage of favorable market conditions.\29\
---------------------------------------------------------------------------

    \27\ See Proposing Release, supra footnote 10, at n.17
(discussing rule 415(a)(1)).
    \28\ In this release we use the term ``seasoned'' to refer
generally to an issuer that meets the registrant requirements in
General Instruction I.A of Form S-3 and, when referring to seasoned
funds, a fund that meets these Form S-3 registrant requirements as
well as certain modifications for registered CEFs. See Proposing
Release, supra footnote 10, at n.18 (explaining the requirements
under General Instruction I.A. of Form S-3).
    \29\ Issuers that rely on rule 415(a)(1)(x) must file a new
registration statement every three years, with unsold securities and
fees paid thereon carried forward to the new registration statement.
See Securities Act rule 415(a)(5) and (6). If the new registration
statement is an automatic shelf registration statement filed by a
WKSI, it will be effective immediately upon filing.
---------------------------------------------------------------------------

    Affected funds currently can make shelf offerings under rule
415(a)(1)(x) if they meet the eligibility criteria for Form S-3, even
though affected funds register their securities offerings on Form N-
2.\30\ Our rules for operating companies, however, are more flexible
and efficient than for affected funds. In particular, seasoned
operating companies can use a short-form registration statement on Form
S-3. Certain seasoned operating companies also can rely on Securities
Act rule 430B to omit certain information from the ``base'' prospectus
when the registration statement becomes effective and later provide
that information in a subsequent Exchange Act report incorporated by
reference, a prospectus supplement, or a post-effective amendment.\31\
The ability to ``forward incorporate'' information in Exchange Act
reports filed after the registration statement becomes effective allows
operating companies to efficiently update their prospectuses and access
capital markets without the expense and delay of filing post-effective
amendments in most cases.
---------------------------------------------------------------------------

    \30\ See Proposing Release, supra footnote 10, at n.20.
    \31\ The base prospectus of a shelf registration statement will
generally describe in broad terms the types of securities and
offerings that the issuer may conduct at some later time.
---------------------------------------------------------------------------

    Affected funds, on the other hand, currently have limited ability
to incorporate information by reference into their registration
statements and cannot forward incorporate information from
subsequently-filed Exchange Act reports.\32\ When an affected fund
sells securities, including as part of a takedown ``off the shelf,''
its registration statement must include all required information.\33\
In particular, the affected fund's registration statement must include
current financial information, including any annual update required by
section 10(a)(3) of the Securities Act.\34\ Affected funds provide any
section 10(a)(3) update to the registration statement by filing a post-
effective amendment, which involves the expense and potential delay
associated with the fund's preparation of the amendment and also
provides our staff with time to review the amendment for compliance
with the applicable disclosure and accounting requirements and to
provide comments where appropriate.\35\
---------------------------------------------------------------------------

    \32\ See Proposing Release, supra footnote 10, at n.22
(discussing ``backward incorporation'').
    \33\ The fund's registration statement must include all required
information to avoid liability from selling securities from an out-
of-date prospectus and to satisfy section 10(a) of the Securities
Act. See infra footnotes 83-84 and accompanying text.
    \34\ See Proposing Release, supra footnote 10, at n.24.
    \35\ These post-effective amendments become effective pursuant
to section 8(c) of the Securities Act on such date as the Commission
may determine and are typically declared effective by the staff
acting pursuant to delegated authority. In contrast, Form S-3 is
updated through the filing of an annual report on Form 10-K, which
contains the issuer's audited financial statements for its most
recently completed fiscal year. See Securities Offering Reform
Adopting Release, supra footnote 5, at n.61; see also Proposing
Release, supra footnote 10, at n.25.
---------------------------------------------------------------------------

    Affected funds also cannot currently rely on rule 430B, which
allows certain issuers to omit information from a prospectus, or the
process that operating companies follow to file prospectus
supplements.\36\ In addition, affected funds cannot currently file
automatic shelf registration statements because only WKSIs can file
these registration statements. These differences can result in
additional expense or delay for affected funds relative to operating
companies and can affect the timing of an affected fund's capital
raising.\37\
---------------------------------------------------------------------------

    \36\ See id. at n.26.
    \37\ The final rule will give certain affected funds greater
flexibility to control the timing of their capital raising. As
discussed in the Proposing Release, section 23(b) of the Investment
Company Act generally prohibits a registered CEF from issuing its
shares at a price below the fund's current net asset value (``NAV'')
without shareholder approval (this provision applies to BDCs as well
with certain modifications). See id. at n.27. Because the shares of
affected funds often trade at a discount to NAV, by allowing certain
affected funds to sell securities ``off the shelf,'' the final rule
will avoid potential delays associated with updating the funds'
registration statements if they seek to access the markets when
their shares are trading at a premium.
---------------------------------------------------------------------------

2. Amendments to the Registration Process for Affected Funds
    The amendments we are adopting are designed to streamline the
registration process for affected funds in parity with operating
companies. Specifically, and as discussed in more detail below, the
amendments will permit affected funds to:
     File a short-form registration statement on Form N-2 that
will

function like a Form S-3 registration statement. An affected fund that
files this short-form registration statement can use it to register
shelf offerings, including shelf registration statements that are filed
by affected funds that qualify as WKSIs and become effective
automatically, and can satisfy Form N-2's disclosure requirements by
incorporating by reference information from the fund's Exchange Act
reports;
     Rely on rule 430B to omit information from their base
prospectuses, and to use the process operating companies follow to file
prospectus supplements; and
     Include additional information in periodic reports to
update their registration statements.
    Commenters generally supported our general approach to streamlining
the registration process for affected funds. Commenters stated that the
proposed amendments would allow affected funds to raise capital more
efficiently and cost-effectively and would provide affected funds with
greater flexibility to manage the timing of their offerings in response
to market opportunities.\38\ One commenter stated that affected funds
will benefit from the proposed amendments because they no longer will
have to file post-effective amendments to shelf registration statements
to update their financial statements. Instead, that information will be
in annual reports and incorporated by reference into their registration
statements.\39\
---------------------------------------------------------------------------

    \38\ See, e.g., ACC Comment Letter; ICI Comment Letter; Comment
Letter of Securities Industry and Financial Markets Association
(June 5, 2019) (``SIFMA Comment Letter'').
    \39\ See ICI Comment Letter.
---------------------------------------------------------------------------

3. Short-Form Registration on Form N-2
    We are adopting, as proposed, new General Instruction A.2 in Form
N-2, which will allow affected funds to file a short-form registration
statement on Form N-2 that will function like a registration statement
filed on Form S-3.\40\ If a fund files a registration statement under
this new instruction, the fund's registration statement will
incorporate certain past and future Exchange Act reports by reference,
allowing the fund to use a short-form registration statement and avoid
the need to make post-effective amendments in most cases. An affected
fund may use the new instruction to register a shelf offering under
rule 415(a)(1)(x), and we are adopting conforming amendments to that
rule to make this clear.\41\ The new instruction, however, is not
limited to offerings under rule 415(a)(1)(x). Rather, an affected fund
may use the new instruction to register any of the securities offerings
that operating companies are permitted to register on Form S-3.\42\
---------------------------------------------------------------------------

    \40\ Throughout this release, we refer to General Instruction
A.2 as the ``short-form registration instruction'' and refer to
funds relying on this instruction as filing a ``short-form
registration statement'' on amended Form N-2. Some of the required
amendments and the conditions in our current rules are available
only to issuers that meet the eligibility and transaction
requirements of Form S-3 and therefore are eligible to file a short-
form registration statement on that form. The short-form
registration instruction in Form N-2 is designed to facilitate these
amendments, as directed in the BDC Act and the Registered CEF Act.
    \41\ See amended rule 415(a)(1)(x) (conforming amendments for
affected funds); see also supra section II.B.3.c.
    \42\ See General Instruction I.B of Form S-3 (identifying
transactions that can be registered on the form); see also General
Instruction A.2.c of amended Form N-2. Form S-3, and therefore the
short-form registration instruction, also is available to a
majority-owned subsidiary that is a closed-end management investment
company eligible to register a securities offering on Form N-2 if it
meets certain conditions. See Proposing Release, supra footnote 10,
at n.29 (describing the conditions necessary for majority-owned
subsidiaries of closed-end management companies to register a
securities offering on Form N-2).
---------------------------------------------------------------------------

a. Eligibility To File a Short-Form Registration Statement
    As proposed, we are adopting amendments to permit an affected fund
to file a short-form registration statement under the short-form
registration instruction on Form N-2 if:
     For either a BDC or a registered CEF, the fund meets both
the registrant requirements and the transaction requirements of Form S-
3 (i.e., the fund could register the offering on Form S-3 if it were an
operating company); \43\ and
---------------------------------------------------------------------------

    \43\ See General Instructions A.2.a and A.2.c of amended Form N-
2; General Instructions I.A (registrant requirements) and I.B
(transaction requirements) of Form S-3.
---------------------------------------------------------------------------

     for registered CEFs only, the fund also has been
registered under the Investment Company Act for at least 12 calendar
months immediately preceding the filing of the registration statement
and has timely filed all reports required to be filed under section 30
of the Investment Company Act during that time.\44\
---------------------------------------------------------------------------

    \44\ Under this amendment to Form N-2, the fund also must have
timely filed all reports required to be filed under section 30 of
the Investment Company Act during any portion of a month immediately
preceding the filing of the registration statement. See new General
Instruction A.2.b of amended Form N-2.
---------------------------------------------------------------------------

    An affected fund generally will meet the registrant requirements of
Form S-3 if it has timely filed all reports and other materials
required under the Exchange Act during the prior year.\45\ An affected
fund will generally meet the transaction requirements of Form S-3 for a
primary offering if the fund's public float is $75 million or more.\46\
Requiring affected funds to satisfy the requirements of Form S-3 in
order to file a short-form registration statement provides parity
between affected funds and operating companies, consistent with
Congress's mandates in the BDC Act and Registered CEF Act.
---------------------------------------------------------------------------

    \45\ See General Instruction I.A.3 of Form S-3.
    \46\ See General Instruction I.B of Form S-3.
---------------------------------------------------------------------------

    Commenters generally supported the proposal to permit affected
funds to file short-form registration statements.\47\ Several
commenters, however, urged that we provide additional bases other than
public float for an affected fund to be eligible to file a short-form
registration statement (or to qualify as a WKSI).\48\ While the
arguments advanced by commenters apply to our proposed short-form
registration requirement, commenters focused primarily on our proposed
public float threshold for WKSI status.\49\ Accordingly, we discuss
these comments below in section II.C.2. For the reasons discussed in
that section, we are not changing the public float requirement or
adopting new requirements for affected funds to file a short-form
registration statement. We are adopting the proposed $75 million public
float requirement for an affected fund to file a short-form
registration statement on Form N-2 to provide affected funds parity
with operating companies.
---------------------------------------------------------------------------

    \47\ See, e.g., SIFMA Comment Letter; Comment Letter of Mutual
Fund Directors Forum (June 12, 2019) (``MFDF Comment Letter'').
    \48\ See, e.g., ICI Comment Letter; ABA Comment Letter.
    \49\ See infra section II.C.2 (discussing comments on public
float requirement for WKSI eligibility).
---------------------------------------------------------------------------

    Certain affected funds, including most interval funds,\50\ do not
list their securities on an exchange and thus do not have public float.
As a result, these affected funds generally would not be able to
satisfy the transaction requirement necessary to file a short-form
registration statement.\51\ In

addition, as we noted in the Proposing Release, because interval funds
make continuous offerings, they (as well as other continuously offered,
non-listed affected funds) would not be able to file a short-form
registration statement that omits information required to be in an
issuer's prospectus when it is offering its securities.\52\
---------------------------------------------------------------------------

    \50\ Only one interval fund is currently exchange-listed.
    \51\ We intend for the short-form registration instruction to
provide affected funds parity with operating companies so that
affected funds can register the same transactions as operating
companies register on Form S-3. To register a primary offering of
equity securities on Form S-3, an issuer must meet the applicable
eligibility and registrant requirements. For example, an issuer with
the requisite public float may register a primary offering of
securities to be offered for cash. See General Instruction I.B.1 of
Form S-3. Alternatively, an issuer may register a primary offering
if it has common equity securities listed on an exchange, limits the
amount sold over a twelve-month period to no more than one-third of
the aggregate value of voting and non-voting common equity held by
non-affiliates, and meets certain other requirements. See General
Instruction I.B.6 of Form S-3. Interval funds that are not exchange-
listed and without public float would not be qualified to register a
primary offering of their shares on Form S-3.
    \52\ See Proposing Release, supra footnote 10, at text following
n.37.
---------------------------------------------------------------------------

    Interval funds also have their own offering provision, Securities
Act rule 415(a)(1)(xi),\53\ and post-effective amendments to their
registration statements are immediately effective upon filing or
automatically effective 60 days after filing under rule 486 under the
Securities Act, depending on the substance of the amendments.\54\ As a
result, interval funds currently have a tailored registration process
that, although different in certain respects from that of operating
companies, may provide many of the same efficiencies, including the
ability to raise capital as the opportunity arises. As discussed below
in section II.D, we are adopting amendments to rule 486 to allow any
affected fund that conducts continuous offerings under rule
415(a)(1)(ix), such as continuously-offered tender offer funds, to rely
on rule 486. We believe these amendments will benefit such
continuously-offered affected funds by allowing them to maintain
effective registration statements in a more efficient, cost-effective
manner, similar to the benefits that the rules we are adopting will
provide to affected funds that file short-form registration statements.
---------------------------------------------------------------------------

    \53\ 17 CFR 230.415(a)(1)(xi).
    \54\ See 17 CFR 230.486.
---------------------------------------------------------------------------

    As proposed, in addition to satisfying the registrant requirements
of Form S-3, a registered CEF also must have timely filed all reports
required under section 30 of the Investment Company Act for the
preceding 12 months in order to register an offering under the short-
form registration instruction. A registered CEF therefore must have
timely filed during the prior year all required Exchange Act reports,
such as annual and semi-annual reports to shareholders filed with the
Commission on Form N-CSR, as well as reports required only under
section 30 of the Act, such as reports on Forms N-CEN and N-PORT.
    As we stated in the Proposing Release, an issuer's Exchange Act
filings provide the basic source of information to the market and to
potential purchasers, and investors in the secondary market use that
information in making their investment decisions.\55\ Although all
affected funds file reports under the Exchange Act, registered CEFs
also file reports under the Investment Company Act. These Investment
Company Act reports also provide important information to the market
and investors, including information about an affected fund's portfolio
holdings that will be publicly reported on a quarterly basis on Form N-
PORT. We believe that the market will analyze this portfolio holdings
information in a similar manner to how it analyzes financial statements
for operating companies to determine changes in prospects for growth
and performance. Portfolio holdings disclosure on Form N-PORT, for
example, provides important information that is comparable to
information BDCs include in Exchange Act reports for purposes of
providing a quarterly flow of key information to the market. Moreover,
requiring registered CEFs to have timely filed their Investment Company
Act reports also will provide parity among BDCs, registered CEFs, and
operating companies. This is because once Form N-PORT fully replaces
Form N-Q, registered CEFs will only file Exchange Act reports semi-
annually on Form N-CSR, whereas BDCs and operating companies file
Exchange Act reports on Forms 10-K, 10-Q and 8-K.\56\ As such, all
issuers will be required to have filed their quarterly and other
required reports in order to file a short-form registration statement.
---------------------------------------------------------------------------

    \55\ See Proposing Release, supra footnote 10, at text
accompanying nn.42-46.
    \56\ Because Form N-PORT will render reports on Form N-Q
unnecessarily duplicative, once a registered fund begins filing
reports on Form N-PORT, it will no longer be required to file
reports on Form N-Q. See Investment Company Reporting Modernization,
Investment Company Act Release No. 32936 (Dec. 8, 2017) [82 FR 58731
(Dec. 14, 2017)] (delaying the requirement for registered funds to
submit reports on Form N-PORT through the EDGAR system until April
2019 for larger fund groups, and April 2020 for smaller fund
groups). Form N-Q will be rescinded on May 1, 2020. See id.
---------------------------------------------------------------------------

    We received one comment on this particular aspect of the proposal.
This commenter expressed support for this aspect of the proposal,
stating that it provides parity between registered CEFs and operating
companies.\57\
---------------------------------------------------------------------------

    \57\ See Comment Letter of Teachers Insurance and Annuity
Association of America (June 13, 2019) (``TIAA Comment Letter'').
---------------------------------------------------------------------------

b. Information Incorporated by Reference
    As proposed, the same rules on incorporation by reference that
apply to Form S-3 registration statements also will apply to a short-
form registration statement filed on Form N-2.\58\ We did not receive
comments on these amendments and are adopting them as proposed.
Specifically, an affected fund relying on the short-form registration
instruction will be required to:
---------------------------------------------------------------------------

    \58\ See section 803(c)(1) of the BDC Act (directing us to
include an item or instruction that is similar to item 12 on Form S-
3 to provide that a BDC that would otherwise meet the requirements
of Form S-3 shall incorporate by reference the reports and documents
filed by the BDC under the Exchange Act into the registration
statement of the BDC filed on Form N-2). We are amending General
Instruction F.3 of current Form N-2 in its entirety and replacing it
with a new General Instruction F.3. In these provisions and others
that are substantively identical to parallel provisions in Form S-3,
we have included conforming references to a fund's SAI.
---------------------------------------------------------------------------

     Specifically incorporate by reference into the prospectus
and statement of additional information (``SAI''): (1) Its latest
annual report filed pursuant to section 13(a) or section 15(d) of the
Exchange Act that contains financial statements for the registrant's
latest fiscal year for which a Form N-CSR or Form 10-K was required to
be filed; and (2) all other reports filed pursuant to section 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered by
the annual report (backward incorporation by reference); \59\ and
---------------------------------------------------------------------------

    \59\ See new General Instruction F.3.a.(1)-(2) of amended Form
N-2; cf. Item 12(a)(1)-(2) of Form S-3. In addition, if sales of a
class of capital stock are to be registered on Form N-2 and the same
class is registered under section 12 of the Exchange Act, the
affected fund must incorporate by reference the description of the
class contained in the Exchange Act registration statement with
respect to that class (including any amendment or reports filed for
the purpose of updating such description). See new General
Instruction F.3.a.(3) of amended Form N-2; cf. Item 12(a)(3) of Form
S-3.
---------------------------------------------------------------------------

     State that all documents subsequently filed pursuant to
section 13(a), 13(c), 14, or 15(d) of the Exchange Act prior to the
termination of the offering shall be deemed to be incorporated by
reference into the prospectus and SAI (forward incorporation by
reference).\60\
---------------------------------------------------------------------------

    \60\ See new General Instruction F.3.b of amended Form N-2; cf.
Item 12(b) of Form S-3.
---------------------------------------------------------------------------

    We also are adopting, as proposed, an instruction to Form N-2 that
will permit an affected fund filing a short-form registration statement
on Form N-2 to satisfy the disclosure requirements for its prospectus
or SAI by incorporating the information by reference from Exchange Act
reports.\61\ This provision,

which is substantively identical to a parallel item in Form S-3, will
give affected funds filing a short-form registration statement on Form
N-2 the option to either provide required disclosure directly in the
prospectus or SAI or to satisfy Form N-2's disclosure requirements with
information incorporated by reference.\62\ We did not receive any
comments on these particular amendments to Form N-2.
---------------------------------------------------------------------------

    \61\ See new General Instruction F.3 of amended Form N-2. The
amendments will permit a fund to use this incorporated information
to provide the disclosure required by Items 3-12 and Items 16-24 of
Form N-2. See new General Instruction F.3.c of amended Form N-2; cf.
Item 12(d) of Form S-3.
    \62\ The BDC Act directed us to extend this parallel item in
Form S-3 (Item 12) to BDCs that meet Form S-3's requirements. See
supra footnote 58; Item 12(d) of Form S-3; see also section 509(a)
of the Registered CEF Act.
---------------------------------------------------------------------------

    We also are adopting, as proposed, conforming changes to Form N-2's
undertakings.\63\ Form N-2 currently requires an undertaking that would
prevent seasoned funds that file a short-form shelf registration
statement from incorporating information by reference as proposed,
because it requires funds to file post-effective amendments in certain
circumstances without providing an exception that would allow the
required information to be supplied via incorporation by reference.\64\
In contrast, operating companies registering an offering on Form S-3
are not required under the applicable undertaking to file post-
effective amendments if the required information is included in an
Exchange Act report incorporated by reference or a prospectus
supplement that is part of the registration statement.\65\ To implement
the statutory mandates and provide parity for affected funds, we are
adopting amendments to Form N-2's undertakings to provide the same
approach for affected funds filing a short-form registration statement
on that form that applies to operating companies that file on Form S-
3.\66\
---------------------------------------------------------------------------

    \63\ See section 803(b)(2)(P) of the BDC Act (directing us to
revise Item 34 of Form N-2 to require a BDC to provide undertakings
``that are no more restrictive than the undertakings that are
required of a registrant under [Item 512 of Regulation S-K],'' which
sets forth the undertakings an operating company must include in its
registration statement for certain offerings).
    Commenters suggested that the Item 34.1 undertaking to suspend
an offering if a fund's NAV declines more than 10% from its NAV on
its registration statement effective date until the fund amends the
prospectus should not apply to continuous or delayed shelf offerings
conducted by affected funds pursuant to proposed General Instruction
A.2 of Form N-2. See Comment Letter of Dechert LLP (June 10, 2019)
(``Dechert Comment Letter''); IPA Comment Letter; see also Item 34.1
of current Form N-2. Commenters urged that the undertaking should
not apply in these circumstances because the shelf offering could
extend over 3-1/2 years, and the undertaking did not seem necessary
because the fund would amend its prospectus by incorporating by
reference the information from its Exchange Act reports. See Dechert
Comment Letter; IPA comment Letter. We agree, and are amending Item
34.1 to clarify that this undertaking is not applicable in the
circumstance described by commenters. See Item 34.1 of amended Form
N-2.
    \64\ Form N-2 currently requires an affected fund registering an
offering under rule 415 to undertake to file, during any period in
which offers or sales are being made, a post-effective amendment to
the registration statement under certain circumstances, including to
provide any prospectus required by section 10(a)(3) of the
Securities Act. See Item 34.4.a of current Form N-2.
    \65\ See 17 CFR 229.512(a)(1)(iii)(B) (Item 512(a)(1)(iii)(B) of
Regulation S-K).
    \66\ Specifically, our amendments add a new provision to the
relevant undertaking stating that the requirement to undertake to
file a post-effective amendment does not apply if the registration
statement is filed under the short-form registration instruction and
the information required to be included in a post-effective
amendment is contained in Exchange Act reports that are incorporated
by reference into the fund's registration statement or is contained
in a form of prospectus that is part of the registration statement.
See Item 34.3.a of amended Form N-2; cf. Item 512(a) of Regulation
S-K.
     We also are amending Item 34 to make conforming changes to
mirror parallel undertakings in Item 512 of Regulation S-K. See,
e.g., Item 34.3.a(2) of amended Form N-2; cf. Item 512(a)(1)(ii) of
Regulation S-K; Item 34.3.d(1) of amended Form N-2; cf. Item
512(a)(5)(i) of Regulation S-K; Item 34.3.e(2)-(3) of amended Form
N-2; cf. Item 512(a)(6)(ii)-(iii) of Regulation S-K; Item 34.5 of
amended Form N-2; cf. Item 512(b) of Regulation S-K; and Item 34.6
of amended Form N-2; cf. Item 512(h) of Regulation S-K.
    Additionally, in response to comments, we are eliminating the
undertaking in Item 34.3 of current Form N-2, which requires
affected funds to undertake to supplement the prospectus or file a
post-effective amendment to disclose certain information if the
securities being registered are to be offered to existing
shareholders, and if not taken, to be reoffered to the public. See
Dechert Comment Letter; IPA Comment. The Commission recently
eliminated a parallel undertaking from Regulation S-K because other
requirements make the undertaking duplicative and unnecessary. See
FAST Act Modernization and Simplification of Regulation S-K,
Investment Company Act Release No. 33426 (Mar. 20, 2019) [84 FR
12674 (Apr. 2, 2019)] (``FAST Act Modernization Adopting Release''),
at n.171. We are eliminating this undertaking from Form N-2 for the
same reasons, and renumbering Item 34's sub-items accordingly.
---------------------------------------------------------------------------

    The Proposing Release requested comment on whether we should modify
incorporation by reference provisions in other registration forms filed
by affected funds to provide parity or consistency across registration
statements. In particular, we asked if we should amend Form N-14 to
provide that BDCs may incorporate by reference to the same extent as
registered CEFs.\67\ Commenters supported this approach,\68\ which
would provide for more consistent treatment between registered CEFs and
BDCs.
---------------------------------------------------------------------------

    \67\ Form N-14 currently permits a registered CEF--but not a
BDC--to incorporate by reference certain information about the
registrant and the company being acquired that is required by Items
5, 6 and 11-14 of Form N-14 from its prospectus, SAI, or Investment
Company Act reports into the Form N-14 prospectus. See General
Instruction G of current Form N-14.
    \68\ See Dechert Comment Letter; IPA Comment Letter.
---------------------------------------------------------------------------

    We are modifying Form N-14 to allow BDCs to incorporate by
reference to the same extent as registered CEFs. As commenters
observed, this change will provide consistent treatment for BDCs and
registered CEFs. This change also will reduce the length of a BDC's
Form N-14 prospectus, which in some cases can exceed 1,000 pages,
because BDCs cannot currently incorporate information by reference. To
effectuate this change, we are amending the instruction in Form N-14
that governs incorporation by reference to specifically include BDCs
and clarify that current reports include those filed pursuant to
section 13(a) or 15(d) of the Exchange Act.\69\ Additionally, in
response to comments,\70\ we are eliminating the requirement that
registrants file with the Form N-14 registration statement the
documents that contain information that is incorporated by reference
into the prospectus or SAI.\71\ Such documents are filed on EDGAR and
readily available to Commission staff.
---------------------------------------------------------------------------

    \69\ See General Instruction G of amended Form N-14. We also are
eliminating the instruction's reference to sub-paragraph (d) of
Section 30, and will instead reference Section 30 (no sub-part
specified). This change will have the effect of requiring a Form N-
14 registrant that seeks to incorporate by reference to be current
in filing all Section 30 reports, including reports filed on Forms
N-PORT and N-CEN. Commenters also suggested that we further amend
Form N-14 to provide that a seasoned affected fund that incorporates
by reference information about the registrant into the prospectus
need not deliver copies of the documents containing such information
with the prospectus. See, e.g., Dechert Comment Letter. Because the
delivery requirement applies to funds generally and not just
affected funds, we believe that any changes to the requirement
should be considered on a broader basis that is beyond the scope of
this rulemaking.
    \70\ See Dechert Comment Letter; IPA Comment Letter.
    \71\ See General Instruction G of amended Form N-14. The
requirement to file with the registration statement the documents
that contain the information that is incorporated by reference is no
longer necessary given the availability of such documents on EDGAR.
We are similarly eliminating the requirement to file with the
registration statement each document from which information is
incorporated by reference into the SAI.
---------------------------------------------------------------------------

c. Affected Funds' Use of Rule 415(a)(1)(x) and Automatic Shelf
Registration Statements \72\
---------------------------------------------------------------------------

    \72\ As proposed, amended Form N-2 will become effective on
August 1, 2020. The Commission also will need time to modify its
systems to automatically reflect that automatic shelf registration
statements are effective upon filing and process ``pay-as-you-go''
payments for affected funds that are WKSIs. See infra section II.J.
Until such modifications are complete, which is anticipated to be
September 2020, affected funds should contact the staff of the
Division of Investment Management's Disclosure Review and Accounting
Office if they are filing an automatic shelf registration statement.
---------------------------------------------------------------------------

    We are adopting, as proposed, two additional amendments to allow

affected funds to use the shelf registration system in parity with
operating companies. First, we are amending rule 415(a)(1)(x) to
clarify that affected funds may use that rule by adding references to a
registration statement filed under the short-form registration
instruction.\73\ Second, we are adopting a new general instruction to
permit affected funds that qualify as WKSIs to file an automatic shelf
registration statement.\74\ A WKSI can register unspecified amounts of
different types or classes of securities on an automatic shelf
registration statement.\75\ An automatic shelf registration statement
and any amendments to the registration statement will be effective
immediately upon filing.\76\ Automatic shelf registration provides
WKSIs with significant flexibility to take advantage of market windows,
structure terms of securities on a real-time basis to accommodate
investor demand, and determine or change the plan of distribution in
response to changing market conditions. WKSIs using an automatic shelf
registration statement further benefit by being able to pay filing fees
at any time in advance of a shelf takedown or on a ``pay-as-you-go''
basis at the time of each takedown off the shelf registration statement
in an amount calculated for that takedown.\77\ Our amendments will
extend these same benefits to affected funds that qualify as WKSIs, as
directed by the BDC Act and the Registered CEF Act.\78\ We did not
receive any comments on these particular amendments.\79\
---------------------------------------------------------------------------

    \73\ See rule 415(a)(1)(x) (amended to include securities
registered pursuant to General Instruction A.2 of Form N-2). See
also section 803(b)(2)(J) of the BDC Act (directing us to revise
rule 415(a)(1)(x) to provide that a BDC that would otherwise meet
the eligibility requirements of Form S-3 can register its securities
under that provision). Our amendments also add a reference to a Form
N-2 registration statement filed pursuant to General Instruction A.2
to rule 415(a)(2) to make clear that affected funds registering
offerings pursuant to rule 415(a)(1)(ix), like other issuers relying
on that provision, will not be subject to the limitation that they
register an amount of securities that the issuer reasonably expected
would be offered or sold within two years from the date that the
registration statement became effective. Cf. Securities Offering
Reform Adopting Release, supra footnote 5, at 44774-44775.
    \74\ See General Instruction B of amended Form N-2; section
803(c)(2) of the BDC Act (directing that we amend Form N-2 to
include an instruction that is similar to the instruction regarding
automatic shelf registration offerings by WKSIs on Form S-3 to
provide that a BDC that is a WKSI may file automatic shelf offerings
on Form N-2). This instruction will provide that an affected fund
that is a WKSI may use the form as an automatic shelf registration
statement only for the transactions that are described in, and
consistent with the requirements of, General Instruction I.D of Form
S-3. This provides parity with operating companies because General
Instruction I.D of Form S-3 specifies the transactions and
requirements for an automatic shelf registration statement filed on
Form S-3. Consistent with General Instruction I.D of Form S-3,
General Instruction B specifies that the form could not be used as
an automatic shelf registration statement for securities offerings
under rule 415(a)(1)(vii) or (viii).
    \75\ See 17 CFR 230.430B(a) (Securities Act rule 430B(a)).
    \76\ See 17 CFR 230.462(e) and (f) (Securities Act rule 462(e)
and (f)).
    \77\ See 17 CFR 230.457(r) and 17 CFR 230.456(b) (Securities Act
rule 457(r) and rule 456(b)).
    \78\ As proposed, we are making conforming amendments to
Securities Act rule 462(f) and to the registration fee table in Form
N-2 to enhance consistency with Form S-3 and to allow affected funds
that file as WKSIs to use the pay-as-you-go registration fee
process. See section II.J for a discussion of applicable effective
dates for pay-as-you-go registration fees.
    \79\ While we did not receive any comments specifically on the
proposed general instruction to permit affected funds that qualify
as WKSIs to file an automatic shelf registration statement, we did
receive comments on the proposed WKSI standard for affected funds.
Those comments are addressed in section II.C below.
---------------------------------------------------------------------------

d. Omitting Information From a Base Prospectus and Prospectus
Supplements
    The BDC Act directed us to include a process for a BDC to file a
prospectus in the same manner as under rule 424(b).\80\ Consistent with
this directive and with the Registered CEF Act, we are amending, as
proposed, rule 424(f) to allow affected funds to file a prospectus
under rule 424.\81\ As discussed in the Proposing Release, affected
funds registering shelf offerings under Securities Act rule 415
generally can omit required information from the base prospectus that
is unknown or not reasonably available to the fund when the
registration statement becomes effective.\82\ WKSIs and certain issuers
eligible to use Form S-3 for primary offerings are permitted under rule
430B to omit certain additional information. A base prospectus that
omits statutorily-required information is not a final prospectus under
section 10(a) of the Securities Act.\83\ Filing a prospectus supplement
pursuant to rule 424 is one way to provide information required for a
prospectus to satisfy the requirements of section 10(a).\84\
---------------------------------------------------------------------------

    \80\ See section 803(b)(2)(K) of the BDC Act.
    \81\ These amendments will not apply to open-end funds or other
registered investment companies. Accordingly, those investment
companies would continue to file prospectuses pursuant to rule 497.
See amended rule 424(f). We also are amending rule 424(f) to state
that references to the term ``form of prospectus'' in the rule
include the SAI.
    \82\ See 17 CFR 230.409 (Securities Act rule 409).
    \83\ 15 U.S.C. 77j(a).
    \84\ Omitted information also may be provided in a post-
effective amendment or, where permitted, through Exchange Act
filings that are incorporated by reference.
---------------------------------------------------------------------------

    Our rules, however, provide different processes for operating
companies and investment companies to file prospectuses. Operating
companies currently follow rule 424 to file prospectus supplements,
whereas investment companies follow rule 497.
    Although these rules provide similar processes, they have certain
key differences. For example, rule 424(b) is designed to work together
with rule 415(a)(1)(x), and provides additional time for an issuer to
file a prospectus. Rule 497 does not contain provisions specifically
related to offerings under rule 415(a)(1)(x) and requires the fund to
file a prospectus with the Commission before using it. Rule 424 also
requires an issuer to file a prospectus when the issuer makes changes
from or additions to a previously-filed prospectus that are
substantive, whereas rule 497 requires funds to file every prospectus
that varies from any previously-filed prospectus.
    Under the amendment to rule 424(f), an affected fund will be able
to file any type of prospectus enumerated in rule 424(b) to update, or
to include information omitted from, a prospectus or in connection with
a shelf takedown.\85\ We also are amending rule 497 to provide that
rule 424 would be the exclusive rule for affected funds to file a
prospectus supplement other than an advertisement that is deemed to be
a prospectus under 17 CFR 230.482 (rule 482).\86\ This will avoid any
confusion that might result if affected funds were permitted to file
prospectuses under both rule 424 and rule 497, while also continuing to
require affected funds to file rule 482 advertisements as they and
other investment companies do today.
---------------------------------------------------------------------------

    \85\ An affected fund that seeks to file a rule 424(b)(1) or
424(b)(4) prospectus supplement to provide pricing information
omitted pursuant to rule 430A must be able to satisfy the conditions
of rule 430A, which include the requirement to furnish the
``undertakings required by Item 512(i) of Regulation S-K.'' See rule
430A(a)(2) under the Securities Act. To facilitate an affected
fund's ability to rely on the rule, we are amending rule 430A to
require affected funds to provide the parallel undertaking required
by Item 34.4 of amended Form N-2.
    \86\ See amended Securities Act rule 497(l).
---------------------------------------------------------------------------

    We also are adopting, as proposed, an amendment to permit affected
funds to use rule 430B in parity with operating companies.\87\ We
received no comments on this aspect of the proposal. Thus an affected
fund may omit certain information from its prospectus in two
circumstances:
---------------------------------------------------------------------------

    \87\ See Proposing Release, supra footnote 10, at text preceding
n.72.
---------------------------------------------------------------------------

     A WKSI filing an automatic shelf registration statement
may omit the plan

of distribution and information as to whether the offering is a primary
one or an offering on behalf of selling security holders.
     If an issuer is eligible to file a registration statement
on Form S-3 to register a primary offering pursuant to General
Instruction I.B.1 of Form S-3, and is registering the resale of
securities on behalf of selling security holders, it may omit the
identities of selling security holders and the amount of securities to
be registered on their behalf, subject to certain conditions.\88\
---------------------------------------------------------------------------

    \88\ See amended rule 430B (allowing affected funds eligible to
register a primary offering under the short-form registration
instruction to rely on rule 430B). We also are amending the
undertakings in Form N-2 to require affected funds relying on rule
430B to make the same undertakings required of operating companies
that rely on the rule. See Item 34.3.d(1) of amended Form N-2; cf.
Item 512(a)(5)(i) of Regulation S-K. See also supra footnotes 63-66
and accompanying text. Rules 430B and 424 and 17 CFR 230.158 (rule
158) specify when information contained in a prospectus supplement
will be deemed part of and included in the registration statement
and circumstances that will trigger a new effective date of the
registration statement for purposes of section 11(a) of the
Securities Act. These rules apply to affected funds just as they
apply to operating companies.
---------------------------------------------------------------------------

e. Additional Information in Periodic Reports
    As discussed above, the amendments we are adopting will permit
certain affected funds to forward incorporate information from their
Exchange Act reports. These funds may wish to include information in
their periodic reports that is not required to be included in these
reports in order to update their registration statements. We therefore
proposed to include a new instruction to Form N-2 that would allow a
fund to include additional information so as long as the fund included
a statement in the report identifying information that it included for
this purpose to provide context for investors.\89\ After considering
comments we received, we are not adopting this proposed instruction.
---------------------------------------------------------------------------

    \89\ See Proposing Release, supra footnote 10, at n.73 and
accompanying text (discussing proposed Instruction 6.i to Item 24 of
Form N-2).
---------------------------------------------------------------------------

    The commenters that addressed this proposed new instruction to Form
N-2 recommended against requiring this identifying statement in
periodic reports on the grounds that it unnecessarily emphasized
information included to update the fund's registration statement and
could potentially distract investors from other information that may be
more material to their investment decisions.\90\ These commenters also
stated that requiring funds to identify this information would not be
consistent with an integrated disclosure regime in which the
information is incorporated by reference. We have determined not to
adopt the identification requirement. After considering comments, we
are persuaded that requiring an affected fund to highlight information
just because it updates the fund's registration statement could
unnecessarily emphasize it.
---------------------------------------------------------------------------

    \90\ See Dechert Comment Letter; IPA Comment Letter.
---------------------------------------------------------------------------

C. Well-Known Seasoned Issuer Status

    We are adopting, as proposed, amendments that will allow certain
affected funds to qualify as WKSIs. Issuers that qualify as WKSIs are
permitted to receive the greatest degree of benefits from the
modifications to the communications and registration rules that the
Commission adopted in 2005.\91\ A WKSI, for example, can file a
registration statement or amendment that becomes effective
automatically in a broader variety of contexts than a non-WKSI. In
addition, subject to certain conditions, a WKSI may communicate at any
time, including through a free writing prospectus, without violating
the ``gun-jumping'' provisions of the Securities Act.\92\
---------------------------------------------------------------------------

    \91\ Securities Offering Reform Adopting Release, supra footnote
5, at 44727.
    \92\ See infra section II.F.
---------------------------------------------------------------------------

    To qualify as a WKSI, the issuer must meet the registrant
requirements of Form S-3, i.e., it must be ``seasoned'' \93\ and
generally must have at least $700 million in public float.\94\ An
issuer is not eligible for WKSI status if, among other bases: (1) It is
not current and timely in its Exchange Act reports, or (2) it is the
subject of a judicial or administrative decree or order arising out of
a governmental action involving violations of the anti-fraud provisions
of the Federal securities laws (the ``anti-fraud prong'' of the
ineligible issuer definition).\95\
---------------------------------------------------------------------------

    \93\ See supra footnote 28.
    \94\ See paragraph (1)(i)(A) of the WKSI definition in rule 405.
See also supra footnote 19. See also Proposing Release, supra
footnote 10, at n.77 (identifying alternative bases for an issuer to
qualify as a WKSI, including that an issuer may qualify if it has
issued, for cash, within the last three years, at least $1 billion
in aggregate principal amount of non-convertible securities, other
than common equity, in primary offerings registered under the
Securities Act).
    \95\ See paragraphs (1)(i) and (vi) of the definition of
ineligible issuer in Securities Act rule 405.
---------------------------------------------------------------------------

1. WKSI Definition
    As proposed, we are amending rule 405 to delete the exclusion of
affected funds from the definition of WKSI.\96\ In addition, we are
adopting, as proposed, an amendment to the WKSI definition to include a
reference to the registrant requirements of the proposed short-form
registration instruction on Form N-2.\97\ We received no comments on
our proposal to make these particular amendments to rule 405.
Commenters generally supported permitting affected funds to qualify as
WKSIs.\98\
---------------------------------------------------------------------------

    \96\ See amended paragraph (1)(v) of rule 405.
    \97\ See amended paragraph (1)(i) of the WKSI definition in rule
405. In addition, we are adopting, as proposed, amendments to the
definition of WKSI to make conforming references to a registration
statement filed under new General Instruction A.2 of amended Form N-
2. See paragraphs (1)(i) introductory text and (1)(i)(B)(2) of the
definition of WKSI in amended rule 405; new General Instruction A.2
of amended Form N-2. We also are making a conforming amendment, as
proposed, to paragraph (2) of the definition of WKSI to add a
reference to Form N-CSR, the form on which registered CEFs file
their shareholder reports with the Commission. See amendment to
paragraph (2) of the definition of WKSI in amended rule 405. We did
not receive any comments on our proposal to make these conforming
amendments to the WKSI definition in rule 405.
    \98\ See, e.g., ICI Comment Letter; ACC Comment Letter; SIFMA
Comment Letter; MFDF Comment Letter.
---------------------------------------------------------------------------

2. WKSI Eligibility
    The BDC Act directed us to amend Securities Act rule 405 to allow a
BDC to qualify as a WKSI, and the Registered CEF Act directed us to
allow a registered CEF covered by the Act to use the securities
offering rules that are available to operating companies.\99\
Consistent with these directives, and to provide parity in the offering
rules for affected funds and operating companies, we are adopting, as
proposed, amendments to allow affected funds to qualify as WKSIs if
they satisfy the same $700 million public float requirement that
applies to operating companies.
---------------------------------------------------------------------------

    \99\ See section 803(b)(2)(A)(i) of the BDC Act and section
509(a) of the Registered CEF Act.
---------------------------------------------------------------------------

    Our securities offering rules provide WKSIs with certain
registration and communication flexibilities because, among other
reasons, they have a demonstrated market following (i.e., they are
``well-known'').\100\ The Commission has used public float as an
approximate measure of an issuer's market following and the extent to
which the market absorbs information about the issuer that is
ultimately reflected in the price of the issuer's securities.\101\ The
$700 million public

float requirement is meant to encompass issuers that are presumptively
the most widely followed in the marketplace and whose disclosures and
other communications therefore are subject to market scrutiny by
investors, the financial press, analysts, and others.\102\
---------------------------------------------------------------------------

    \100\ See Securities Offering Reform Adopting Release, supra
footnote 5, at n.49 and accompanying text. In establishing the WKSI
category of issuers for operating companies, the Commission stated
that issuers that meet the $700 million public float threshold or
the alternative $1 billion registered offering of non-convertible
securities threshold have a wide following by market participants,
the media, and institutional investors. See id. at section II.A.
    \101\ See, e.g., id. at n.50 (stating that the determination of
public float is based on a public trading market, such as an
exchange or certain over-the-counter markets). See also Shelf
Registration, Securities Act Release No. 6499, at 5 (Nov. 17, 1983)
[48 FR 52889] (``Forms S-3 and F-3 recognize the applicability of
the efficient market theory to those companies which provide a
steady stream of high quality corporate information to the
marketplace and whose corporate information is broadly disseminated.
Information about these companies is constantly digested and
synthesized by financial analysts, who act as essential conduits in
the continuous flow of information to investors, and is broadly
disseminated on a timely basis by the financial press and other
participants in the marketplace.''); see also Covered Investment
Fund Research Reports, Investment Company Act Release No. 33311
(Nov. 30, 2018) [83 FR 64180 (Dec. 13, 2018)] (``Covered Investment
Fund Research Reports Adopting Release'').
    \102\ See Securities Offering Reform Adopting Release, supra
footnote 5, at text accompanying n.40.
---------------------------------------------------------------------------

    Although the comments we received generally supported permitting
affected funds to qualify as WKSIs, commenters also suggested specific
modifications to the proposed amendments to permit certain additional
affected funds to qualify. Several commenters recommended that we
eliminate the public float requirement for affected funds.\103\ Other
commenters recommended that we adopt a substantially lower public float
threshold for affected funds, among other reasons, to make WKSI status
available to a greater percentage of affected funds that have listed
securities.\104\ One such commenter offered a specific suggestion: That
we reduce the public float threshold for affected funds from $700
million to $480 million.\105\ This commenter stated that the $700
million public float requirement adopted in 2005 for operating
companies permitted approximately 30% of operating companies to qualify
as WKSIs, and stated that we should seek to achieve a similar 30%
``target'' by adopting a $480 million public float requirement for
affected funds.
---------------------------------------------------------------------------

    \103\ See ICI Comment Letter (suggesting that we permit affected
funds to qualify as WKSIs solely based on the other proposed
requirements for WKSI status, such as meeting other registrant and
transaction requirements of Form S-3); see also Comment Letter of
Invesco Ltd. (June 10, 2019) (``Invesco Comment Letter'') (same).
See also TIAA Comment Letter (recommending that we eliminate the
public float requirement and adopt a standard for WKSI qualification
for registered CEFs based on whether certain information about the
fund is available to the public, such as information about the
fund's holdings, total return performance, and daily NAV).
    \104\ See ABA Comment Letter. See also TIAA Comment Letter
(recommending that we adopt a $480 million public float requirement
for registered CEFs in order to permit approximately 30% of
registered CEFs to qualify as WKSIs, which would be consistent with
the percentage of operating companies that were permitted to qualify
as WKSIs under the Commission's 2005 securities offering reforms).
    \105\ See TIAA Comment Letter (recommending that we reduce the
public float threshold to $480 million as an alternative to its
recommendation that we eliminate the public float requirement for
affected funds). See supra footnote 103.
---------------------------------------------------------------------------

    As the basis for the recommended elimination of or modification to
the $700 million public float requirement for affected funds, these
commenters stated that while affected funds may not have the same level
of market following as operating companies with the requisite public
float, market following is a less relevant standard for affected funds
than it is for operating companies. These commenters suggested that
certain distinguishing characteristics of affected funds compensate for
their relative lack of market following and corresponding market
scrutiny. For example, commenters stated that affected funds, as pass-
through investment vehicles, have a less complex business than
traditional operating companies, and thus require less market
scrutiny.\106\ Commenters also stated that market scrutiny is less
relevant for affected funds because, unlike operating companies,
affected funds must satisfy the investor protection requirements of the
Investment Company Act and related Commission rules, including
requirements relating to financial transparency, valuation of portfolio
securities, transactions with affiliates, and board oversight, among
others.\107\
---------------------------------------------------------------------------

    \106\ See, e.g., ICI Comment Letter; see also ABA Comment Letter
(stating that, unlike operating companies, affected funds
``generally describe their operations in terms of a stated
investment objective and investment strategies that tend to remain
constant over time''). The ABA Comment Letter further asserted that
the proposed $700 million public float requirement would be
burdensome for affected funds relative to operating companies
because, unlike operating companies, affected funds have a
relatively fixed asset base (and therefore a relatively fixed public
float) that would be unlikely to increase over time to a level that
would satisfy the public float requirement.
    \107\ See, e.g., ABA Comment Letter (stating that the
``operating limitations, oversight requirements and investor
protection provisions'' that apply to affected funds under the
Investment Company Act ``more than compensate for Affected Funds'
lower level of research analyst coverage relative to large operating
companies''); ICI Comment Letter (stating that affected funds ``are
subject to important requirements under the Investment Company Act,
including valuing their investments under board-approved valuation
procedures and ongoing board oversight''); TIAA Comment Letter
(stating that market following is less relevant to affected funds
because, among other reasons, they are subject to ``the valuation
framework of the 1940 Act'').
---------------------------------------------------------------------------

    Similarly, on the basis that public float is not a suitable
criterion for determining WKSI status for affected funds, commenters
also urged that we permit unlisted affected funds (which do not have
public float) to qualify for WKSI status on the basis of their
aggregate NAVs.\108\ In addition to the reasons provided by commenters,
discussed above, for eliminating or modifying the public float
requirement,\109\ these commenters stated that the intermediaries and
distribution platforms through which unlisted affected funds are sold
perform extensive due diligence on unlisted affected funds, resulting
in these funds being subject to scrutiny ``equal'' to the market
scrutiny indicated by a large public float.\110\ Commenters also stated
that technological advancements have made unlisted affected funds'
financial disclosures directly accessible to investors, and that,
particularly in light of the extensive disclosure funds provide,
investors are less dependent on market analysts for financial
information.\111\
---------------------------------------------------------------------------

    \108\ See, e.g., ABA Comment Letter; Dechert Comment Letter; ICI
Comment Letter.
    \109\ Similar to the comments discussed above recommending that
we eliminate or reduce the $700 million public float requirement,
these commenters stated, among other things, that unlisted affected
funds are subject to the Investment Company Act's investor
protection, board oversight, and disclosure requirements, and that
unlisted affected funds are structurally and operationally less
complex than operating companies. See supra footnotes 106-107 and
accompanying text.
    \110\ See Dechert Comment Letter; ABA Comment Letter.
    \111\ See, e.g., Dechert Comment Letter. See section 509(a) of
the Registered CEF Act.
---------------------------------------------------------------------------

    After considering these comments, we are adopting, as proposed,
WKSI requirements for affected funds that are in parity with the
requirements for operating companies. We are not eliminating or
modifying the $700 million public float requirement for affected funds,
or permitting affected funds to qualify as WKSIs based on their
aggregate NAVs. Our amendments will implement the BDC Act and
Registered CEF Act, and are designed to provide parity in the offering
rules for affected funds and operating companies.
    As discussed above, commenters stated that there are certain
distinctions between affected funds and operating companies that
suggest that the $700 million public float requirement is not an
appropriate criterion for determining WKSI status for affected funds.
For example, commenters noted that affected funds generally have less
complex businesses than operating companies, are subject to the
requirements of the Investment Company Act, and provide extensive
financial information to the market. We agree with commenters that the
WKSI framework, which the Commission designed specifically for
operating

companies, is not well-tailored to the specific characteristics of
affected funds. However, these rules are designed to provide WKSI
status to issuers with a demonstrated market following, and the
Commission has for many years used public float, based on a public
trading market, as an approximate measure of a stock's market following
and, consequently, the degree of efficiency with which the market
absorbs information and reflects it in the price of a security.\112\
Moreover, the offering rules for operating companies, which Congress
specifically directed the Commission to extend to certain affected
funds, are not premised on the characteristics of specific types of
issuers, such as whether an issuer's business is less complex than
other issuers' businesses or whether an issuer is subject to different
regulatory requirements. Further, the market following for closed-end
funds is significantly less robust than is the case for operating
companies. As a result, in our view, it would not be appropriate to
select a public float figure that is below the figure used to determine
WKSI status for operating companies.
---------------------------------------------------------------------------

    \112\ See Revisions to the Eligibility Requirements for Primary
Securities Offerings on Forms S-3 and F-3, Securities Act Release
No. 8878 (Dec. 19, 2007) [72 FR 73534 (Dec. 27, 2007)], at text
accompanying n.25; See also Securities Offering Reform Adopting
Release, supra footnote 5, at text accompanying n.52 (``High levels
of analyst coverage, institutional ownership, and trading volume are
useful indicators of the scrutiny that an issuer receives from the
market, although no one statistic can fully capture the extent to
which an issuer is followed by the market.'').
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    We also are not persuaded by commenters that allowing an affected
fund, including an unlisted affected fund, to qualify on the basis of
its aggregate NAV would be consistent with the requirements for an
issuer to qualify as a WKSI, which Congress directed us to extend to
affected funds.\113\ In addition, permitting unlisted affected funds to
qualify as WKSIs based on their aggregate NAVs would result in
disparate treatment between unlisted affected funds and similarly
situated operating companies under these rules. For example, unlisted
real estate investment trusts (``unlisted REITs'') do not have a public
float and therefore generally cannot qualify as WKSIs under the rules
for operating companies. Unlisted REITs, however, have many of the
characteristics that commenters cited in support of permitting unlisted
affected funds to use their aggregate NAVs to qualify as WKSIs.\114\
Nonetheless, unlisted REITs and other unlisted operating companies may
not qualify as WKSIs unless they have the requisite public float or
satisfy one of the alternative bases (which we also are adopting for
affected funds).
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    \113\ As discussed above, the Registered CEF Act, as enacted,
requires us to allow only interval funds and listed registered CEFs
to use the securities offering rules available to operating
companies See supra section II.A. To provide parity of treatment for
similarly situated affected funds, we are exercising our discretion
to extend certain of these rules to unlisted registered CEFs that
are not interval funds. We do not believe, however, that it would be
consistent with the Registered CEF Act to provide these unlisted
registered CEFs with new criteria for qualifying as WKSIs. Indeed,
legislative language that preceded the passage of the Registered CEF
Act would have applied to all registered closed-end investment
companies, but the legislation enacted as the Registered CEF Act was
subsequently narrowed in scope to apply only to listed closed-end
funds and interval funds. Compare the Financial CHOICE Act of 2017,
H.R. 10, 115th Cong. section 499A(a) (June 8, 2017) (directing us to
revise rules to the extent necessary to allow a closed-end company,
as defined in section 5(a)(2) of the Investment Company Act, that is
registered as an investment company under the Act 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 Exchange Act) with section 509(a) of Registered
CEF Act. See also 163 Cong. Rec. H4791, H4792 (2017) (daily ed. June
8, 2017) (statement of Rep. Ellison) (stating that the prior bill
would ``allow even illiquid, nontraded funds to claim multiple
exemptions,'' making it ``harder for the . . . Commission . . . to
police these products for investors'').
    \114\ For example, both unlisted REITS and unlisted affected
funds sell their shares through intermediaries and both types of
entities' financial disclosures have been made directly accessible
to investors through advances in technology.
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    Moreover, many of the distinctions between affected funds and
operating companies that commenters raised are based on the
characteristics of registered funds and BDCs generally, and are not
unique to affected funds. We believe that the particular
characteristics of registered funds, including affected funds, may be
appropriate for the Commission to examine as part of a more
comprehensive consideration of whether the securities offering rules
for funds should be modified rather than in this rulemaking related to
affected funds specifically.\115\
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    \115\ As discussed at infra section III.A.1, affected funds
represent approximately 5.1% of all registered investment companies
by number of funds and approximately 2% by assets. In addition, as
discussed at infra section III.D, we believe that providing affected
funds with specific WKSI-eligibility criteria would not provide
affected funds parity with similarly-situated operating companies
that do not have public float or do not meet the $700 million public
float requirement and thus cannot qualify as WKSIs under the rules
for operating companies.
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    We do not agree with the commenters who stated that changing or
eliminating the WKSI requirements for affected funds would be
consistent with the intent of the Acts. We do not believe, as
commenters suggested, that the BDC Act and Registered CEF Act were
designed to result in a higher percentage of affected funds qualifying
for WKSI status.\116\ Rather, as discussed above, the Acts directed us
to extend to affected funds the benefits of our securities offering
rules that are available to operating companies. We believe that
designing specific WKSI requirements for affected funds to permit a
particular percentage of those funds to qualify as WKSIs would not
provide parity of treatment. Moreover, the $700 million public float
requirement for operating companies was not designed to result in a
certain percentage of operating companies qualifying as WKSIs, as
suggested by the commenter who recommended that the public float
requirement for affected funds be lowered to $480 million.\117\ In
describing the $700 million public float threshold for operating
companies, the Commission observed that the threshold would make the
WKSI provisions available to approximately 30% of listed issuers, but
this was describing the effect of the provision and not its
intent.\118\
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    \116\ See, e.g., Invesco Comment Letter (stating that the
percentage of listed BDCs and registered CEFs that would meet the
$700 million public float requirement, as set forth in the proposing
release, were lower percentages than the Acts were designed to
permit (citing Proposing Release, supra footnote 10, at section
IV.A.1.); ABA Comment Letter (same); Dechert Comment Letter (stating
that a goal of the BDC Act was to improve the flow of funds to
middle-market companies, which would be furthered by permitting
unlisted funds to qualify as WKSIs based on their aggregate NAVs).
    \117\ See TIAA Comment Letter.
    \118\ See Securities Offering Reform Adopting Release, supra
footnote 5, at text following n.48.
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    We also do not agree with commenters that the Registered CEF Act,
by referring to interval funds, requires us to permit affected funds to
qualify as WKSIs based on criteria other than the criteria that apply
to operating companies.\119\ The Registered CEF Act directed us to
allow interval funds (in addition to listed CEFs) to use the securities
offering rules that are available to other issuers required to file
reports under section 13 or 15(d) of the Exchange Act.\120\ As
discussed throughout this release and summarized in Tables 1 and 2
above, the rules that we are amending in this release are available to
all affected funds, including interval funds, that satisfy the relevant
conditions of those rules. In addition, many of the rules we are
amending are not conditioned on an issuer's public

float, such as the amendments to permit affected funds to use the
``access equals delivery'' prospectus delivery framework available to
operating companies.
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    \119\ See, e.g., ICI Comment Letter (stating that the Registered
CEF Act effectively requires the Commission to proceed without a
public float standard to enable interval funds to qualify as
seasoned funds and WKSI funds); Dechert Comment Letter (stating that
adoption of a public float requirement for affected funds
effectively would frustrate the intent of the Registered CEF Act).
    \120\ See section 509(a) of the Registered CEF Act.
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    We are adopting certain targeted amendments to permit certain non-
interval affected funds to rely on rule 486 under the Securities Act.
Unlike the WKSI requirements, rule 486 is specifically designed to
apply to funds. These amendments to rule 486 will permit certain
registered CEFs and BDCs that conduct continuous offerings--regardless
of whether they qualify as WKSIs--to file post-effective amendments and
certain registration statements that become either effective
immediately upon filing under rule 486(b) or automatically effective
after 60 days under rule 486(a).\121\ Similar to the benefits the final
rule will provide to affected funds that qualify as WKSIs or that are
eligible to file short-form registration statements, these amendments
will facilitate certain unlisted affected funds' ability to raise
capital without delay by allowing the funds to more efficiently
maintain effective registration statements while they engage in
continuous offerings. The final rule, therefore, will provide certain
listed affected funds with the flexibility to use a short-form
registration statement and to file registration statements and
amendments that become effective automatically. Additionally, unlisted
affected funds generally will have the flexibility to make filings that
become effective either immediately upon filing or automatically after
60 days. Thus the final rule will provide additional flexibilities to
both listed and unlisted affected funds.
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    \121\ See infra section II.D (discussing the Commission's
request for comment on broadening rule 486(b) in the Proposing
Release and comments received in response to this request, as well
as the amendments we are adopting to rule 486).
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3. Ineligible Issuer Definition
    We are adopting, as proposed, amendments to the definition of
ineligible issuer in rule 405. Although all of the provisions in the
ineligible issuer definition would apply to affected funds, our
amendments are designed to tailor certain of these provisions for
affected funds specifically. First, we are amending the definition of
``ineligible issuer'' to provide that a registered CEF would be
ineligible if it has failed to file all reports and materials required
to be filed under section 30 of the Investment Company Act during the
preceding 12 months. This provision is consistent with the proposed
short-form registration instruction and would mirror the current
Exchange Act reporting provision in the ineligible issuer
definition.\122\ We did not receive any comments on this particular
proposed amendment.
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    \122\ See amended paragraph (1)(i) of the ineligible issuer
definition in rule 405.
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    Second, we are adopting, as proposed, an amendment to the
definition of ineligible issuer to give effect to the definition's
anti-fraud prong in the context of affected funds. Specifically, we are
adopting a parallel anti-fraud prong for affected funds, which provides
that an affected fund is an ineligible issuer if within the past three
years its investment adviser, including any sub-adviser, was the
subject of any judicial or administrative decree or order arising out
of a governmental action that determines the investment adviser aided
or abetted or caused the affected fund to have violated the anti-fraud
provisions of the Federal securities laws.\123\ We believe this
amendment is appropriate because investment companies typically are
externally managed by an investment adviser, which is primarily
responsible for the day-to-day management of the fund and the
preparation of the fund's disclosures.\124\
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    \123\ See amended paragraph (1)(ix) of the ineligible issuer
definition in rule 405.
    \124\ See Proposing Release, supra footnote 10, at text
following n.84.
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    We received several comments requesting that we clarify or modify
certain aspects of the proposed amendments. Commenters suggested that
we clarify that a violation of section 206(4) of the Advisers Act, or
the rules adopted under section 206(4) (except for 17 CFR 275.206(4)-8
(rule 206(4)-8)), by an affected fund's investment adviser or sub-
adviser would not give rise to WKSI ineligibility for the affected
fund.\125\ These commenters also recommended that we modify the
proposed anti-fraud provision so that an affected fund would not be an
ineligible issuer if the investment adviser (or sub-adviser) that was
the subject of a judicial or administrative decree or order as
described in the proposed rule no longer advises the affected fund at
the time the affected fund seeks WKSI status.\126\
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    \125\ See ACC Comment Letter; CBD Comment Letter.
    \126\ Id.
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    Under the anti-fraud prong for affected funds, an affected fund is
ineligible for WKSI status if the affected fund's adviser or sub-
adviser is determined to have aided or abetted or caused a violation by
the fund of the anti-fraud provisions of the Federal securities laws.
As such, only the anti-fraud provisions of the securities laws that
apply to the affected fund itself can give rise to WKSI ineligibility.
There could not be a violation of section 206(4) or the rules adopted
thereunder by an affected fund, because the fund is not itself an
adviser.
    We also do not believe it would be appropriate, as commenters
suggested, to modify the proposed amendments to permit an affected fund
whose adviser or sub-adviser was determined to have aided or abetted or
caused a violation by the fund of the anti-fraud provisions of the
securities laws to preserve its WKSI eligibility by terminating the
adviser or sub-adviser.\127\ An operating company currently will be an
ineligible issuer under the anti-fraud prong even if the operating
company terminates all of the employees who aided or abetted the
underlying violation of the Federal securities laws, and our amendments
will provide comparable treatment if an affected fund were to terminate
its adviser. The affected fund also may have the same board of
directors that was in place when the affected fund violated the anti-
fraud provisions. The specific facts and circumstances relating to a
particular issuer's WKSI status under the ineligible issuer definition