file information under Item 5.07 of Form 8-K (Submission of Matters to
a Vote of Security Holders) from the requirement to furnish information
about matters submitted to a shareholder vote in the fund's annual or
semi-annual shareholder report? Would investors be more likely to miss
information disclosed only on Form 8-K, and not also included in an
annual or semi-annual report to shareholders, because some investors
may be more likely to read a shareholder report rather than monitor for
8-K filings during the year?
     Does a listed registered CEF's compliance with exchange
disclosure rules impact the potential costs and benefits of requiring
listed registered CEFs to report information on Form 8-K? If so, how?
     What are the impacts, if any, of requiring registered CEFs
to make reports on Form 8-K but not subjecting other registered
investment companies to this requirement? \259\ Should we require that
other registered investment companies provide current disclosure on
Form 8-K or otherwise? Why or why not?
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    \259\ We have not proposed requiring registered investment
companies that are not affected funds, such as registered open-end
funds, to report information on Form 8-K because these funds are not
eligible to take advantage of the other amendments to the
registration, communications, and offering rules we are proposing.
Further, the new Form 8-K items we are proposing are tailored to
affected funds and may not provide useful information for other
types of funds. For example, as described below, registered open-end
funds typically invest in more liquid investments for which there is
publicly-available information surrounding events that may impact
valuations, which makes Form 8-K disclosure about these funds'
material write-downs less important to investors. See infra Part
II.H.3.b.ii (discussing proposed Item 10.02 of Form 8-K).
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     In addition to the requests for comment above, we request
general comment on feasible alternatives to our proposal to require
registered CEFs to report on Form 8-K that would minimize the reporting
burdens on funds while maintaining the anticipated benefits of the
reporting and disclosure. We also request comment on the utility of the
information proposed to be included in reports to the Commission,
investors, and the public in relation to the costs to funds of
providing the reports.
b. Proposed Form 8-K Reporting Items for Affected Funds
    We are proposing amendments to Form 8-K as it relates to affected
funds to improve current reporting of important information by affected
funds to investors and the market. We believe it is appropriate to
propose certain new reporting items that would apply to all affected
funds to better tailor Form 8-K disclosure to these types of investment
companies. We believe these amendments enhance parity between affected
funds and operating companies that are able to take advantage of the
registration, communications, and offering rules in the 2005 securities
offering reforms with respect to the amount of current information
available to investors, consistent with the overall intent of the
Registered CEF and BDC Acts.
    We believe many current reporting items are relevant to affected
funds and provide information that is important to investors and the
market. However, based on an analysis of BDC reporting on Form 8-K,
BDCs did not file any reports under 7 of the 23 mandatory reporting
items reflected in Item 1.01 through Item 5.08 over a 3-year review
period, and there was a relatively low volume of reporting on several
other items.\260\ While we recognize that Form 8-K is meant to capture
important events, many of which may occur at a low frequency, we
believe it would be beneficial to investors and the market to make
certain targeted amendments to Form 8-K as it applies to affected funds
to ensure that investors and the markets receive important current
information from affected funds. The additional reporting items we
propose are designed to recognize certain differences between events
that are relevant to affected funds and those that are relevant to
operating companies. We believe these additions should promote parity
between affected funds and operating companies with respect to the
market benefits of current disclosure about relevant important events.
This approach is similar to our approach to applying tailored Form 8-K
reporting requirements to asset-backed issuers.\261\
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    \260\ See also infra footnotes 415-416 and accompanying text.
    \261\ See section 6 of Form 8-K (identifying six discrete
reportable events that apply only to asset-backed securities);
Asset-Backed Securities, Exchange Act Release No. 50905 (Dec. 22,
2004) [70 FR 1506, 1508, 1577-80 (Jan. 7, 2005)] (establishing
separate Form 8-K reportable events for asset-backed securities in
recognition that many of the Commission's then-existing disclosure
and reporting requirements did not elicit relevant information for
most asset-backed securities transactions). Similar to asset-backed
issuers, affected funds differ from corporate issuers because, for
example, they typically do not have employees and they are generally
formed to provide investors with exposure to a pool of assets.
Unlike our approach to asset-backed issuers, we are not proposing a
General Instruction to Form 8-K to exclude affected funds from
certain reporting requirements. While we believe that certain items
will never or very rarely create reporting obligations for affected
funds, excluding affected funds from certain reporting requirements
may unduly complicate Form 8-K and may not provide tangible benefits
since affected funds are unlikely to be subject to such reporting
requirements regardless of whether we provide specific exclusions.

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    Specifically, we are proposing to add new Section 10 to Form 8-K to
list two additional reportable events for affected funds. Under new
Section 10, an affected fund would be required to file a report on Form
8-K if the fund has: (1) A material change to its investment objectives
or policies; or (2) a material write-down in fair value of a
significant investment. The first item represents an event that does
not occur in operating companies and, thus, it has not previously been
considered for purposes of current reporting requirements on Form 8-K.
The second item is similar to the Form 8-K requirement that operating
companies report material impairments, but with necessary modifications
to tailor the disclosure requirements to affected funds and their use
of fair value accounting under generally accepted accounting principles
(``GAAP''). We believe these two events are important to investors and
that affected funds should be required to provide timely disclosure
when they occur. We believe that the proposed reportable events occur
infrequently and should not result in numerous, persistent reports on
Form 8-K by affected funds.
    We request comment immediately below on this general approach and,
separately, discuss each new proposed Form 8-K item.
     Should we add new reporting items to Form 8-K for affected
funds? Why or why not? Should reportable items be the same or different
for registered CEFs and BDCs?
     Should we expressly exclude affected funds from being
required to report certain events covered by existing Form 8-K items,
similar to the approach we took for asset-backed issuers? Which items
should be covered by such an exclusion, and why? What are the potential
benefits and costs of this approach?
     Beyond the proposed additional reporting items for
affected funds, are there other events that are of such importance to
investors that we should require affected funds to report these events
on Form 8-K? What are these events, and why are they important to
investors? What are the potential benefits and costs of requiring an
affected fund to furnish or file a report on Form 8-K for such events?
For example, are there events covered by rule 8b-16(b) under the
Investment Company Act, other than material changes to a fund's
investment objectives or policies, that an affected fund should be
required to report on Form 8-K? \262\ Are there other ways we should
modify Form 8-K to recognize differences between affected funds and
operating companies?
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    \262\ See 17 CFR 270.8b-16(b).
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     An affected fund would be required to file a Form 8-K for
both proposed reporting items in Section 10. Should we instead permit
an affected fund to furnish rather than file a Form 8-K report for any
of the proposed new reporting items? If so, which item, and why? \263\
Should affected funds be permitted to furnish reports under certain
items of Form 8-K that other issuers are required to file?
Alternatively, should affected funds be required to file information
that other issuers may furnish? Please explain any basis for treating
affected funds differently.
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    \263\ A Form 8-K report that is ``furnished'' rather than
``filed'' is not subject to section 18 of the Exchange Act or
otherwise subject to the liabilities of that section, unless the
registrant specifically states that the information is to be
considered ``filed'' under the Exchange Act or incorporates it by
reference into a filing under the Securities Act or the Exchange
Act. See General Instruction B.2 of Form 8-K.
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i. Material Change to Investment Objectives or Policies
    Information about an affected fund's investment objectives or
policies, such as the types of instruments and investment practices it
uses, is important to prospective investors and current shareholders to
help inform their investment decisions. Currently, affected funds
disclose information about a material change in their investment
objectives or policies through a post-effective amendment to a
registration statement (in the case of a fund that is selling its
securities in a delayed or continuous offering) or a periodic report.
For example, certain registered CEFs are not required to amend their
registration statements on an annual basis as long as their annual
reports to shareholders disclose, among other things, any material
changes to the fund's investment objectives or policies that have not
been approved by shareholders.\264\
---------------------------------------------------------------------------

    \264\ See rule 8b-16 under the Investment Company Act [17 CFR
270.8b-16].
---------------------------------------------------------------------------

    Given the importance of this information to investors, we are
proposing to require current disclosure about a material change in an
affected fund's investment objectives or policies.\265\ Under proposed
Item 10.01 of Form 8-K, an affected fund would be required to file a
Form 8-K report if the fund's investment adviser, including any sub-
adviser, has determined to implement a material change to the
registrant's investment objectives or policies, and such change has not
been, and will not be, submitted to shareholders for approval.\266\ A
reporting obligation would be triggered under this item once an
affected fund's adviser determines to implement a material change that
represents a new or different principal portfolio emphasis--including
the types of securities in which the fund invests or will invest, or
the significant investment practices or techniques that the fund
employs or intends to employ--from the fund's most recent disclosure of
its principal objectives or strategies.\267\
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    \265\ For these purposes, investment objectives or policies
would mean the information specified in Item 8.2 of Form N-2. See
proposed Instruction 1 to Item 10.01 of Form 8-K.
    \266\ A sub-adviser is typically responsible for the day-to-day
portfolio management of some or all assets of a fund, subject to
oversight by the fund's adviser and board of directors. We
understand that sub-advisory agreements already establish procedures
for a sub-adviser to communicate with the adviser or board about
matters related to a fund's investment objectives or policies to,
among other things, ensure that the fund's assets are being managed
consistently with its disclosed investment objectives or policies.
    \267\ See proposed Instruction 2 to Item 10.01 of Form 8-K. The
most recent disclosure would be the later of the most recent version
of the fund's prospectus (i.e., that included in the fund's
effective registration statement or as modified through post-
effective amendments or prospectus supplements) or its most recent
periodic report. A BDC's most recent periodic report would be the
most recently filed report on Form 10-Q or Form 10-K, while a
registered CEF's most recent periodic report would be the most
recently filed annual or semi-annual report to shareholders under
rule 30b2-1 under the Investment Company Act.
---------------------------------------------------------------------------

    A report under proposed Item 10.01 would disclose the date the
adviser plans to implement the material change to the affected fund's
objectives or policies, as well as a description of the material
change. This description of the material change should help an investor
understand the change and how it relates to the fund's current
investment objectives and policies.\268\ Affected

funds also may disclose other information related to a material change
in investment objective or policy in a Form 8-K report filed under
proposed Item 10.01. For example, an affected fund could disclose
material changes in the fund's risk factors that are associated with
the material change to its investment objective or policy.\269\
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    \268\ The Form 8-K report should not, for example, solely
discuss a new investment practice or technique without explaining
how it relates to or modifies the fund's most recent disclosure of
its investment objectives and policies.
    \269\ Affected funds are otherwise required to disclose material
changes in risk factors in periodic or annual reports. See Item 1A
to Part II of Form 10-Q (requiring BDCs to disclose any material
change to risk factors previously disclosed in its annual report on
Form 10-K); rule 8b-16(b)(4) (requiring registered CEFs to disclose
any material change in the principal risk factors associated with
investment in the fund in its annual report to shareholders).
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    Affected funds engaged in a delayed or continuous offering of their
securities are subject to other requirements to update the disclosure
in their registration statements. A fund would not be required to file
a Form 8-K report under proposed Item 10.01 if it provides
substantially the same information in a post-effective amendment.\270\
A fund that relies on the proposed short-form registration instruction
could, however, update its registration statement by filing a Form 8-K
report instead of a post-effective amendment.\271\ A registered CEF
relying on rule 8b-16(b) to avoid updating its registration statements
on an annual basis would continue to be required to disclose in its
annual report to shareholders any material change in its investment
objectives or policies.\272\
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    \270\ See proposed Instruction 3 to Item 10.01 of Form 8-K.
    \271\ See supra Part II.B.2.a. If the material change in the
fund's investment objectives or strategies involves facts or events
that, individually or in the aggregate, represent a fundamental
change in the information set forth in the fund's registration
statement and the fund discloses this change on Form 8-K in lieu of
filing a post-effective amendment, the date the fund filed the Form
8-K report would be a new effective date of its registration
statement for purposes of the last paragraph of section 11(a) of the
Securities Act. See rule 158(c)(3) under the Securities Act [17 CFR
230.158(c)(3)].
    \272\ See supra Part II.H.3.a (discussing our determination to
not propose to remove or otherwise modify current disclosure
requirements for registered CEFs that are similar to reportable
events under Form 8-K). Additionally, we believe annual report
disclosure of all material changes to a fund's investment objectives
or policies that have occurred over the past year would continue to
benefit shareholders.
---------------------------------------------------------------------------

    We request comment on our proposal to require Form 8-K disclosure
if an affected fund's adviser has determined to make a material change
to the fund's investment objectives or policies:
     Should a report under proposed Item 10.01 include
different information than what we have proposed? Are there additional
types of information that would be helpful to investors or the market?
For example, should affected funds be required to report under proposed
Item 10.01 any changes to principal risk factors that accompany a
material change to the fund's investment objectives or policies that
the fund discloses in such report? Why or why not?
     Current disclosure on Form 8-K is generally required
within 4 business days after the relevant event occurs.\273\ Should we
modify the timeframe in which an affected fund must file a report under
proposed Item 10.01? If so, what is a more appropriate timeframe, and
why should the reporting timeframe be different for proposed Item 10.01
than the reporting timeframe for other items under Form 8-K? Rather
than require disclosure within 4 business days after an affected fund's
adviser has determined to implement a material change to the fund's
investment objectives or policies, should we require an affected fund
to file a report on Form 8-K concurrent with, or before, any material
change to the fund's investment objectives or policies? Would this
approach be administratively easier or more difficult for funds to
implement in practice? Would this approach raise front-running concerns
or impact the usefulness of information to investors or the market more
generally?
---------------------------------------------------------------------------

    \273\ See General Instruction B.1 of Form 8-K.
---------------------------------------------------------------------------

     Is there a standard industry practice for approving a
material change to a fund's investment objectives or policies before it
is implemented? If so, is there a particular step in the approval
process that should trigger the obligation to file a Form 8-K report
under proposed Item 10.01? If there is not a standard industry
practice, how could we modify the proposal to achieve more consistent
reporting across affected funds? Are there differences between the
approval process for funds with a single adviser and funds with one or
more sub-advisers that we should take into account? \274\
---------------------------------------------------------------------------

    \274\ See supra footnote 266 (discussing sub-advisers).
---------------------------------------------------------------------------

     Instead of generally requiring current disclosure on Form
8-K before a material change to the fund's investment objectives or
policies is implemented, should we require Form 8-K disclosure after
the adviser has begun to implement the material change? If so, when
should we require disclosure? For example, should we require Form 8-K
disclosure when the fund's investment portfolio has changed by a
defined threshold (such as a 5% or 10% change in total assets invested
in a particular industry, asset type, geography, or credit quality)?
What are the advantages and disadvantages of this approach, including
the impact on investors of less timely disclosure?
     Should we exempt registered CEFs from the requirement in
rule 8b-16 to report material changes to a fund's investment objectives
or policies in its annual report if they have already reported the
change on Form 8-K? Why or why not?
     BDCs are required to disclose material changes to their
risk factors on a quarterly basis, while registered CEFs are generally
required to make this disclosure on an annual basis.\275\ Should
registered CEFs be required to provide updated disclosure about
material changes to risk factors on a more frequent basis, such as
semi-annually in their shareholder reports? Why or why not?
---------------------------------------------------------------------------

    \275\ See supra footnote 269.
---------------------------------------------------------------------------

ii. Material Write-Downs
    Item 2.06 of Form 8-K requires a registrant to report certain
information if it concludes that a material charge for impairment to
one or more of its assets is required under GAAP applicable to the
registrant. Because affected funds use fair value accounting to value
their investments, Item 2.06 does not apply to them.\276\ To provide
investors with consistent information and to promote parity with
operating companies, we are proposing a new Form 8-K reporting item
that is conceptually similar to Item 2.06, but tailored to the
accounting method used by affected funds. Specifically, proposed Item
10.02 would require reporting if an affected fund concludes that a
material write-down in fair value of a significant investment is
required under GAAP applicable to the affected fund. An affected fund
would have a reporting obligation under this item once a conclusion
that a material write-down is required is made in accordance with the
fund's valuation procedures.
---------------------------------------------------------------------------

    \276\ In defining ``value,'' section 2(a)(41) of the Investment
Company Act distinguishes between the market value of securities for
which market quotations are readily available and the fair value, as
determined in good faith by the board of directors, of other
securities and assets. See 15 U.S.C. 80a-2(a)(41). Fair value
accounting, as that term is used in GAAP, refers to the method
investment companies use to value all investments, regardless of the
availability of market quotations. Consistent with GAAP, we use fair
value in proposed Item 10.02 to refer to the method for valuing any
investment of an affected fund.
---------------------------------------------------------------------------

    We believe a material decline in the valuation of one or more
significant investments of an affected fund would be important to
investors. Such a decline would likely have a significant impact on the
value of an investment in

the fund. Further, unlike open-end funds, which must maintain
sufficiently liquid assets in order to provide daily redemptions (and
generally must limit their investments in illiquid securities to 15% of
the fund's assets),\277\ affected funds often invest more significantly
in less liquid investments where there is less publicly-available
information surrounding events that may impact valuations.\278\ We
recognize that affected funds--particularly registered CEFs--may hold a
range of investment types, including liquid securities that have
publicly-available pricing information. While investors may have less
need for current disclosure on Form 8-K regarding a material write-down
of an investment that has public pricing information, we propose to
require affected funds to report a material write-down of any
investment type, provided the investment is a significant size of the
fund's portfolio. Capturing all investment types would provide greater
and more uniform information to investors about potentially significant
changes to the value of their investment in an affected fund. We
propose to balance the broad scope of investment types that could
trigger a reporting obligation by limiting this reporting item to only
those investments that are significant in size.
---------------------------------------------------------------------------

    \277\ See rule 22e-4 under the Investment Company Act [17 CFR
270.22e-4]; Investment Company Liquidity Risk Management Programs,
Investment Company Act Release No. 32315 (Oct. 13, 2016) [81 FR
82142 (Nov. 18, 2016)].
    \278\ For example, there is often little information publicly
available about private small and midsized businesses in which BDCs
often invest. While an investor has access to a BDC's schedule of
investments and the fair value of such investments on a quarterly
basis, the investor generally has little insight into the operations
of a portfolio company or events that may impact its value.
---------------------------------------------------------------------------

    Under proposed Item 10.02 of Form 8-K, an affected fund would be
required to report the date it concluded that a material write-down in
fair value was required and an estimate of the amount or range of
amounts of the material write down. Although affected funds may not
assess valuations of their investments on a continuous (i.e., daily or
weekly) basis and are generally only required to calculate their NAVs
at discrete times under the Investment Company Act (e.g., prior to
selling shares or in connection with their periodic reports), we
understand that affected funds typically monitor and review investment
valuations between their periodic reports, particularly if a
significant event occurs that is likely to impact the value of one or
more sizable investments. An affected fund would be required to report
on Form 8-K if it concludes that a material write-down of a significant
investment is required in connection with this process. We recognize
that a fund may write down the fair value of an investment for a
variety of reasons, including company-specific considerations or events
(such as bankruptcy) or macro-level events that cause a market decline
in a certain sector or type of security. An affected fund would not be
required to disclose the reasons it determined that a material write-
down of a significant investment is required.
    With respect to the requirement to report an estimate of the amount
or range of amounts of the material write down, an affected fund would
not be required to disclose an estimate in its initial report on Form
8-K if it was unable to make a good faith estimate at the time it was
required to file a Form 8-K report. However, the affected fund would be
required to file an amended report on Form 8-K under this item within 4
business days after it makes a determination of the estimate or range
of estimates. This approach is similar to current reporting by
operating companies under Item 2.06 of Form 8-K. We believe that this
requirement would be more relevant for less liquid investments where
the affected fund has discretion under GAAP to determine fair value.
    Instruction 1 to proposed Item 10.02 would clarify the meaning of a
``significant'' investment for these purposes.\279\ An investment would
be considered significant if the affected fund's and its other
subsidiaries' investments in a portfolio holding exceed 10% of the
total assets of the registrant and its consolidated subsidiaries.\280\
We are proposing that an investment be greater than 10% of the affected
fund's total assets to be significant for these purposes to focus on
material write-downs that may substantially affect a fund's NAV and,
thus, would be of greater interest to investors. A 10% threshold also
is consistent with our definition of acquisitions and dispositions that
involve a significant amount of assets for purposes of Item 2.01 of
Form 8-K.\281\ To determine whether a portfolio holding is significant,
an affected fund would be required to aggregate investments in the same
issuer.\282\ An affected fund would use the valuation of the portfolio
holding prior to the material write-down to determine whether such
holding exceeds 10% of total assets and, thus, is a significant
investment.
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    \279\ Item 2.06 of Form 8-K requires an operating company to
report a material charge for impairment to one or more of its
assets, including, without limitation, impairments of securities or
goodwill. For purposes of affected funds, we believe it is
appropriate to limit the requirement to report material write-downs
to only those fund investments that are of a significant size
relative to the fund's total portfolio. These material write-downs
would be more likely to substantially affect a fund's NAV and would
be more relevant to investors.
    \280\ Based on staff analysis, approximately 14% of affected
funds hold investments that are greater than 10% of total assets. We
anticipate that fewer funds would be required to file Form 8-K
reports under the proposed item since a reporting obligation is not
triggered unless a material write-down occurs.
    \281\ See Instruction 4 to Item 2.01 of Form 8-K.
    \282\ For example, if an affected fund held debt and equity
securities issued by Company A, it would need to consider the
percentage of total assets invested in Company A securities in the
aggregate to determine whether it had a significant investment under
proposed Item 10.02.
---------------------------------------------------------------------------

    Like Item 2.06 of Form 8-K, an affected fund would not have to file
a report under proposed Item 10.02 if the conclusion to materially
write down a significant investment is made in connection with the
preparation, review, or audit of financial statements required to be
included in the next periodic report under the Exchange Act, the
periodic report is filed on a timely basis, and such conclusion is
disclosed in the report.\283\
---------------------------------------------------------------------------

    \283\ See Instruction to Item 2.06 of Form 8-K; proposed
Instruction 3 to proposed Item 10.02 of Form 8-K. The relevant
periodic reports for registered CEFs would be annual and semi-annual
reports to shareholders on Form N-CSR, while the relevant periodic
reports for BDCs would be quarterly and annual reports on Form 10-Q
and Form 10-K.
---------------------------------------------------------------------------

    Rather than propose to require Form 8-K disclosure about a material
write-down of a significant investment, we considered proposing to
require an affected fund to disclose a significant decline in the value
of its investment portfolio as a whole. Specifically, we considered
requiring an affected fund to report on Form 8-K when its NAV declines
by more than 10% over a specified period. We recognize investors may
have an interest in significant NAV declines for affected funds in
which they invest since, like a material write-down, a significant
decline in NAV will likely impact the value of their investments and
may be useful to inform investment decisions.\284\ Additionally, a
requirement to report a significant decline in NAV would more broadly
apply to all affected funds, while the proposed material write-down
requirement only applies to affected funds that hold large investments
in a

single issuer.\285\ This broader scope could potentially enhance the
information available to investors.
---------------------------------------------------------------------------

    \284\ While shares of an affected fund do not necessarily trade
at NAV, information about an affected fund's NAV could help the
market to price an affected fund's shares in certain circumstances
and could help an investor otherwise make investment decisions,
including by being able to better assess the price of a fund's
shares.
    \285\ See supra footnote 280.
---------------------------------------------------------------------------

    However, a requirement to report significant declines in NAV could
result in a large amount of Form 8-K reporting by affected funds in the
event of a general market downturn or, for funds invested in a
particular sector, a downturn in that sector. Moreover, investors may
already have access to readily-available public information (such as
news reports, disclosure of fund strategies and portfolio holdings, and
daily or weekly NAV information for some funds) that could reduce the
value of this reporting. For example, with respect to affected funds
that already publicly disclose their NAVs on a daily or weekly
basis,\286\ Form 8-K reporting about declines in these funds' NAVs
could be less timely than information that is already available to the
market. Since affected funds publish their NAVs at different
frequencies--from semi-annual to daily NAV reporting--there also is not
a clear baseline for measuring declines in NAV across all affected
funds. This variability likely would either result in inconsistent
reporting standards for affected funds (e.g., if the 10% decline was
measured from the most-recently published NAV) or reporting of stale
information (e.g., if the 10% decline was measured from the NAV a
registered CEF disclosed in its most recent semi-annual shareholder
report, even if it publishes a daily NAV). Given these concerns, we
preliminarily believe that the requirement to report material write-
downs of significant investments in proposed Item 10.02 would be more
likely to provide investors with timely, relevant, and consistent
information that they cannot otherwise discern from currently-available
public disclosures.
---------------------------------------------------------------------------

    \286\ For example, many listed registered CEFs publicly disclose
daily or weekly NAVs. See, e.g., Barron's Market Data Center for
Closed-End Funds, available at http://www.barrons.com/mdc/public/page/2_3040-CEFmain.html.
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    We request comment on proposed Item 10.02 of Form 8-K, including
potential alternatives for providing investors and the market with
timely information about declines in the value of an affected fund's
portfolio:
     Should a report under proposed Item 10.02 include
different information than what we have proposed? Are there additional
types of information that would be helpful to investors or the market?
     Should we modify the timeframe in which an affected fund
must file a report under proposed Item 10.02? If so, what is a more
appropriate timeframe, and why should the reporting timeframe be
different for proposed Item 10.02 than the reporting timeframe for
other items under Form 8-K, particularly Item 2.06?
     Should proposed Item 10.02 only require an affected fund
to report a material write-down of certain types of investments, such
as investments for which there are no readily available market
quotations or investments that do not have publicly-available pricing
information? For any investment types that should be excluded, please
discuss the potential impact on investors (e.g., whether investors have
existing sources of information to identify material declines in the
value of significant portfolio holdings of an affected fund) and
affected funds (e.g., the impact of the exclusion on an affected fund's
reporting burden under proposed Item 10.02).
     Should we limit proposed Item 10.01 to certain types of
affected funds? For example, do affected funds that consistently
publish daily NAVs provide sufficient information to investors and the
market about the value of their portfolios such that information about
material write-downs would not be important?
     Should we modify our proposed definition of a significant
investment to capture a smaller or larger investment size? If so, what
is a more appropriate definition of significant investment for purposes
of proposed Item 10.02, and why?
     Should a reporting obligation be triggered under proposed
Item 10.02 when the affected fund concludes, in accordance with its
valuation procedures, that a material write-down is required under
GAAP, as proposed? Does this approach establish a sufficiently concrete
guideline for determining when a reporting obligation has been
triggered? If not, under what circumstances should an affected fund be
required to report about a material write-down determination?
     Should the determination of a significant investment
account for a group of investments in the same issuer that are
significant in the aggregate? If not, why not? Should a fund also be
required to aggregate derivatives investments that provide exposure to
the same issuer or reference asset under certain circumstances? If so,
when? If an affected fund were required to aggregate derivatives
contracts, what values should it use? Because the market value of a
derivatives contract will generally be small and will not reflect the
market exposure provided by the contract, would it be more appropriate
for a fund to aggregate the value of the underlying reference asset
rather than the value of the derivatives contracts? Why or why not?
     Should we allow an affected fund to not file a Form 8-K
report if the conclusion that a material write-down is required is made
in connection with the preparation, review, or audit of financial
statements required to be included in its next Exchange Act periodic
report, the periodic report is timely filed, and the conclusion is
disclosed in the report, as proposed? Why or why not?
     Do affected funds need more guidance on how to calculate
whether a portfolio holding is a significant investment or on any other
aspects of proposed Item 10.02?
     Instead of requiring affected funds to report material
write-downs of significant investments on Form 8-K, should we require
affected funds to use a different approach to provide information about
declines in the value of their portfolio investments? For example,
should we require affected funds to file Form 8-K reports when their
NAVs decline by a specified percent (such as more than 10%) over a
specified period? If so, what is the appropriate baseline for measuring
a decline in NAV since affected funds publish their NAVs at different
frequencies? For instance, should a NAV decline be measured against the
most recently published NAV or the NAV disclosed in the fund's most
recent periodic report? Is information about a NAV decline relevant for
all affected funds, or should this requirement be limited to a subset
of affected funds (e.g., those that do not publish a NAV on a daily
basis or those that invest in less liquid investments that lack
publicly-available pricing information)? How should such a Form 8-K
reporting requirement interact with the undertaking in Item 34.1 of
Form N-2? \287\ What information should we require in a Form 8-K report
about a significant decline in NAV (e.g., the amount of the NAV
decline, the date of the determination, and the associated impacts on
the fund or its investors)?
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    \287\ This undertaking provides that an affected fund will amend
its prospectus and suspend its offering in the interim if subsequent
to the effective date of its registration statement, the NAV
declines by more than 10% from its NAV as of the effective date of
the registration statement. See Item 34.1 of Form N-2.
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iii. Impact on Eligibility Under the Proposed Short-Form Registration
Instruction of Form N-2 and Safe Harbor
    While operating companies generally must timely file Exchange Act
reports to be eligible to use Form S-3, there is an

exception for failing to timely file reports under certain Form 8-K
items.\288\ Separately, companies that are required to report on Form
8-K have a limited safe harbor from Exchange Act section 10(b) and rule
10b-5 if they fail to file a report under many of the same Form 8-K
items.\289\ For parity, we propose to implement this same general
approach for affected funds.
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    \288\ Form S-3 requires, among other things, that a registrant
has timely filed its required reports, other than reports required
solely pursuant to Items 1.01, 1.02, 1.04, 2.03, 2.04, 2.05, 2.06,
4.02(a), or 5.02(e) of Form 8-K. See General Instruction I.A.3(b) of
Form S-3.
    \289\ See rules 13a-11(c) and 15d-11(c) under the Exchange Act
[17 CFR 240.13a-11(c) and 17 CFR 240.15d-11(c)] (providing a limited
safe harbor for failing to timely file a report required solely
pursuant to Items 1.01, 1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a),
5.02(e), or 6.03 of Form 8-K). Notably, the safe harbor only applies
to a failure to file a report on Form 8-K. It does not provide
protection from section 10(b) and rule 10b-5 where an affected fund
has a duty to disclose information for any reason apart from the
Form 8-K requirement. See 2004 8-K Adopting Release, supra footnote
245, at 15607. For example, the safe harbor would not protect a fund
that files a short-form registration statement from liability under
section 10(b) or rule 10b-5 (or other provisions of the federal
securities laws) if the fund was engaged in an offering and its
failure to file a Form 8-K report under an item covered by the safe
harbor would result in the fund having a material misstatement or
omission in its registration statement. See, e.g., section 10 of the
Exchange Act [15 U.S.C. 78j]; sections 11, 12(a)(2), and 17(a) of
the Securities Act [15 U.S.C. 77k, 77l(a)(2), and 77q(a)]; rule 10b-
5 under the Exchange Act [17 CFR 240.10b-5]; rule 159 under the
Securities Act [17 CFR 230.159].
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    As a general matter, the Commission has excluded Form 8-K items
from the timeliness requirement of Form S-3 and provided a limited safe
harbor for Form 8-K items when they require management to quickly
assess the materiality of an event or to determine whether a disclosure
obligation has been triggered.\290\ Thus, we believe it would be
appropriate to allow affected funds to file short-form registration
statements even if they fail to timely file reports required solely
under proposed Items 10.01 or 10.02, in addition to the other Form 8-K
items identified in Form S-3.\291\ We also propose to extend the safe
harbor to proposed Items 10.01 and 10.02.
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    \290\ The Commission also has considered whether a company's
sudden loss of eligibility to use Form S-3 under the circumstances
could cause a potentially significant negative consequence that is
disproportionate to an untimely Form 8-K filing. See 2004 8-K
Adopting Release, supra footnote 245, at 15606-07.
    \291\ See proposed General Instruction A.2.a of Form N-2. Thus,
an affected fund's failure to timely file a report required solely
pursuant to Item 1.01, 1.02, 1.04, 2.03, 2.04, 2.05, 2.06, 4.02(a),
5.02(e), 10.01, or 10.02 would not affect the fund's ability to meet
the terms of General Instruction I.A.3(b) of Form S-3 for purposes
of the short-form registration instruction of Form N-2.
---------------------------------------------------------------------------

    Like operating companies that use Form S-3, an affected fund that
elects to file a short-form registration statement on Form N-2 would
need to be current in its Form 8-K filings with respect to all required
items at the actual time of a Form N-2 filing.\292\ In addition,
consistent with the approach for operating companies, the safe harbor
from section 10(b) and rule 10b-5 included in rules 13a-11 and 15d-11
would extend only until the due date of the affected fund's periodic
report for the relevant period in which the Form 8-K was not timely
filed.\293\ While we recognize that linking reporting compliance with
continued eligibility to file a short-form registration statement on
Form N-2 may result in loss of access to shelf registration, other
issuers have long faced similar consequences. We believe it would be
appropriate to extend the same treatment to affected funds to provide
parity with operating companies, consistent with the BDC Act and
Registered CEF Act, and in recognition of the important role of timely
Exchange Act reporting in the shelf registration system.\294\
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    \292\ See General Instruction A.2.a of Form N-2; General
Instruction I.A.3(a) of Form S-3.
    \293\ This is already the case for BDCs since they are required
to file periodic reports on Form 10-Q and Form 10-K. See Item 5 of
Form 10-Q and Item 9B of Form 10-K; 2004 Form 8-K Adopting Release,
supra footnote 245, at 15607. We are proposing to add new
Instruction 6.h to Item 24 of Form N-2 to require a registered CEF
to disclose in its next shareholder report any information that it
was required to disclose in a report on Form 8-K for the relevant
half-year period but did not disclose.
    \294\ See supra Part II.B.2.a (discussing the importance of the
timely reporting requirement for purposes of Form S-3 and the
proposed Form N-2 short-form registration instruction).
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    We request comment on the proposed impact of delinquent Form 8-K
filings on eligibility to file a short-form registration statement on
Form N-2 and our proposed safe harbor amendments, particularly with
respect to proposed Items 10.01 and 10.02:
     Should an affected fund lose its eligibility to file a
short-form registration statement on Form N-2 or be disqualified from
the safe harbor from section 10(b) and rule 10b-5 if it fails to timely
report under proposed Items 10.01 or 10.02? If so, why should proposed
Item 10.02 be treated differently than Item 2.06 of Form 8-K?
     Should affected funds be eligible to use the short-form
registration instruction if they fail to timely file Form 8-K reports
under other items, beyond those we have proposed? If so, which items,
and why should affected funds be treated differently than operating
companies for these purposes?
     For purposes of the safe harbor, should a registered CEF
be required to disclose Form 8-K information that it has failed to
timely report on a more frequent basis than semi-annually, given that
BDCs and operating companies must disclose such information on a
quarterly basis? If so, how should we implement such a change since
registered CEFs are not subject to similar quarterly reporting
requirements?
c. Additional Amendments to Form 8-K for Affected Funds
    We are proposing certain modifications to the General Instructions
in Form 8-K, as well as instructions relating to specific reporting
items, to make them more applicable to affected funds, particularly
registered CEFs. These modifications will only apply to affected funds.
    With respect to the General Instructions to Form 8-K, we propose to
add a modified definition of ``previously reported'' in General
Instruction B.3 for registered CEFs. Currently, this instruction makes
it clear that registrants are not required to report on Form 8-K if
they have previously reported substantially the same information in a
statement under section 12 of the Exchange Act, a report under section
13 or 15(d), a definitive proxy statement or information statement
under section 14, or a registration statement under the Securities
Act.\295\ To recognize that registered CEFs also may report information
under the Investment Company Act, we propose to amend the instructions
to make it clear that registered CEFs are not required to make an
additional report on Form 8-K if they have previously reported an event
or transaction in a publicly-available filing described in rule 8b-2(i)
of the Investment Company Act.\296\ This will include certain reports
filed under section 30 and registration statements filed under section
8 of the Investment Company Act. Similarly, we propose to add a
reference to registration statements filed under the Investment

Company Act in General Instruction B.5.\297\
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    \295\ See rule 12b-2 under the Exchange Act [17 CFR 240.12b-2]
(defining ``previously reported'').
    \296\ See rule 8b-2(i) under the Investment Company Act [17 CFR
270.8b-2(i)] (defining ``previously reported'' to include a
registration statement filed under section 8 of the Investment
Company Act or under the Securities Act, a report filed under
section 30 of the Investment Company Act or section 13 or 15(d) of
the Exchange Act, a definitive proxy statement filed under section
20 of the Investment Company Act or section 14 of the Exchange Act,
or a prospectus filed under the Securities Act). This proposal would
not prevent a registered CEF from reporting on Form 8-K information
previously reported in a section 30 report for purposes of forward
incorporating such information into the registration statement by
reference.
    \297\ Amended General Instruction B.5 would provide that, when
considering current reporting on Form 8-K, particularly under Item
7.01 (Regulation FD Disclosure) and Item 8.01 (Other Events),
registrants should have due regard for the accuracy, completeness,
and currency of information in registration statements filed under
the Securities Act and the Investment Company Act that incorporate
by reference information in Exchange Act reports, including reports
on Form 8-K.
---------------------------------------------------------------------------

    As for the amendments to existing reporting items, we are proposing
clarifications to the instructions for Items 2.02 and 3.02 of Form 8-K
to extend certain allowances to affected funds. With respect to Item
2.02 (Results of Operations and Financial Condition), Instruction 4 to
this Item currently states that a registrant is not required to report
information under the Item when it is disclosing its results of
operations and financial condition in a quarterly report on Form 10-Q
or an annual report on Form 10-K. Since registered CEFs do not report
information on these forms, we are proposing to provide the same
treatment to shareholder reports that registered CEFs file with the
Commission under rule 30b2-1 under the Investment Company Act.\298\
Similarly, Instruction 2 to Item 3.02 (Unregistered Sales of Equity
Securities) allows smaller reporting companies to sell a larger
percentage of unregistered securities (relative to the number of shares
outstanding of the relevant class of equity securities) than other
registrants before triggering a Form 8-K reporting obligation,\299\ but
small affected funds would be unable to rely on the current
provision.\300\ We propose to revise Instruction 2 to Item 3.02 to
allow small affected funds to use the same 5% threshold available to
smaller reporting companies.\301\
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    \298\ Rule 30b2-1 requires registered management investment
companies to file on Form N-CSR any shareholder report required to
be transmitted to shareholders under rule 30e-1 and to file a copy
of every periodic or interim report or similar communication
containing financial statements that is transmitted to a class of
shareholders. See 17 CFR 270.30b2-1.
    \299\ This threshold is less than 5% for smaller reporting
companies and less than 1% for other registrants.
    \300\ Instruction 2 to Item 3.02 currently refers to smaller
reporting companies, as defined in Item 10(f)(1) of Regulation S-K.
This definition excludes issuers that are investment companies.
    \301\ We are proposing that an affected fund would be treated
like a smaller reporting company for these purposes if it was an
investment company identified in 17 CFR 270.0-10 (rule 0-10 under
the Investment Company Act). An investment company is considered
small under rule 0-10 if the investment company, together with other
investment companies in the same group of related investment
companies, has net assets of $50 million or less as of the end of
its most recent fiscal year. See 17 CFR 270.0-10.
---------------------------------------------------------------------------

    We request comment on our additional proposed amendments to Form 8-
K:
     For purposes of General Instruction B.3 of Form 8-K, are
there specific reports that a registered CEF makes under section 30 of
the Investment Company Act that we should exclude or include in the
definition of ``previously reported,'' such that a registered CEF would
or would not be required to report information on Form 8-K if it
previously reported substantially the same information in the relevant
report? For example, should the definition of ``previously reported''
include information reported on Form N-CEN and information publicly
reported on Form N-PORT, as proposed?
     With respect to asset-backed securities, Item 1.03 of Form
8-K requires reporting if certain material parties to the asset-backed
security enter bankruptcy proceedings or receivership. Should an
affected fund be required to file a report on Form 8-K if its
investment adviser enters bankruptcy or receivership? Why or why not?
     Is our proposed approach to modifying the definition of
``smaller reporting companies'' for affected funds appropriate? If not,
what category of affected funds should qualify as smaller reporting
companies for purposes of Item 3.02 of Form 8-K? For example, should we
use a standard similar to that in Item 10(f)(1) of Regulation S-K to
define a smaller reporting company?
     Are there other amendments we should make to Form 8-K to
improve current reporting by affected funds or to give them comparable
treatment to operating companies required to report on Form 8-K?
d. Rule 103 of Regulation FD
    Rule 100 of Regulation FD generally requires an issuer to make
either simultaneous or prompt public disclosure of any material
nonpublic information regarding the issuer or its securities that the
issuer or a person acting on its behalf has selectively disclosed to
certain parties.\302\ As recognized above, an issuer may make this
public disclosure by filing or furnishing information on Form 8-K.\303\
Rule 103(a) of Regulation FD provides that an issuer's failure to make
a public disclosure required solely by rule 100 of Regulation FD will
not affect whether, for purposes of eligibility to use Form S-3 and
certain other forms, an issuer is deemed to have filed all materials
required to be filed pursuant to section 13 or section 15(d) of the
Exchange Act (i.e., whether the issuer is ``seasoned'') or to have
filed such materials in a timely manner (i.e., whether the issuer is
``timely'').\304\ The BDC Act requires us to amend rule 103(a) to
provide that, with respect to BDCs, this section applies for purposes
of Form N-2.\305\ To implement the BDC Act, and to provide parity for
affected registered funds consistent with the Registered CEF Act, we
propose to amend rule 103(a) to add references to Form N-2. As a
result, for purposes of amended Form N-2, we would not consider an
affected fund to have failed to file materials it is required to file
pursuant to section 13 or section 15(d) of the Exchange Act, or to have
failed to file these materials in a timely manner, if the affected fund
fails to make public disclosure that is required solely by rule 100 of
Regulation FD. Thus, failure to make a public disclosure required
solely under rule 100 of Regulation FD would not impact an affected
fund's ability to file a short-form registration statement or qualify
as a WKSI.
---------------------------------------------------------------------------

    \302\ 17 CFR 243.100 (requiring simultaneous public disclosure
in the case of an intentional selective disclosure or prompt public
disclosure in the case of a non-intentional selective disclosure).
    \303\ See supra footnote 251.
    \304\ 17 CFR 243.103(a); Selective Disclosure and Insider
Trading, Exchange Act Release No. 43154 (Aug. 15, 2000) [65 FR
51716, 51725-26 (Aug. 24, 2000)].
    \305\ See section 803(b)(2)(O) of the BDC Act.
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    We request comment on our proposed amendment to rule 103 of
Regulation FD:
     Do our proposed amendments to rule 103 of Regulation FD
provide affected funds with comparable treatment to operating
companies? If not, why not?
4. Online Availability of Information Incorporated by Reference
    Above, we discuss our proposal to permit expanded incorporation by
reference for affected funds that choose to file a short-form
registration statement on Form N-2.\306\ We are, in addition, proposing
revisions to Form N-2's current General Instruction for Incorporation
by Reference, which permits all registered CEFs and BDCs (not just
those that would be eligible to file the proposed short-form
registration statement) to backward incorporate their financial
information into the prospectus or SAI. Specifically, we are proposing
to remove the requirement that a fund deliver to new investors
information that it has incorporated by reference into the prospectus
or SAI, and instead require the fund to make its prospectus, SAI, and
the incorporated materials readily available and

accessible on a website.\307\ Our proposal is designed to make readily
available to investors documents that are incorporated by reference,
and to facilitate the efficient use of incorporation by reference by
affected funds.\308\
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    \306\ See supra footnote 47 and accompanying text.
    \307\ Proposed General Instruction F.4.a of Form N-2 would
require a fund to post its prospectus, SAI, and any periodic and
current Exchange Act reports that are incorporated by reference on a
website maintained by or for the fund. Proposed General Instruction
F.4.b of Form N-2 would also require funds to provide to any person
to whom a prospectus or SAI is delivered any materials that were
incorporated by reference upon request, at no charge.
    \308\ We would also conform certain incorporation by reference
provisions of Form N-2 to mirror parallel provisions in Form N-1A,
which has been more recently amended. See proposed General
Instruction F.2.a-c of Form N-2; cf. General Instruction D.1(a)-(c)
of Form N-1A.
---------------------------------------------------------------------------

    Although all registered CEFs and BDCs can ``backward incorporate''
certain financial information from previous Commission filings into
their registration statements, Form N-2 currently requires that a fund
provide to new purchasers a copy of all previously-filed materials that
the fund incorporated by reference into the prospectus and/or SAI.\309\
For example, if the fund sells shares to a new investor, it must
deliver to them the prospectus, along with the financial statements (or
any other information) that is incorporated by reference into the
prospectus. We understand that this requirement creates particular
challenges for BDCs, which generally do not take advantage of the
backward incorporation permitted by Form N-2 because they are required
to include their financial statements in the prospectus.\310\ That
means that if a BDC incorporates its financial statements by reference
into the prospectus, every time it delivers a prospectus to an
investor, it must determine whether the investor is a new investor, and
if so, must also deliver any incorporated material. To avoid the
operational challenges associated with identifying and providing
different disclosure documents to new and existing investors, BDCs
instead generally set forth the required financial and related
information in the prospectus, which can double or even triple the
length of a BDC's prospectus. Registered CEFs, in contrast, are
required to include their financial statements in the SAI,\311\ which
is delivered only upon request. Because we understand that funds
typically receive very few requests for the SAI, registered CEFs,
unlike BDCs, are only minimally affected by the requirement to deliver
incorporated materials to new investors.
---------------------------------------------------------------------------

    \309\ See supra footnote 22. Current General Instruction F.3 of
Form N-2 requires the material incorporated by reference to be
provided with the prospectus and/or the SAI to each person to whom
the prospectus and/or the SAI is sent or given, unless the person
holds securities of the fund and otherwise has received a copy of
the material.
    \310\ See Item 8.6.c and Instruction 1.b to Item 24 of current
Form N-2.
    \311\ See Instruction 1.a to Item 24 of current Form N-2.
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    This proposal is designed to make readily available to investors
documents that are incorporated by reference by requiring an affected
fund to make the incorporated materials, and the corresponding
prospectus and SAI, readily available and accessible on a website
maintained by or for the fund, as identified in the fund's prospectus
and SAI.\312\ Affected funds would also be required to provide
incorporated materials upon request free of charge. We do not believe
that this proposal would result in a substantial reduction in the
amount of information affected funds deliver to investors through the
mail or electronically because most affected funds would rely on rules
172 and 173, as we propose to amend them, to satisfy their prospectus
delivery obligations. An issuer that uses these rules would satisfy its
final prospectus delivery obligations by filing the prospectus with the
Commission rather than delivering the prospectus and any incorporated
materials to investors.\313\
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    \312\ Proposed General Instruction F.4.a of Form N-2; cf.
General Instruction VII.F of Form S-1; Proposed General Instruction
F.4.b(5) of Form N-2; cf. Item 12(c)(1)(v) of Form S-1. We would
eliminate current General Instruction F.3, and move its requirement
directing a fund to state in the prospectus and SAI that it will
furnish, without charge, a copy of the incorporated materials on
request, to proposed General Instruction F.4.b.
    \313\ See supra Part II.D.
---------------------------------------------------------------------------

    These proposed requirements mirror parallel requirements for
certain operating companies that incorporate by reference, and the
requirement to put a fund's prospectus and SAI on a website is
consistent with requirements for open-end funds that choose to use a
summary prospectus.\314\ In addition, many funds currently post their
annual and semi-annual reports and other fund information on their
websites.\315\ Given that the website posting of these types of
disclosure documents has become commonplace for many operating
companies and most funds, we believe it is reasonable to require an
affected fund that chooses to incorporate by reference to post its
prospectus and SAI online, along with any Exchange Act materials
incorporated into those documents,\316\ and that investors likely
expect to be able to access this information on fund websites. Retail
investors, in particular, may be more inclined to look to a fund's
website for its disclosure documents before turning to other sources
for information.\317\A retail investor also could request to receive
the materials directly.
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    \314\ Cf. General Instruction VII.F of Form S-1; Securities Act
rule 498(e) [17 CFR 230.498(e)]. We also recently proposed rule
498A, which would, among other things, require variable annuity and
variable life insurance contracts that choose to use a summary
prospectus to post prospectus(es), SAIs, and certain Exchange Act
reports online. See Variable Contract Summary Prospectus Proposing
Release, supra footnote 172.
    \315\ See also, e.g., Optional internet Availability of
Investment Company Shareholder Reports, Investment Company Act
Release No. 33115 (June 5, 2018) [83 FR 29158 (June 22, 2018)]
(providing funds the option of satisfying their obligations to
transmit shareholder reports by making such reports and other
materials accessible at a website address specified in a notice to
investors); Enhanced Disclosure and New Prospectus Delivery Option
for Registered Open End Management Investment Companies, Investment
Company Act Release No. 28584 (Jan. 13, 2009) [74 FR 4546 (Jan. 26,
2009)] (requiring open-end funds that opt to deliver summary
prospectuses to investors to post prospectus and other disclosure
materials on their websites).
    \316\ A fund must also deliver the incorporated materials upon
request, at no charge. See proposed General Instruction F.4.b of
Form N-2. Investors without internet access, or those that prefer
not to review incorporated materials on a website, could obtain
copies of the materials directly from the fund.
    \317\ Investor testing that the Commission sponsored and
conducted in 2011 suggested that an investor looking for a fund's
annual report is most likely to seek it out on the fund's website,
rather than request it by mail or phone or by retrieving it from our
Electronic Data, Gathering, Analysis, and Retrieval System
(``EDGAR''). See Investment Company Reporting Modernization,
Investment Company Act Release No. 31610 (May 20, 2015) [80 FR
33590, 33626-27 (June 12, 2015)].
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    Finally, we are proposing to streamline Form N-2's current
provisions regarding the disclosure requirements for incorporation by
reference, which are spread across several provisions in current
General Instruction F. We propose to replace these current instructions
with a new General Instruction F.4, which largely mirrors the
disclosure requirements in Item 12(c) of Form S-3. The new instruction
largely streamlines--but does not substantively change--the disclosure
requirements for incorporation by reference currently in Form N-2.\318\
The requirement to disclose the fund's website where the incorporated
information may be accessed is a new addition, and is related to the
proposed online

availability requirements for information that is incorporated by
reference.
---------------------------------------------------------------------------

    \318\ Compare proposed General Instruction F.4.b with current
General Instruction F.3 of Form N-2; cf. Item 12(c) of Form S-3. For
example, the proposed instruction, similar to Form N-2's current
instruction, would require a fund to state in the prospectus and SAI
that it will provide upon request a copy of the information that has
been incorporated by reference into the prospectus or SAI but not
delivered with the prospectus or SAI, and provide contact
information for any request for incorporated information.
---------------------------------------------------------------------------

    We request comment generally on these proposed revisions for
incorporation by reference, including:
     Should we, as proposed, eliminate the requirement that
funds provide a copy of incorporated materials to new investors and
instead require funds to make the incorporated materials, prospectus,
and SAI available on a website? Why or why not?
     Would this proposal negatively affect investors' ability
to receive incorporated information in light of the proposal to permit
affected funds to satisfy their final prospectus delivery obligations
by filing their prospectus with the Commission under rule 172? If so,
how? Would investors without internet access have difficulty requesting
the incorporated materials from the fund?
     Form N-2 only permits an affected fund to backward
incorporate certain financial information into its prospectus or SAI.
We are not proposing to expand the scope of information that may be
backward incorporated into a fund's registration statement. Are there
other items in Form N-2 that we should also permit to be backward
incorporated by reference? If so, which ones and why?
     Does our proposal to require affected funds that
incorporate by reference to post on a website their prospectuses, SAIs,
and periodic and current reports filed under the Exchange Act that are
incorporated by reference into the prospectus or SAI pose any
particular challenges for funds? Is there any reason why funds should
not be required to post this information on a website if they
incorporate the information by reference into their registration
statement? Are there other technological approaches that we should
consider to make available to investors the information that is
incorporated by reference?
     The online posting requirement for incorporated materials,
as proposed, mirrors similar requirements in Form S-1. Should we be
more specific regarding the criteria for online posting, similar to the
requirements for open-end funds that use summary prospectuses? \319\
For example, should Form N-2 specify that the website maintained by or
for the fund must be publicly-available, free of charge? Similarly,
should we specify the format in which materials that are provided upon
request must be delivered (electronically or in paper)? In what format
do funds that receive requests for incorporated materials currently
deliver such documents?
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    \319\ Rule 498(e) under the Securities Act [17 CFR 230.498(e)]
(mutual funds and ETFs); see also Variable Contract Summary
Prospectus Proposing Release, supra footnote 172 (proposing
Securities Act rule 498A(h) for variable contracts).
---------------------------------------------------------------------------

     Our proposed amendments to Form N-2's current provisions
regarding the disclosure requirements for incorporation by reference
are designed to streamline--but not substantively change--the
disclosure requirements for backward incorporation by reference
currently in Form N-2. Do the proposed amendments have this effect?
     Are there any other changes we should make to the proposed
incorporation by reference regime?
5. Enhancements to Certain Registered CEFs' Annual Report Disclosure
    As a general matter, registered investment companies are required
to update their registration statements annually.\320\ Registered CEFs
may take advantage of an exemption that permits them to forgo an annual
update provided that they disclose in their annual reports certain key
changes that have occurred during the prior year.\321\ For example, the
fund must disclose any material changes in its investment objectives or
policies that have not been approved by shareholders, and any material
changes in the principal risk factors associated with an investment in
the fund.\322\ We are concerned, however, that funds disclosing
important changes may not always provide enough context for investors
to understand the implications of those changes. For example, if a fund
does not provide sufficient context, a shareholder may have to look at
a series of documents--from the fund's prospectus, which could be
several years old, plus each subsequent annual report--to understand
the fund's current investment strategy or principal risk factors.\323\
This may burden investors and frustrate the goal of providing
shareholders with important disclosures.
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    \320\ Rule 8b-16 under the Investment Company Act requires all
registered management investment companies, including registered
CEFs, to update their registration statements with the Commission on
an annual basis.
    \321\ Rule 8b-16(b).
    \322\ The rule 8b-16 exemption is conditioned on disclosure in
the annual report of information that repeats or updates certain key
prospectus disclosures, specifically: (1) Information about the
fund's dividend reinvestment plan; (2) material changes in the
fund's investment objectives or policies that have not been approved
by shareholders; (3) any change concerning the fund's control
provisions that has not been approved by shareholders; (4) material
changes in the principal risk factors associated with an investment
in the fund; and (5) any portfolio manager changes. Except for
information about the fund's dividend reinvestment plan (which
requires a complete description of the plan), the fund must only
disclose changes that have occurred during the year covered by the
annual report.
    \323\ See, e.g., Comment Letter from Amy Wellington (Sept. 3,
2018) (noting that there is no one location where a registered CEF
investor can find a fund's strategies, risks and fees; because the
annual report only discloses changes to the fund's strategies and
policies, investors must review the original prospectus and each
subsequent shareholder report to get all of the fund's information).
This comment letter was provided in response to our June 2018
Investor Experience Request for Comment, see infra footnote 206, in
which we sought input from individual investors on how to enhance
fund disclosures.
---------------------------------------------------------------------------

    To allow investors in funds relying on rule 8b-16 to more easily
identify and understand key information about their investments, we
propose to amend the rule to require funds to describe any changes in
enough detail to allow investors to understand each change and how it
may affect the fund. For example, to the extent a fund's principal
investment objectives and policies or principal risk factors have
changed, the fund should describe its investment objectives or
principal risk factors before and after the change. This would provide
context for the change and identify for the investor the fund's current
strategy or principal risk factors. We also propose to require funds to
preface such disclosures with a legend clarifying that the disclosures
provide only a summary of certain changes that have occurred in the
past year, and also state that the summary may not reflect all of the
changes that have occurred since the investor purchased the fund.\324\
---------------------------------------------------------------------------

    \324\ See proposed rule 8b-16(e) under the Investment Company
Act (requiring changes required by paragraphs (b)(2) through (b)(5)
of rule 8b-16 to be described in enough detail to allow investors to
understand each change and how it may affect the fund, and prefaced
with a legend stating that ``[t]he following information [in this
annual report] is a summary of certain changes since [date]. This
may not reflect all of the changes that have occurred since you
purchased [this fund].'').
---------------------------------------------------------------------------

    We request comment on this proposal:
     Would requiring funds that rely on rule 8b-16 to describe
changes to the fund in enough detail to allow investors to understand
each change and how it may affect the fund, as proposed, improve the
quality and scope of the disclosures that investors in these funds
currently receive? To what extent are funds already doing this
voluntarily?
     We also are proposing to require affected funds to report
on Form 8-K if the fund's investment adviser, including any sub-
adviser, has determined to implement a material change to the
registrant's investment objectives or policies, and such change has not
been, and will not be, submitted to shareholders for approval. How
would Form 8-K reports affect the benefits to

investors of receiving contextual information in annual reports?
     Would a fund understand what level of detail the proposed
rule amendments would require it to disclose? Would a fund understand
what it means to describe how a change may affect the fund? Would any
additional clarification in the rule text or guidance be helpful?
     What is the adequacy of information about registered CEFs
in the secondary market in general? Where can investors in a fund with
a stale prospectus look to find information about the fund's current
strategies and risks, or other key information? Do registered CEF
investors have access to sufficient information to make knowledgeable
investment decisions concerning their investments in these funds?
     Should we require funds that rely on rule 8b-16 to update
their registration statements on a periodic basis, for example, every 3
years, as required for certain issuers with shelf registration
statements to bring the disclosures current? Alternatively, should we
require funds to summarize in their annual report certain key
information that would be required in a current prospectus that has
been annually updated? If so, what information should be required (for
example, only the disclosure items that are specified in rule 8b-16, or
certain other Form N-2 disclosure items)? Should we consider making any
other changes to rule 8b-16? If so, what changes and why?

I. Certain Staff No-Action Letters

    Rule 486(b) permits interval funds to file certain post-effective
amendments to their registration statement that become effective
automatically, including an amendment to bring the financial statements
up to date under section 10(a)(3). The rule is designed to recognize
that interval funds may need continuously effective registration
statements and would benefit if certain filings could become effective
automatically.\325\ Our staff has stated that it would not recommend
that the Commission take any enforcement action under section 5(b) or
6(a) of the Securities Act against specific listed registered CEFs
conducting offerings under rule 415(a)(1)(x) on a case-by-case basis
regarding their use of rule 486(b).\326\
---------------------------------------------------------------------------

    \325\ See Post-Effective Amendments to Investment Company
Registration Statements, Securities Act Release No. 7083 (Aug. 17,
1994) [59 FR 43460 (Aug. 24, 1994)] (in adopting rule 486, we noted
that ``[t]he initial proposal of rule 486 recognized that closed-end
interval funds may need continuously effective registration
statements and would benefit if certain filings could become
effective automatically'').
    \326\ See, e.g., Nuveen California Select Tax-Free Income
Portfolio, SEC Staff No-Action Letter (Nov. 21, 2017), PIMCO Dynamic
Income Fund, SEC Staff No-Action Letter (Dec. 12, 2017), Eagle Point
Credit Company, Inc., SEC Staff No-Action Letter (Feb. 14, 2018),
PIMCO Corporate & Income Opportunity Fund and PIMCO Income
Opportunity Fund, SEC Staff No-Action Letter (Sep. 13, 2018), and
DNP Select Income Fund, Inc., SEC Staff No-Action Letter (Oct. 4,
2018). Our staff has not provided these no-action assurances to any
BDC.
---------------------------------------------------------------------------

    The amendments we are proposing today are designed to address the
process by which affected funds, including listed registered CEFs
offering their securities under rule 415(a)(1)(x), may update their
registration statements. The amendments would provide a consistent
regulatory framework for all affected funds. Staff in the Division of
Investment Management are reviewing these no-action letters to
determine if they should be withdrawn in connection with any final
rules we adopt under this proposal.
    We request comment on whether we should make any changes to rule
486(b) to address the concerns expressed by funds that sought no-action
assurances from the staff:
     Should we, for example, permit all or a broader group of
registered CEFs or BDCs to rely on the rule? Why or why not?
     To what extent would expanding the availability of rule
486(b) complement, or conversely, create any tension with, the
amendments we are proposing in this release? For example, if we
permitted all affected funds to rely on rule 486(b), would funds that
would be eligible to file a short-form registration statement on Form
N-2 choose to use rule 486(b) to update their registration statements,
or would they choose to file a short-form registration statement and
update it through Exchange Act reports incorporated by reference? Which
approach would be more efficient for funds and why? Would either
approach be more beneficial to investors? If so, which approach and
why? Would using rule 486(b) be more or less efficient for BDCs or
registered CEFs?

J. Conforming Changes to Form N-2

    In addition to the proposed amendments to Form N-2 discussed
throughout this release that are meant to implement the statutory
mandates and tailor the disclosure and regulatory framework for
affected funds in light of the proposed amendments to the offering
rules, we also are proposing certain non-substantive changes to the
form. These additional proposed changes are designed to provide greater
consistency with similar or parallel provisions in Forms N-1A, S-1, and
S-3, all of which have been more recently amended than Form N-2. For
example, we are proposing stylistic changes, including the renumbering
of certain items, and the elimination of outdated references, such as
the instruction related to paper copies, which are generally no longer
filed, and the requirement to provide a table of contents in an
affected fund's SAI.\327\ We request comment on these proposed
amendments to Form N-2:
---------------------------------------------------------------------------

    \327\ We have also adopted certain changes to Form N-2 in the
FAST Act rulemaking. See FAST Act Modernization Adopting Release,
supra footnote 177. Those amendments, as part of a broader
initiative to modernize and simplify certain disclosure requirements
in Regulation S-K (and related rules and forms), revise certain
rules on incorporation by reference, and require all of the
information on the cover pages of some Exchange Act forms to be
tagged in Inline XBRL format.
---------------------------------------------------------------------------

     Do commenters agree that the proposed amendments to Form
N-2 that are not discussed elsewhere in this release are appropriate?
     Because some affected funds have received exemptive relief
to offer different share classes, our proposal to require registered
CEFs to include MDFP in their annual shareholder reports includes an
instruction requiring funds with multiple share classes to reflect the
performance for each class. Should we revise Form N-2 to clarify any
other disclosure requirements for multi-class funds?
     Are there additional stylistic or similar changes we
should make to Form N-2 to provide greater consistency with similar or
parallel provisions in our other disclosure forms or otherwise to
improve Form N-2's readability? Which changes and why?
     Should we make any technical changes or corrections to
Form N-2? For example, Instruction 1.a. to Item 8.6.c of Form N-2,
which requires BDCs to include financial statements in the prospectus,
directs BDCs to comply with provisions of Regulation S-X that apply to
registered investment companies. This includes a cross-reference to
rule 3-18 of Regulation S-X, which includes the financial statement
timing requirements for registered investment companies. Rule 3-12 of
Regulation S-X, however, specifically prescribes the age of financial
statements for Exchange Act reporting companies, like BDCs. BDCs, as a
matter of practice follow rule 3-12. Should we revise the instruction
to make clear that BDCs should follow the requirements in rule 3-12
(and not rule 3-18) for financial statement timing purposes? If not,
why not?

     Should we make any other conforming changes to Form N-2?
For example, while registered CEFs are required to discuss the material
factors and conclusions that formed the basis for the board's approval
of any investment advisory contract in its shareholder reports,\328\
BDCs are not required to provide this disclosure.\329\ Should we create
such a requirement for BDCs? Why or why not? If yes, where and when
should BDCs provide the disclosure--in any Exchange Act report filed
within a certain period after board approval (e.g., 90 days), or only
in certain reports (e.g., Form 10-K)? Should the disclosure requirement
be set forth in Form N-2, or in the form requirements for any relevant
Exchange Act reports (i.e., Forms 10-Q or 10-K), or elsewhere?
---------------------------------------------------------------------------

    \328\ See Instructions 6.e and 6.f of Item 24 of Form N-2; see
also Item 27(d)(6)(i) of Form N-1A (parallel provision for open-end
funds).
    \329\ The relevant disclosure requirement is contained in a sub-
part of Instruction 6 of Item 24 of Form N-2, which specifically
concerns annual and semi-annual reports required by section 30(e) of
the Investment Company Act and rule 30e-1 thereunder. Because BDCs
do not file these reports, they are not subject to this instruction.
---------------------------------------------------------------------------

K. Compliance Date

    We propose to provide a transition period after the publication of
a final rule in the Federal Register to give affected funds sufficient
time to comply with four of the proposed new requirements, as follows:
     Form 8-K. All affected funds that would be eligible to
file a short-form registration statement would be required to comply
with the full scope of Form 8-K as proposed,\330\ including the new
Form 8-K items for affected funds, by the earlier of: (1) One year
after the publication of a final rule in the Federal Register, or (2)
the date a fund first files a short-form registration statement under
General Instruction A.2 of Form N-2. All other affected funds would be
required to comply 18 months after the date of the publication of a
final rule in the Federal Register.
---------------------------------------------------------------------------

    \330\ See supra Part II.H.3.
---------------------------------------------------------------------------

     MDFP. Any annual report that a registered CEF files one
year or more after the publication of a final rule in the Federal
Register would be required to include the proposed MDFP
disclosures.\331\
---------------------------------------------------------------------------

    \331\ See supra Part II.H.2.b.
---------------------------------------------------------------------------

     Structured Data Requirements. All affected funds subject
to the financial statement or prospectus structured data reporting
requirements that would be eligible to file a short-form registration
statement would be required to comply with those provisions no later
than 18 months after the date of publication of a final rule in the
Federal Register. All other affected funds subject to those
requirements would be required to comply 24 months after publication of
a final rule in the Federal Register. All filers on Form 24F-2 would be
required to comply with the proposed structured data format for this
form \332\ no later than 18 months after the publication of a final
rule in the Federal Register.
---------------------------------------------------------------------------

    \332\ See supra Part II.H.1.d.
---------------------------------------------------------------------------

     Rule 24f-2. The proposed amendments to rules 23c-3 and
24f-2 \333\ would become effective one year after the publication of a
final rule in the Federal Register.
---------------------------------------------------------------------------

    \333\ See supra Part II.G.
---------------------------------------------------------------------------

    We request comment on the proposed compliance dates, and
specifically on the following items:
     Are the proposed compliance dates appropriate? If not, why
not? Is a longer or shorter period necessary to allow registrants to
comply with one or more of these particular amendments? If so, what
would be a recommended compliance date?
     Do any other proposed amendments warrant an extended
compliance period? If so, which ones, why, and what would be an
appropriate compliance date? For example, should affected funds be
given a compliance period within which to transition from filing forms
of prospectuses that vary from the registration statement pursuant to
rule 497 to filing such forms pursuant to rule 424? Are there any
complexities about this change in the filing process that would justify
providing a compliance period? If so, what are those complexities, and
how long would affected funds need to adjust to this change?
     Should we provide affected funds with a different
compliance date, or a transition period, before they are required to
comply with the full scope of the proposed new Form 8-K requirements?
If so, how long should the transition period be, and how should any
transition period be structured? For example, should all affected funds
be permitted to rely on an extended compliance date or any transition
period with respect to filing the new proposed reportable events, or
should such accommodations be available only to registered CEFs
(because, in contrast to BDCs, they generally have not previously been
required to report on Form 8-K)?

III. General Request for Comment

    We request and encourage any interested person to submit comments
regarding the proposed rules and forms, specific issues discussed in
this release, and other matters that may have an effect on the proposed
rules and forms. With regard to any comments, we note that such
comments are of particular assistance to our rulemaking initiative if
accompanied by supporting data and analysis of the issues addressed in
those comments.

IV. Economic Analysis

    We are proposing amendments to our rules designed to carry out the
requirements of section 803 of the BDC Act and section 509 of the
Registered CEF Act and tailor the disclosure and regulatory framework
for affected funds in light of the proposed amendments to the offering
rules applicable to them. Currently, affected funds face regulatory
impediments to capital formation as they are not able to use the
flexible and less costly offering process that operating companies use
when conducting registered securities offerings. This may hinder
affected funds' ability to raise capital, take advantage of favorable
market conditions as operating companies do, and enjoy lower cost of
capital and lower offering costs. Additionally, because of existing
rules, affected funds are unable to communicate about an offering
before a registration statement is filed, and their post-filing
communications are subject to prospectus liability under section 12 of
the Securities Act (or must be accompanied or preceded by the statutory
prospectus). The proposed rules would provide incremental flexibility
to funds in their communications, which may increase the flow of
information to investors. As discussed in detail above, the proposed
rules would affect numerous distinct aspects of how our securities
offering and communications rules apply to affected funds. The proposed
rules would:
     Streamline the registration process to allow eligible
affected funds to use a short-form registration statement to sell
securities ``off the shelf'' more quickly and efficiently in response
to market opportunities; \334\
---------------------------------------------------------------------------

    \334\ See supra Part II.B.
---------------------------------------------------------------------------

     Allow affected funds to qualify as WKSIs under rule 405
under the Securities Act; \335\
---------------------------------------------------------------------------

    \335\ See supra Part II.C.
---------------------------------------------------------------------------

     Allow affected funds to satisfy final prospectus delivery
requirements using the same method as operating companies; \336\
---------------------------------------------------------------------------

    \336\ See supra Part II.D.
---------------------------------------------------------------------------

     Allow affected funds to use communications rules currently
available to operating companies, such

as the use of certain factual business information, forward-looking
information, a free writing prospectus, and broker-dealer research
reports; \337\ and
---------------------------------------------------------------------------

    \337\ See supra Part II.E.
---------------------------------------------------------------------------

     Modify certain aspects of affected funds' disclosure and
regulatory framework in light of the proposed amendments to the
offering rules applicable to them.\338\ These proposed 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 these reports; a new
requirement for registered CEFs to file reports on Form 8-K in parity
with operating companies and BDCs, including new Form 8-K items
tailored to registered CEFs and BDCs; and a proposal to require
interval funds to pay securities registration fees using the same
method that mutual funds and ETFs use today.
---------------------------------------------------------------------------

    \338\ See supra Parts II.F-II.H.
---------------------------------------------------------------------------

A. Introduction and Baseline

    We are sensitive to the economic effects that may result from the
rule proposal, including the benefits, costs, and the effects on
efficiency, competition, and capital formation. Section 3(f) of the
Exchange Act, section 2(b) of the Securities Act, and section 2(c) of
the Investment Company Act state that when engaging in rulemaking that
requires us to consider or determine whether an action is necessary or
appropriate in (or, with respect to the Investment Company Act,
consistent with) the public interest, to consider, in addition to the
protection of investors, whether the action will promote efficiency,
competition, and capital formation. Additionally, section 23(a)(2) of
the Exchange Act requires us, when making rules or regulations under
the Exchange Act, to consider, among other matters, the impact that any
such rule or regulation would have on competition and states that the
Commission shall not adopt any such rule or regulation which would
impose a burden on competition that is not necessary or appropriate in
furtherance of the Exchange Act.
    We have considered the potential costs and benefits that would
result from the proposed rules, as well as the potential effects on
efficiency, competition, and capital formation. Many of the potential
economic effects of the proposed rules would stem from the statutory
mandates, while others would stem from the discretion we are
exercising. We discuss the potential economic effects of the proposed
amendments to implement the statutory mandates in Parts IV.B and IV.C.
We considered certain alternatives to our proposed approach to
implementing the statutory mandate, as discussed in Part IV.D. We are
also proposing certain other amendments to tailor affected funds'
disclosure and regulatory framework. We discuss the potential economic
effects of these discretionary amendments, as well as reasonable
alternatives to these provisions, in Part IV.E. We note that, where
possible, we have attempted to quantify the costs, benefits, and
effects on efficiency, competition, and capital formation expected to
result from the proposed rule. In some cases, however, we are unable to
quantify the economic effects because we lack the information necessary
to provide a reasonable and reliable estimate.
    The baseline we use to analyze the potential effects of the
proposed rules is the current set of legal requirements and market
practices. The proposed rules likely would have a significant impact on
the security offering requirements and disclosure practices of affected
funds. The overall magnitude of the benefits and the costs associated
with the proposed rules will depend on many factors, including the
number of affected funds that rely on the proposed rules. We recognize
that some affected funds would not satisfy the conditions in certain of
the proposed amendments (e.g., those limited to WKSIs or funds that
file a short-form registration statement on Form N-2), and other
affected funds may satisfy the conditions but choose not to rely on the
proposed rules. The discussion below describes our understanding of the
markets and issuers that would be affected by the proposed rules.
1. Number of Affected Funds
    The proposed rules would affect BDCs and registered CEFs. As of
September 30, 2018, there were 807 affected funds, including 103 BDCs
and 704 registered CEFs. To estimate the number of BDCs, we use data
from Form 10-K and 10-Q filings as of September 30, 2018, the latest
data available.\339\ We identify 49 listed BDCs and 54 unlisted BDCs.
The average net assets of the listed BDCs is approximately $729
million, and the average of their total assets is $1.3 billion. Based
on trading data as of June 30, 2018, 44 of the listed BDCs have public
float greater than $75 million (i.e., one of the transaction
requirement thresholds for primary offerings under the short-form
registration instruction) and 14 of those BDCs have public float
greater than $700 million (i.e., the WKSI public float threshold).\340\
---------------------------------------------------------------------------

    \339\ The estimated number of BDCs includes BDCs that have not
registered a securities offering on Form N-2. Certain of our
proposed amendments, such as the proposed requirement to tag certain
Form N-2 prospectus disclosure items in Inline XBRL, would only
apply to affected funds that have filed a registration statement on
Form N-2. As a result, our quantitative estimates of the costs and
paperwork burdens of these proposed amendments with respect to BDCs
may be over-estimates in certain respects.
    \340\ The most recent available data (as of June 30, 2018) on
prices and shares outstanding, which are used to calculate the
public float, is taken from the Center for Research of Securities
Prices (``CRSP'') database. CRSP data on shares outstanding includes
all publicly held shares.
---------------------------------------------------------------------------

    We use data from Morningstar and SEC filings to estimate the number
of registered CEFs.\341\ We identify 516 registered CEFs that were
listed on an exchange as of September 30, 2018, including 1 interval
fund. There were 188 unlisted registered CEFs as of September 30, 2018,
including 56 interval funds. The average net assets of the listed
registered CEFs is approximately $539 million, while the average net
assets of the unlisted registered CEFs is approximately $461
million.\342\ Based on trading data as of June 30, 2018, 457 of the
listed registered CEFs have public float greater than $75 million, and
83 of those funds have public float greater than $700 million.\343\
Information about the types of offerings conducted by different
categories of affected funds for the period of January 1, 2014-December
31, 2018 is reflected in the below table.\344\
---------------------------------------------------------------------------

    \341\ The estimated number of registered CEFs includes
registered CEFs that have not registered a securities offering under
the Securities Act. Certain of our proposed amendments, such as the
proposed requirement that registered CEFs report on Form 8-K,
generally would not apply to these registered CEFs. See, e.g., supra
footnote 243. Thus, our quantitative estimates of the costs and
paperwork burdens of certain of the proposed amendments with respect
to registered CEFs may be over-estimates in certain respects.
    \342\ The average of net assets of registered interval funds is
$448 million.
    \343\ This includes the listed interval fund, which had public
float of approximately $76 million as of June 30, 2018. Data on
prices and shares outstanding, which are used to calculate the
public float, is taken from CRSP.
    \344\ Data on registered offerings (initial public offerings,
equity offerings by seasoned issuers, convertible debt offerings,
and public debt offerings) for BDCs and listed registered CEFs are
taken from Securities Data Corporation's New Issues database
(Thomson Financial). Data on Regulation D offerings was collected
from all Form D filings (new filings and amendments) on EDGAR. Data
on registered offerings for unlisted registered CEFs was collected
from Form N-2 and Form N-CSR filings on EDGAR.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Listed registered     Unlisted registered
         Types of offerings            Offering statistics         Listed BDCs           Unlisted BDCs               CEFs                   CEFs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Registered offerings...............  Number of offerings...  114...................  24...................  31...................  144.
                                     Total amount raised...  $11.7 bil.............  $1.7 bil.............  $5.9 bil.............  $21.4 bil.
                                     Average (median)        $102.8 mil ($65.5 mil)  $7.8 mil ($7.2 mil)..  $190.5 mil ($103.1     $177.3 mil ($31.0
                                      offering amount.                                                       mil).                  mil).
Regulation D offerings.............  Number of offerings...  13....................  72...................  .....................  167.
                                     Total amount raised...  $720.8 mil............  $20.5 bil............  .....................  $6.4 bil.
                                     Average (median)        $55.4 mil ($32.7 mil).  $284.3 mil ($76.3      .....................  $38.3 mil ($6.5 mil).
                                      offering amount.                                mil).
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. Current Securities Offering Requirements for Affected Funds
    The securities offering process for affected funds at present
differs from that for operating companies. Affected funds register
their securities offerings on Form N-2, while operating companies use
other forms (e.g., Form S-1 or Form S-3). As discussed above,
registered investment companies and BDCs are excluded from certain
offering and communication rules available to operating companies.
    Affected funds are expressly excluded from the WKSI definition. As
a result, even if they would otherwise meet the WKSI definition, they
are unable to, for example, file an automatic shelf registration
statement or communicate about an offering before filing a registration
statement.
    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.
Affected funds, however, currently face certain challenges in using the
shelf registration system. These challenges are generally due to the
fact that, unlike operating companies, affected funds cannot: Forward
incorporate information from subsequently-filed Exchange Act reports
into their registration statements, rely on Securities Act rule 430B to
omit certain information from the ``base'' prospectus, or use the
process that operating companies use to file prospectus
supplements.\345\ For example, when an affected fund sells or ``takes
down'' securities from a shelf registration statement, like an
operating company, its registration statement must include all required
information, including any annual update of financial information that
section 10(a)(3) of the Securities Act requires. However, unlike an
operating company, an affected fund must provide any section 10(a)(3)
update to its registration statement by filing a post-effective
amendment, with associated expenses and potential delays related to the
fund's preparation of the amendment and our staff's review and comment
process. In contrast, an operating company filing on Form S-3 would
generally make the section 10(a)(3) update by timely filing its annual
report on Form 10-K containing the issuer's audited financial
statements for the most recently completed fiscal year. The financial
statements would be forward incorporated by reference into the
operating company's registration statement and, thus, the company would
avoid the need to file a post-effective amendment to comply with
section 10(a)(3).
---------------------------------------------------------------------------

    \345\ See supra Part II.B.1.
---------------------------------------------------------------------------

    Currently, affected funds' communications generally are subject to
rule 482 under the Securities Act.\346\ Affected funds can use these
communications only after a fund has filed a registration
statement.\347\ These communications are deemed to be prospectuses that
are subject to prospectus liability under section 12 of the Securities
Act. Rule 138, one of our rules governing research reports published by
broker-dealers, does not currently specifically exclude BDCs and
registered CEFs from research coverage. The rule's conditions are
designed for operating companies, however, and therefore can
effectively preclude broker-dealers from relying on the rule to publish
research reports on affected funds. Broker-dealers can, however,
publish research reports on affected funds under rule 139b or rule
482.\348\
---------------------------------------------------------------------------

    \346\ Affected funds also may engage in communications that are
not deemed a prospectus under section 2(a)(10) of the Securities Act
(e.g., communications that are accompanied or preceded by a
statutory prospectus). See 15 U.S.C. 77b(a)(10).
    \347\ We recently issued a proposal that would allow issuers,
including affected funds, to engage in oral or written
communications with potential investors that are, or are reasonably
believed to be, qualified institutional buyers or institutional
accredited investors, either prior to or following the filing of a
registration statement, to determine whether such investors might
have an interest in a contemplated registered securities offering.
If this rule is adopted, affected funds would be permitted to engage
in certain communications with qualified institutional buyers and
institutional accredited investors outside the context of rule 482
or the communications rules we are proposing to extend to affected
funds in this release. See Solicitations of Interest Prior to a
Registered Public Offering, Securities Act Release No. 10607 (Feb.
19, 2019) [84 FR 6713 (Feb. 28, 2019)].
    \348\ See supra Part II.E.2.
---------------------------------------------------------------------------

    As a general matter, affected funds are limited in their ability to
incorporate information into their registration statements by reference
and are required to deliver a final prospectus to investors. Form N-2
also requires affected funds to provide to new purchasers a copy of all
previously-filed materials that the fund incorporated by reference into
the prospectus and/or SAI. We understand that this requirement creates
particular challenges for BDCs, which generally do not take advantage
of the backward incorporation permitted by Form N-2. Instead, BDCs
generally include the required financial and related information in the
prospectus, which can double or even triple the length of a BDC's
prospectus. For example, the median page length of prospectuses filed
by listed BDCs is approximately 234 pages.\349\
---------------------------------------------------------------------------

    \349\ This estimate is based on the most recent Form N-2 filings
of the 49 listed BDCs.
---------------------------------------------------------------------------

3. Current Disclosure Obligations of Affected Funds
    Affected funds differ in their periodic and current reporting
obligations. Like operating companies, BDCs file annual reports with
audited financials on Form 10-K, quarterly reports with unaudited
financials on Form 10-Q, and current reports on Form 8-K. In 2018, all
49 of the listed BDCs filed form 8-K reports, while only 38 of the 54
unlisted BDCs filed such reports. Registered CEFs file annual reports
to shareholders with audited financials and semi-annual reports to
shareholders with unaudited financials on Form N-CSR. Listed registered
CEFs are also subject to exchange rules that require listed issuers to
provide the market current information in response to certain events
(e.g., dividends announcements through a press release or report on
Form 8-K). In 2018, there were 75 registered CEFs that furnished or
filed Form 8-K reports either voluntarily or as a result of current
disclosure requirements under exchange rules. Of

these, 65 were listed registered CEFs and 10 were unlisted registered
CEFs.

B. Potential Benefits Resulting From the Proposed Implementation of the
Statutory Mandates

    As discussed, the proposed amendments to implement the statutory
mandates are designed to provide securities offering parity between
affected funds and operating companies and streamline the registration
process for BDCs and registered CEFs, consistent with the BDC Act and
the Registered CEF Act. We believe that the proposed rules would
achieve this goal and consequently result in significant benefits in a
number of areas, including by improving access to the public capital
markets and possibly lowering the cost of capital by, among other
things, modifying our rules related to affected funds' ability to
qualify as WKSIs, to use the full shelf registration process, and to
engage in certain communications during a registered offering.\350\
Additionally, as discussed below, we believe that the proposed rules
would provide benefits to investors as well, including by increasing
the flow of valuable information that could be available to investors
to inform their investment decisions. Finally, we believe that the
proposed rules would provide cost-saving options to affected fund
issuers and underwriters.
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    \350\ See also infra Part IV.E (discussing benefits associated
with our discretionary rule amendments).
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1. Improved Access to Capital and Lower Cost of Capital
    We anticipate that the proposed rules would facilitate capital
formation and possibly lower the cost of capital by improving access to
the public capital markets for affected funds. The rules are designed
to reduce regulatory impediments to capital formation and provide more
flexibility to these funds to conduct registered securities offerings.
The amount of flexibility accorded by the proposed rules will depend on
the characteristics of the affected funds, consistent with our rules'
treatment of similarly-situated operating companies. For example, and
as explained below, certain affected funds like large listed BDCs and
large listed registered CEFs are expected to benefit more from the
proposed rules than unlisted BDCs and unlisted registered CEFs,
including unlisted interval funds. The proposed rules would provide the
most flexibility under the communications rules and the automatic shelf
registration system to eligible WKSIs. Other affected funds, such as
seasoned affected funds, also would benefit, albeit to a lesser degree,
from the other revisions to the offering process and our communications
rules.
    The largest increase in capital formation and reduction in cost of
capital that the proposed rules could generate would come from allowing
affected funds to obtain WKSI status. Affected funds that qualify as
WKSIs would enjoy additional flexibility compared to affected funds
that are non-WKSIs.\351\ There are 97 affected funds (14 listed BDCs
and 83 listed registered CEFs) that meet the $700 million public float
criterion as of June 30, 2018.\352\ A WKSI's registration statement and
any subsequent amendments are automatically effective upon filing. This
flexibility would allow affected funds that qualify as WKSIs to
promptly tap favorable windows of opportunity in the public market, to
structure terms of securities on a real-time basis to accommodate
investor demand, and to determine or change the plan of distribution in
response to changing market conditions. For example, affected funds,
which typically trade at a discount to their NAV,\353\ that are WKSIs
would be able to act more quickly to raise capital when their shares
are trading at a premium,\354\ thus increasing the amount of capital
raised and enhancing capital formation.
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    \351\ See supra Part II.C.
    \352\ See supra Part IV.A.1.
    \353\ See, e.g., Jonathan B. Berk and Richard Stanton,
Managerial Ability, Compensation, and the Closed-End Fund Discount,
Journal of Finance, Vol. 62, 529-556 (2007); Jeffrey Pontiff, Costly
Arbitrage: Evidence from Closed-End Funds, Quarterly Journal of
Economics, Vol. 111, 1135-1151 (1996); Charles M.C. Lee, Andrei
Shleifer, and Richard H. Thaler, Investor Sentiment and the Closed-
End Fund Puzzle, Journal of Finance, Vol. 46, 76-110 (1991).
    \354\ See supra footnote 27 (discussing restrictions on affected
funds' ability to sell their shares at a price below NAV).
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    Additionally, WKSIs are not required to pay any registration fees
at the time of the filing of the registration statement. They are only
required to pay the SEC filing fee at the time securities are taken
down and sold off the shelf. This would provide additional flexibility
to qualifying affected funds in that they need only incur such filing
fees if and when they decide to proceed with an offering. The proposed
rules may also lower the cost of capital because they would provide
significant flexibility to affected funds that are WKSIs and their
underwriters in marketing securities. The proposed communications rules
would allow these funds to communicate at any time regarding an
offering.
    Given the important benefits that the WKSI status creates, and the
fact that currently only few affected funds would qualify as WKSIs, it
is possible that advisers to some affected funds may try, through
various means, including raising additional capital and mergers and
acquisitions, to increase their funds' public float to the WKSI
threshold. Thus, possible effects of the rule may include increased
fund size and consolidation of affected funds. Such developments may
increase efficiency by allowing the larger resulting funds to benefit
from improved access and lower cost of capital. We also recognize that
consolidation may be driven by other factors as well, in combination
with the effects of the rule, and typically would be subject to certain
approvals by a fund's board of directors or shareholders.\355\
Potential consolidation and increases in fund size could also reduce
costs to investors by, for example, allowing an affected fund to
realize greater efficiencies and reduce its total operating expenses
over time. However, consolidation also could negatively affect the
number of investment opportunities available to investors if it leads
to a reduction of the number of strategies funds employ. While barriers
to entry in the affected fund industry are relatively low, and it is
possible that new funds will enter the market thereby increasing
competition and investment opportunities, potential consolidation of
affected funds could make it more difficult for new or smaller funds to
compete since funds with larger amounts of assets may have better
access to certain investment opportunities or may be able to offer
lower costs to investors. At present, we are not able to estimate the
effects of these competitive dynamics.
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    \355\ See, e.g., rule 17a-8 under the Investment Company Act [17
CFR 270.17a-8].
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    Other provisions of the proposed rules could also enhance capital
formation and lower the cost of offerings for affected funds that
qualify as seasoned funds and file a short-form registration statement
on Form N-2.\356\ For example, the proposed rules would generally allow
these funds to more efficiently use the shelf registration process if,
like operating companies, they meet the eligibility requirements of
Form S-3.\357\ As of June 30, 2018, there were 501 affected funds that
met the $75 million dollar public float criterion for primary offerings
under Form S-3 (which criterion would be incorporated

into the short-form registration instruction of Form N-2).\358\
Affected funds that qualify would bear fewer costs associated with
updating the information in their registration statements because
information in the fund's Exchange Act reports would be incorporated by
reference into the fund's registration statement. For example, we
estimate that eligible affected funds would file approximately 112
fewer post-effective amendments annually as a result of the proposal,
which would result in an annual aggregate cost reduction of
approximately $7,943,376 for these funds.\359\ Additionally, we
understand that currently BDCs often file prospectus supplements close-
in-time to filing their current and periodic Exchange Act reports to
make sure the BDC's prospectus disclosure provides the same information
as that disclosed in its Exchange Act reports. Under the proposed
rules, eligible BDCs would no longer file these prospectus supplements
since their Exchange Act reports would be incorporated by reference
into their registration statements. As a result, an eligible BDC may,
on average, file approximately 14 fewer prospectus supplements on an
annual basis under the proposed rules.\360\ We anticipate that eligible
registered CEFs also would be able to make fewer prospectus supplement
filings under the proposed rules, although they likely would not
experience as large of a reduction in filings since, among other
things, they file periodic reports on a semi-annual basis (rather than
quarterly) and generally are not required to report on Form 8-K at
present. While we believe that affected funds would likely file fewer
prospectus supplements under the proposed amendments, we are unable to
estimate any reduction in the number of prospectus supplements that
affected funds would file under the proposal, and any associated cost
savings for affected funds, due to certain counterbalancing factors.
For example, if the proposal causes affected funds to increase their
capital-raising activities, they may need to update their prospectuses
more often and may file more prospectus supplements as a result.
However, if affected funds begin to use their Exchange Act reports to
update their prospectuses, as permitted under the proposed amendments
and as we believe they might,\361\ they may file fewer prospectus
supplements. On average, we believe that affected funds would likely
file fewer prospectus supplements under the proposed amendments since
they would be able to update their prospectus more efficiently by
forward incorporating their Exchange Act reports, although an affected
fund that greatly increases its capital-raising activities may not
experience the same reduction in filing burdens.
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    \356\ See supra Part II.B.
    \357\ The short-form registration instruction refers to the
eligibility criteria in Form S-3, with additional references to
reporting requirements under the Investment Company Act.
    \358\ See supra Part IV.A.1.
    \359\ For purposes of the PRA, we estimate that this would
decrease the aggregate annual burden of Form N-2 by 11,984 hours and
would result in a reduction in the cost burden for Form N-2 by
$3,149,776. See infra footnote 448. We monetize the internal burden
of preparing post-effective amendments by multiplying the burden
hours by an estimated wage rate of $400 per hour (11,984 x $400 =
$4,793,600). The estimated wage figure is based on analysis in
previous rulemakings. The total annual cost is calculated by adding
the monetized internal burden ($4,793,600) to the cost of outside
professionals ($3,149,776).
    \360\ This analysis assumes that a BDC would file a prospectus
supplement for each Form 10-Q filing (3 filings per year), Form 10-K
filing (1 filing per year), and Form 8-K filing (estimated to be 10
filings per year), for a total of 14 periodic and current reports
per year. See infra footnote 415 and associated text.
    \361\ See supra Parts II.B.2.c and II.H.2.a.
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    In general, we believe affected funds that qualify for the short-
form registration instruction would experience cost savings associated
with making fewer filings and would be able to use a more efficient
process to update their prospectus disclosure. This would decrease the
costs of eligible funds' registered offerings and would also allow them
to act more quickly to take advantage of favorable market conditions
(e.g., when trading at a premium). Certain seasoned funds registering
securities in shelf offerings also would be able to omit certain
information from their base prospectuses and use the same process as
operating companies to provide omitted information by filing a
prospectus supplement, which would generally make the shelf
registration process less costly for these funds as compared to the
baseline.
    The proposed rule also may provide incremental cost savings to
affected funds that are eligible to file a short-form registration
statement in certain other respects. For example, the proposed rule
would reduce the costs of these funds seeking shareholder approval for
proposals to authorize, issue, modify, or exchange securities by
allowing them to incorporate by reference certain materials rather than
delivering these materials to security holders with the proxy
statement.\362\ We do not anticipate that these cost savings would be
substantial, however, as we understand that affected funds do not often
make these types of proposals to security holders. Affected funds that
are eligible to file a short-form registration statement also could
experience modest cost savings from the proposed amendment to rule 418
since they would no longer be required by that rule to furnish certain
information to the Commission or its staff promptly on request.\363\
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    \362\ See supra Part II.F.2.
    \363\ See supra Part II.F.1.
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    The proposed rules would generate other benefits for affected funds
generally, regardless of whether they are WKSIs or seasoned funds. For
example, the proposal to require affected funds to follow the same
process that operating companies follow to file prospectuses in rule
424 would require that affected funds file prospectus supplements only
if substantive changes from or additions to a previously filed
prospectus are made, whereas currently they are required to file every
prospectus that varies from any previously filed prospectus under rule
497.\364\ Rule 424 also is designed to work together with rule
415(a)(1)(x), and provides additional time for an issuer to file a
prospectus. This proposed change could modestly reduce filing burdens
and should facilitate eligible funds using the shelf registration
process efficiently and in parity with operating companies. Also, the
proposed rules would allow an affected fund to satisfy its obligation
to deliver a final prospectus by filing it with the Commission, thus
decreasing the cost of the offering.\365\ For example, the proposed
rules would permit affected funds to save on printing and mailing costs
for delivering the final prospectus in paper.\366\
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    \364\ See supra Part II.B.2.b.
    \365\ See supra Part II.D.
    \366\ Because a fund is not required to report the extent to
which it relies on Commission guidance, we lack information to
estimate the percentage of funds that solely or predominantly rely
on electronic delivery under existing Commission guidance. See,
e.g., Use of Electronic Media for Delivery Purposes, Investment
Company Act Release No. 21399 (Oct. 6, 1995) [60 FR 53458 (Oct. 13,
1995)]. Affected funds that rely to a greater extent on electronic
delivery of final prospectuses under existing Commission guidance
may realize smaller net cost savings under the proposed rules.
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