Securities Offering Reform for Closed-End Investment Companies, 33290-33394 [2020-07790]

Download as PDF 33290 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 229, 230, 232, 239, 240, 243, 249, 270, and 274 [Release Nos. 33–10771; 34–88606; IC– 33836; File No. S7–03–19] RIN 3235–AM31 Securities Offering Reform for ClosedEnd Investment Companies Securities and Exchange Commission. ACTION: Final rule. AGENCY: The Securities and Exchange Commission (the ‘‘Commission’’) is adopting rules that will modify the registration, communications, and offering processes for business development companies (‘‘BDCs’’) and other closed-end investment companies under the Securities Act of 1933. As directed by Congress, we are adopting rules that will allow these investment companies to use the securities offering rules that are already available to operating companies. These rules will extend to closed-end investment companies offering reforms currently available to operating company issuers by expanding the definition of ‘‘wellknown seasoned issuer’’ to allow these investment companies to qualify; streamlining the registration process for these investment companies, including the process for shelf registration; permitting these investment companies to satisfy their final prospectus delivery requirements by filing the prospectus with the Commission; and permitting additional communications by and about these investment companies during a registered public offering. In addition, we are amending certain rules and forms to tailor the disclosure and regulatory framework to these investment companies. These amendments also will modernize our approach to securities registration fee payment by requiring closed-end investment companies that operate as ‘‘interval funds’’ to pay securities registration fees using the same method as mutual funds and exchange-traded funds and extend the ability to use this payment method to issuers of certain continuously offered, exchange-traded products (‘‘ETPs’’). Additionally, we are expanding the ability of certain registered closed-end funds or BDCs that conduct continuous offerings to make changes to their registration statements on an immediately effective basis or on an automatically effective basis a set period of time after filing. Lastly, we are adopting certain jbell on DSKJLSW7X2PROD with RULES2 SUMMARY: VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 structured data reporting requirements, including for filings on the form providing annual notice of securities sold pursuant to the rule under the Investment Company Act of 1940 that prescribes the method by which certain investment companies (including mutual funds) calculate and pay registration fees. DATES: Effective Dates: This rule is effective August 1, 2020, except for amendatory instructions 21, 22, 30, 31, 33, 34, 41, 42, and 45 which are effective August 1, 2021. Compliance Dates: The applicable compliance dates are discussed below in section II.J. FOR FURTHER INFORMATION CONTACT: Asaf Barouk, Attorney-Adviser; Joel Cavanaugh, Senior Counsel; Terri G. Jordan, Senior Counsel; Amy Miller, Senior Counsel; Angela Mokodean, Senior Counsel; Amanda Hollander Wagner, Branch Chief; David J. Marcinkus, Branch Chief; Jacob D. Krawitz, Branch Chief; or Brian McLaughlin Johnson, Assistant Director, at (202) 551–6792, Investment Company Regulation Office, Division of Investment Management; Charles Kwon, Senior Counsel, Office of Rulemaking, at (202) 551–3430, Division of Corporation Finance; U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to: Commission reference CFR citation (17 CFR) SECURITIES ACT OF 1933 (‘‘SECURITIES ACT’’) 1 Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule Rule 134 .................... 138 .................... 156 .................... 163 .................... 163A ................. 164 .................... 168 .................... 169 .................... 172 .................... 173 .................... 405 .................... 415 .................... 418 .................... 424 .................... 430A ................. 430B ................. 433 .................... 456 .................... 457 .................... 462 .................... 486 .................... § 230.134 § 230.138 § 230.156 § 230.163 § 230.163A § 230.164 § 230.168 § 230.169 § 230.172 § 230.173 § 230.405 § 230.415 § 230.418 § 230.424 § 230.430A § 230.430B § 230.433 § 230.456 § 230.457 § 230.462 § 230.486 1 15 U.S.C. 77a et seq. U.S.C. 78a et seq. 3 15 U.S.C. 80a–1 et seq. 2 15 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 Commission reference Rule 497 .................... Form S–1 .................. Form S–3 .................. Form N–14 ................ Form F–1 .................. Form F–3 .................. CFR citation (17 CFR) § 230.497 § 239.11 § 239.13 § 239.23 § 239.31 § 239.33 REGULATION S–T [17 CFR 232.10 THROUGH 232.903] Rule 11 ...................... Rule 405 .................... § 232.11 § 232.405 SECURITIES EXCHANGE ACT OF 1934 (‘‘EXCHANGE ACT’’) 2 Schedule 14A ............ Rule 103 of Regulation FD. § 240.14a–101 § 243.103 INVESTMENT COMPANY ACT OF 1940 (‘‘INVESTMENT COMPANY ACT’’) 3 Rule 8b–16 ................ Rule 23c–3 ................ Rule 24f–2 ................. Form 24F–2 .............. § 270.8b–16 § 270.23c–3 § 270.24f–2 § 274.24 SECURITIES ACT AND INVESTMENT COMPANY ACT Form N–2 .................. §§ 239.14 and 274.11a–1 EXCHANGE ACT AND INVESTMENT COMPANY ACT Form N–CSR ............ §§ 249.331 and 274.128 Table of Contents I. Introduction II. Discussion A. Scope of Closed-End Investment Companies Affected by the Final Rule B. Registration Process 1. Current Shelf Offering Process for Affected Funds 2. Amendments to the Registration Process for Affected Funds 3. Short-Form Registration on Form N–2 C. Well-Known Seasoned Issuer Status 1. WKSI Definition 2. WKSI Eligibility 3. Ineligible Issuer Definition D. Automatic or Immediate Effectiveness for Filings by Affected Funds Conducting Certain Continuous Offerings E. Final Prospectus Delivery Reforms F. Communications Reforms 1. Offering Communications 2. Broker-Dealer Research Reports G. Other Rule Amendments 1. Rule 418 Supplemental Information 2. Amendments to Incorporation by Reference Into Proxy Statements 3. Rule 103 of Regulation FD H. New Registration Fee Payment Method for Interval Funds and Issuers of Certain Exchange-Traded Products I. Disclosure and Reporting Parity Proposals E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 1. Structured Data Requirements 2. Periodic Reporting Requirements 3. Current Reporting Requirements for Affected Funds 4. Online Availability of Information Incorporated by Reference 5. Amendments to Certain Registered CEFs’ Annual Report Disclosure J. Effective and Compliance Dates III. Economic Analysis A. Introduction and Baseline 1. Number of Affected Funds 2. Current Securities Offering Requirements for Affected Funds 3. Current Disclosure Obligations of Affected Funds B. Potential Benefits Resulting From the Proposed Implementation of the Statutory Mandates 1. Improved Access to Capital and Lower Cost of Capital 2. Facilitated Communication With Investors C. Potential Costs Resulting From the Proposed Implementation of the Statutory Mandates 1. Compliance Costs 2. Other Costs D. Alternatives to Adopted Approach To Implementing Statutory Mandates E. Discussion of Discretionary Choices 1. New Registration Fee Payment Method for Interval Funds and Issuers of Certain Exchange-Traded Products 2. Structured Data Requirements 3. Periodic Reporting Requirements 4. Discretionary Amendments to Incorporation by Reference Requirements 5. Automatic or Immediate Effectiveness of Filings by Affected Funds Conducting Certain Continuous Offerings IV. Paperwork Reduction Act Analysis A. Background B. Summary of the Amendments and Impact on Information Collections 1. Amendments to Form N–2 Registration Statement 2. Structured Data Reporting Requirements 3. New Annual Reporting Requirements Under 17 CFR 270.30e–1 (Rule 30e–1) and Exchange Act Periodic Reporting Requirements for BDCs 4. Securities Offering Communications 5. Prospectus Delivery Requirements 6. Form 24F–2 7. Amendments Permitting the Registration of Offerings of an Indeterminate Number of Exchange-Traded Vehicle Securities and the Payment of Registration Fees for Such Offerings on an Annual Net Basis 8. Amendments to Form N–14 V. Final Regulatory Flexibility Analysis A. Need and Objectives of the Final Rule B. Significant Issues Raised by Public Comments C. Small Entities Subject to the Rule D. Projected Reporting, Recordkeeping, and Other Compliance Requirements 1. Registration Process and Final Prospectus Delivery 2. Communications Rules 3. New Registration Fee Payment Method for Interval Funds 4. Disclosure and Reporting Requirements 5. Automatic or Immediate Effectiveness for Filings by Affected Funds VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 Conducting Certain Continuous Offerings E. Agency Action To Minimize Effect on Small Entities 1. Alternatives to the Adopted Approach To Implementing Statutory Mandates 2. Alternative Approaches to Discretionary Choices VI. Other Matters VII. Statutory Authority I. Introduction We are adopting rules that will modify the registration, communications, and offering processes for business development companies (‘‘BDCs’’) and registered closed-end investment companies (‘‘registered CEFs’’), including interval funds (collectively, ‘‘affected funds’’) under the Securities Act.4 In 2005, the Commission adopted securities offering reforms for operating companies to modernize the securities offering and communication processes while maintaining the protection of investors under the Securities Act.5 At that time, the Commission specifically excluded all investment companies—including affected funds—from the scope of the reforms.6 Now, as directed by Congress, we are adopting rules that will allow affected funds to use the securities offering rules that are already available to operating companies. The Small Business Credit Availability Act (the ‘‘BDC Act’’) directs us to allow a BDC to use the securities offering rules that are available to other issuers required to file reports under section 13(a) or section 15(d) of the 4 BDCs are a category of closed-end investment companies that do not register under the Investment Company Act, but rather elect to be subject to the provisions of sections 55 through 65 of the Investment Company Act. See section 2(a)(48) of the Investment Company Act [15 U.S.C. 80a– 2(a)(48)]. Congress established BDCs for the purpose of making capital more readily available to small, developing and financially troubled companies that do not have ready access to the public capital markets or other forms of conventional financing. See H.R. Rep. No. 1341, 96th Cong., 2d Sess. 21 (1980). See infra section II.A for additional discussion of the definition of ‘‘affected funds.’’ ‘‘Interval funds’’ are a type of registered CEF or BDC that make periodic repurchase offers pursuant to rule 23c–3 under the Investment Company Act. See 17 CFR 270.23c–3 (‘‘rule 23c–3’’). 5 Securities Offering Reform, Securities Act Release No. 8591 (July 19, 2005) [70 FR 44721 (Aug. 3, 2005)] (‘‘Securities Offering Reform Adopting Release’’). In this release we generally use the term ‘‘operating company’’ to refer to issuers that are not investment companies and that are currently eligible to rely on the rules we are amending. 6 See, e.g., id. at 44727 (discussing the exclusion of investment companies registered under the Investment Company Act and BDCs from the definition of ‘‘well-known seasoned issuer’’); id. at 44735 (discussing the exclusion of such companies from the safe harbors for factual business information and forward-looking information); id. at 44784 (discussing the exclusion of such companies from final prospectus delivery reforms). PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 33291 Exchange Act.7 As discussed in detail below, the BDC Act identifies with specificity the required revisions.8 The Economic Growth, Regulatory Relief, and Consumer Protection Act (the ‘‘Registered CEF Act’’) (and, together with the BDC Act, the ‘‘Acts’’) directs us to adopt rules to allow any registered CEF that is listed on a national securities exchange (a ‘‘listed registered CEF’’) or that makes periodic repurchase offers under rule 23c–3 to use the securities offering rules that are available to other issuers that are required to file reports under section 13(a) or section 15(d) of the Exchange Act, subject to appropriate conditions.9 Unlike the BDC Act, the Registered CEF Act does not identify with specificity the revisions that are required. In 2019, we proposed rules that would modify the registration, communications, and offering processes for affected funds under the Securities Act.10 As discussed in greater detail below, most commenters supported the proposal.11 Many of the commenters who supported the proposal generally also recommended modifications to some of the proposed rules.12 For example, some commenters recommended further expanding the scope of issuers that would qualify as ‘‘well-known seasoned issuers’’ to include smaller issuers or those without 7 Section 803(b) of Small Business Credit Availability Act, Public Law 115–141, 132 Stat. 348 (2018) (‘‘BDC Act’’). This section also directs us to make specified revisions to allow a BDC to use the proxy rules that are available to such other issuers. Id. Affected funds generally use the proxy rules that are available to operating companies already. One current difference applicable to these entities, however, is a more limited ability to incorporate information into their proxy statements by reference. The BDC Act directs that we eliminate this difference by providing these entities parity with operating companies. Section 803(b)(2)(N) of the BDC Act; see also infra section II.G.2. 8 See section 803(b)(2) of the BDC Act. 9 Section 509(a) of Economic Growth, Regulatory Relief, and Consumer Protection Act, Public Law 115–174, 132 Stat. 1296 (2018) (‘‘Registered CEF Act’’). The Registered CEF Act also refers to proxy rules, as does the BDC Act. See supra footnote 7. 10 Securities Offering Reform for Closed-End Investment Companies, Investment Company Act Release No. 33427 (Mar. 20, 2019) [84 FR 14448 (Apr. 10, 2019)] (‘‘Proposing Release’’). 11 See, e.g., Comment Letter of the Federal Regulation of Securities Committee of the Business Law Section of the American Bar Association (July 3, 2019) (‘‘ABA Comment Letter’’); Comment Letter of Alternative Credit Council (June 10, 2019) (‘‘ACC Comment Letter’’); Comment Letter of Coalition for Business Development (June 10, 2019) (‘‘CBD Comment Letter’’). The comment letters on the Proposing Release (File No. S7–03–19) are available at https://www.sec.gov/comments/s7-03-19.htm. 12 See, e.g., Comment Letter of Calcbench, Inc. (May 13, 2019) (‘‘Calcbench Comment Letter’’); Comment Letter of GraniteShares LLC (June 26, 2019) (‘‘GraniteShares Comment Letter’’); Comment Letter of Institute for Portfolio Alternatives (June 10, 2019) (‘‘IPA Comment Letter’’). E:\FR\FM\01JNR2.SGM 01JNR2 33292 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations public float.13 Commenters also recommended eliminating or modifying the proposed requirement that certain additional affected funds file current reports on Form 8–K.14 Other commenters recommended that the Commission expand the scope of issuers permitted to file certain immediately effective registration statements.15 Several commenters that are sponsors to exchange-traded products recommended that the Commission expand the scope of issuers permitted to pay registration fees on an annual net basis.16 Finally, one commenter expressed concern with the proposal, recommending that large BDCs and registered CEFs be subject to additional scrutiny.17 As discussed in detail below, we are adopting the proposed rules with certain modifications, after consideration of comments received. Our action will institute a number of reforms: • First, it will streamline the registration process to allow eligible affected funds to use a short-form shelf registration statement to sell securities ‘‘off the shelf’’ more quickly and efficiently in response to market opportunities. • Second, the final rule will allow affected funds to qualify as ‘‘wellknown seasoned issuers’’ (‘‘WKSIs’’) under rule 405 under the Securities Act. • Third, it will allow affected funds to satisfy final prospectus delivery requirements using the same method as operating companies. • Fourth, it will allow affected funds to use certain rules currently available to operating companies, such as communications safe harbors for certain factual business information and forward-looking information, ‘‘free writing prospectuses,’’ and brokerdealer research reports (referred throughout this release as the ‘‘communications rules’’). • Fifth, the final rule will allow certain continuously-offered affected funds to make certain changes to their registration statements on an immediately-effective basis or on an automatically effective basis a set period of time after filing. • Finally, it will tailor the disclosure and regulatory framework for affected funds in light of the amendments to the offering rules applicable to them. These amendments include structured data requirements to make it easier for investors and others to analyze fund data; new annual report disclosure requirements to provide key information in annual reports; a requirement that interval funds pay securities registration fees using the same method that mutual funds and exchange-traded funds (‘‘ETFs’’) use today; and a provision that will allow certain ETPs that are not registered under the Investment Company Act to elect to pay securities registration fees in the same manner. As discussed in detail below, the final rule will affect different categories of affected funds differently, just as different categories of operating companies are treated differently under these rules currently. For example, some of the provisions will apply to all affected funds, that is, all BDCs and registered CEFs. Many of the provisions, however, will apply only to ‘‘seasoned funds.’’ These are listed affected funds that are current and timely in their reporting and therefore generally eligible to file a short-form registration statement under the proposal if they have at least $75 million in ‘‘public float.’’ 18 Some of the provisions will apply only to seasoned funds that also qualify as WKSIs, that is, listed affected funds that qualify as seasoned funds and generally have at least $700 million in public float.19 Additionally, the final rule provides unlisted affected funds with the flexibility to make certain filings that become effective either immediately upon filing or automatically after 60 days.20 The final rule therefore will provide additional flexibilities to both listed and unlisted affected funds. Tables 1 and 2 below summarize these different impacts. TABLE 1 Entity Summary definition Affected funds .......................... Seasoned funds 1 ..................... Affected funds include all BDCs and registered CEFs, including interval funds. Seasoned funds are affected funds that are current and timely in their reporting and therefore generally eligible to file a short-form registration statement if they have at least $75 million in ‘‘public float.’’ See supra footnote 18. WKSIs are seasoned funds that generally have at least $700 million in ‘‘public float.’’ ETPs are issuers that are not registered investment companies and whose assets consist primarily of commodities, currencies or derivative instruments that reference commodities or currencies; whose securities are listed for trading on a national securities exchange; and that purchase or redeem securities for a ratable share of their assets at NAV. WKSIs ....................................... ETPs ......................................... Notes: 1. Some of the rule changes that are shown below as affecting ‘‘seasoned funds’’ will only affect those seasoned funds that elect to file a registration statement on Form N–2 using an instruction permitting funds to use the form to file a short-form registration statement. 13 See infra section II.C. infra section II.I.3. 15 See ABA Comment Letter; Comment Letter of Investment Company Institute (June 10, 2019) (‘‘ICI Comment Letter’’). 16 See, e.g., Comment Letter of United States Commodity Funds LLC (June 10, 2019) (‘‘USCF Comment Letter’’); Comment Letter of World Gold Council (June 10, 2019) (‘‘WGC Comment Letter’’). jbell on DSKJLSW7X2PROD with RULES2 14 See VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 17 Comment Letter of Dale White (Apr. 3, 2019) (‘‘White Comment Letter’’). 18 See General Instruction I.B.1 of Form S–3 (defining ‘‘aggregate market value’’). In this release, we use ‘‘public float’’ to mean the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant. See General Instruction I.B.1 of Form S–3. Certain issuers with less than $75 million in public float also are eligible to use Form S–3 to register a primary offering but are limited as to the amount of securities they can PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 register. See General Instruction I.B.6 of Form S–3. The Commission has stated that the calculations of an issuer’s public float for the purpose of determining an issuer’s eligibility to use Form S– 3 and for determining WKSI status under rule 405 are the same. See Securities Offering Reform Adopting Release, supra footnote 5, at n.50. 19 See rule 405 (defining WKSI). 20 See amended rules 486(a) and 486(b) under the Securities Act. See also supra section II.D. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 33293 TABLE 2 Rule Summary description of rule Entities affected by changes Discussed below in Affected Funds (Including BDCs, Registered CEFs, and Interval Funds) Registration Provisions: General Instruction F.4.a of Form N–2. Securities Act Rules 424 and 497. Investment Company Act Rule 23c–3. Securities Act Rule 486 .... General Instruction G of Form N–14. Communication Provisions: Securities Act Rule 134 .... Securities Act Rule 163A .. Securities Act Rules 168 and 169. Securities Act Rules 164 and 433. Prospectus Delivery Provisions: Securities Act Rules 172 and 173. Periodic Reporting Provisions: Investment Company Act Rule 8b–16. Instruction 4.g to Item 24 of Form N–2. Item 4 of Form N–2; Instruction 10 to Item 24 of Form N–2. Structured Data Reporting Requirements: Structured Financial Statement Data. Prospectus Structured Data Requirements. Form 24F–2 Structured Format. Requires online posting of information incorporated by reference. Provide the processes for filing prospectus supplements. Subjects interval funds to the registration fee payment system based on annual net sales. Allows continuously-offered unlisted affected funds to make certain filings that are immediately effective upon filing or automatically effective 60 days after filing. Permits certain registrants to incorporate by reference. Affected Funds ....................... Section II.I.4. Affected Funds ....................... Section II.B.3.d. Interval Funds ......................... Section II.H. Continuously-offered unlisted affected funds not relying on rule 23c–3. Section II.D. BDCs ...................................... Section II.B.3.b. Permits issuers to publish factual information about the issuer or the offering, including ‘‘tombstone ads.’’. Permits issuers to communicate without risk of violating the gun-jumping provisions until 30 days prior to filing a registration statement. Permit the publication and dissemination of regularly released factual and forward-looking information. Permit use of a ‘‘free writing prospectus.’’ ..... Affected Funds ....................... Section II.F.1. Affected Funds ....................... Section II.F.1. Affected Funds ....................... Section II.F.1. Affected Funds ....................... Section II.F.1. Permit issuers, brokers, and dealers to satisfy final prospectus delivery obligations if certain conditions are satisfied. Affected Funds ....................... Section II.E. A requirement that funds that rely on paragraph (b) of the rule describe in the annual report the fund’s current investment objectives, policies and risks, and certain key changes in enough detail to allow investors to understand each change and how it may affect the fund. A requirement for narrative disclosure about the fund’s performance in the fund’s annual report. Requires disclosure of certain financial information. Registered CEFs .................... Section II.I.5. Registered CEFs .................... Section II.I.2.b. BDCs ...................................... Section II.I.2.c. A requirement that BDCs tag their financial statements using Inline eXtensible Business Reporting Language (‘‘Inline XBRL’’) format. A requirement that registrants tag certain information required by Form N–2 using Inline XBRL. A requirement that filings on Form 24F–2 be submitted in a structured format. BDCs ...................................... Section II.I.1.a. Affected Funds ....................... Sections II.I.1.b and II.I.1.c. Form 24F–2 Filers, including open-end funds and unit investment trusts. Section II.I.1.d. Seasoned Funds .................... Section II.B.3. Seasoned Funds .................... Section II.B.3.b. Seasoned Funds .................... Section II.B.3.d. jbell on DSKJLSW7X2PROD with RULES2 Seasoned Funds Registration Provisions: Securities Act Rule 415 .... General Instructions A.2 and F.3 of Form N–2. Securities Act Rule 430B .. VerDate Sep<11>2014 20:35 May 29, 2020 Permits registration of securities to be offered on a delayed or a continuous basis. Provide for backward and forward incorporation by reference. Permits certain issuers to omit certain information from their prospectuses at effectiveness. Jkt 250001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\01JNR2.SGM 01JNR2 33294 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations TABLE 2—Continued Rule Securities Act Rule 418 .... Regulation FD Rule 103 ... Communication Provisions: Securities Act Rule 138 .... Proxy Statements: Item 13 of Schedule 14A .. Periodic Reporting Provisions: Instruction 4.h.(2) to Item 24 of Form N–2. Instruction 4.h.(3) to Item 24 of Form N–2. Instruction 4.h.(1) to Item 24 of Form N–2. Instruction 4.h.(4) to Item 24 of Form N–2. Summary description of rule Entities affected by changes Discussed below in Exempts some registrants from an obligation to furnish certain engineering, management, or similar reports. Provides that a failure to make a public disclosure required solely by 17 CFR 243.100 (rule 100 of Regulation FD) will not disqualify a ‘‘seasoned’’ issuer from use of certain forms. Seasoned Funds .................... Section II.G.1. Seasoned Funds .................... Section II.G.3. Permits a broker or dealer to publish or distribute certain research reports about securities other than those it is distributing. Seasoned Funds .................... Section II.F.2. Permits certain registrants to use incorporation by reference to provide information that otherwise must be furnished with certain types of proxy statements. Seasoned Funds .................... Section II.G.2. A requirement for information about the investor’s costs and expenses in the registrant’s annual report. A requirement for information about the share price of the registrant’s stock and any premium or discount in the registrant’s annual report. A requirement for information about each of a fund’s classes of senior securities in the registrant’s annual report. A requirement to disclose outstanding material unresolved staff comments that remain unresolved for a substantial period of time. Seasoned Funds .................... Section II.I.2.a. Seasoned Funds .................... Section II.I.2.a. Seasoned Funds .................... Section II.I.2.a. Seasoned Funds .................... Section II.I.2.d. Provides for effectiveness of registration statements immediately upon filing with the Commission. WKSIs ..................................... Section II.B.3.c. Permits oral and written communications by or on behalf of WKSIs at any time. WKSIs ..................................... Section II.F.1. ETPs ....................................... Section II.H. WKSIs Registration Provisions: Securities Act Rule 462 .... Communication Provisions: Securities Act Rule 163 .... ETPs Registration Provisions: Securities Act Rules 415, 424, 456 and 457; Forms S–1, S–3, F–1 and F–3. Permits ETPs to register an indeterminate amount of certain securities and pay registration fees based on annual net sales. II. Discussion jbell on DSKJLSW7X2PROD with RULES2 A. Scope of Closed-End Investment Companies Affected by the Final Rule As we proposed, the final rule will apply to all BDCs and registered CEFs, with certain conditions and exceptions discussed below and generally illustrated in Tables 1 and 2 above. The BDC Act applies to all BDCs, including BDCs that are listed on a securities exchange and those that are unlisted.21 21 Listed BDCs are publicly traded BDCs that are listed on a stock exchange. Unlisted BDCs include non-traded BDCs, which are offered via a continuous offering up to a preset maximum amount, and private BDCs, which are offered via a private placement offering. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 In contrast, the Registered CEF Act extends to all registered CEFs listed on a securities exchange, as well as interval funds, but excludes other unlisted registered CEFs.22 Although the Registered CEF Act only requires us to allow interval funds and listed registered CEFs to use the securities offering rules available to operating companies, that Act does not preclude us from exercising our discretion to extend these rules to all registered CEFs. The Commission 22 See section 509(a) of the Registered CEF Act. Similar to BDCs, registered CEFs include listed and unlisted funds, including publicly traded CEFs that are listed on a stock exchange, non-traded CEFs, and interval funds. PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 therefore proposed to apply the rules to all BDCs and all registered CEFs, including unlisted registered CEFs, with certain conditions and exceptions.23 We believed that this approach would benefit unlisted registered CEFs and their investors by avoiding the adverse consequences that could result from treating unlisted registered CEFs differently from all other registered CEFs and unlisted BDCs. We believed that applying such a distinction is unnecessary because, for purposes of these rules, unlisted registered CEFs are not distinguishable 23 Proposing Release, supra footnote 10, at section II. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations from unlisted BDCs, which the rule amendments must cover. Unlisted registered CEFs, like unlisted BDCs, also would benefit from parity of treatment.24 We did not receive comment on this aspect of the proposal. Because we continue to believe that this approach will benefit unlisted registered CEFs and their investors by providing new investor protections and avoiding adverse consequences from differential treatment, the final rule will apply to all BDCs and registered CEFs as proposed. The Commission proposed to generally apply the specific requirements of the BDC Act to both BDCs and registered CEFs because it believed that, except where dictated by meaningful differences between BDCs and registered CEFs, consistent application of the proposed rules across affected funds would result in more efficient offering processes and more consistent investor protections.25 We continue to believe that both Acts share the overall purpose of providing offering and communication rule parity to the investment companies covered by each Act.26 We did not receive public comment on this aspect of the proposal, and, for the reasons stated above, we are adopting it as proposed. B. Registration Process We are adopting, substantially as proposed, amendments to our rules and forms to streamline the registration process for affected funds by permitting them to use the more flexible registration process available to operating companies. These amendments collectively will allow affected funds to offer and sell securities ‘‘off the shelf’’ more quickly and efficiently in response to market opportunities. 1. Current Shelf Offering Process for Affected Funds Issuers, including affected funds, whose offerings are registered or qualified to be registered on Form S–3 may conduct primary offerings ‘‘off the shelf’’ under Securities Act rule 415(a)(1)(x), the provision for offerings made on a delayed or continuous basis.27 In a rule 415(a)(1)(x) shelf offering, a seasoned issuer can register an unallocated dollar amount of securities for sale at a later time.28 The jbell on DSKJLSW7X2PROD with RULES2 24 Id. 25 Id. 26 Id. (explaining the similarity of the BDC Act’s and the Registered CEF Act’s broad mandates). 27 See Proposing Release, supra footnote 10, at n.17 (discussing rule 415(a)(1)). 28 In this release we use the term ‘‘seasoned’’ to refer generally to an issuer that meets the registrant requirements in General Instruction I.A of Form S– VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 issuer can then take down securities ‘‘off the shelf’’ for sale in a public offering as market conditions warrant. This allows seasoned issuers to quickly access the public securities markets from time to time to take advantage of favorable market conditions.29 Affected funds currently can make shelf offerings under rule 415(a)(1)(x) if they meet the eligibility criteria for Form S–3, even though affected funds register their securities offerings on Form N–2.30 Our rules for operating companies, however, are more flexible and efficient than for affected funds. In particular, seasoned operating companies can use a short-form registration statement on Form S–3. Certain seasoned operating companies also can rely on Securities Act rule 430B to omit certain information from the ‘‘base’’ prospectus when the registration statement becomes effective and later provide that information in a subsequent Exchange Act report incorporated by reference, a prospectus supplement, or a post-effective amendment.31 The ability to ‘‘forward incorporate’’ information in Exchange Act reports filed after the registration statement becomes effective allows operating companies to efficiently update their prospectuses and access capital markets without the expense and delay of filing post-effective amendments in most cases. Affected funds, on the other hand, currently have limited ability to incorporate information by reference into their registration statements and cannot forward incorporate information from subsequently-filed Exchange Act reports.32 When an affected fund sells securities, including as part of a takedown ‘‘off the shelf,’’ its registration statement must include all required information.33 In particular, the affected 3 and, when referring to seasoned funds, a fund that meets these Form S–3 registrant requirements as well as certain modifications for registered CEFs. See Proposing Release, supra footnote 10, at n.18 (explaining the requirements under General Instruction I.A. of Form S–3). 29 Issuers that rely on rule 415(a)(1)(x) must file a new registration statement every three years, with unsold securities and fees paid thereon carried forward to the new registration statement. See Securities Act rule 415(a)(5) and (6). If the new registration statement is an automatic shelf registration statement filed by a WKSI, it will be effective immediately upon filing. 30 See Proposing Release, supra footnote 10, at n.20. 31 The base prospectus of a shelf registration statement will generally describe in broad terms the types of securities and offerings that the issuer may conduct at some later time. 32 See Proposing Release, supra footnote 10, at n.22 (discussing ‘‘backward incorporation’’). 33 The fund’s registration statement must include all required information to avoid liability from selling securities from an out-of-date prospectus PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 33295 fund’s registration statement must include current financial information, including any annual update required by section 10(a)(3) of the Securities Act.34 Affected funds provide any section 10(a)(3) update to the registration statement by filing a posteffective amendment, which involves the expense and potential delay associated with the fund’s preparation of the amendment and also provides our staff with time to review the amendment for compliance with the applicable disclosure and accounting requirements and to provide comments where appropriate.35 Affected funds also cannot currently rely on rule 430B, which allows certain issuers to omit information from a prospectus, or the process that operating companies follow to file prospectus supplements.36 In addition, affected funds cannot currently file automatic shelf registration statements because only WKSIs can file these registration statements. These differences can result in additional expense or delay for affected funds relative to operating companies and can affect the timing of an affected fund’s capital raising.37 2. Amendments to the Registration Process for Affected Funds The amendments we are adopting are designed to streamline the registration process for affected funds in parity with operating companies. Specifically, and as discussed in more detail below, the amendments will permit affected funds to: • File a short-form registration statement on Form N–2 that will and to satisfy section 10(a) of the Securities Act. See infra footnotes 83–84 and accompanying text. 34 See Proposing Release, supra footnote 10, at n.24. 35 These post-effective amendments become effective pursuant to section 8(c) of the Securities Act on such date as the Commission may determine and are typically declared effective by the staff acting pursuant to delegated authority. In contrast, Form S–3 is updated through the filing of an annual report on Form 10–K, which contains the issuer’s audited financial statements for its most recently completed fiscal year. See Securities Offering Reform Adopting Release, supra footnote 5, at n.61; see also Proposing Release, supra footnote 10, at n.25. 36 See id. at n.26. 37 The final rule will give certain affected funds greater flexibility to control the timing of their capital raising. As discussed in the Proposing Release, section 23(b) of the Investment Company Act generally prohibits a registered CEF from issuing its shares at a price below the fund’s current net asset value (‘‘NAV’’) without shareholder approval (this provision applies to BDCs as well with certain modifications). See id. at n.27. Because the shares of affected funds often trade at a discount to NAV, by allowing certain affected funds to sell securities ‘‘off the shelf,’’ the final rule will avoid potential delays associated with updating the funds’ registration statements if they seek to access the markets when their shares are trading at a premium. E:\FR\FM\01JNR2.SGM 01JNR2 33296 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations function like a Form S–3 registration statement. An affected fund that files this short-form registration statement can use it to register shelf offerings, including shelf registration statements that are filed by affected funds that qualify as WKSIs and become effective automatically, and can satisfy Form N– 2’s disclosure requirements by incorporating by reference information from the fund’s Exchange Act reports; • Rely on rule 430B to omit information from their base prospectuses, and to use the process operating companies follow to file prospectus supplements; and • Include additional information in periodic reports to update their registration statements. Commenters generally supported our general approach to streamlining the registration process for affected funds. Commenters stated that the proposed amendments would allow affected funds to raise capital more efficiently and cost-effectively and would provide affected funds with greater flexibility to manage the timing of their offerings in response to market opportunities.38 One commenter stated that affected funds will benefit from the proposed amendments because they no longer will have to file post-effective amendments to shelf registration statements to update their financial statements. Instead, that information will be in annual reports and incorporated by reference into their registration statements.39 jbell on DSKJLSW7X2PROD with RULES2 3. Short-Form Registration on Form N– 2 We are adopting, as proposed, new General Instruction A.2 in Form N–2, which will allow affected funds to file a short-form registration statement on Form N–2 that will function like a registration statement filed on Form S– 3.40 If a fund files a registration statement under this new instruction, the fund’s registration statement will incorporate certain past and future Exchange Act reports by reference, 38 See, e.g., ACC Comment Letter; ICI Comment Letter; Comment Letter of Securities Industry and Financial Markets Association (June 5, 2019) (‘‘SIFMA Comment Letter’’). 39 See ICI Comment Letter. 40 Throughout this release, we refer to General Instruction A.2 as the ‘‘short-form registration instruction’’ and refer to funds relying on this instruction as filing a ‘‘short-form registration statement’’ on amended Form N–2. Some of the required amendments and the conditions in our current rules are available only to issuers that meet the eligibility and transaction requirements of Form S–3 and therefore are eligible to file a short-form registration statement on that form. The short-form registration instruction in Form N–2 is designed to facilitate these amendments, as directed in the BDC Act and the Registered CEF Act. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 allowing the fund to use a short-form registration statement and avoid the need to make post-effective amendments in most cases. An affected fund may use the new instruction to register a shelf offering under rule 415(a)(1)(x), and we are adopting conforming amendments to that rule to make this clear.41 The new instruction, however, is not limited to offerings under rule 415(a)(1)(x). Rather, an affected fund may use the new instruction to register any of the securities offerings that operating companies are permitted to register on Form S–3.42 a. Eligibility To File a Short-Form Registration Statement As proposed, we are adopting amendments to permit an affected fund to file a short-form registration statement under the short-form registration instruction on Form N–2 if: • For either a BDC or a registered CEF, the fund meets both the registrant requirements and the transaction requirements of Form S–3 (i.e., the fund could register the offering on Form S– 3 if it were an operating company); 43 and • for registered CEFs only, the fund also has been registered under the Investment Company Act for at least 12 calendar months immediately preceding the filing of the registration statement and has timely filed all reports required to be filed under section 30 of the Investment Company Act during that time.44 An affected fund generally will meet the registrant requirements of Form S– 3 if it has timely filed all reports and other materials required under the Exchange Act during the prior year.45 41 See amended rule 415(a)(1)(x) (conforming amendments for affected funds); see also supra section II.B.3.c. 42 See General Instruction I.B of Form S–3 (identifying transactions that can be registered on the form); see also General Instruction A.2.c of amended Form N–2. Form S–3, and therefore the short-form registration instruction, also is available to a majority-owned subsidiary that is a closed-end management investment company eligible to register a securities offering on Form N–2 if it meets certain conditions. See Proposing Release, supra footnote 10, at n.29 (describing the conditions necessary for majority-owned subsidiaries of closed-end management companies to register a securities offering on Form N–2). 43 See General Instructions A.2.a and A.2.c of amended Form N–2; General Instructions I.A (registrant requirements) and I.B (transaction requirements) of Form S–3. 44 Under this amendment to Form N–2, the fund also must have timely filed all reports required to be filed under section 30 of the Investment Company Act during any portion of a month immediately preceding the filing of the registration statement. See new General Instruction A.2.b of amended Form N–2. 45 See General Instruction I.A.3 of Form S–3. PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 An affected fund will generally meet the transaction requirements of Form S–3 for a primary offering if the fund’s public float is $75 million or more.46 Requiring affected funds to satisfy the requirements of Form S–3 in order to file a short-form registration statement provides parity between affected funds and operating companies, consistent with Congress’s mandates in the BDC Act and Registered CEF Act. Commenters generally supported the proposal to permit affected funds to file short-form registration statements.47 Several commenters, however, urged that we provide additional bases other than public float for an affected fund to be eligible to file a short-form registration statement (or to qualify as a WKSI).48 While the arguments advanced by commenters apply to our proposed short-form registration requirement, commenters focused primarily on our proposed public float threshold for WKSI status.49 Accordingly, we discuss these comments below in section II.C.2. For the reasons discussed in that section, we are not changing the public float requirement or adopting new requirements for affected funds to file a short-form registration statement. We are adopting the proposed $75 million public float requirement for an affected fund to file a short-form registration statement on Form N–2 to provide affected funds parity with operating companies. Certain affected funds, including most interval funds,50 do not list their securities on an exchange and thus do not have public float. As a result, these affected funds generally would not be able to satisfy the transaction requirement necessary to file a shortform registration statement.51 In 46 See General Instruction I.B of Form S–3. e.g., SIFMA Comment Letter; Comment Letter of Mutual Fund Directors Forum (June 12, 2019) (‘‘MFDF Comment Letter’’). 48 See, e.g., ICI Comment Letter; ABA Comment Letter. 49 See infra section II.C.2 (discussing comments on public float requirement for WKSI eligibility). 50 Only one interval fund is currently exchangelisted. 51 We intend for the short-form registration instruction to provide affected funds parity with operating companies so that affected funds can register the same transactions as operating companies register on Form S–3. To register a primary offering of equity securities on Form S–3, an issuer must meet the applicable eligibility and registrant requirements. For example, an issuer with the requisite public float may register a primary offering of securities to be offered for cash. See General Instruction I.B.1 of Form S–3. Alternatively, an issuer may register a primary offering if it has common equity securities listed on an exchange, limits the amount sold over a twelvemonth period to no more than one-third of the aggregate value of voting and non-voting common equity held by non-affiliates, and meets certain 47 See, E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 addition, as we noted in the Proposing Release, because interval funds make continuous offerings, they (as well as other continuously offered, non-listed affected funds) would not be able to file a short-form registration statement that omits information required to be in an issuer’s prospectus when it is offering its securities.52 Interval funds also have their own offering provision, Securities Act rule 415(a)(1)(xi),53 and post-effective amendments to their registration statements are immediately effective upon filing or automatically effective 60 days after filing under rule 486 under the Securities Act, depending on the substance of the amendments.54 As a result, interval funds currently have a tailored registration process that, although different in certain respects from that of operating companies, may provide many of the same efficiencies, including the ability to raise capital as the opportunity arises. As discussed below in section II.D, we are adopting amendments to rule 486 to allow any affected fund that conducts continuous offerings under rule 415(a)(1)(ix), such as continuously-offered tender offer funds, to rely on rule 486. We believe these amendments will benefit such continuously-offered affected funds by allowing them to maintain effective registration statements in a more efficient, cost-effective manner, similar to the benefits that the rules we are adopting will provide to affected funds that file short-form registration statements. As proposed, in addition to satisfying the registrant requirements of Form S– 3, a registered CEF also must have timely filed all reports required under section 30 of the Investment Company Act for the preceding 12 months in order to register an offering under the short-form registration instruction. A registered CEF therefore must have timely filed during the prior year all required Exchange Act reports, such as annual and semi-annual reports to shareholders filed with the Commission on Form N–CSR, as well as reports required only under section 30 of the Act, such as reports on Forms N–CEN and N–PORT. As we stated in the Proposing Release, an issuer’s Exchange Act filings provide the basic source of information to the other requirements. See General Instruction I.B.6 of Form S–3. Interval funds that are not exchangelisted and without public float would not be qualified to register a primary offering of their shares on Form S–3. 52 See Proposing Release, supra footnote 10, at text following n.37. 53 17 CFR 230.415(a)(1)(xi). 54 See 17 CFR 230.486. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 market and to potential purchasers, and investors in the secondary market use that information in making their investment decisions.55 Although all affected funds file reports under the Exchange Act, registered CEFs also file reports under the Investment Company Act. These Investment Company Act reports also provide important information to the market and investors, including information about an affected fund’s portfolio holdings that will be publicly reported on a quarterly basis on Form N–PORT. We believe that the market will analyze this portfolio holdings information in a similar manner to how it analyzes financial statements for operating companies to determine changes in prospects for growth and performance. Portfolio holdings disclosure on Form N–PORT, for example, provides important information that is comparable to information BDCs include in Exchange Act reports for purposes of providing a quarterly flow of key information to the market. Moreover, requiring registered CEFs to have timely filed their Investment Company Act reports also will provide parity among BDCs, registered CEFs, and operating companies. This is because once Form N–PORT fully replaces Form N–Q, registered CEFs will only file Exchange Act reports semi-annually on Form N– CSR, whereas BDCs and operating companies file Exchange Act reports on Forms 10–K, 10–Q and 8–K.56 As such, all issuers will be required to have filed their quarterly and other required reports in order to file a short-form registration statement. We received one comment on this particular aspect of the proposal. This commenter expressed support for this aspect of the proposal, stating that it provides parity between registered CEFs and operating companies.57 b. Information Incorporated by Reference As proposed, the same rules on incorporation by reference that apply to 55 See Proposing Release, supra footnote 10, at text accompanying nn.42–46. 56 Because Form N–PORT will render reports on Form N–Q unnecessarily duplicative, once a registered fund begins filing reports on Form N– PORT, it will no longer be required to file reports on Form N–Q. See Investment Company Reporting Modernization, Investment Company Act Release No. 32936 (Dec. 8, 2017) [82 FR 58731 (Dec. 14, 2017)] (delaying the requirement for registered funds to submit reports on Form N–PORT through the EDGAR system until April 2019 for larger fund groups, and April 2020 for smaller fund groups). Form N–Q will be rescinded on May 1, 2020. See id. 57 See Comment Letter of Teachers Insurance and Annuity Association of America (June 13, 2019) (‘‘TIAA Comment Letter’’). PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 33297 Form S–3 registration statements also will apply to a short-form registration statement filed on Form N–2.58 We did not receive comments on these amendments and are adopting them as proposed. Specifically, an affected fund relying on the short-form registration instruction will be required to: • Specifically incorporate by reference into the prospectus and statement of additional information (‘‘SAI’’): (1) Its latest annual report filed pursuant to section 13(a) or section 15(d) of the Exchange Act that contains financial statements for the registrant’s latest fiscal year for which a Form N– CSR or Form 10–K was required to be filed; and (2) all other reports filed pursuant to section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the annual report (backward incorporation by reference); 59 and • State that all documents subsequently filed pursuant to section 13(a), 13(c), 14, or 15(d) of the Exchange Act prior to the termination of the offering shall be deemed to be incorporated by reference into the prospectus and SAI (forward incorporation by reference).60 We also are adopting, as proposed, an instruction to Form N–2 that will permit an affected fund filing a short-form registration statement on Form N–2 to satisfy the disclosure requirements for its prospectus or SAI by incorporating the information by reference from Exchange Act reports.61 This provision, 58 See section 803(c)(1) of the BDC Act (directing us to include an item or instruction that is similar to item 12 on Form S–3 to provide that a BDC that would otherwise meet the requirements of Form S– 3 shall incorporate by reference the reports and documents filed by the BDC under the Exchange Act into the registration statement of the BDC filed on Form N–2). We are amending General Instruction F.3 of current Form N–2 in its entirety and replacing it with a new General Instruction F.3. In these provisions and others that are substantively identical to parallel provisions in Form S–3, we have included conforming references to a fund’s SAI. 59 See new General Instruction F.3.a.(1)–(2) of amended Form N–2; cf. Item 12(a)(1)–(2) of Form S–3. In addition, if sales of a class of capital stock are to be registered on Form N–2 and the same class is registered under section 12 of the Exchange Act, the affected fund must incorporate by reference the description of the class contained in the Exchange Act registration statement with respect to that class (including any amendment or reports filed for the purpose of updating such description). See new General Instruction F.3.a.(3) of amended Form N– 2; cf. Item 12(a)(3) of Form S–3. 60 See new General Instruction F.3.b of amended Form N–2; cf. Item 12(b) of Form S–3. 61 See new General Instruction F.3 of amended Form N–2. The amendments will permit a fund to use this incorporated information to provide the disclosure required by Items 3–12 and Items 16–24 of Form N–2. See new General Instruction F.3.c of amended Form N–2; cf. Item 12(d) of Form S–3. E:\FR\FM\01JNR2.SGM 01JNR2 33298 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 which is substantively identical to a parallel item in Form S–3, will give affected funds filing a short-form registration statement on Form N–2 the option to either provide required disclosure directly in the prospectus or SAI or to satisfy Form N–2’s disclosure requirements with information incorporated by reference.62 We did not receive any comments on these particular amendments to Form N–2. We also are adopting, as proposed, conforming changes to Form N–2’s undertakings.63 Form N–2 currently requires an undertaking that would prevent seasoned funds that file a shortform shelf registration statement from incorporating information by reference as proposed, because it requires funds to file post-effective amendments in certain circumstances without providing an exception that would allow the required information to be supplied via incorporation by reference.64 In contrast, operating companies registering an offering on Form S–3 are not required under the applicable undertaking to file post-effective amendments if the required information is included in an Exchange Act report incorporated by reference or a prospectus supplement that is part of 62 The BDC Act directed us to extend this parallel item in Form S–3 (Item 12) to BDCs that meet Form S–3’s requirements. See supra footnote 58; Item 12(d) of Form S–3; see also section 509(a) of the Registered CEF Act. 63 See section 803(b)(2)(P) of the BDC Act (directing us to revise Item 34 of Form N–2 to require a BDC to provide undertakings ‘‘that are no more restrictive than the undertakings that are required of a registrant under [Item 512 of Regulation S–K],’’ which sets forth the undertakings an operating company must include in its registration statement for certain offerings). Commenters suggested that the Item 34.1 undertaking to suspend an offering if a fund’s NAV declines more than 10% from its NAV on its registration statement effective date until the fund amends the prospectus should not apply to continuous or delayed shelf offerings conducted by affected funds pursuant to proposed General Instruction A.2 of Form N–2. See Comment Letter of Dechert LLP (June 10, 2019) (‘‘Dechert Comment Letter’’); IPA Comment Letter; see also Item 34.1 of current Form N–2. Commenters urged that the undertaking should not apply in these circumstances because the shelf offering could extend over 3–1/2 years, and the undertaking did not seem necessary because the fund would amend its prospectus by incorporating by reference the information from its Exchange Act reports. See Dechert Comment Letter; IPA comment Letter. We agree, and are amending Item 34.1 to clarify that this undertaking is not applicable in the circumstance described by commenters. See Item 34.1 of amended Form N–2. 64 Form N–2 currently requires an affected fund registering an offering under rule 415 to undertake to file, during any period in which offers or sales are being made, a post-effective amendment to the registration statement under certain circumstances, including to provide any prospectus required by section 10(a)(3) of the Securities Act. See Item 34.4.a of current Form N–2. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 the registration statement.65 To implement the statutory mandates and provide parity for affected funds, we are adopting amendments to Form N–2’s undertakings to provide the same approach for affected funds filing a short-form registration statement on that form that applies to operating companies that file on Form S–3.66 The Proposing Release requested comment on whether we should modify incorporation by reference provisions in other registration forms filed by affected funds to provide parity or consistency across registration statements. In particular, we asked if we should amend Form N–14 to provide that BDCs may incorporate by reference to the same extent as registered CEFs.67 Commenters supported this approach,68 which would provide for more consistent 65 See 17 CFR 229.512(a)(1)(iii)(B) (Item 512(a)(1)(iii)(B) of Regulation S–K). 66 Specifically, our amendments add a new provision to the relevant undertaking stating that the requirement to undertake to file a post-effective amendment does not apply if the registration statement is filed under the short-form registration instruction and the information required to be included in a post-effective amendment is contained in Exchange Act reports that are incorporated by reference into the fund’s registration statement or is contained in a form of prospectus that is part of the registration statement. See Item 34.3.a of amended Form N–2; cf. Item 512(a) of Regulation S–K. We also are amending Item 34 to make conforming changes to mirror parallel undertakings in Item 512 of Regulation S–K. See, e.g., Item 34.3.a(2) of amended Form N–2; cf. Item 512(a)(1)(ii) of Regulation S–K; Item 34.3.d(1) of amended Form N–2; cf. Item 512(a)(5)(i) of Regulation S–K; Item 34.3.e(2)–(3) of amended Form N–2; cf. Item 512(a)(6)(ii)–(iii) of Regulation S–K; Item 34.5 of amended Form N–2; cf. Item 512(b) of Regulation S–K; and Item 34.6 of amended Form N–2; cf. Item 512(h) of Regulation S–K. Additionally, in response to comments, we are eliminating the undertaking in Item 34.3 of current Form N–2, which requires affected funds to undertake to supplement the prospectus or file a post-effective amendment to disclose certain information if the securities being registered are to be offered to existing shareholders, and if not taken, to be reoffered to the public. See Dechert Comment Letter; IPA Comment. The Commission recently eliminated a parallel undertaking from Regulation S–K because other requirements make the undertaking duplicative and unnecessary. See FAST Act Modernization and Simplification of Regulation S–K, Investment Company Act Release No. 33426 (Mar. 20, 2019) [84 FR 12674 (Apr. 2, 2019)] (‘‘FAST Act Modernization Adopting Release’’), at n.171. We are eliminating this undertaking from Form N–2 for the same reasons, and renumbering Item 34’s sub-items accordingly. 67 Form N–14 currently permits a registered CEF—but not a BDC—to incorporate by reference certain information about the registrant and the company being acquired that is required by Items 5, 6 and 11–14 of Form N–14 from its prospectus, SAI, or Investment Company Act reports into the Form N–14 prospectus. See General Instruction G of current Form N–14. 68 See Dechert Comment Letter; IPA Comment Letter. PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 treatment between registered CEFs and BDCs. We are modifying Form N–14 to allow BDCs to incorporate by reference to the same extent as registered CEFs. As commenters observed, this change will provide consistent treatment for BDCs and registered CEFs. This change also will reduce the length of a BDC’s Form N–14 prospectus, which in some cases can exceed 1,000 pages, because BDCs cannot currently incorporate information by reference. To effectuate this change, we are amending the instruction in Form N–14 that governs incorporation by reference to specifically include BDCs and clarify that current reports include those filed pursuant to section 13(a) or 15(d) of the Exchange Act.69 Additionally, in response to comments,70 we are eliminating the requirement that registrants file with the Form N–14 registration statement the documents that contain information that is incorporated by reference into the prospectus or SAI.71 Such documents are filed on EDGAR and readily available to Commission staff. c. Affected Funds’ Use of Rule 415(a)(1)(x) and Automatic Shelf Registration Statements 72 We are adopting, as proposed, two additional amendments to allow 69 See General Instruction G of amended Form N– 14. We also are eliminating the instruction’s reference to sub-paragraph (d) of Section 30, and will instead reference Section 30 (no sub-part specified). This change will have the effect of requiring a Form N–14 registrant that seeks to incorporate by reference to be current in filing all Section 30 reports, including reports filed on Forms N–PORT and N–CEN. Commenters also suggested that we further amend Form N–14 to provide that a seasoned affected fund that incorporates by reference information about the registrant into the prospectus need not deliver copies of the documents containing such information with the prospectus. See, e.g., Dechert Comment Letter. Because the delivery requirement applies to funds generally and not just affected funds, we believe that any changes to the requirement should be considered on a broader basis that is beyond the scope of this rulemaking. 70 See Dechert Comment Letter; IPA Comment Letter. 71 See General Instruction G of amended Form N– 14. The requirement to file with the registration statement the documents that contain the information that is incorporated by reference is no longer necessary given the availability of such documents on EDGAR. We are similarly eliminating the requirement to file with the registration statement each document from which information is incorporated by reference into the SAI. 72 As proposed, amended Form N–2 will become effective on August 1, 2020. The Commission also will need time to modify its systems to automatically reflect that automatic shelf registration statements are effective upon filing and process ‘‘pay-as-you-go’’ payments for affected funds that are WKSIs. See infra section II.J. Until such modifications are complete, which is anticipated to be September 2020, affected funds E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 affected funds to use the shelf registration system in parity with operating companies. First, we are amending rule 415(a)(1)(x) to clarify that affected funds may use that rule by adding references to a registration statement filed under the short-form registration instruction.73 Second, we are adopting a new general instruction to permit affected funds that qualify as WKSIs to file an automatic shelf registration statement.74 A WKSI can register unspecified amounts of different types or classes of securities on an automatic shelf registration statement.75 An automatic shelf registration statement and any amendments to the registration statement will be effective immediately upon filing.76 Automatic shelf registration provides WKSIs with significant flexibility to take advantage of market windows, structure terms of securities on a real-time basis to accommodate investor demand, and determine or change the plan of distribution in response to changing market conditions. WKSIs using an automatic shelf registration statement further benefit by being able to pay should contact the staff of the Division of Investment Management’s Disclosure Review and Accounting Office if they are filing an automatic shelf registration statement. 73 See rule 415(a)(1)(x) (amended to include securities registered pursuant to General Instruction A.2 of Form N–2). See also section 803(b)(2)(J) of the BDC Act (directing us to revise rule 415(a)(1)(x) to provide that a BDC that would otherwise meet the eligibility requirements of Form S–3 can register its securities under that provision). Our amendments also add a reference to a Form N–2 registration statement filed pursuant to General Instruction A.2 to rule 415(a)(2) to make clear that affected funds registering offerings pursuant to rule 415(a)(1)(ix), like other issuers relying on that provision, will not be subject to the limitation that they register an amount of securities that the issuer reasonably expected would be offered or sold within two years from the date that the registration statement became effective. Cf. Securities Offering Reform Adopting Release, supra footnote 5, at 44774–44775. 74 See General Instruction B of amended Form N– 2; section 803(c)(2) of the BDC Act (directing that we amend Form N–2 to include an instruction that is similar to the instruction regarding automatic shelf registration offerings by WKSIs on Form S–3 to provide that a BDC that is a WKSI may file automatic shelf offerings on Form N–2). This instruction will provide that an affected fund that is a WKSI may use the form as an automatic shelf registration statement only for the transactions that are described in, and consistent with the requirements of, General Instruction I.D of Form S– 3. This provides parity with operating companies because General Instruction I.D of Form S–3 specifies the transactions and requirements for an automatic shelf registration statement filed on Form S–3. Consistent with General Instruction I.D of Form S–3, General Instruction B specifies that the form could not be used as an automatic shelf registration statement for securities offerings under rule 415(a)(1)(vii) or (viii). 75 See 17 CFR 230.430B(a) (Securities Act rule 430B(a)). 76 See 17 CFR 230.462(e) and (f) (Securities Act rule 462(e) and (f)). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 filing fees at any time in advance of a shelf takedown or on a ‘‘pay-as-you-go’’ basis at the time of each takedown off the shelf registration statement in an amount calculated for that takedown.77 Our amendments will extend these same benefits to affected funds that qualify as WKSIs, as directed by the BDC Act and the Registered CEF Act.78 We did not receive any comments on these particular amendments.79 d. Omitting Information From a Base Prospectus and Prospectus Supplements The BDC Act directed us to include a process for a BDC to file a prospectus in the same manner as under rule 424(b).80 Consistent with this directive and with the Registered CEF Act, we are amending, as proposed, rule 424(f) to allow affected funds to file a prospectus under rule 424.81 As discussed in the Proposing Release, affected funds registering shelf offerings under Securities Act rule 415 generally can omit required information from the base prospectus that is unknown or not reasonably available to the fund when the registration statement becomes effective.82 WKSIs and certain issuers eligible to use Form S–3 for primary offerings are permitted under rule 430B to omit certain additional information. A base prospectus that omits statutorilyrequired information is not a final prospectus under section 10(a) of the Securities Act.83 Filing a prospectus supplement pursuant to rule 424 is one way to provide information required for a prospectus to satisfy the requirements of section 10(a).84 77 See 17 CFR 230.457(r) and 17 CFR 230.456(b) (Securities Act rule 457(r) and rule 456(b)). 78 As proposed, we are making conforming amendments to Securities Act rule 462(f) and to the registration fee table in Form N–2 to enhance consistency with Form S–3 and to allow affected funds that file as WKSIs to use the pay-as-you-go registration fee process. See section II.J for a discussion of applicable effective dates for pay-asyou-go registration fees. 79 While we did not receive any comments specifically on the proposed general instruction to permit affected funds that qualify as WKSIs to file an automatic shelf registration statement, we did receive comments on the proposed WKSI standard for affected funds. Those comments are addressed in section II.C below. 80 See section 803(b)(2)(K) of the BDC Act. 81 These amendments will not apply to open-end funds or other registered investment companies. Accordingly, those investment companies would continue to file prospectuses pursuant to rule 497. See amended rule 424(f). We also are amending rule 424(f) to state that references to the term ‘‘form of prospectus’’ in the rule include the SAI. 82 See 17 CFR 230.409 (Securities Act rule 409). 83 15 U.S.C. 77j(a). 84 Omitted information also may be provided in a post-effective amendment or, where permitted, through Exchange Act filings that are incorporated by reference. PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 33299 Our rules, however, provide different processes for operating companies and investment companies to file prospectuses. Operating companies currently follow rule 424 to file prospectus supplements, whereas investment companies follow rule 497. Although these rules provide similar processes, they have certain key differences. For example, rule 424(b) is designed to work together with rule 415(a)(1)(x), and provides additional time for an issuer to file a prospectus. Rule 497 does not contain provisions specifically related to offerings under rule 415(a)(1)(x) and requires the fund to file a prospectus with the Commission before using it. Rule 424 also requires an issuer to file a prospectus when the issuer makes changes from or additions to a previously-filed prospectus that are substantive, whereas rule 497 requires funds to file every prospectus that varies from any previously-filed prospectus. Under the amendment to rule 424(f), an affected fund will be able to file any type of prospectus enumerated in rule 424(b) to update, or to include information omitted from, a prospectus or in connection with a shelf takedown.85 We also are amending rule 497 to provide that rule 424 would be the exclusive rule for affected funds to file a prospectus supplement other than an advertisement that is deemed to be a prospectus under 17 CFR 230.482 (rule 482).86 This will avoid any confusion that might result if affected funds were permitted to file prospectuses under both rule 424 and rule 497, while also continuing to require affected funds to file rule 482 advertisements as they and other investment companies do today. We also are adopting, as proposed, an amendment to permit affected funds to use rule 430B in parity with operating companies.87 We received no comments on this aspect of the proposal. Thus an affected fund may omit certain information from its prospectus in two circumstances: • A WKSI filing an automatic shelf registration statement may omit the plan 85 An affected fund that seeks to file a rule 424(b)(1) or 424(b)(4) prospectus supplement to provide pricing information omitted pursuant to rule 430A must be able to satisfy the conditions of rule 430A, which include the requirement to furnish the ‘‘undertakings required by Item 512(i) of Regulation S–K.’’ See rule 430A(a)(2) under the Securities Act. To facilitate an affected fund’s ability to rely on the rule, we are amending rule 430A to require affected funds to provide the parallel undertaking required by Item 34.4 of amended Form N–2. 86 See amended Securities Act rule 497(l). 87 See Proposing Release, supra footnote 10, at text preceding n.72. E:\FR\FM\01JNR2.SGM 01JNR2 33300 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations of distribution and information as to whether the offering is a primary one or an offering on behalf of selling security holders. • If an issuer is eligible to file a registration statement on Form S–3 to register a primary offering pursuant to General Instruction I.B.1 of Form S–3, and is registering the resale of securities on behalf of selling security holders, it may omit the identities of selling security holders and the amount of securities to be registered on their behalf, subject to certain conditions.88 jbell on DSKJLSW7X2PROD with RULES2 e. Additional Information in Periodic Reports As discussed above, the amendments we are adopting will permit certain affected funds to forward incorporate information from their Exchange Act reports. These funds may wish to include information in their periodic reports that is not required to be included in these reports in order to update their registration statements. We therefore proposed to include a new instruction to Form N–2 that would allow a fund to include additional information so as long as the fund included a statement in the report identifying information that it included for this purpose to provide context for investors.89 After considering comments we received, we are not adopting this proposed instruction. The commenters that addressed this proposed new instruction to Form N–2 recommended against requiring this identifying statement in periodic reports on the grounds that it unnecessarily emphasized information included to update the fund’s registration statement and could potentially distract investors from other information that may be more material to their investment decisions.90 These commenters also stated that requiring funds to identify this information would not be 88 See amended rule 430B (allowing affected funds eligible to register a primary offering under the short-form registration instruction to rely on rule 430B). We also are amending the undertakings in Form N–2 to require affected funds relying on rule 430B to make the same undertakings required of operating companies that rely on the rule. See Item 34.3.d(1) of amended Form N–2; cf. Item 512(a)(5)(i) of Regulation S–K. See also supra footnotes 63–66 and accompanying text. Rules 430B and 424 and 17 CFR 230.158 (rule 158) specify when information contained in a prospectus supplement will be deemed part of and included in the registration statement and circumstances that will trigger a new effective date of the registration statement for purposes of section 11(a) of the Securities Act. These rules apply to affected funds just as they apply to operating companies. 89 See Proposing Release, supra footnote 10, at n.73 and accompanying text (discussing proposed Instruction 6.i to Item 24 of Form N–2). 90 See Dechert Comment Letter; IPA Comment Letter. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 consistent with an integrated disclosure regime in which the information is incorporated by reference. We have determined not to adopt the identification requirement. After considering comments, we are persuaded that requiring an affected fund to highlight information just because it updates the fund’s registration statement could unnecessarily emphasize it. C. Well-Known Seasoned Issuer Status We are adopting, as proposed, amendments that will allow certain affected funds to qualify as WKSIs. Issuers that qualify as WKSIs are permitted to receive the greatest degree of benefits from the modifications to the communications and registration rules that the Commission adopted in 2005.91 A WKSI, for example, can file a registration statement or amendment that becomes effective automatically in a broader variety of contexts than a nonWKSI. In addition, subject to certain conditions, a WKSI may communicate at any time, including through a free writing prospectus, without violating the ‘‘gun-jumping’’ provisions of the Securities Act.92 To qualify as a WKSI, the issuer must meet the registrant requirements of Form S–3, i.e., it must be ‘‘seasoned’’ 93 and generally must have at least $700 million in public float.94 An issuer is not eligible for WKSI status if, among other bases: (1) It is not current and timely in its Exchange Act reports, or (2) it is the subject of a judicial or administrative decree or order arising out of a governmental action involving violations of the anti-fraud provisions of the Federal securities laws (the ‘‘antifraud prong’’ of the ineligible issuer definition).95 1. WKSI Definition As proposed, we are amending rule 405 to delete the exclusion of affected funds from the definition of WKSI.96 In addition, we are adopting, as proposed, an amendment to the WKSI definition to include a reference to the registrant 91 Securities Offering Reform Adopting Release, supra footnote 5, at 44727. 92 See infra section II.F. 93 See supra footnote 28. 94 See paragraph (1)(i)(A) of the WKSI definition in rule 405. See also supra footnote 19. See also Proposing Release, supra footnote 10, at n.77 (identifying alternative bases for an issuer to qualify as a WKSI, including that an issuer may qualify if it has issued, for cash, within the last three years, at least $1 billion in aggregate principal amount of non-convertible securities, other than common equity, in primary offerings registered under the Securities Act). 95 See paragraphs (1)(i) and (vi) of the definition of ineligible issuer in Securities Act rule 405. 96 See amended paragraph (1)(v) of rule 405. PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 requirements of the proposed short-form registration instruction on Form N–2.97 We received no comments on our proposal to make these particular amendments to rule 405. Commenters generally supported permitting affected funds to qualify as WKSIs.98 2. WKSI Eligibility The BDC Act directed us to amend Securities Act rule 405 to allow a BDC to qualify as a WKSI, and the Registered CEF Act directed us to allow a registered CEF covered by the Act to use the securities offering rules that are available to operating companies.99 Consistent with these directives, and to provide parity in the offering rules for affected funds and operating companies, we are adopting, as proposed, amendments to allow affected funds to qualify as WKSIs if they satisfy the same $700 million public float requirement that applies to operating companies. Our securities offering rules provide WKSIs with certain registration and communication flexibilities because, among other reasons, they have a demonstrated market following (i.e., they are ‘‘well-known’’).100 The Commission has used public float as an approximate measure of an issuer’s market following and the extent to which the market absorbs information about the issuer that is ultimately reflected in the price of the issuer’s securities.101 The $700 million public 97 See amended paragraph (1)(i) of the WKSI definition in rule 405. In addition, we are adopting, as proposed, amendments to the definition of WKSI to make conforming references to a registration statement filed under new General Instruction A.2 of amended Form N–2. See paragraphs (1)(i) introductory text and (1)(i)(B)(2) of the definition of WKSI in amended rule 405; new General Instruction A.2 of amended Form N–2. We also are making a conforming amendment, as proposed, to paragraph (2) of the definition of WKSI to add a reference to Form N–CSR, the form on which registered CEFs file their shareholder reports with the Commission. See amendment to paragraph (2) of the definition of WKSI in amended rule 405. We did not receive any comments on our proposal to make these conforming amendments to the WKSI definition in rule 405. 98 See, e.g., ICI Comment Letter; ACC Comment Letter; SIFMA Comment Letter; MFDF Comment Letter. 99 See section 803(b)(2)(A)(i) of the BDC Act and section 509(a) of the Registered CEF Act. 100 See Securities Offering Reform Adopting Release, supra footnote 5, at n.49 and accompanying text. In establishing the WKSI category of issuers for operating companies, the Commission stated that issuers that meet the $700 million public float threshold or the alternative $1 billion registered offering of non-convertible securities threshold have a wide following by market participants, the media, and institutional investors. See id. at section II.A. 101 See, e.g., id. at n.50 (stating that the determination of public float is based on a public trading market, such as an exchange or certain overthe-counter markets). See also Shelf Registration, Securities Act Release No. 6499, at 5 (Nov. 17, E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 float requirement is meant to encompass issuers that are presumptively the most widely followed in the marketplace and whose disclosures and other communications therefore are subject to market scrutiny by investors, the financial press, analysts, and others.102 Although the comments we received generally supported permitting affected funds to qualify as WKSIs, commenters also suggested specific modifications to the proposed amendments to permit certain additional affected funds to qualify. Several commenters recommended that we eliminate the public float requirement for affected funds.103 Other commenters recommended that we adopt a substantially lower public float threshold for affected funds, among other reasons, to make WKSI status available to a greater percentage of affected funds that have listed securities.104 One such commenter offered a specific suggestion: That we reduce the public float threshold for affected funds from $700 million to $480 million.105 This commenter stated that the $700 million public float requirement adopted in 2005 for 1983) [48 FR 52889] (‘‘Forms S–3 and F–3 recognize the applicability of the efficient market theory to those companies which provide a steady stream of high quality corporate information to the marketplace and whose corporate information is broadly disseminated. Information about these companies is constantly digested and synthesized by financial analysts, who act as essential conduits in the continuous flow of information to investors, and is broadly disseminated on a timely basis by the financial press and other participants in the marketplace.’’); see also Covered Investment Fund Research Reports, Investment Company Act Release No. 33311 (Nov. 30, 2018) [83 FR 64180 (Dec. 13, 2018)] (‘‘Covered Investment Fund Research Reports Adopting Release’’). 102 See Securities Offering Reform Adopting Release, supra footnote 5, at text accompanying n.40. 103 See ICI Comment Letter (suggesting that we permit affected funds to qualify as WKSIs solely based on the other proposed requirements for WKSI status, such as meeting other registrant and transaction requirements of Form S–3); see also Comment Letter of Invesco Ltd. (June 10, 2019) (‘‘Invesco Comment Letter’’) (same). See also TIAA Comment Letter (recommending that we eliminate the public float requirement and adopt a standard for WKSI qualification for registered CEFs based on whether certain information about the fund is available to the public, such as information about the fund’s holdings, total return performance, and daily NAV). 104 See ABA Comment Letter. See also TIAA Comment Letter (recommending that we adopt a $480 million public float requirement for registered CEFs in order to permit approximately 30% of registered CEFs to qualify as WKSIs, which would be consistent with the percentage of operating companies that were permitted to qualify as WKSIs under the Commission’s 2005 securities offering reforms). 105 See TIAA Comment Letter (recommending that we reduce the public float threshold to $480 million as an alternative to its recommendation that we eliminate the public float requirement for affected funds). See supra footnote 103. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 operating companies permitted approximately 30% of operating companies to qualify as WKSIs, and stated that we should seek to achieve a similar 30% ‘‘target’’ by adopting a $480 million public float requirement for affected funds. As the basis for the recommended elimination of or modification to the $700 million public float requirement for affected funds, these commenters stated that while affected funds may not have the same level of market following as operating companies with the requisite public float, market following is a less relevant standard for affected funds than it is for operating companies. These commenters suggested that certain distinguishing characteristics of affected funds compensate for their relative lack of market following and corresponding market scrutiny. For example, commenters stated that affected funds, as pass-through investment vehicles, have a less complex business than traditional operating companies, and thus require less market scrutiny.106 Commenters also stated that market scrutiny is less relevant for affected funds because, unlike operating companies, affected funds must satisfy the investor protection requirements of the Investment Company Act and related Commission rules, including requirements relating to financial transparency, valuation of portfolio securities, transactions with affiliates, and board oversight, among others.107 Similarly, on the basis that public float is not a suitable criterion for determining WKSI status for affected funds, commenters also urged that we permit unlisted affected funds (which 106 See, e.g., ICI Comment Letter; see also ABA Comment Letter (stating that, unlike operating companies, affected funds ‘‘generally describe their operations in terms of a stated investment objective and investment strategies that tend to remain constant over time’’). The ABA Comment Letter further asserted that the proposed $700 million public float requirement would be burdensome for affected funds relative to operating companies because, unlike operating companies, affected funds have a relatively fixed asset base (and therefore a relatively fixed public float) that would be unlikely to increase over time to a level that would satisfy the public float requirement. 107 See, e.g., ABA Comment Letter (stating that the ‘‘operating limitations, oversight requirements and investor protection provisions’’ that apply to affected funds under the Investment Company Act ‘‘more than compensate for Affected Funds’ lower level of research analyst coverage relative to large operating companies’’); ICI Comment Letter (stating that affected funds ‘‘are subject to important requirements under the Investment Company Act, including valuing their investments under boardapproved valuation procedures and ongoing board oversight’’); TIAA Comment Letter (stating that market following is less relevant to affected funds because, among other reasons, they are subject to ‘‘the valuation framework of the 1940 Act’’). PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 33301 do not have public float) to qualify for WKSI status on the basis of their aggregate NAVs.108 In addition to the reasons provided by commenters, discussed above, for eliminating or modifying the public float requirement,109 these commenters stated that the intermediaries and distribution platforms through which unlisted affected funds are sold perform extensive due diligence on unlisted affected funds, resulting in these funds being subject to scrutiny ‘‘equal’’ to the market scrutiny indicated by a large public float.110 Commenters also stated that technological advancements have made unlisted affected funds’ financial disclosures directly accessible to investors, and that, particularly in light of the extensive disclosure funds provide, investors are less dependent on market analysts for financial information.111 After considering these comments, we are adopting, as proposed, WKSI requirements for affected funds that are in parity with the requirements for operating companies. We are not eliminating or modifying the $700 million public float requirement for affected funds, or permitting affected funds to qualify as WKSIs based on their aggregate NAVs. Our amendments will implement the BDC Act and Registered CEF Act, and are designed to provide parity in the offering rules for affected funds and operating companies. As discussed above, commenters stated that there are certain distinctions between affected funds and operating companies that suggest that the $700 million public float requirement is not an appropriate criterion for determining WKSI status for affected funds. For example, commenters noted that affected funds generally have less complex businesses than operating companies, are subject to the requirements of the Investment Company Act, and provide extensive financial information to the market. We agree with commenters that the WKSI framework, which the Commission designed specifically for operating 108 See, e.g., ABA Comment Letter; Dechert Comment Letter; ICI Comment Letter. 109 Similar to the comments discussed above recommending that we eliminate or reduce the $700 million public float requirement, these commenters stated, among other things, that unlisted affected funds are subject to the Investment Company Act’s investor protection, board oversight, and disclosure requirements, and that unlisted affected funds are structurally and operationally less complex than operating companies. See supra footnotes 106–107 and accompanying text. 110 See Dechert Comment Letter; ABA Comment Letter. 111 See, e.g., Dechert Comment Letter. See section 509(a) of the Registered CEF Act. E:\FR\FM\01JNR2.SGM 01JNR2 33302 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 companies, is not well-tailored to the specific characteristics of affected funds. However, these rules are designed to provide WKSI status to issuers with a demonstrated market following, and the Commission has for many years used public float, based on a public trading market, as an approximate measure of a stock’s market following and, consequently, the degree of efficiency with which the market absorbs information and reflects it in the price of a security.112 Moreover, the offering rules for operating companies, which Congress specifically directed the Commission to extend to certain affected funds, are not premised on the characteristics of specific types of issuers, such as whether an issuer’s business is less complex than other issuers’ businesses or whether an issuer is subject to different regulatory requirements. Further, the market following for closed-end funds is significantly less robust than is the case for operating companies. As a result, in our view, it would not be appropriate to select a public float figure that is below the figure used to determine WKSI status for operating companies. We also are not persuaded by commenters that allowing an affected fund, including an unlisted affected fund, to qualify on the basis of its aggregate NAV would be consistent with the requirements for an issuer to qualify as a WKSI, which Congress directed us to extend to affected funds.113 In 112 See Revisions to the Eligibility Requirements for Primary Securities Offerings on Forms S–3 and F–3, Securities Act Release No. 8878 (Dec. 19, 2007) [72 FR 73534 (Dec. 27, 2007)], at text accompanying n.25; See also Securities Offering Reform Adopting Release, supra footnote 5, at text accompanying n.52 (‘‘High levels of analyst coverage, institutional ownership, and trading volume are useful indicators of the scrutiny that an issuer receives from the market, although no one statistic can fully capture the extent to which an issuer is followed by the market.’’). 113 As discussed above, the Registered CEF Act, as enacted, requires us to allow only interval funds and listed registered CEFs to use the securities offering rules available to operating companies See supra section II.A. To provide parity of treatment for similarly situated affected funds, we are exercising our discretion to extend certain of these rules to unlisted registered CEFs that are not interval funds. We do not believe, however, that it would be consistent with the Registered CEF Act to provide these unlisted registered CEFs with new criteria for qualifying as WKSIs. Indeed, legislative language that preceded the passage of the Registered CEF Act would have applied to all registered closed-end investment companies, but the legislation enacted as the Registered CEF Act was subsequently narrowed in scope to apply only to listed closed-end funds and interval funds. Compare the Financial CHOICE Act of 2017, H.R. 10, 115th Cong. section 499A(a) (June 8, 2017) (directing us to revise rules to the extent necessary to allow a closed-end company, as defined in section 5(a)(2) of the Investment Company Act, that is registered as an investment company under the Act to use the securities offering and proxy rules VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 addition, permitting unlisted affected funds to qualify as WKSIs based on their aggregate NAVs would result in disparate treatment between unlisted affected funds and similarly situated operating companies under these rules. For example, unlisted real estate investment trusts (‘‘unlisted REITs’’) do not have a public float and therefore generally cannot qualify as WKSIs under the rules for operating companies. Unlisted REITs, however, have many of the characteristics that commenters cited in support of permitting unlisted affected funds to use their aggregate NAVs to qualify as WKSIs.114 Nonetheless, unlisted REITs and other unlisted operating companies may not qualify as WKSIs unless they have the requisite public float or satisfy one of the alternative bases (which we also are adopting for affected funds). Moreover, many of the distinctions between affected funds and operating companies that commenters raised are based on the characteristics of registered funds and BDCs generally, and are not unique to affected funds. We believe that the particular characteristics of registered funds, including affected funds, may be appropriate for the Commission to examine as part of a more comprehensive consideration of whether the securities offering rules for funds should be modified rather than in this rulemaking related to affected funds specifically.115 We do not agree with the commenters who stated that changing or eliminating the WKSI requirements for affected funds would be consistent with the intent of the Acts. We do not believe, as commenters suggested, that the BDC Act and Registered CEF Act were designed to result in a higher percentage of affected funds qualifying for WKSI that are available to other issuers that are required to file reports under section 13(a) or section 15(d) of the Exchange Act) with section 509(a) of Registered CEF Act. See also 163 Cong. Rec. H4791, H4792 (2017) (daily ed. June 8, 2017) (statement of Rep. Ellison) (stating that the prior bill would ‘‘allow even illiquid, nontraded funds to claim multiple exemptions,’’ making it ‘‘harder for the . . . Commission . . . to police these products for investors’’). 114 For example, both unlisted REITS and unlisted affected funds sell their shares through intermediaries and both types of entities’ financial disclosures have been made directly accessible to investors through advances in technology. 115 As discussed at infra section III.A.1, affected funds represent approximately 5.1% of all registered investment companies by number of funds and approximately 2% by assets. In addition, as discussed at infra section III.D, we believe that providing affected funds with specific WKSIeligibility criteria would not provide affected funds parity with similarly-situated operating companies that do not have public float or do not meet the $700 million public float requirement and thus cannot qualify as WKSIs under the rules for operating companies. PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 status.116 Rather, as discussed above, the Acts directed us to extend to affected funds the benefits of our securities offering rules that are available to operating companies. We believe that designing specific WKSI requirements for affected funds to permit a particular percentage of those funds to qualify as WKSIs would not provide parity of treatment. Moreover, the $700 million public float requirement for operating companies was not designed to result in a certain percentage of operating companies qualifying as WKSIs, as suggested by the commenter who recommended that the public float requirement for affected funds be lowered to $480 million.117 In describing the $700 million public float threshold for operating companies, the Commission observed that the threshold would make the WKSI provisions available to approximately 30% of listed issuers, but this was describing the effect of the provision and not its intent.118 We also do not agree with commenters that the Registered CEF Act, by referring to interval funds, requires us to permit affected funds to qualify as WKSIs based on criteria other than the criteria that apply to operating companies.119 The Registered CEF Act directed us to allow interval funds (in addition to listed CEFs) to use the securities offering rules that are available to other issuers required to file reports under section 13 or 15(d) of the Exchange Act.120 As discussed throughout this release and summarized in Tables 1 and 2 above, the rules that we are amending in this release are available to all affected funds, including interval funds, that satisfy the relevant conditions of those rules. In addition, many of the rules we are amending are not conditioned on an issuer’s public 116 See, e.g., Invesco Comment Letter (stating that the percentage of listed BDCs and registered CEFs that would meet the $700 million public float requirement, as set forth in the proposing release, were lower percentages than the Acts were designed to permit (citing Proposing Release, supra footnote 10, at section IV.A.1.); ABA Comment Letter (same); Dechert Comment Letter (stating that a goal of the BDC Act was to improve the flow of funds to middle-market companies, which would be furthered by permitting unlisted funds to qualify as WKSIs based on their aggregate NAVs). 117 See TIAA Comment Letter. 118 See Securities Offering Reform Adopting Release, supra footnote 5, at text following n.48. 119 See, e.g., ICI Comment Letter (stating that the Registered CEF Act effectively requires the Commission to proceed without a public float standard to enable interval funds to qualify as seasoned funds and WKSI funds); Dechert Comment Letter (stating that adoption of a public float requirement for affected funds effectively would frustrate the intent of the Registered CEF Act). 120 See section 509(a) of the Registered CEF Act. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 float, such as the amendments to permit affected funds to use the ‘‘access equals delivery’’ prospectus delivery framework available to operating companies. We are adopting certain targeted amendments to permit certain noninterval affected funds to rely on rule 486 under the Securities Act. Unlike the WKSI requirements, rule 486 is specifically designed to apply to funds. These amendments to rule 486 will permit certain registered CEFs and BDCs that conduct continuous offerings— regardless of whether they qualify as WKSIs—to file post-effective amendments and certain registration statements that become either effective immediately upon filing under rule 486(b) or automatically effective after 60 days under rule 486(a).121 Similar to the benefits the final rule will provide to affected funds that qualify as WKSIs or that are eligible to file short-form registration statements, these amendments will facilitate certain unlisted affected funds’ ability to raise capital without delay by allowing the funds to more efficiently maintain effective registration statements while they engage in continuous offerings. The final rule, therefore, will provide certain listed affected funds with the flexibility to use a short-form registration statement and to file registration statements and amendments that become effective automatically. Additionally, unlisted affected funds generally will have the flexibility to make filings that become effective either immediately upon filing or automatically after 60 days. Thus the final rule will provide additional flexibilities to both listed and unlisted affected funds. 3. Ineligible Issuer Definition We are adopting, as proposed, amendments to the definition of ineligible issuer in rule 405. Although all of the provisions in the ineligible issuer definition would apply to affected funds, our amendments are designed to tailor certain of these provisions for affected funds specifically. First, we are amending the definition of ‘‘ineligible issuer’’ to provide that a registered CEF would be ineligible if it has failed to file all reports and materials required to be filed under section 30 of the Investment Company Act during the preceding 12 months. This provision is consistent with the proposed short-form 121 See infra section II.D (discussing the Commission’s request for comment on broadening rule 486(b) in the Proposing Release and comments received in response to this request, as well as the amendments we are adopting to rule 486). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 registration instruction and would mirror the current Exchange Act reporting provision in the ineligible issuer definition.122 We did not receive any comments on this particular proposed amendment. Second, we are adopting, as proposed, an amendment to the definition of ineligible issuer to give effect to the definition’s anti-fraud prong in the context of affected funds. Specifically, we are adopting a parallel anti-fraud prong for affected funds, which provides that an affected fund is an ineligible issuer if within the past three years its investment adviser, including any sub-adviser, was the subject of any judicial or administrative decree or order arising out of a governmental action that determines the investment adviser aided or abetted or caused the affected fund to have violated the antifraud provisions of the Federal securities laws.123 We believe this amendment is appropriate because investment companies typically are externally managed by an investment adviser, which is primarily responsible for the day-to-day management of the fund and the preparation of the fund’s disclosures.124 We received several comments requesting that we clarify or modify certain aspects of the proposed amendments. Commenters suggested that we clarify that a violation of section 206(4) of the Advisers Act, or the rules adopted under section 206(4) (except for 17 CFR 275.206(4)–8 (rule 206(4)–8)), by an affected fund’s investment adviser or sub-adviser would not give rise to WKSI ineligibility for the affected fund.125 These commenters also recommended that we modify the proposed anti-fraud provision so that an affected fund would not be an ineligible issuer if the investment adviser (or sub-adviser) that was the subject of a judicial or administrative decree or order as described in the proposed rule no longer advises the affected fund at the time the affected fund seeks WKSI status.126 Under the anti-fraud prong for affected funds, an affected fund is ineligible for WKSI status if the affected fund’s adviser or sub-adviser is determined to have aided or abetted or caused a violation by the fund of the anti-fraud provisions of the Federal securities laws. As such, only the anti122 See amended paragraph (1)(i) of the ineligible issuer definition in rule 405. 123 See amended paragraph (1)(ix) of the ineligible issuer definition in rule 405. 124 See Proposing Release, supra footnote 10, at text following n.84. 125 See ACC Comment Letter; CBD Comment Letter. 126 Id. PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 33303 fraud provisions of the securities laws that apply to the affected fund itself can give rise to WKSI ineligibility. There could not be a violation of section 206(4) or the rules adopted thereunder by an affected fund, because the fund is not itself an adviser. We also do not believe it would be appropriate, as commenters suggested, to modify the proposed amendments to permit an affected fund whose adviser or sub-adviser was determined to have aided or abetted or caused a violation by the fund of the anti-fraud provisions of the securities laws to preserve its WKSI eligibility by terminating the adviser or sub-adviser.127 An operating company currently will be an ineligible issuer under the anti-fraud prong even if the operating company terminates all of the employees who aided or abetted the underlying violation of the Federal securities laws, and our amendments will provide comparable treatment if an affected fund were to terminate its adviser. The affected fund also may have the same board of directors that was in place when the affected fund violated the anti-fraud provisions. The specific facts and circumstances relating to a particular issuer’s WKSI status under the ineligible issuer definition may, however, be considered through the Commission’s process under rule 405 for granting waivers of ineligible issuer status.128 For these reasons, we are adopting the amendments to the ineligible issuer definition as proposed. D. Automatic or Immediate Effectiveness for Filings by Affected Funds Conducting Certain Continuous Offerings Based on comments that we received, we are expanding the scope of rule 486 to permit any registered CEF or BDC that conducts continuous offerings under rule 415(a)(1)(ix) (e.g., a continuously-offered tender offer fund) to rely on the rule. Rule 486 under the Securities Act currently permits interval funds to file post-effective amendments and certain registration statements that are either immediately effective upon filing under rule 486(b) or automatically effective 60 days after filing under rule 486(a).129 127 See ACC Comment Letter; CBD Comment Letter; 128 See paragraph (2) of the ineligible issuer definition in rule 405 (providing that the Commission may grant waivers of ineligible issuer status upon a good-cause showing that it is not necessary under the circumstances for the issuer to be considered an ineligible issuer). 129 Filings under rule 486(a) are generally effective on the sixtieth day after filing, but a registrant may designate a later date for E:\FR\FM\01JNR2.SGM Continued 01JNR2 33304 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations As discussed in the Proposing Release, our staff has previously stated that it would not recommend that the Commission take enforcement action under certain provisions of the Securities Act if, on a case-by-case basis, specific listed registered CEFs that conduct offerings under rule 415(a)(1)(x) use rule 486(b) to file certain posteffective amendments that are immediately effective upon filing.130 The Proposing Release noted that staff in the Division of Investment Management were reviewing these noaction letters to determine if they should be withdrawn in connection with any final rules. The Commission also requested comment on whether it should make rule 486(b) available to all or a broader group of registered CEFs and BDCs.131 In response to this request, several commenters asked that we allow certain non-interval funds that conduct delayed or continuous offerings under rule 415 to rely on rule 486, in whole or in part.132 For example, one commenter suggested that the existing no-action letters be retained or codified. This commenter stated that withdrawing the no-action letters would be disruptive to relevant non-WKSI funds and their ability to update their registration statements and receive automatic effectiveness.133 Additionally, two commenters recommended that we permit affected funds that are continuously-offered unlisted funds to rely on rule 486 in its entirety, including rule 486(a) and rule 486(b). The commenters suggested that, like interval funds, these unlisted funds are continuously offered and would benefit if their filings could become immediately effective or automatically effective 60 days after filing.134 One of these commenters stated that, for example, allowing continuously-offered unlisted affected funds to rely on rule 486 would benefit investors in these funds by allowing the funds to avoid the time and expense of an annual staff review of registration statements where no changes are made beyond immaterial updates and updates to audited financial information.135 In response to these comments, we are amending rule 486 to allow any registered CEF or BDC that conducts a continuous offering under rule 415(a)(1)(ix) to rely on rule 486.136 We believe this rule amendment will allow these continuously-offered affected funds to maintain effective registration statements in a more efficient, costeffective manner. For example, under rule 486(a), these funds will be able to make material changes to their registration statements on an automatically effective basis 60 days after filing. In addition, under rule 486(b), continuously-offered unlisted affected funds will be able, for example, to update their financial statements under section 10(a)(3) or make nonmaterial changes to their registration statements on an immediately effective basis. The rule amendment will allow these funds to more efficiently maintain effective registration statements while they engage in continuous offerings. This is similar to the benefits the final rule will provide to affected funds that file short-form registration statements or qualify as WKSIs, as those funds also will be able to make certain updates to their registration statements more efficiently (i.e., through forward incorporation by reference or automatically effective registration statements and post-effective amendments).137 We believe it is appropriate for any affected fund that conducts delayed or continuous offerings under rule 415(a)(1)(ix), (x), or (xi) to have a mechanism for bringing its financial statements up to date under section 10(a)(3) without delay.138 jbell on DSKJLSW7X2PROD with RULES2 135 See effectiveness (which must not be later than eighty days after filing). In addition, the Commission, having due regard to the public interest and the protection of investors, may declare an amendment or registration statement effective under rule 486(a) on an earlier date. See rule 486(a). 130 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). 131 See Proposing Release, supra footnote 10, at section II.I. 132 See ABA Comment Letter and ICI Comment Letter. 133 See ICI Comment Letter. 134 See ABA Comment Letter and ICI Comment Letter. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 ABA Comment Letter. also are making a technical amendment to rule 486(b)(1)(iv) to provide a more accurate cross reference to Item 9.1.c of Form N–2. Moreover, we are amending Form N–2 to recognize the broader scope of affected funds that may rely on rule 486. See General Instruction E.4 of amended Form N– 2 and cover page of amended Form N–2. 137 See supra sections II.B.3.b and II.B.3.c. Although affected funds that file short-form registration statements or qualify as WKSIs will be able to use forward incorporation by reference and automatically effective filings to make a broader range of updates to their registration statements on an immediate basis than those specified in rule 486(b), the majority of post-effective amendments that affected funds currently file are solely for one or more purposes described in rule 486(b). Moreover, interval funds, and affected funds that make continuous offerings under rule 415(a)(1)(ix), will be able to make other, material amendments that are automatically effective 60 days after filing. 138 Rule 415(a)(1)(ix), (x), and (xi) are the provisions affected funds primarily use to conduct 136 We PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 Together, the amendments we are adopting in this release and current rule 486 will achieve this objective. Continuously-offered unlisted affected funds relying on rule 486 will continue to be subject to applicable provisions in rule 415.139 Moreover, these funds will need to comply with relevant conditions in rule 486.140 If it appears to the Commission that a posteffective amendment or registration statement filed under rule 486(a) may be incomplete or inaccurate in any material respect, the Commission may suspend the effective date of that filing. Further, if it appears to the Commission that the fund has not complied with the conditions in rule 486(b), the Commission may suspend the fund’s ability to rely on rule 486(b).141 In addition to allowing an affected fund to rely on rule 486 if the fund makes continuous offerings under rule 415(a)(1)(ix), we are also amending the scope of registration statements that rule 486 covers. Currently, rule 486 is available for post-effective amendments and for registration statements filed for purposes of registering additional shares of common stock for which a Form N– 2 registration statement is effective. This generally reflects the scope of amendments and registration statement filings interval funds make after their initial registration statements are effective. However, unlike interval funds, the affected funds that will newly be eligible to rely on rule 486 generally are required to file new registration statements every three years under rule 415(a)(5) and (6). We are amending rule 486 to allow these registration statements to be immediately or automatically effective under the rule, depending on the substance of the disclosure.142 Specifically, a registration delayed or continuous offerings of their securities. Rule 415(a)(1)(ix) allows nontraded affected funds to engage in continuous offerings but does not allow delayed (or ‘‘shelf’’) offerings. Rule 415(a)(1)(x) allows affected funds that are eligible to file shortform registration statements on Form N–2 to engage in delayed or continuous offerings. Rule 415(a)(1)(xi) allows interval funds to engage in delayed or continuous offerings. 139 For example, rule 415 limits the amount of securities that can be registered in a continuous offering under rule 415(a)(1)(ix) and generally requires an issuer relying on rule 415(a)(1)(ix) to file a new registration statement every three years. See rule 415(a)(2), (5), and (6). 140 See rule 486(b)(2) (requiring certain written representations that a post-effective amendment filed under rule 486(b) is filed solely for one or more of the permissible purposes covered by the provision); rule 486(e) (requiring a fund to have filed a post-effective amendment or registration statement relating to its common stock that became effective within two years prior to the filing made under rule 486(a) or (b)). 141 See rule 486(c). 142 See amended rule 486(a), (b)(1)(vi), and (g). E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations statement a fund files to comply with rule 415(a)(5) and (6) could be immediately effective upon filing if it is filed for no purpose other than to comply with those provisions of rule 415 or for other purposes listed in rule 486(b), such as making non-material changes or updating the fund’s financial statements under section 10(a)(3). If the registration statement does not qualify under rule 486(b) because, for example, it includes material changes to the fund’s disclosure, the registration statement could be automatically effective 60 days after filing under rule 486(a). As a result of the amendments, affected funds that make continuous offerings under rule 415(a)(1)(ix) will be able to rely on rule 486 for registration statements filed to comply with rule 415(a)(5) and (6), regardless of whether they choose to register additional shares at the time these provisions requires them to file new registration statements. This will promote consistent treatment of these funds’ filings under the rule. Although one commenter suggested that we retain or codify the staff noaction letters discussed above to allow affected funds that conduct delayed or continuous offerings under rule 415(a)(1)(x) to file post-effective amendments that are immediately effective under rule 486(b), we believe the final rule makes such relief unnecessary.143 For example, while these funds will need to file new registration statements every three years under rule 415, during the interim period they will be able to update their registration statements through the forward incorporation by reference provisions applicable to short-form registration statement filers.144 The forward incorporation by reference provisions allow these funds to avoid filing the types of post-effective amendments that rule 486(b) covers, as well as other types of post-effective amendments (e.g., those making material changes to the fund’s disclosure). Thus, we do not believe that affected funds that make delayed or continuous offerings under rule 415(a)(1)(x) will need to file the types of post-effective amendments rule 486(b) covers. Moreover, while the commenter only referred to post-effective amendments, rule 486(b) also covers new registration statements under certain circumstances. For instance, when an eligible fund has an effective registration statement and wants to register additional shares without making material amendments to 143 See ICI Comment Letter. rule 415(a)(5) and (6); General Instructions A.2 and F.3 of amended Form N–2. 144 See VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 its existing disclosure, rule 486(b) allows that new registration statement to be immediately effective.145 If we were to permit a fund that makes delayed or continuous offerings under rule 415(a)(1)(x) to rely on rule 486(b) in its entirety, then the new registration statement the fund must file every three years could effectively become an automatic shelf registration statement, even though the fund does not qualify as a WKSI (e.g., it does not have $700 million in public float).146 As a result of these considerations, the no-action letters stating that the staff would not recommend an enforcement action if specific listed, registered CEFs conducted offerings under rule 415(a)(1)(x) using rule 486(b) will be withdrawn effective August 1, 2021 (one year from the effective date of the final rule).147 Importantly, as recognized above, the final amendments provide a mechanism for these funds to efficiently update their registration statements. E. Final Prospectus Delivery Reforms We are adopting, as proposed, rule amendments that will allow an affected fund to satisfy its final prospectus delivery obligations by filing its final prospectus with the Commission. The Securities Act requires registrants to deliver to each investor in a registered offering a prospectus meeting the requirements of section 10(a) (known as a ‘‘final prospectus’’).148 Section 5(b)(2) makes it unlawful to deliver a security for the purpose of sale or for delivery after sale unless accompanied or preceded by a final prospectus. After the effectiveness of a registration statement, a written communication that offers a security for sale, or confirms the sale of a security, may be provided to investors if a final prospectus is sent or given previously or at the same time. Otherwise, such a communication may not be provided unless it is otherwise permitted under 145 See rule 486(b)(1)(i) and (v). these circumstances, a non-WKSI fund potentially could combine its ability to forward incorporate by reference and its ability to rely on rule 486(b) to achieve a WKSI-like status, with registration statements that would always be immediately effective upon filing. This could occur if, for example, a fund made material changes to its registration statement by forward incorporating information into its registration statement and then, to satisfy the requirement to file a new registration statement every three years, it filed a new registration statement under rule 486(b). In contrast, when an affected fund that may rely on rule 486 makes a material change to its registration statement, the relevant filing is not effective immediately. See rule 486(a). 147 See supra footnote 130. 148 15 U.S.C. 77j(a). 146 Under PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 33305 Commission rules or meets the requirements of section 10(a).149 Rule 172 allows issuers, brokers, and dealers to satisfy final prospectus delivery obligations if a final prospectus is or will be on file with the Commission within the time required by the rules and other conditions are satisfied.150 For example, rule 172 provides that a final prospectus will be deemed to precede or accompany a security for sale for purposes of section 5(b)(2) as long as the final prospectus is filed with the Commission or it will be filed as part of the registration statement.151 Rule 172 applies only to final prospectuses and not to other documents.152 Rule 173 requires the delivery of a copy of the final prospectus or, in lieu of a final prospectus, a notice to purchasers stating that a sale of securities was made pursuant to a registration statement or in a transaction in which a final prospectus would have been required to have been delivered in the absence of rule 172.153 Rules 172 and 173 do not apply to offerings of affected funds.154 The BDC Act directs us to remove the exclusion for BDC offerings.155 To implement the BDC Act, and to provide parity for registered CEFs consistent with the Registered CEF Act, we proposed to amend rules 172 and 173 to remove the exclusion for offerings of all affected funds. Commenters supported this approach, stating that the proposed amendments would reduce prospectus printing and delivery costs and provide parity for affected funds, consistent with 149 15 U.S.C. 77e(b)(2). CFR 230.172 (Securities Act rule 172); see also Securities Offering Reform Adopting Release, supra footnote 5, at nn.560–562 and accompanying text. 151 See Securities Act rule 172. In the event that the issuer fails to file such a prospectus in a timely manner, the issuer must file the prospectus as soon as practicable thereafter. Securities Act rule 172(c)(3); see also Securities Offering Reform Adopting Release, supra footnote 5, at n.568 and preceding text (describing this ‘‘cure’’ provision). 152 See, e.g., Securities Offering Reform Adopting Release, supra footnote 5, at text following n.567. 153 17 CFR 230.173 (Securities Act rule 173). See also Proposing Release, supra footnote 10, at n.109. Rule 173(d) provides that a purchaser who receives a notification may request a copy of the final prospectus. We proposed a change to Item 34.6 of Form N–2, under which funds currently undertake to provide an SAI upon request, to require an affected fund to also undertake to provide a prospectus upon request. We received no comments regarding this aspect of the proposal and are making the change as proposed. See Item 34.7 of amended Form N–2. 154 See Securities Act rule 172(d)(1)–(2); Securities Act rule 173(f)(2)–(3). 155 Section 803(b)(2)(L) of the BDC Act; see also section 509(a) of Registered CEF Act (requiring parity of securities offering rules with operating companies for listed registered CEFs and interval funds). 150 17 E:\FR\FM\01JNR2.SGM 01JNR2 33306 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations the BDC Act and the Registered CEF Act.156 We are adopting the amendments to rules 172 and 173 as proposed.157 F. Communications Reforms jbell on DSKJLSW7X2PROD with RULES2 1. Offering Communications We are adopting amendments to the communications rules, as proposed, to extend to affected funds the rules that currently provide operating companies and other parties (such as underwriters) increased flexibility in their communications.158 The amendments permit these communications notwithstanding the ‘‘gun-jumping provisions’’ in the Securities Act, which restrict the types of offering communications that issuers or other parties subject to the Act’s provisions may use in connection with a registered public offering.159 The gun-jumping provisions were designed to make the statutorily mandated prospectus the primary means for investors to obtain information regarding a registered securities offering.160 Accordingly, the statute provides that unless otherwise permitted: • Before an issuer files a registration statement, all offers, in whatever form, are prohibited; 161 • After the issuer files a registration statement but before it has become 156 See, e.g., SIFMA Comment Letter; ICI Comment Letter; Invesco Comment Letter; TIAA Comment Letter. 157 See amended Securities Act rule 172(d); amended Securities Act rule 173(f). 158 See, Proposing Release, supra footnote 10 at section II.E.1; see also Securities Act rule 134; Securities Act rule 168; Securities Act rule 156; Securities Act rule 163; Securities Act rule 163A; Securities Act rule 164; Securities Act rule 168; Securities Act rule 169; and Securities Act rule 433. 159 Unless otherwise noted, offering communications generally refer to written communications. Rule 405 provides that ‘‘[e]xcept as otherwise specifically provided or the context otherwise requires, a written communication is any communication that is written, printed, a radio or television broadcast, or a graphic communication as defined in [rule 405].’’ 160 See Securities Offering Reform Adopting Release, supra footnote 5, at 44731. But see section 5(d) of the Securities Act [15 U.S.C. 77e(d)], which permits an emerging growth company, or any person authorized to act on its behalf, to engage in oral or written communications with potential investors that are qualified institutional buyers, as defined in 17 CFR 230.144A (Securities Act rule 144A), or institutions that are accredited investors, as defined in 17 CFR 230.501(a) (Securities Act rule 501(a)), either prior to or after the filing of a registration statement, to determine their interest in a contemplated registered offering. These communications are often referred to as ‘‘testing the waters.’’ 17 CFR 230.163B (Securities Act rule 163B), recently adopted by the Commission, extends this accommodation to all issuers. Solicitations of Interest Prior to a Registered Public Offering, Securities Act Release No. 10699 (Sept. 25, 2019) [84 FR 53011 (Oct. 4, 2019)] (‘‘Rule 163B Adopting Release’’). 161 See section 5(c) of the Securities Act [15 U.S.C. 77e(c)]. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 effective, the only written offers that are permitted are those made using a preliminary prospectus that meets the requirements of section 10 of the Securities Act, which must be filed with the Commission; 162 and • Even after the registration statement is declared effective, offering participants still may make written offers only through a statutory prospectus, except that they may use additional written offering materials if a final prospectus that meets the requirements of Securities Act section 10(a) is sent or given prior to or with those materials.163 Since the adoption of the Securities Act, the Commission has recognized that certain communications before, during, and after the filing of a registration statement do not raise the investor protection concerns that the gun jumping provisions aim to address. For this reason, the Commission has adopted several rules to provide clarity to issuers on the types of communications that are permissible and how to communicate with investors without violating the gun jumping provisions. We proposed to extend those rules to affected funds in the Proposing Release. Commenters generally supported the proposed amendments to the communications rules.164 Two commenters stated that the amendments would allow increased flexibility in communications and provide parity with operating companies.165 One commenter added that the amendments would make it easier to execute offerings by affected funds and would decrease costs, leading to lower offering costs and potentially enhance capital formation while not negatively impacting investor protections.166 The Commission continues to believe that investors and the market will benefit from access to greater communications under conditions that preserve investor protections. To implement the BDC Act, and to provide parity for registered CEFs consistent 162 This is because after the filing of the registration statement but before its effectiveness, offers made in writing (including electronically), by radio, or by television are limited to a ‘‘statutory prospectus’’ that conforms to the information requirements section 10 of the Securities Act. See sections 5(b)(1) and 10 of the Securities Act [15 U.S.C. 77e(b)(1) and 77(j)]. 163 See section 2(a)(10) and section 5(b)(1) of the Securities Act [15 U.S.C. 77b(a)(10) and 77e(b)(1)]. 164 See, e.g., SIFMA Comment Letter; Comment Letter of Sidley Austin LLP (June 10, 2019); ICI Comment Letter; ACC Comment Letter; CBD Comment Letter; MFDF Comment Letter; TIAA Comment Letter. 165 See, e.g., SIFMA Comment Letter; ICI Comment Letter. 166 See, e.g., SIFMA Comment Letter. PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 with the Registered CEF Act, we are extending, as proposed, the communications rules currently available to operating companies to affected funds by removing the exclusions for affected funds and making other conforming changes.167 Specifically, the amended rules will: • Permit affected funds to use rule 134 to publish factual information about the issuer or the offering, including ‘‘tombstone ads.’’ 168 • Permit affected funds to rely on rule 163A, which provides issuers a brightline time period, ending 30 days prior to filing a registration statement, during which they may communicate without risk of violating the gun-jumping provisions.169 • Permit affected funds that are reporting companies to rely on rule 168 to publish or disseminate regularly released factual business information and forward-looking information at any time, including around the time of a registered offering.170 The amendments to rule 169 will also permit affected funds’ continued publication or dissemination of regularly released factual business information that is intended for use by persons other than in their capacity as investors or potential investors.171 We also are adopting amendments to rule 156 to state that nothing in that rule may be construed to prevent an affected fund from qualifying for an exemption under rule 168 or 169.172 The contents of any rule 168 or 169 communication remain subject to the anti-fraud provisions of the Federal securities laws. 167 See amended rules 134(g), 163(b)(3), 163A(b)(4), 164(f), 168(d)(3), and 169(d)(4) (removing references to BDCs and limiting the rules’ exclusion of registered investment companies from the safe harbor to exclude registered funds other than registered CEFs). See also amended rule 168 (adding to paragraphs (b)(1) and (2) references to the Investment Company Act to parallel current references to the Exchange Act to provide that forward-looking information and factual business information may be included in materials filed under the Investment Company Act); amended rule 433 (adding to paragraphs (a)(1)(i) and (iv) references to registration statements filed on Form N–2 under adopted General Instruction A.2 to parallel current references to Form S–3; adding to paragraph (c)(1)(ii) a reference to reports filed under section 30 of the Investment Company Act as reports with which a free-writing prospectus may not conflict). See also amended rule 156(d); infra footnote 172. 168 See Proposing Release, supra footnote 10, at n.122 (discussing rule 134). 169 See id. at n.123 (discussing rule 163A). 170 See id. at n.124 (discussing rule 168). 171 Rule 169 is also a safe harbor from the definition of ‘‘prospectus’’ in section 2(a)(10) of the Securities Act. 172 See amended rule 156(d); section 803(b)(2)(G) of the BDC Act; section 509(a) of Registered CEF Act. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 • Permit affected funds to rely on rules 164 and 433 to use a ‘‘free writing prospectus.’’ 173 • Permit affected funds that are WKSIs to engage at any time in oral and written communications, including use at any time of a free writing prospectus (before or after a registration statement is filed), subject to the same conditions applicable to other WKSIs.174 As we discussed in the Proposing Release, investment company communications currently are subject to rule 482.175 Rule 482 communications can only be used by a fund that is selling or is proposing to sell its securities pursuant to a filed registration statement, and are prospectuses subject to prospectus liability under section 12 of the Securities Act.176 The amendments to the communications rules provide affected funds with incremental flexibility in their communications, including additional flexibility to communicate before filing a registration statement, and some additional flexibility in using communications that are not subject to prospectus liability under section 12 of the Securities Act.177 Moreover, as we discussed in the Proposing Release, both the BDC Act and Registered CEF Act direct the Commission to continue to make available Securities Act rule 482 communications, or ‘‘ads,’’ notwithstanding the amendments to the communications rules.178 Affected funds therefore can now take advantage of additional flexibility under the communications rules as amended or continue to rely on rule 482 and other rules currently applicable to investment company communications. In addition to comments on the proposed amendments to the communications rules, two commenters urged us to adopt rules that would extend the safe harbors for liability in private actions for certain forward 173 See Proposing Release, supra footnote 10, at n.127 (discussing rules 164 and 433). 174 See id. at n.128 (discussing how communications rules apply to WKSIs). 175 See id. at section II.E.1. 176 17 CFR 230.482 (Securities Act rule 482); see also 17 CFR 230.497(i) (Securities Act rule 497). 177 See Proposing Release, supra footnote 10, at section II.E.1. 178 See id. at text following n.128; see also sections 803(e)(2) of the BDC Act (prohibiting the Commission from interpreting the amendments directed by the BDC Act in a manner that would prevent BDCs from distributing sales material pursuant to rule 482 under the Securities Act); and 509(c)(1) of the Registered CEF Act (prohibiting the Commission from interpreting the amendments directed by the Registered CEF Act to impair or limit in any way a registered closed-end company from using rule 482 communications, under the Investment Company Act, to distribute sales material). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 looking statements under section 27A of the Securities Act and section 21E of the Exchange Act to affected funds.179 Those commenters did not specify what the conditions or requirements of such a rule might be, and the public has not had the opportunity to comment on whether or how to extend safe harbors for forward-looking statements to affected funds. For these reasons, we believe commenters’ request requires more extensive consideration beyond the scope of this rulemaking. 2. Broker-Dealer Research Reports We are adopting the amendments to Securities Act rule 138 as proposed. Rule 138 permits a broker-dealer participating in the registered offering of an eligible issuer’s common stock and similar securities to publish or distribute research reports about that issuer’s fixed income securities, and vice versa, if it publishes or distributes that research in the regular course of its business. Although rule 138 does not currently exclude affected funds from coverage, it does include references to Form S–3 but not Form N–2. We therefore proposed to amend the rule’s references to shelf registration statements filed on Form S– 3 to include a parallel reference to a registration statement filed on Form N– 2 under the proposed short-form registration instruction. Rule 138 also currently provides that an issuer covered in a research report published in reliance on the rule must be required to file reports, and must have filed all periodic reports required during the preceding 12 months (or such shorter time that the issuer was required to file such reports), on Forms 10–K and 10– Q.180 Because registered CEFs do not file the periodic reports currently specified in rule 138, we proposed to include parallel references to the reports that registered CEFs are required to file, i.e., reports on Forms N–CSR, N–Q, N– CEN, and N–PORT.181 We did not receive any comments on these amendments and are adopting them as proposed. We are not adopting changes to 17 CFR 230.139 (rule 139).182 That rule provides a safe harbor for a brokerdealer’s publication or distribution of 179 See Dechert Comment Letter; IPA Comment Letter; see also sections 27A(b)(2)(B) and 27A(g) of the Securities Act [15 U.S.C. 77z–2(b)(2)(B) and 15 U.S.C. 77z–2(g)] and sections 21E(b)(2)(B) and 21E(g) of the Exchange Act [15 U.S.C. 78u– 5(b)(2)(B) and 15 U.S.C. 78u–5(g)]. 180 See 17 CFR 230.138(a)(2)(i) (Securities Act rule 138(a)(2)(i)). 181 See supra section II.B.3.a (Form N–Q will be rescinded on May 1, 2020). 182 See Proposing Release, supra footnote 10, at section II.E.2. PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 33307 research reports where the broker-dealer is participating in the registered offering of the issuer’s securities and, unlike rule 138, permits the research report to cover any class of the issuer’s securities. As we stated in the Proposing Release, in 2018 the Commission adopted new 17 CFR 230.139b (Securities Act rule 139b) to implement the Fair Access to Investment Research Act of 2017 (the ‘‘FAIR Act’’).183 The FAIR Act directed that the Commission extend rule 139 to cover broker-dealers’ publication or distribution of ‘‘covered investment fund research reports.’’ These include research reports about affected funds.184 Rule 139b includes specific provisions mandated by Congress for covered investment fund research reports. For example, rule 139b excludes from the rule’s safe harbor research reports published or distributed by the covered investment fund itself, any affiliate of the covered investment fund, or any broker-dealer that is an investment adviser (or an affiliated person of an investment adviser) for the covered investment fund.185 The Commission did not propose changes to rule 139 because it believed that rule 139b satisfies the directives of the BDC Act and Registered CEF Act by extending rule 139’s safe harbor to research reports on BDCs and registered CEFs and is consistent with Congress’s core objective regarding research reports covering these funds.186 The Commission observed that, if it were to amend rule 139 to cover research reports on BDCs, or on affected funds generally, exactly the same conduct would be subject to different standards based on the rule a brokerdealer chose to use.187 The Commission believed that it would be more appropriate to provide a consistent approach for affected fund research reports under rule 139b.188 One commenter suggested that we amend rule 139 and repeal rule 139b, in order to provide the same requirements for broker-dealer research reports on 183 See Fair Access to Investment Research Act of 2017, Public Law 115–66, 131 Stat. 1196 (2017); see also Covered Investment Fund Research Reports Adopting Release, supra footnote 101. 184 17 CFR 230.139b; see also Covered Investment Fund Research Reports Adopting Release, supra footnote 101, at 64183 (providing that under rule 139b, the term ‘‘covered investment fund’’ includes, among other things, registered investment companies and BDCs). 185 See Covered Investment Fund Research Reports Adopting Release, supra footnote 101 at sections II.A.1 and II.E.2; see also section 2(f)(3) of the FAIR Act. 186 See Covered Investment Fund Research Reports Adopting Release, supra footnote 101, at nn.144–145 and accompanying paragraph. 187 Id. 188 Id. E:\FR\FM\01JNR2.SGM 01JNR2 33308 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations affected funds and operating companies.189 The commenter raised concerns regarding differences between these two rules’ requirements, such as rule 139b’s ‘‘affiliate exclusion.’’ That provision makes rule 139b’s safe harbor inapplicable to research reports by a broker-dealer that is an investment adviser (or an affiliated person of an investment adviser) to the covered investment fund. We acknowledged the differences between rule 139b and rule 139 in the Proposing Release. Indeed, the different requirements in rule 139b—which were mandated by Congress in the FAIR Act—are why we did not propose amendments to rule 139. We continue to believe that rule 139b already satisfies the directives of the BDC Act and Registered CEF Act by extending rule 139’s safe harbor to research reports on BDCs and registered CEFs and is consistent with Congress’s core objective regarding research reports covering these funds. If we were to amend rule 139 and rescind rule 139b as urged by this commenter, this would not give effect to Congress’s more specific directives in the FAIR Act. Moreover, rule 139b, as directed by the FAIR Act, provides a consistent framework for research reports on ‘‘covered investment funds,’’ which are not limited to the affected funds covered in this rulemaking. Maintaining rule 139b therefore provides a consistent approach for all ‘‘covered investment fund research reports.’’ jbell on DSKJLSW7X2PROD with RULES2 G. Other Rule Amendments 1. Rule 418 Supplemental Information As proposed, we are adopting amendments to rule 418 to exempt affected funds that are eligible to file a short-form registration statement on Form N–2 from the requirement to furnish certain supplemental information to the Commission or staff on request under paragraph (a)(3) of the rule. As discussed in the Proposing Release, operating companies that are eligible to use Form S–3 are already exempt from having to furnish certain information under rule 418(a)(3).190 Commenters did not address the amendments to rule 418, which we proposed to implement the BDC Act and to provide parity for registered CEFs consistent with the Registered CEF Act.191 Consistent with the proposal, affected funds that are eligible to file a short-form registration statement on Form N–2 will not be required to 189 See ABA Comment Letter. Proposing Release, supra footnote 10, at text accompanying n.147. 191 See section 803(b)(2)(M) of the BDC Act. 190 See VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 furnish, on request, recent engineering, management, or similar reports or memoranda relating to broad aspects of the business, operations, or products of the registrant under amended rule 418(a)(3).192 2. Amendments to Incorporation by Reference Into Proxy Statements We are adopting amendments to Schedule 14A under the Exchange Act as proposed, consistent with the BDC Act and the Registered CEF Act.193 We did not receive comments on the proposed amendments to Schedule 14A. The amendments will allow affected funds that meet the requirements of the short-form registration instruction in Form N–2, as further described in Note E to Schedule 14A, to incorporate certain information by reference to previously-filed documents for proxy statements containing specific proposals under Item 13 of Schedule 14A.194 The amendments allow eligible funds to incorporate by reference certain required information for relevant proxy proposals to the same extent that operating companies meeting the requirements of Form S–3 (as defined in Note E to Schedule 14A) may use incorporation by reference under the same circumstances.195 3. Rule 103 of Regulation FD We are adopting amendments to rule 103(a) of Regulation FD, as proposed, to provide that an affected fund’s failure to make a public disclosure required solely by rule 100 of Regulation FD will not affect the fund’s eligibility under the short-form registration instruction of 192 See Proposing Release, supra footnote 10, at n.148. 193 Section 803(b)(2)(N) of the BDC Act (directing us to amend Item 13(b)(1) of Schedule 14A to include as an issuer to which Item 13(b)(1) applies a BDC that would otherwise meet the requirements of Note E of the Schedule); section 509(a) of the Registered CEF Act (requiring us to provide certain registered CEFs with the same flexibility under the proxy rules, subject to appropriate conditions, as is available to other issuers required to file reports under section 13 or section 15(d) of the Exchange Act). 194 Item 13 applies to proxy statements seeking security holder approval to authorize, issue, modify, or exchange securities as described in Items 11 or 12 of Schedule 14A. 195 The proposed definition in Note E of Schedule 14A of an affected fund that ‘‘meets the requirements of General Instruction A.2 of Form N– 2’’ included certain conditions relating to the transaction requirements in General Instruction I.B or I.C of Form S–3, consistent with the conditions in the definition in Note E of an operating company that ‘‘meets the requirements of Form S–3.’’ We are adopting the definition in Note E as proposed to provide parity between affected funds and operating companies although, as discussed in the Proposing Release, we believe these conditions are less likely to be relevant to affected funds. See Proposing Release, supra footnote 10, at n.152. PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 Form N–2.196 We did not receive comments on the proposed amendments to rule 103(a). The final amendments to rule 103(a) will enhance parity between affected funds and operating companies, consistent with the BDC Act and the Registered CEF Act, as rule 103(a) already provides that an operating company’s failure to make a public disclosure required solely by rule 100 of Regulation FD will not affect its eligibility to use Form S–3.197 H. New Registration Fee Payment Method for Interval Funds and Issuers of Certain Exchange-Traded Products We are adopting a modernized approach to registration fee payment that will require interval funds to pay securities registration fees using the same method that mutual funds and ETFs use today.198 Specifically, for interval funds, the final rule will provide that such funds register an indefinite amount of securities upon their registration statements’ effectiveness.199 Like mutual funds and ETFs, interval funds will be required to 196 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. See 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 nonintentional selective disclosure). 197 See section 803(b)(2)(O) of the BDC Act; 17 CFR 243.103(a) (rule 103(a) of Regulation FD). 198 In general, issuers today—including interval funds—are required under the Securities Act to pay a registration fee to the Commission at the time of filing a registration statement. See sections 6(b)(1) (requiring applicants to pay a fee to the Commission at the time of filing a registration statement) and (c) (providing that a registration statement shall not be deemed to have taken place without payment of a registration fee) of the Securities Act [15 U.S.C. 77f(b)(1)]. This means that they pay registration fees at the time they register the offering of securities, regardless of when (or if) they sell them. WKSIs using automatic shelf registration statements have additional flexibility to pay filing fees at or prior to the time of a securities offering. See supra footnote 78; see also Securities Offering Reform Adopting Release, supra footnote 5, at 44780. This arrangement is commonly known as ‘‘pay-as-yougo.’’ Id. As a result, these filers may defer payment until a future takedown of shares off a shelf registration statement. Affected funds that become WKSIs as a result of our final rule will also gain that flexibility, but other affected funds will not. See supra section II.C. 199 The final rule applies to interval funds the same treatment provided by rule 24f–2 to open-end funds and UITs. See amended rule 23c–3(e) (providing that an interval fund would be deemed to have registered an indefinite amount of securities under section 24(f) upon the effective date of its registration statement); see also amended rule 24f– 2 (providing for interval funds to pay their registration fees on the same annual net basis as mutual funds, other open-end funds, and UITs). See section 4(e) of the Exchange Act [15 U.S.C. 78d– 4(e)]; section 28 of the Securities Act [15 U.S.C. 77z–3)]. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 pay registration fees based on their net issuance of shares, no later than 90 days after the funds’ fiscal year ends.200 These issuers will be required to file information about the computation of this registration fee and other information on Form 24F–2 under the Investment Company Act when paying the fee.201 In response to comments that we received, we also are extending similar treatment to certain ETPs that are not registered under the Investment Company Act. We proposed to amend rules 23c–3 and 24f–2 so that interval funds would pay registration fees on this same annual net basis.202 The commenters who addressed this aspect of the proposal supported it.203 Two commenters suggested expanding the scope of this aspect of our proposal to include additional types of issuers.204 One commenter recommended extending the scope of the provision to ‘‘all other funds’’ to confer the same benefits to those additional funds, such as eliminating the need to predict the number of shares the fund expects to sell.205 Another commenter suggested extending the scope to ‘‘tender offer funds’’—those that make repurchase offers but that are not, like interval funds, required to periodically repurchase shares or to have a fundamental policy regarding its repurchase offers that can be changed only by a shareholder vote.206 We are adopting this provision as proposed. Of the categories of investment companies contemplated by commenters, only interval funds routinely repurchase shares at NAV and are required to periodically offer to repurchase their shares, making these funds more like mutual funds and ETFs, which are required to use this method. In response to a request for comment in the Proposing Release, a number of commenters also recommended that certain ETPs that are not registered under the Investment Company Act be permitted to register offerings of an indefinite number of securities and pay 200 See section 24(f)(2) of the Investment Company Act [15 U.S.C. 80a–24(f)(2)]. Specifically, mutual funds and ETFs currently are required to pay fees on a net basis, based upon the sales price for securities sold during the fiscal year and reduced based on the price of shares redeemed or repurchased that year. 201 17 CFR 274.24. 202 Proposing Release, supra footnote 10, at section II.G (discussing how and why interval funds are currently not permitted to pay registration fees on an annual net basis). 203 ICI Comment Letter; Invesco Comment Letter. No commenter expressed opposition to the proposed provision. 204 ABA Comment Letter; ICI Comment Letter. 205 ICI Comment Letter. 206 ABA Comment Letter. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 registration fees in a manner equivalent to that under rule 24f–2.207 These commenters stated that these ETPs operate in a manner substantially similar to that of ETFs and would similarly benefit from paying registration fees on an annual net basis and from registering offerings of an indefinite number of securities.208 Some of these commenters also noted that the attributes cited in the Proposing Release for extending the ability to pay registration fees on an annual net basis to interval funds (routine repurchases of shares at NAV and avoiding the possibility that an interval fund would inadvertently sell more shares than it had registered) would also apply to these ETPs.209 After considering these comments, we have determined to adopt amendments to enable certain ETPs that are not registered under the Investment Company Act to elect to register an offering of an indeterminate number of securities and to pay registration fees for such an offering in a manner equivalent to that for mutual funds and ETFs (i.e., in arrears on an annual net basis). In view of the concerns raised by commenters as well as the similarities between these ETPs and ETFs, we agree that it is appropriate to extend the availability of this treatment to these ETPs under the Securities Act. Accordingly, issuers that offer exchange-traded vehicle securities, as the term will now be defined in amended rule 405,210 will be eligible 207 GraniteShares Comment Letter; Invesco Comment Letter; ProShares Comment Letter; Comment Letter of State Street Global Advisors (June 21, 2019) (‘‘SSGA Comment Letter’’); USCF Comment Letter; WGC Comment Letter; Comment Letter of Morgan, Lewis & Bockius LLP (Jan. 15, 2020). 208 Invesco Comment Letter (stating that the provision would assist ETPs); ProShares Comment Letter (same); SSGA Comment Letter (same); GraniteShares Comment Letter (stating that the provision would assist ETPs, and would eliminate a competitive difference between ETPs and mutual funds); USCF Comment Letter (stating that the provision would provide ETPs with cost savings and efficiencies that would benefit investors); WGC Comment Letter (same). One commenter noted that the securities of these ETPs are issued and redeemed in large blocks called ‘‘creation units’’ through either in-kind transactions with brokerage firms and institutional investors or on a cash basis when the ETPs invest in futures contracts and other investments that cannot be transferred in-kind. GraniteShares Comment Letter. 209 USCF Comment Letter; SSGA Comment Letter; WGC Comment Letter. 210 We believe that the scope of this definition properly limits the availability of this treatment to offerings of securities that share substantially similar attributes with those issued by ETFs, such as being listed on a national securities exchange and routine purchases and redemptions of the securities in ‘‘creation units’’ at NAV. The reference to ‘‘ratable share’’ in the definition encompasses repurchases or redemptions of securities that occur at NAV on an in-kind basis or cash basis. PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 33309 under new Securities Act rule 456(d) to elect to register an offering of an indeterminate amount of exchangetraded vehicle securities and pay registration fees for such an offering on an annual net basis no later than 90 days after the end of the fiscal year when making this election. We are also adopting Securities Act rule 457(u), which sets forth the calculation method for paying registration fees in this manner and is consistent with the fee calculation provisions of Form 24F– 2.211 Finally, we are adopting rule 424(i) pursuant to which issuers that elect to register an offering of an indeterminate amount of securities pursuant to rule 456(d) will be required to file a prospectus supplement when paying registration fees on an annual net basis.212 I. Disclosure and Reporting Parity Proposals We are adopting amendments to our rules and forms, substantially as proposed, intended to tailor the disclosure and regulatory framework for affected funds in light of our amendments to the offering rules. Many of these amendments are not required by the BDC Act or the Registered CEF Act, but we believe are consistent with the respective Acts’ requirements to increase regulatory parity of affected funds with otherwise similarly-situated issuers.213 As discussed in detail below, these amendments include structured data requirements; new annual reporting requirements; amendments to provide all affected funds additional flexibility to incorporate information by reference; and enhancements to the disclosures that registered CEFs make to investors when the funds are not updating their registration statements. 1. Structured Data Requirements We are adopting, substantially as proposed, certain new structured data reporting requirements for registered CEFs and BDCs. In particular, and as discussed in detail below, we are requiring: 211 We are amending a number of Securities Act registration statement forms (Forms S–1, S–3, F–1 and F–3) to provide that an issuer may elect to register an indeterminate amount of exchangetraded vehicle securities on these registration statement forms. 212 Rule 424(i) also includes certain disclosure requirements modeled after Form 24F–2. 213 For example, regulatory parity could mitigate any competitive disparities between affected funds and other issuers. It also could help investors in affected funds by providing them investor protections that are currently provided to investors in similarly-situated issuers. See, e.g., infra discussion in paragraphs accompanying footnotes 284–289. E:\FR\FM\01JNR2.SGM 01JNR2 33310 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations • BDCs, like operating companies, to submit financial statement information using Inline XBRL format; • registered CEFs and BDCs to include structured cover page information in their registration statements on Form N–2 using Inline XBRL format; • certain information required in an affected fund’s prospectus to be tagged using Inline XBRL format; and • filings on Form 24F–2 to be submitted in eXtensible Markup Language (‘‘XML’’) format. jbell on DSKJLSW7X2PROD with RULES2 a. Inline XBRL Requirements for Financial Statements and Notes to Financial Statements We are adopting, as proposed, an amendment to 17 CFR 229.601 (Item 601 of Regulation S–K) to subject BDCs to the Inline XBRL financial statement tagging requirements that apply to operating companies, by removing the exclusion for BDCs from the Inline XBRL financial statement tagging requirements.214 We continue to believe that reporting in a structured data format makes financial information easier for investors to analyze and helps automate regulatory filings and business information processing.215 We also believe that BDC investors and other market participants would benefit from the availability of relevant information in a structured data format.216 These requirements will reduce the current disparity between the accessibility of financial information BDCs provide to the market and the accessibility of substantially similar financial information that operating companies provide to the market.217 The commenters who addressed this proposed requirement supported it.218 Some of these commenters stated that 214 Compare 17 CFR 229.601(b)(101)(i) (amended Item 601(b)(101)(i) of Regulation S–K) (excluding registered investment companies from rule 601’s tagging requirements) with current Item 601(b)(101)(i) of Regulation S–K (excluding all registrants that prepare financial statements in accordance with 17 CFR 210.6–01 through 210.6– 10 (Article 6 of Regulation S–X); see also amended rule 405(b)(3)(i) of Regulation S–T (requiring a BDC to tag its financial statements). We also are making conforming amendments to Items 601(b)(101)(ii)(A) and (iii) of Regulation S–K to clarify the exclusion of registered investment companies from rule 601’s tagging requirements. 215 Proposing Release, supra footnote 10, at section II.H.1.a. 216 Id. We also observed that having this information in a structured data format would enhance our staff’s ability to review and analyze BDCs’ financial statements. 217 Id. (summarizing the structured data reporting requirements for operating companies and registered investment companies). 218 Calcbench Comment Letter; Comment Letter of IRIS Business Services Ltd. (June 10, 2019) (‘‘IRIS Comment Letter’’); Comment Letter of XBRL US (June 10, 2019) (‘‘XBRL US Comment Letter’’). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 structured financial statement data would be more useful to investors than information in only a HyperText Markup Language (‘‘HTML’’) or plain text format.219 One of these commenters stated that more structured financial statement reporting would improve the clarity and transparency of reported information by using consistent, agreedupon definitions, and would yield information that is less expensive to process and more timely than unstructured data.220 Another commenter stated that eliminating the delay for data users to obtain information once it is public makes capital markets more efficient.221 Two commenters supported the use of the Inline XBRL format specifically.222 One of these commenters noted that, because Inline XBRL is both machinereadable and human-readable, it will help investors in BDCs quickly access structured data just as investors in operating companies can.223 This commenter also highlighted potential benefits of the format for issuers, stating that data in Inline XBRL format is easier to review than, for example, the same data in separate XBRL and HTML formats.224 Some commenters also stated that the currently available XBRL taxonomies will be sufficient for BDCs.225 After considering public comments received, and because we continue to believe that investors will benefit from the availability of relevant 219 Calcbench Comment Letter; XBRL US Comment Letter. 220 XBRL US Comment Letter. 221 Calcbench Comment Letter. 222 IRIS Comment Letter; XBRL US Comment Letter. 223 IRIS Comment Letter. 224 IRIS Comment Letter. The commenter also stated that it is appropriate to subject BDCs to the same format as operating companies—compared to requiring BDCs to report on Forms N–PORT and N– CEN—because the format of their financial statements is similar to that of operating companies. Id. Another commenter observed that the same applications used to prepare XBRL for operating companies could be leveraged for BDCs, increasing economies of scale. XBRL US Comment Letter. 225 IRIS Comment Letter; XBRL US Comment Letter. Based on our staff’s review of BDCs’ disclosures and assessment of the XBRL taxonomies’ development since they were first adopted in 2009, the Commission stated its belief that relevant XBRL taxonomies were sufficiently well developed for financial statement reporting by BDCs. Proposing Release, supra footnote 10, at section II.H.1.a. One commenter observed that BDC financial statement line items were already captured in the US GAAP Taxonomy and that a new custom schema would be an unnecessary cost for the Commission and the marketplace. XBRL US Comment Letter. Another commenter stated, however, that it would expect a greater use of nonstandard reporting elements than for average operating companies. IRIS Comment Letter. We continue to believe that the relevant XBRL taxonomies are sufficiently well developed for use by BDCs, even if BDCs use non-standard elements more than the average operating company. PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 information in a structured data format, we are adopting this requirement as proposed.226 b. New Check Boxes and Structured Data Format for Form N–2 Cover Page Information We are adopting, as proposed, a requirement that all affected funds tag all of the data points that appear on the cover page of Form N–2, except the Calculation of Registration Fee table, using Inline XBRL format.227 These cover page data points will include, for example, the company name, the Act or Acts to which the registration statement relates, and check boxes relating to the effectiveness of the registration statement. We currently require operating companies to tag all of the data points on the cover page of Form 10–K, Form 10–Q, Form 8–K, Form 20– F, and Form 40–F using Inline XBRL format.228 The Commission generally proposed to extend this requirement to mandatory tagging of the data points on the cover page of Form N–2 because it believed it would allow investors, other market participants, and other data users to automate their use of this information.229 The commenters who addressed the proposed requirement supported it.230 As above, two commenters supported the proposed Inline XBRL format, stating that it would provide benefits for investors, regulators, and issuers.231 One commenter specifically supported requiring the Inline XBRL format over allowing reporting entities to choose from more than one data standard or developing a custom schema for the required information.232 After 226 See supra footnote 214. new General Instruction I.1 of amended Form N–2; new rule 405(b)(3)(ii) of amended Regulation S–T. We also are making certain conforming revisions to proposed General Instruction H (Interactive Data Files), which we renumbered as General Instruction I of amended Form N–2. In addition, and as a result, we renumbered General Instruction I of current Form N–2 (Registration of Additional Securities) as General Instruction J of amended Form N–2. 228 See 17 CFR 232.406 [rule 406 of Regulation S– T]; FAST Act Modernization Adopting Release, supra footnote 66, at 12674. 229 Proposing Release, supra footnote 10, at section II.H.1.b. The Commission noted that this requirement would enhance investors’ ability to better identify, count, sort, aggregate, compare, and analyze registrants and disclosures to the extent these data points otherwise would be formatted only in HTML. 230 IRIS Comment Letter; XBRL US Comment Letter. 231 IRIS Comment Letter; XBRL US Comment Letter; see also supra footnotes 222–224 and accompanying text. 232 XBRL US Comment Letter (stating that multiple data standards would cause confusion in the marketplace and unnecessary costs throughout the reporting supply chain and that a custom 227 See E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 considering public comments received, and because we continue to believe that it would allow investors, other market participants, and other data users to automate their use of this information, we are adopting this requirement as proposed. The Commission did not propose to require affected funds to tag the table on the form’s cover page that includes information about calculation of the fund’s registration fee under the Securities Act.233 One commenter recommended that the Commission require tagging of such registration fee information, stating that these are valuable data elements and that extending the requirement to fee information would not increase the burden of tagging on issuers.234 The Commission recently proposed such amendments to Form N–2 as part of a larger proposal to modernize the filing fee disclosure and payment methods for most of the Commission’s fee-bearing forms, statements, and related rules.235 As a result, we believe that the filing fee disclosure and payment modernization rulemaking is a more appropriate vehicle for considering whether the fee calculation information on Form N–2 should be tagged. In addition, we are amending Form N–2 to add new check boxes to its cover page, as proposed.236 We proposed several new check boxes to allow investors, Commission staff, and others to more readily identify types of issuers and securities.237 We continue to believe that this check box information will allow investors, Commission staff, and others to more readily identify types of issuers and securities, and so schema would require the development of new tools to create and to extract and analyze the data). 233 See Proposing Release, supra footnote 10, at section II.H.1.b. 234 See XBRL US Comment Letter. 235 See Filing Fee Disclosure and Payment Methods Modernization, Investment Company Act Release No. 33676 (Oct. 24, 2019) [84 FR 71580 (Dec. 27, 2019)]. 236 See cover page of amended Form N–2. For purposes of 17 CFR 230.401(g) (Securities Act rule 401(g)), an affected fund that checks a box on Form N–2 to indicate that it is relying on the short-form registration instruction or that it is a WKSI filing an automatic shelf registration statement will be deemed to have filed the relevant registration statement or post-effective amendment properly under the applicable provisions of Form N–2 unless the Commission objects in the manner set forth in rule 401(g). See 17 CFR 230.401(g). 237 Proposing Release, supra footnote 10, at section II.G.1.b. (discussing proposed check box requirements on Form N–2 cover page). In a conforming change, we are also including a check box that is substantively identical to a parallel check box on Form S–3 for emerging growth companies that have elected not to use an extended transition period for complying with new or revised accounting standards. See cover page of amended Form N–2. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 are adopting this provision as proposed.238 These check boxes will be among the data points required to be tagged using Inline XBRL format.239 c. Tagging of Prospectus Disclosure Items We are adopting, as proposed, a requirement that all affected funds tag certain information that is required to be included in an affected fund’s prospectus using Inline XBRL format. All affected funds will be required to submit certain information in registration statements or post-effective amendments filed on Form N–2 and certain forms of prospectuses filed pursuant to rule 424 under the Securities Act to the Commission using Inline XBRL.240 A seasoned fund filing a short-form registration statement on Form N–2 also will be required to tag information appearing in Exchange Act reports—such as those on Form N–CSR, 10–K, 10–Q, or 8–K—if that information is required to be tagged in the fund’s prospectus.241 We will require affected funds to tag the following prospectus disclosure items using Inline XBRL format: Fee Table; Senior Securities Table; Investment Objectives and Policies; Risk Factors; Share Price Data; and Capital Stock, Long-Term Debt, and Other Securities.242 We continue to believe that these items are of greatest utility for investors and other data users that seek structured data to analyze and compare funds, as they provide important information about a fund’s key features, costs, and risks.243 We believe tagging the Fee Table, which provides detailed information about the fund’s costs, could facilitate analysis of fund costs and allow investors and other data users to compare the costs of a particular 238 Commenters recommended that the Commission clarify that the check box indicating that the only securities being registered are being offered pursuant to dividend or interest reinvestment plans is not intended to affect the ability of affected funds to rely on ‘‘Guide 5. Dividend Reinvestment Plans’’ to Form N–2. See Dechert Comment Letter; IPA Comment Letter. The new check box will not affect that ability. 239 See supra footnote 227. 240 See new General Instruction I.2 of amended Form N–2. 241 See new General Instruction I.3 of amended Form N–2. 242 See new General Instructions I.2 and I.3 of amended Form N–2; see also Items 3.1, 4.3, 8.2.b, 8.2.d, 8.3.a, 8.3.b, 8.5.b, 8.5.c, 8.5.e, 10.1.a–d, 10.2.a–c, 10.2.e, 10.3, and 10.5 of amended Form N–2. This information largely parallels similar information contained in the Form N–1A risk/ return summary. See Item 2 (Risk/Return Summary: Investment Objectives/Goals), Item 3 (Risk/Return Summary: Fee Table), and Item 4 (Risk/Return Summary: Investments, Risks and Performance) of Form N–1A. 243 See generally Proposing Release, supra footnote 10, at section II.H.1.b. PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 33311 affected fund to the costs of other funds or other investment products, such as mutual funds. The Senior Securities Table requires registrants to include information about each class of senior securities, including bank loans. Tagging this information will facilitate analyses of outstanding senior securities that may bear on the likelihood, frequency, and size of distributions from the fund to its investors. Tagging Investment Objectives and Policies, which provides information about the fund’s principal portfolio emphasis, will help an investor determine the degree to which a fund’s objectives and policies align with the investor’s preferences. Risk Factors describes risks associated with an investment in the fund. Tagging Risk Factors will facilitate the aggregation, analysis, and comparison by investors and other data users of information about a fund’s risks alongside the fund’s features and benefits. Tagging Share Price Information is important because the presence of a premium or discount may bear on the likelihood, frequency, and size of distributions from the fund to its investors, which we believe may be of particular importance to many affected fund investors. Tagging Capital Stock, Long-Term Debt, and Other Securities better informs common shareholders how their rights, expenses, and risks are affected when the fund issues other types or classes of securities. We also continue to believe that these items are best suited to being tagged in a structured format. The commenters who addressed the proposed requirement supported it.244 These commenters stated that the tagged data would be useful, including both numeric and narrative information.245 In addition, one commenter asserted that the Commission should require tagging all financial data that is required to be reported.246 We believe that this rule is appropriately focused on the key items that are most suitable for tagging and of greatest utility for investors. Because we continue to believe that structuring these data elements will allow investors, other market participants, and other data users to automate their use of this information, 244 IRIS Comment Letter; XBRL US Comment Letter. 245 Id. One commenter also supported the proposed scope of the new requirement—all affected funds—stating that if some issuers are excluded, it would result in higher costs for preparer and users of data. XBRL US Comment Letter. One commenter offered support for the proposed Inline XBRL format, stating that it would provide benefits to investors, regulators, and issuers. IRIS Comment Letter; see also supra footnotes 222–224 and accompanying text. 246 XBRL US Comment Letter. E:\FR\FM\01JNR2.SGM 01JNR2 33312 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 we are adopting this requirement as proposed.247 As with other new Commission XBRL taxonomies, staff will post for public review and feedback a draft Inline XBRL taxonomy for affected funds’ tagged prospectus disclosures.248 When available, affected funds will be required to use the most recent version of the Inline XBRL taxonomy for tagged prospectus disclosures, as specified by the EDGAR Filer Manual.249 As the Commission proposed, and as required of mutual funds and ETFs under the recently adopted Inline XBRL regime,250 we will require affected funds to submit ‘‘Interactive Data Files’’ (i.e., machine-readable computer code that presents information in XBRL format) 251 as follows: • For any registration statements and post-effective amendments, Interactive Data Files must be filed either concurrently with the filing or in a subsequent amendment that is filed on or before the date that the registration statement or post-effective amendment that contains the related information becomes effective; 252 • for any form of prospectus filed pursuant to rule 424, Interactive Data Files must be submitted concurrently with the filing; 253 and • for any Exchange Act reports that a seasoned fund filing a short-form registration statement on Form N–2 will have to tag, as discussed above, Interactive Data files must be submitted concurrently with the filing.254 We proposed this approach to facilitate timely availability and promote the comparability and utility of 247 See new General Instructions I.2 and I.3 of amended Form N–2; new rule 405(b)(3)(iii) of amended Regulation S–T. We also are making conforming amendments to rule 601(b)(101)(i)(C) of Regulation S–K, rule 11 of Regulation S–T, and adding a new general instruction to Form N–CSR to implement the specified prospectus disclosure tagging requirements for affected funds. 248 Taxonomies are available at https:// www.sec.gov/structureddata/dera_taxonomies. 249 See rule 405(c)(1) of Regulation S–T. 250 See Inline XBRL Filing of Tagged Data, Investment Company Act Release No. 33139 (June 28, 2018) (‘‘Inline XBRL Adopting Release’’). 251 The term ‘‘Interactive Data File’’ is defined to mean ‘‘the machine-readable computer code that presents information in [XBRL] electronic format pursuant to [rule 405 of Regulation S–T] and as specified by the EDGAR Filer Manual.’’ See rule 11 of Regulation S–T. The EDGAR Filer Manual sets forth the technical formatting requirements for the presentation and submission of electronic filings through the EDGAR system. 252 New General Instruction I.2 of amended Form N–2; cf. General Instruction C.3.(g)(i)(B) of Form N– 1A. 253 New General Instruction I.2 of amended Form N–2; cf. General Instruction C.3.(g)(ii) of Form N– 1A. 254 New General Instruction I.3 of amended Form N–2. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 important information in a structured data format for investors, other market participants, and other data users, which we believed would yield substantial benefits.255 We did not receive comments on this aspect of the proposal. We continue to believe that this approach will yield the substantial benefits discussed above and therefore are adopting it as proposed. d. Structured Data Format for Form 24F–2 We will require submission of filings on Form 24F–2 in a structured XML format.256 We proposed this use of a structured data format, believing that it would make it easier for issuers to accurately prepare and submit the information required by Form 24F–2 and would make the submitted information more useful to Commission staff.257 The commenters who addressed the proposed requirement to structure Form 24F–2 supported it,258 with one commenter observing that the structured registration fee information could be useful in validating the submission.259 Commenters were mixed on the proposed custom XML format, with one commenter supporting the proposed XML format,260 and another 255 Proposing Release, supra footnote 10, at section II.H.1.c. 256 See General Instruction A.3 to amended Form 24F–2 (requiring reports on Form 24F–2 to be submitted in electronic format pursuant to the EDGAR Filer Manual and Appendices). We are expanding the group of issuers subject to filing on Form 24F–2 to include interval funds. See supra section II.H. We also are making a technical correction in Form 24F–2 to refer to the applicable paragraph of 17 CFR 232.101 (rule 101 of Regulation S–T). See General Instruction A.3 to amended Form 24F–2 (correcting ‘‘rule 101(a)(1)(i)’’ to ‘‘rule 101(a)(1)(iv)’’). In addition, we are amending Form 24F–2 to add a free text response field, and a requirement to provide the EDGAR series/class (contract) ID for each separately reported series/class (contract) to facilitate implementation of the new structured data format. See amended Form 24F–2. 257 Proposing Release, supra footnote 10, at section II.H.1.d. 258 IRIS Comment Letter; XBRL US Comment Letter. 259 IRIS Comment Letter. 260 IRIS Comment Letter. Additionally, two commenters recommended that the Commission require that reports on Forms N–CEN and N–PORT, which require reporting of information in a structured data format using a custom XML schema, be in XBRL or Inline XBRL format. See XBRL US Comment Letter; IRIS Comment Letter. The Commission considered requiring reporting in XBRL format in connection with its adoption of Forms N–CEN and N–PORT and determined that the relatively simple characteristics reported on those forms is more suited to XML than XBRL. See Investment Company Reporting Modernization, Investment Company Act Release No. 32314 (Oct. 13, 2016) [81 FR 81870, 81906–07 (Nov. 17, 2016)] (‘‘Investment Company Reporting Modernization Adopting Release’’). PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 recommending that the Commission use an XBRL format instead.261 Because Form 24F–2 is primarily used by Commission staff to validate registration fees paid by issuers and not for financial reporting purposes, we continue to believe that a custom XML schema will be an appropriate format for the required information. For example, while XBRL allows issuers to capture the rich complexity of financial information presented in accordance with GAAP, we believe that XML is more appropriate for the relatively simple characteristics of the fund’s fee information in reports on Form 24F– 2.262 In addition we continue to believe that the XML format will improve the quality of information disclosed by providing a built-in validation framework of the data in the reports.263 We therefore will require reports on Form 24F–2 to be filed in a structured XML format, as proposed. 2. Periodic Reporting Requirements We are also adopting new annual report requirements, as proposed. As we discussed in the Proposing Release, we expect several of the reforms we are adopting in this release, such as those relating to automatically effective shelf registration, forward incorporation by reference, and final prospectus delivery, will elevate the importance of periodic reporting relative to prospectus disclosure for affected funds. A seasoned fund filing a short-form registration statement on Form N–2 will be required to forward incorporate all periodic Exchange Act reports into its registration statement.264 This should result in periodic reports becoming a more salient, convenient, and comprehensive source of updated information about a particular seasoned fund, relative to that fund’s registration statement. As a result, these funds’ annual reports may take on greater prominence, with investors looking to the annual reports for key 261 XBRL US Comment Letter (stating that a custom XML schema will result in added costs for reporting entities and data consumers relative to XBRL). This commenter also suggested requiring the use of validation rules and linking custom extensions to improve data quality for reported financial information. XBRL US Comment Letter. While we encourage the use of appropriate tools to improve data quality, we believe that consideration of a requirement to use validation rules or use custom extension linking would best be taken up on a separate, holistic basis, for BDCs and operating companies alike, rather than in the context of this final rule. 262 See Investment Company Reporting Modernization Adopting Release, supra footnote 260, at nn.449–50 and accompanying text. 263 See id. 264 See new General Instruction F.3.b of amended Form N–2. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 information.265 Registered CEFs’ shareholder reports may also take on greater prominence for investors because, under the final rule, affected funds will not be required to deliver final prospectuses but will still be required to deliver shareholder reports at least semi-annually.266 Accordingly, as proposed, we are requiring seasoned funds that register using the proposed short-form registration instruction to include key information in their annual reports regarding fees and expenses, premiums and discounts, and outstanding senior securities that the funds currently disclose in their prospectuses.267 Because the annual report will be incorporated by reference into the fund’s prospectus, requiring disclosure in both the prospectus and annual report should not require duplicative disclosure. Moreover, specifying identical disclosure requirements in both places may facilitate forward incorporation by reference, by making clear that the same required disclosure will satisfy both requirements. We continue to believe that investors should have no less current information than they do today about these items when the fund is offering its shares.268 Finally, we are requiring, as proposed, registered CEFs to provide management’s discussion of fund performance (or ‘‘MDFP’’) in their annual reports to shareholders, BDCs to provide financial highlights in their registration statements and annual reports, and affected funds filing a short-form registration statement on Form N–2 to disclose material unresolved staff comments.269 These provisions are intended to modernize and harmonize our periodic report disclosure requirements for affected 265 In 2005, the Commission observed that recent enhancements to Exchange Act reporting enabled us to rely on those reports to a greater degree in adopting our rules to reform the securities offering process. Securities Offering Reform Adopting Release, supra footnote 5, at 44726. As the Commission did then, we believe that enhanced periodic reporting is an important corollary to reform of the offering process under the Securities Act. See id. 266 Compare Securities Act rule 172 with 17 CFR 270.30e-1 (Investment Company Act rule 30e-1); see also supra section II.C. 267 In general, these requirements are expressed as a cross-reference to the specified registration statement requirements in Form N–2. See new Instructions 4.h.(1)–4.h.(3) to Item 24 of amended Form N–2 (referencing Items 4.3, 3.1, and 8.5 of amended Form N–2, respectively). 268 Proposing Release, supra footnote 10, at section II.H.2. 269 See infra sections II.I.2.a–II.I.2.d. See new Instruction 4.g to Item 24 of amended Form N–2 (MDFP); deletion of Instruction 1 to Item 4 of current Form N–2 (BDC financial highlights); and new Instruction 4.h.(4) to Item 24.4.h(4) of amended Form N–2 (material unresolved staff comments). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 funds with those applicable to operating companies and mutual funds and ETFs.270 a. Fee and Expense Table, Share Price Data, and Senior Securities Table We are adopting a requirement, as proposed, that funds filing a short-form registration statement on Form N–2 include key information in their annual reports that they disclose in their prospectuses in light of the importance of this information and the increased prominence of shareholder reports under our final rule. Specifically, we will require that these funds include the following information in their annual reports: 271 • Fee and Expense Table: Form N–2 requires registrants to include information about the costs and expenses that the investor will bear directly or indirectly, using specified captions and a specified tabular format.272 This table is designed to help investors understand the costs of investing in an affected fund and to compare those costs with the costs of other affected funds.273 The Commission has previously noted the importance of costs to an investment decision and, in the case of registered open-end funds, has specified the location of the fee table to enhance the prominence of the cost information.274 • Share Price Data: Form N–2 requires registrants to include information about the share price of the registrant’s stock as well as information about any premium or discount that the share price reflects, compared to the registrant’s NAV.275 The presence of a premium or discount may bear on the likelihood, frequency, and size of 270 We are also, as proposed, amending Form N– 2 to apply certain of its requirements for annual reports to BDCs. See new Instruction 10 to Item 24 of amended Form N–2. 271 See new Instructions 4.h.(1) (senior securities table), 4.h.(2) (fee and expense table), and 4.h.(3) (share price data) to Item 24 of amended Form N– 2. 272 See Item 3.1 of amended Form N–2; see also new Instruction 4.h.(2) to Item 24 of amended Form N–2. 273 See Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies, Investment Company Release No. 28064 (Nov. 21, 2007) [72 FR 67790, 67794 (Nov. 30, 2007)]. 274 See id.; Enhanced Disclosure and New Prospectus Delivery Option for Registered OpenEnd Management Investment Companies, Investment Company Act Release No. 28584 (Jan. 13, 2009) [74 FR 4546, 4553 (Jan. 26, 2009)]; Request for Comment on Fund Retail Investor Experience and Disclosure, Investment Company Act Release No. 33113 (June 5, 2018) [83 FR 26891, 26901 (June 11, 2018)] (‘‘Investor Experience Request for Comment’’). 275 See Item 8.5 of amended Form N–2; see also new Instruction 4.h.(3) to Item 24 of amended Form N–2 (share price data). PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 33313 distributions from the fund to its investors, which we believe may be of particular importance to many affected fund investors. • Senior Securities Table: Form N–2 requires registrants to include information about each of its classes of senior securities, including bank loans.276 As with a premium or discount, any outstanding senior securities may bear on the likelihood, frequency, and size of distributions from the fund to its investors. A registrant must disclose information about its senior securities for the most recent ten years, the last five years of which must be audited.277 The commenters that addressed these proposed requirements related to the Fee and Expense Table, Share Price Data, and Senior Securities Table supported them.278 Because we continue to believe in the importance of this information and the increased prominence of shareholder reports under our final rule,279 we are adopting this aspect of the proposal as proposed.280 With respect to the Senior Securities Table, two commenters requested that we revise the instruction to Form N–2 276 See Item 4.3 of amended Form N–2; see also new Instruction 4.h.(1) to Item 24 of amended Form N–2. 277 See Instruction 1 to Item 4.3 (applying Instruction 8 to Item 4.1 to Item 4.3) and Instruction 8 to Item 4.1 (requiring the information to be audited) of amended Form N–2. 278 ICI Comment Letter; Invesco Comment Letter. Two other commenters stated that they did ‘‘not object’’ to the proposed requirements. Dechert Comment Letter; IPA Comment Letter. Several commenters opposed related potential modifications addressed in the requests for comment within the Proposing Release that we are not adopting. Dechert Comment Letter (opposing expansion of proposed requirement to semi-annual reports; opposing expansion of requirement to ‘‘portfolio companies’’ table); IPA Comment Letter (same). One commenter recommended that the Commission continue to consider ways to enhance the fund retail investor experience, including the content of the annual report. ICI Comment Letter. The Commission staff is continuing to consider comment letters received in response to the Investor Experience Request for Comment. See supra footnote 274. 279 Proposing Release, supra footnote 10, at section II.H.2.a. 280 One commenter recommended that we add an instruction to Form N–2 to ‘‘clarify’’ that the schedules required by 17 CFR 210.12–12 (rule 12– 12 of Regulation S–X) satisfy the Portfolio Companies table requirement in Item 8.6.a of Form N–2. See Dechert Comment Letter. We are not making this change because the two provisions do not require the same information. Disclosure satisfying the requirements of rule 12–12 of Regulation S–X would not always satisfy the requirements of Item 8.6.a. For example, Item 8.6.a of Form N–2 requires certain information about each portfolio company, such as the percentage of each class owned by the issuer, the issuer’s relationship with the portfolio company, and the address of the portfolio company. Regulation S–X requires no such disclosures. E:\FR\FM\01JNR2.SGM 01JNR2 33314 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations as it relates to affected funds to reduce the audit requirement from the last fiveyears (in the registration statement) to the same periods as contained in the audited balance sheet presented in the annual report.281 However, such a change would alter the periods presented for the Senior Securities Table, which match the periods presented in the Financial Highlights.282 Given the importance of asset coverage and the comparability of information contained in both the Financial Highlights and the Senior Securities Table, we do not believe such a change is appropriate. Additionally, because the annual report will be incorporated by reference into the fund’s prospectus, filing the audited senior securities table in the annual report will not result in duplicative disclosure. For this reason, we have determined not to amend the requirements in the manner suggested by the commenters. b. Management’s Discussion of Fund Performance jbell on DSKJLSW7X2PROD with RULES2 We are also adopting, as proposed, an amendment to Form N–2 that will extend the MDFP disclosure requirements to all registered CEFs.283 Currently, mutual funds and ETFs are required to include MDFP in their annual reports to shareholders.284 MDFP disclosure aids investors in assessing a fund’s performance over the prior year and complements other backward looking information required in the annual report, such as financial statements.285 This required disclosure is grounded conceptually in the disclosure requirement for operating companies (as well as BDCs) to include a narrative discussion of the financial statements of the company— ‘‘management discussion and analysis’’ or ‘‘MD&A’’—and to provide an 281 Dechert Comment Letter (‘‘[W]e believe that the SEC should revise the instructions to Item 4.3 of Form N–2 to state that an Affected Fund need only audit the information in the senior securities table for the same periods as contained in the audited balance sheet included in the fund’s annual report.’’); IPA Comment Letter. 282 See Instruction 1 to Item 4.3 of Form N–2 (applying Instruction 3 to Item 4.1 to the Senior Securities Table). 283 New Instruction 4.g to Item 24 of amended Form N–2. 284 Item 27(b)(7) of Form N–1A. This requirement applies to registered open-end management investment companies other than money market funds. 285 Shareholder Reports and Quarterly Portfolio Disclosure of Registered Management Investment Companies, Investment Company Act Release No. 26372 (Feb. 27, 2004) [69 FR 11243, 11254 (Mar. 9, 2004)] (‘‘Quarterly Portfolio Disclosure Adopting Release’’); see also Proposing Release, supra footnote 10, at section II.H.2.b (summarizing the history and purpose of the requirement). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 opportunity to look at a company ‘‘through the eyes of management.’’ 286 We proposed to amend Form N–2 to extend the MDFP disclosure requirements to all registered CEFs.287 Specifically, we proposed to require that registered CEFs: • Discuss the factors that materially affected their performance during the most recently completed fiscal year, including the relevant market conditions and the investment strategies and techniques used by the fund; • Provide a line graph comparing the initial and subsequent account values at the end of each of the most recently completed ten fiscal years of the fund and a table of the fund’s total returns for the 1-, 5-, and 10-year periods as of the last day of the fund’s most recent fiscal year; and • Discuss the effect of any policy or practice of maintaining a specified level of distributions to shareholders on the fund’s investment strategies and per share NAV during the last fiscal year, as well as the extent to which the registrant’s distribution policy resulted in distributions of capital. Commenters that addressed this aspect of the proposal supported it.288 Because we continue to believe that investors in these funds—like investors in mutual funds, ETFs, BDCs, and operating companies—would benefit from annual report disclosure that aids them in assessing the fund’s performance over the prior year and that complements other information in the report,289 we are adopting this requirement as proposed.290 c. Financial Highlights We are amending Form N–2, as proposed, to require that a BDC, like 286 Disclosure and Analysis of Mutual Fund Performance Information; Portfolio Manager Disclosure, Investment Company Act Release No. 17294 (Jan. 8, 1990) [55 FR 1460, 1462 (Jan. 16, 1990)]. 287 Proposing Release, supra footnote 10, at section II.H.2.b. 288 ABA Comment Letter; ICI Comment Letter; Invesco Comment Letter; TIAA Comment Letter. One commenter stated that MDFP information can assist investors with understanding fund performance and market conditions over the reporting period from the fund manager’s perspective. ICI Comment Letter. In the Proposing Release, we asked whether, instead of requiring MDFP information for registered CEFs, we should require such funds to disclose MD&A information like BDCs and operating companies. Proposing Release, supra footnote 10, at section II.H.2.b. A few commenters expressly opposed this change to the proposed requirement compared with the MDFP requirement in Form N–1A. ABA Comment Letter; ICI Comment Letter; Invesco Comment Letter; TIAA Comment Letter. 289 Proposing Release, supra footnote 10, at section II.H.2.b. 290 New Instruction 4.g to Item 24 of amended Form N–2. PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 other affected funds, include financial highlights disclosure summarizing its financial statements in its registration statement and annual report.291 Today, BDCs include their full financial statements in their prospectus, and we currently permit BDCs to omit financial highlights disclosure summarizing these financial statements.292 We understand, however, that it is generally market practice for BDCs to include financial highlights disclosure. This information is arranged to allow investors to trace the operating performance of a fund on a per share basis from the fund’s beginning NAV to its ending NAV so that investors may understand the sources of changes.293 It summarizes the financial statements.294 Commenters did not address this aspect of the proposal. Because we continue to believe that investors will benefit from required disclosure summarizing a BDC’s financial statements,295 we are adopting this change as proposed.296 291 To effectuate this change, we are removing and reserving Instruction 1 to Item 4, and adding new Instruction 10 to Item 24 of amended Form N– 2. Currently, only registered CEFs are required to include financial highlights in their registration statements, and annual reports to shareholders. See Instruction 1 to Item 4.1 (limiting the applicability of Item 4.1 in the case of BDCs), and Instruction 4.b (requiring the financial highlights required by Item 4.1 to be included in the annual report) to Item 24 of current Form N 2. 292 General Instruction 1 to Item 4.1 of current Form N–2. 293 Registration Form for Closed-End Management Investment Companies, Investment Company Act Release No. 19115 (Nov. 20, 1992) [57 FR 56826, 56829 (Dec. 1, 1992)]. 294 Registration Form for Closed-End Management Investment Companies, Investment Company Act Release No. 17091 (July 28, 1989) [54 FR 32993, 32997 (Aug. 11, 1989)]. 295 See Proposing Release, supra footnote 10, at section II.H.2.c. 296 See Instruction 1 to Item 4.1 of amended Form N–2 (removed and reserved); new Instruction 10 to Item 24 of amended Form N–2. In addition, we are adopting, as proposed, a conforming change to the financial highlights requirements to eliminate the current requirement that registered CEFs specify the average commission rate paid. See Item 4.1 of amended Form N–2 (removing Instructions 18–19 from Item 4.1). Although this information is currently required for registered CEFs, the Commission previously eliminated a similar requirement from Item 13(a) of Form N–1A for open-end funds registered on Form N–1A. Item 4.1.l of Form N–2; Instructions 18–19 to Item 4.1 of Form N–2; Item 13(a) of Form N–1A; See Registration Form Used by Open-End Management Investment Companies, Investment Company Act Release No. 23064 (Mar. 13, 1998) [63 FR 13916, 13936 (Mar. 23, 1998)]. The Commission reached this determination after receiving and considering public comment arguing that these rates are technical information that typical investors are unable to understand. Id. We continue to believe that the same considerations supporting elimination of this requirement from Form N–1A also apply to registered CEFs. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations d. Unresolved Staff Comments We are also adopting, as proposed, a requirement that affected funds filing a short-form registration statement disclose outstanding staff comments that remain unresolved for a substantial period of time and that the fund believes are material.297 As part of the Commission’s 2005 securities offering reforms for operating companies, the Commission adopted a similar provision for operating companies, recognizing that the new rules could eliminate some incentives issuers may have to timely resolve any staff comments on their Exchange Act reports.298 The Commission observed, in connection with this proposed requirement, that this rulemaking similarly may eliminate some incentives for certain affected funds to timely resolve staff comments. Two commenters recommended that the Commission not adopt this proposed requirement.299 One commenter stated that the proposed requirement would be inconsistent with Commission efforts to simplify disclosure and focus on key information important to investors.300 We believe, however, that, because the requirement only relates to comments that the issuer believes are material and because they will relate to information about which the issuer and the Commission staff disagree, the disclosure of the comments is likely to be information that is important to investors. This commenter also stated that the requirement would be at odds with recent statements about the nonbinding nature of staff guidance. However, the provision will not make the substance of statements by staff in their comments binding upon the public or the Commission. Rather, the Commission, by rule, will require affected funds to inform investors about their disagreements with the staff in connection with the staff’s review of disclosures. Two commenters expressed concern that differing views about whether a particular comment is ‘‘material’’ or ‘‘unresolved’’ could result in inconsistent disclosure among different funds in similar circumstances.301 We recognize that analysis of whether a particular written comment must be disclosed may involve some subjective judgment regarding specific facts and circumstances. Many disclosure requirements inherently involve some subjective judgment and can result in some variance in the disclosure provided by different funds. These commenters also suggested some alternatives to the proposed requirement. For example, one commenter suggested that the Commission, rather than require disclosure of material unresolved staff comments, issue a stop order to prevent an offering from going forward if necessary.302 We believe that it is more appropriate to preserve an intermediate approach for the Commission, in appropriate circumstances, to allow an offering to proceed while informing investors and others about material disagreements between the issuer and the Commission’s staff, so that investors can make an informed judgment about the disagreement. Another commenter recommended, as an alternative, that the Commission publish its staff’s comments and issuer responses.303 We believe, however, that investors and other interested persons are more likely to see and read disclosure of material, unresolved staff comments if they appear in a fund’s annual report than comments and responses published separately.304 In addition, this requirement parallels the current requirement for operating companies that use the offering rules.305 These commenters, however, provide no basis for distinguishing affected funds from those operating companies that are already subject to the requirement. After considering comments received, and because we continue to believe that these disclosure requirements will provide an incentive for affected funds to timely resolve staff comments and that investors may value information about areas of disagreement that the issuer believes are material, we are 301 ICI Comment Letter; Invesco Comment Letter. Comment Letter. 303 Invesco Comment Letter. 304 Adopting this requirement does not prevent the Commission from also publishing staff comments or issuer responses, which may supplement this required disclosure. For example, publishing staff comments and issuer responses, which the staff currently disseminates using the EDGAR system, may also inform investors and the market about comments that are promptly resolved. See Press Release No. 2004–89; SEC Staff to Publicly Release Comment Letters and Responses (June 24, 2004) available at https://www.sec.gov/ news/press/2004-89.htm. 305 Proposing Release, supra footnote 10, at section II.H.2.d. jbell on DSKJLSW7X2PROD with RULES2 302 ICI 297 See new Instruction 4.h.(4) to Item 24 of amended Form N–2. Specifically, such funds will be required to disclose the substance of any unresolved written staff comments that the fund believes are material and that were received not less than 180 days before the end of the fiscal period to which the annual report relates. Id. 298 See generally Proposing Release, supra footnote 10, at section II.H.2.d. 299 ICI Comment Letter; Invesco Comment Letter. One commenter opposed extending the proposed requirement to additional categories of issuers, including mutual funds and ETFs. ICI Comment Letter. 300 ICI Comment Letter. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 33315 adopting the requirement as proposed.306 3. Current Reporting Requirements for Affected Funds As discussed in the Proposing Release, operating companies and BDCs are required to promptly report certain events on Form 8–K, while registered CEFs generally are not required to report on Form 8–K. The Commission proposed to require registered CEFs to report information on Form 8–K to enhance parity with operating companies and BDCs, to improve information for investors and the market, and to recognize the role of Form 8–K reporting in the 2005 offering reform amendments.307 It also proposed to amend Form 8–K to: (1) Add two new reporting items for affected funds on material changes to investment objectives or policies and material write-downs of significant investments, and (2) adapt the existing reporting requirements and instructions to affected funds. As discussed in more detail below, in response to comments, we are not adopting the proposed Form 8–K amendments.308 However, we will continue to consider current reporting more generally as part of our ongoing review of the effectiveness of investment company disclosure. a. Form 8–K Reporting for Registered CEFs The Commission proposed to require registered CEFs that are reporting companies under section 13(a) or section 15(d) of the Exchange Act to report current information on Form 8– K. Commenters generally opposed a Form 8–K reporting requirement for registered CEFs.309 Commenters suggested that registered CEFs should not be subject to Form 8–K reporting requirements because the commenters believe that: (1) Existing registered CEF 306 New Instruction 4.h.(4) to Item 24 of amended Form N–2. 307 See Proposing Release, supra footnote 10, at section II.H.3.a. See also Securities Offering Reform Adopting Release, supra footnote 5, at 44726 (describing the availability of ongoing information about a public issuer and its securities, including current information on Form 8–K, as an important component of the offering reforms the Commission adopted for operating companies) and 44730 (declining to make the benefits of being a reporting issuer, seasoned issuer, or WKSI available to voluntary filers and stating that ‘‘such issuers should be required to register under the Exchange Act, and thus become subject to all of the results of registration for all purposes, if they wish to avail themselves of’’ these benefits). 308 BDCs will continue to be required to report on Form 8–K, as they do today. 309 See ABA Comment Letter; ICI Comment Letter; and Invesco Comment Letter. E:\FR\FM\01JNR2.SGM 01JNR2 33316 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 disclosure is sufficient; 310 (2) Form 8– K reporting would be costly for registered CEFs; 311 (3) parity with operating companies and BDCs is unnecessary in the context of Form 8– K reporting; 312 and (4) investors, analysts, and regulators have not previously indicated that registered CEF disclosure is inadequate.313 With respect to existing disclosure practices, commenters stated that registered CEFs already provide material updates through other required or voluntary mechanisms (e.g., prospectus supplements, press releases, shareholder reports, voluntary Form 8– K filings, and website disclosure) that result in adequate and timely disclosure of information to investors.314 One commenter suggested that registered CEFs would be unlikely to provide meaningful new information under Form 8–K beyond what they already disclose under other regulatory requirements.315 Two commenters expressed concern that Form 8–K reporting may not timely inform investors about important fund 310 See ABA Comment Letter; ICI Comment Letter; and Invesco Comment Letter. 311 See ABA Comment Letter (stating that the cost and administrative burden of Form 8–K reporting would outweigh the benefits discussed in the Proposing Release of establishing a uniform and centralized current reporting regime for registered CEFs); ICI Comment Letter (suggesting that registered CEFs already have a greater regulatory filing burden than operating companies because they report on Forms N–CEN, N–PORT, and N–PX); and Invesco Comment Letter. 312 See ICI Comment Letter (suggesting there are reasons for registered CEFs to be subject to a different disclosure regime than operating companies, including that registered CEFs are highly regulated under the Investment Company Act). 313 See ABA Comment Letter and ICI Comment Letter. But see White Comment Letter (stating that there should always be a current document where an investor can see a fund’s strategy, risks, performance, and costs each year and suggesting that investors should receive notices of any material changes on a more timely basis); Proposing Release, supra footnote 10, at n.323 (citing a similar comment letter the Commission received in response to the Investor Experience Request for Comment). 314 See ABA Comment Letter; ICI Comment Letter; and Invesco Comment Letter. As discussed in the Proposing Release, listed registered CEFs may disclose certain information on Form 8–K to comply with exchange requirements for listed company disclosure, although there are other mechanisms they may use to disclose the information (e.g., press releases). See Proposing Release, supra footnote 10, at section II.H.3.a. Two commenters pointed to these requirements in support of their argument that existing disclosure is adequate. ABA Comment Letter and Invesco Comment Letter. 315 See ABA Comment Letter (stating that Form 8–K is largely duplicative of information that listed registered CEFs disclose in press releases in accordance with exchange rules and that continuously-offered registered CEFs disclose in prospectus supplements or post-effective amendments under SEC rules). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 events.316 One of these commenters suggested that fund investors are more likely to receive timely information through a registered CEF’s typical practice of issuing a press release about an important event, posting the press release to its website, and including information about the event in its next shareholder report.317 Although they opposed a new Form 8–K reporting requirement, a few commenters suggested alternative approaches if we were to require registered CEFs to report on Form 8–K. One commenter suggested that, if the Commission requires registered CEFs to report on Form 8–K, we should require them to report only a subset of Form 8– K items.318 Another commenter suggested that, rather than require registered CEFs to report on Form 8–K, we could require listed registered CEFs to file press releases containing material information on Form 8–K, similar to how continuously-offered registered CEFs file prospectus supplements on EDGAR.319 Additionally, one commenter suggested that we require registered CEFs to more directly notify investors about material fund changes and stated that Form 8–K filings would not provide appropriate notice to a fund’s investors.320 As we recognized in the Proposing Release and as noted by commenters, there are differences between the types of events that are important to registered CEFs and the types of events that are important to operating companies.321 Moreover, for those Form 8–K events that would be relevant to registered CEFs, we recognize that these funds currently may disclose substantially similar information through other mechanisms, such as prospectus supplements, post-effective amendments, and press releases. We also are sensitive to commenters’ concerns about the burdens to registered CEFs associated with a new Form 8–K reporting requirement, particularly for those registered CEFs that will not qualify as WKSIs or be eligible to file 316 See Invesco Comment Letter and White Comment Letter. 317 See Invesco Comment Letter. 318 See ICI Comment Letter. 319 See ABA Comment Letter. 320 See White Comment Letter. 321 See Proposing Release, supra footnote 10, at text following n.260; ABA Comment Letter (suggesting that, as a general matter, registered CEFs tend to have a simpler and more transparent business than operating companies (e.g., many listed registered CEFs publish their NAVs on a daily or weekly basis)); ICI Comment Letter (stating that, for example, disclosure about departures of fund officers on Form 8–K would not be meaningful for registered CEFs because fund officers generally are not actively involved in the day-to-day management of a fund’s portfolio). PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 short-form registration statements under the amendments we are adopting. As a result of these considerations, we are persuaded that a new Form 8–K reporting requirement for registered CEFs may not substantially improve the flow of important current information to investors and the market and, as a result, would not justify the additional burdens associated with Form 8–K reporting. Therefore, we are not adopting the proposed Form 8–K reporting requirements for registered CEFs.322 However, we will continue to consider whether more current reporting requirements that are tailored to registered CEFs, or to registered investment companies more generally, may be appropriate in connection with our continuing review of investment company disclosure effectiveness.323 Although registered CEFs generally will not be required to file reports on Form 8–K, a registered CEF that is eligible to file a short-form registration statement may voluntarily file information on Form 8–K to forward incorporate that information into its registration statement or for other purposes (e.g., to publicly disseminate information under exchange rules, as applicable).324 These voluntary Form 8– K filings will not affect a registered CEF’s ability to qualify as a seasoned fund. This is because the requirements to be current and timely with respect to the fund’s Exchange Act and Investment Company Act reports only apply to materials a fund is required to file.325 322 In addition to the proposed amendments to Form 8–K, we also are not adopting the associated proposed amendments to 17 CFR 240.13a–11 and 240.15d–11 (Exchange Act rule 13a–11 and rule 15d–11) because the proposed amendments to those rules were only necessary to carry out the proposal to require registered CEFs to report on Form 8–K. 323 See Investor Experience Request for Comment, supra footnote 274. See also supra footnote 313. 324 Although registered CEFs are only required to file Form 8–K reports under Item 5.04 (Temporary Suspension of Trading Under Registrant’s Employee Benefit Plans), as applicable, other Form 8–K reports they file on a voluntary basis will be ‘‘filed pursuant to Section 13(a) or 15(d) of the Exchange Act’’ for purposes of the incorporation by reference instructions in Form N–2 that apply to funds that are eligible to file short-form registration statements. See General Instruction F.3 of amended Form N–2; Exchange Act rule 13a–11(b)(1) and rule 15d–11(b)(1). Information a registered CEF furnishes on a Form 8–K report will not be incorporated by reference into the fund’s registration statement under this instruction. This is consistent with the incorporation by reference regime for operating companies on Form S–3, where information voluntarily filed on Form 8–K (e.g., under Item 8.01 (Other Events)) is incorporated by reference into the company’s registration statement while furnished Form 8–K reports are not incorporated by reference. See also supra footnote 314 (discussing exchange rules requiring listed registered CEFs to timely disclose certain information to the public). 325 See new General Instruction A.2 of amended Form N–2; General Instruction I.A.3 of Form S–3. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations b. Other Proposed Amendments to Form 8–K We are similarly not adopting the other proposed amendments to Form 8– K, including the two proposed reporting items regarding material changes to investment objectives or policies and material write-downs.326 Although the two proposed reporting items also would have applied to BDCs, we are not adopting these current reporting requirements for any affected funds. Commenters generally opposed these proposed reporting items and argued that existing disclosure is adequate.327 We will continue to consider the adequacy of affected fund disclosure, including the availability and timeliness of information about material changes in investment objectives or policies and material write-downs of significant investments, as part of our ongoing review of the effectiveness of investment company disclosure.328 Rather than establish new current reporting requirements for affected funds on a piecemeal basis in this release, we believe it is more appropriate to consider current reporting in connection with a broader, systematic review of investment company disclosure. jbell on DSKJLSW7X2PROD with RULES2 4. Online Availability of Information Incorporated by Reference We are adopting, as proposed, amendments to Form N–2’s General Instruction for Incorporation by Reference.329 All registered CEFs and BDCs currently can backward incorporate their financial information from previously-filed Exchange Act reports into the prospectus or SAI. However, 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.330 326 See Proposing Release, supra footnote 10, at section II.H.3.b. Since we are not adopting the proposed items to Form 8–K, we also are not amending the safe harbor in Exchange Act rules 13a–11 and 15d–11 to include those items. See Proposing Release, supra footnote 10, at n.289. 327 See ABA Comment Letter (suggesting that neither of the proposed items would provide additional important information); ACC Comment Letter (opposing the proposed material write-down item for BDCs in particular); CBD Comment Letter. 328 See Investor Experience Request for Comment, supra footnote 274. 329 See General Instruction F of amended Form N–2. 330 See General Instruction F.3 of amended Form N–2 (requiring 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); see also Proposing Release, supra footnote 10, at text accompanying nn.309–311. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 Under the amendments, and as proposed, we are removing the requirement that a fund deliver to new investors information that it has incorporated by reference into the prospectus or SAI.331 These amendments will allow the fund to make its prospectus, SAI, and the incorporated materials readily available and accessible on a website identified in the fund’s prospectus and SAI.332 Affected funds will also be required to provide incorporated materials upon request free of charge. We believe this approach will improve the online accessibility of the prospectus and SAI and any documents that are incorporated by reference for investors that wish to review such information online, and will facilitate the efficient use of incorporation by reference by affected funds.333 The only commenter who addressed this approach supported it,334 and we are adopting it as proposed. 5. Amendments to Certain Registered CEFs’ Annual Report Disclosure We are adopting, largely as proposed, amendments to rule 8b–16(b) that are designed to allow investors in registered CEFs that rely on the rule to more easily identify and understand key information about their investments.335 Although rule 8b–16(a) generally requires registered investment companies to update their registration statements annually, rule 8b–16(b) currently allows registered CEFs to forgo an annual update provided that they disclose in their annual reports certain key changes that have occurred during 331 We also are amending Form N–2’s current disclosure requirements for incorporation by reference, by replacing 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 streamlines—but does not substantively change (other than the website disclosure provision discussed below)—the disclosure requirements for incorporation by reference in current Form N–2. 332 New General Instruction F.4.a of amended Form N–2; cf. General Instruction VII.F of Form S– 1; General Instruction F.4.b.(5) of amended Form N–2; cf. Item 12(c)(1)(v) of Form S–1. We are amending current General Instruction F.3 in its entirety, and moving 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 new General Instruction F.4.b of amended Form N–2. We also are conforming certain incorporation by reference provisions in Form N–2 to mirror parallel provisions in Form N–1A. See new General Instruction F.2.a–c of amended Form N–2; cf. General Instruction D.1.(a)–(c) of Form N–1A. 333 See Proposing Release, supra footnote 10, at nn.313–317 and accompanying text. 334 See SIFMA Comment Letter. 335 See amended Investment Company Act rule 8b–16. PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 33317 the prior year.336 Disclosures that describe a specific change to a fund strategy or risk may not have sufficient context to allow investors to understand the effect of such change, potentially leaving shareholders to 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 certain key information about the fund, such as its current investment strategy or principal risk factors.337 Accordingly, we proposed to require funds that rely on rule 8b–16(b) to describe any changes in enough detail to allow investors to understand each change and how it may affect the fund.338 For example, as stated in the Proposing Release, to the extent a fund’s principal investment objectives, investment policies or principal risks have changed, the fund should describe its objectives, policies or risks before and after the change.339 The one commenter to address this aspect of the proposal stated that a closed-end fund’s annual report should include a full description of the fund’s current objectives, strategies and risks, as many closed-end funds do not maintain a current registration statement, which would otherwise include this information.340 One 336 Current rule 8b–16(b) (requiring 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. 337 See Proposing Release, supra footnote 10, at n.323 and accompanying text. See also Investor Experience Request for Comment, supra footnote 274, in which we sought input from individual investors on how to enhance fund disclosures. 338 See Proposing Release, supra footnote 10, at 136. 339 Id. 340 See Peres Comment Letter (noting that ‘‘[i]f there is a change to an objective, strategy or risk in the past year, they describe the change in the annual report. However, there is no complete description of a fund’s current objectives, strategies and risks. To learn this information, an investor would need to look at the fund’s most recent registration statement (which could be from decades ago) and review each annual report since that time.’’). The Proposing Release requested comment on whether we should adopt different disclosure requirements for funds that rely on rule 8b–16, including whether we should require such funds to summarize in their annual reports certain key information that would be required in a current E:\FR\FM\01JNR2.SGM Continued 01JNR2 33318 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 commenter described difficulties faced by investors in determining an affected fund’s current investment objectives and policies, with another requesting a single location where such key information could be found.341 As proposed, we are requiring funds that rely on rule 8b–16(b) to describe certain key changes in enough detail to allow investors to understand each change and how it may affect the fund.342 We believe that in giving context for a change to one or more of the required disclosures, it is particularly effective for a fund to describe current information regarding related disclosures, as this approach may facilitate a more complete understanding of how a change to one aspect of the fund impacts the fund more broadly. Such disclosures must be prefaced with a legend clarifying that the disclosures provide only a summary of certain changes that have occurred in the past year, which may not reflect all of the changes that have occurred since the investor purchased the fund.343 In response to comments and in a change from the proposal, we also are requiring any affected fund that relies on rule 8b–16(b) to describe the fund’s current investment objectives, investment policies, and principal risks in its annual report.344 These key disclosures must be provided, even if there were no changes in the past year. This will ensure that investors can access in a single location current information about key aspects of the fund in which they invest. We believe that funds could increase the effectiveness of this disclosure by presenting it concisely, in accordance with ‘‘plain English’’ principles for organization, wording, and design. We similarly encourage funds to tailor their disclosures to how the fund operates rather than rely on generic, standard disclosures about the fund’s investment policies and risks. Finally, we encourage funds to describe principal risks in order of importance, with most prospectus. See Proposing Release, supra footnote 10, at section II.H.5. 341 See ABA Comment Letter (‘‘[M]any Affected Funds were organized many years ago, and since the relevant information may be spread among the prospectus used for the Affected Fund’s most recent public offering (which may have taken place years or even decades ago), proxy statements and reports to shareholders spanning many years, it can be a burdensome undertaking to piece such information together.’’); see also Dale White Comment Letter (‘‘There should always be a current document where an investor can see a fund’s strategy, risks, performance, and costs each year.’’). 342 See paragraph (e) of amended Investment Company Act rule 8b–16. 343 Id. 344 See amended rule 8b–16(b)(2), (4). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 significant risks appearing first (i.e., not listing risks in alphabetical order). J. Effective and Compliance Dates Effective Dates. The final rule will become effective on August 1, 2020. While we proposed that the rule would become effective 60 days from publication in the Federal Register, we are establishing a fixed date so that the amendments to certain rules and forms adopted pursuant to the Variable Contract Summary Prospectus Adopting Release will be effective prior to the amendments to the same rules and forms adopted herein.345 The August 1, 2020 effective date will apply to all aspects of the final rule, except for the following: • Rules 23c–3, 24f–2, and Form 24F– 2. The amendments to rules 23c–3, 24f– 2, and Form 24F–2 346 will become effective August 1, 2021 (one year after other aspects of the final rule take effect, as proposed). One commenter suggested making the amendments to rules 23c–3 and 24f–2 immediately effective for new interval funds so they can pay registration fees based on the net issuance of shares sold during their initial fiscal year, and allow existing funds to use the new payment method as soon as possible thereafter.347 While we agree that interval funds should be able to calculate fees on Form 24F–2 as soon as possible, as proposed, the amendments to rules 23c–3 and 24f–2 will become effective one year after the final rule’s effective date to provide sufficient time to modify the Commission’s systems to accept such filings from interval funds.348 • Rules 456 and 457 and Forms S–1, S–3, F–1 and F–3: The amendments to rules 456 and 457 and Forms S–1, S–3, F–1 and F–3 under the Securities Act will become effective August 1, 2021. Compliance Dates. We are adopting compliance dates for certain new requirements to provide a transition period after the effective date of the final rule. • MDFP. As proposed, an annual report filed by a registered CEF one year or more after the effective date of the final rule will be required to include the 345 See Updated Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable Life Insurance Contracts, Investment Company Act Release No. 33814 (March 11, 2020) (‘‘Variable Contract Summary Prospectus Adopting Release’’). 346 See supra section II.G. 347 See ICI Comment Letter. 348 To facilitate the transition to calculating fees on Form 24F–2, an interval fund’s fee calculation should exclude excess shares that were registered under the fund’s last registration statement on Form N–2 that remain unsold prior to the effectiveness of rule 24f–2 as applied to interval funds. PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 MDFP disclosures.349 We received no comments on this proposed compliance period. Affected funds must comply with this requirement by August 1, 2021. • Structured Data Requirements (Financial Statement, Cover Page, and Prospectus Information). We proposed that all affected funds subject to the Inline XBRL structured data reporting requirements for financial statement, registration statement cover page, and prospectus information that are eligible to file a short-form registration statement would be required to comply with those provisions 18 months after the effective date, and all other affected funds to comply 24 months after the effective date. The one commenter who addressed this aspect of the release recommended that any new Inline XBRL requirements have a compliance date later than that required for openend funds.350 We are extending the compliance period by an additional six months to align more closely with the Inline XBRL compliance periods for other fund registrants.351 Accordingly, affected funds that are eligible to file a short-form registration statement will be required to comply with those provisions 24 months after the effective date, or August 1, 2022. All other affected funds subject to these requirements must comply 30 months after the effective date, or February 1, 2023. Affected funds will be permitted to file in Inline XBRL prior to the compliance date once EDGAR has been modified to accept submissions in Inline XBRL for all forms subject to the amendments, which is anticipated to be March 2021. Notice of EDGAR system readiness to accept filings in Inline XBRL will be provided in a manner similar to notices of taxonomy updates and EDGAR Filer Manual updates. • Structured Data Requirements (Form 24F–2). As proposed, all filers on Form 24F–2 (including existing Form 24F–2 filers, such as open-end funds and unit investment trusts, as well as interval funds) will be required to file reports on the form in an XML structured data format 18 months after the effective date, or February 1, 349 See supra section II.H.2.b. ICI Comment Letter (citing Inline XBRL Adopting Release, supra footnote 250, which requires open-end funds to comply with the Inline XBRL requirements on September 17, 2020 (24 months post-effective date) for ‘‘large fund groups’’ and September 17, 2021 (36 months post-effective date) for ‘‘small fund groups’’). 351 Id.; see also Variable Contract Summary Prospectus Adopting Release, supra footnote 345 (requiring variable contracts to comply with the Inline XBRL requirements on January 1, 2023 (30 months post-effective date)). 350 See E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 2022.352 The one commenter who addressed the proposed 18-month transition period supported it.353 jbell on DSKJLSW7X2PROD with RULES2 III. Economic Analysis We are adopting 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 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 generally 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 final rule will provide incremental flexibility to funds in their communications, which may increase the flow of information to investors. As discussed in detail above, the final rule will affect numerous distinct aspects of how our securities offering and communications rules apply to affected funds.354 A. Introduction and Baseline We are sensitive to the economic effects that may result from the final rule, 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, we must 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 352 See supra section II.H.1.d. ICI Comment Letter. 354 See supra section I for summary of final rule. 353 See VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 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 final rule, as well as the potential effects on efficiency, competition, and capital formation. Many of the potential economic effects of the final rule would stem from the statutory mandates, while others would stem from the discretion we are exercising. We discuss the potential economic effects of the amendments to implement the statutory mandates in sections III.B and III.C. We considered certain alternatives to our approach to implementing the statutory mandates, as discussed in section III.D. We are also adopting 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 section III.E. Where possible, we have attempted to quantify the costs, benefits, and effects on efficiency, competition, and capital formation expected to result from the final 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 final rule is the current set of legal requirements and market practices. The final rule likely will 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 final rule will depend on many factors, including the number of affected funds that rely on the final rule. We recognize that some affected funds would not satisfy the conditions in certain of the 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 final rule. The discussion below describes our understanding of the markets and issuers that will be affected by the final rule. 1. Number of Affected Funds The final rule will affect BDCs and registered CEFs. As of June 30, 2019, there were 791 affected funds, including 105 BDCs and 686 registered CEFs. To PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 33319 estimate the number of BDCs, we use data from Form 10–K and Form 10–Q filings as of June 30, 2019, the latest data available.355 We identify 51 listed BDCs and 54 unlisted BDCs. The average net assets of the listed BDCs is approximately $820 million, and the average of their total assets is $1.5 billion. Based on trading data as of June 30, 2019, 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 15 of those BDCs have public float greater than $700 million (i.e., the WKSI public float threshold).356 We use data from Morningstar and SEC filings to estimate the number of registered CEFs.357 We identify 497 registered CEFs that were listed on an exchange as of June 30, 2019, including 1 interval fund. There were 189 unlisted registered CEFs as of June 30, 2019, including 60 interval funds. The average net assets of the listed registered CEFs is approximately $551 million, while the average net assets of the unlisted registered CEFs is approximately $382 million.358 Based on trading data as of June 30, 2019, 455 of the listed registered CEFs have public float greater than $75 million, and 85 of those funds have public float greater than $700 million.359 Information about the types 355 The estimated number of BDCs includes BDCs that have not registered a securities offering on Form N–2. Certain of our amendments, such as the requirement to tag certain Form N–2 prospectus disclosure items in Inline XBRL, will 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 amendments with respect to BDCs may be over-estimates in certain respects. 356 The data (as of June 30, 2019) 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. 357 The estimated number of registered CEFs includes registered CEFs that have not registered a securities offering under the Securities Act. Certain of our amendments, such as the structured data requirements, will apply somewhat differently to these registered CEFs and may impose fewer burdens on them. For example, a registration statement that is filed under only the Investment Company Act is not required to include financial highlights information under Item 4 of Form N–2, while registered CEFs that file a registration statement under the Securities Act must disclose financial highlights information and tag that information in Inline XBRL. See General Instructions G and H of amended Form N–2. Thus, our quantitative estimates of the costs and paperwork burdens of certain of the amendments with respect to registered CEFs may be overestimates in certain respects. 358 The average of net assets of registered interval funds is $520 million. 359 This includes the listed interval fund, which had public float of approximately $73 million as of E:\FR\FM\01JNR2.SGM Continued 01JNR2 33320 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations of offerings conducted by different categories of affected funds for the period of July 1, 2014—June 30, 2019 is reflected in the below table.360 TABLE 3 Types of offerings Offering statistics Listed BDCs Unlisted BDCs Listed registered CEFs Unlisted registered CEFs Registered offerings ........ Number of offerings ........................ Total amount raised ........................ Average (median) offering amount Regulation D offerings .... Number of offerings ........................ Total amount raised ........................ Average (median) offering amount 113 ..................... $12.2 bil ............. $107.9 mil ($60.0 mil). 21 ....................... $12.3 bil ............. $584.7 mil ($100 mil). 24 ....................... $1.7 bil ............... $7.8 mil ($7.2 mil). 67 ....................... $9.1 bil ............... $135.0 mil ($50.0 mil). 26 ....................... $5.2 bil ............... $201.3 mil ($103.8 mil). 1 ......................... $15.1 mil ............ $15.1 mil ($15.1 mil). 137 $20.3 bil $176.3 mil ($31.0 mil) 165 $7.5 bil $45.6 mil ($6.1 mil) 3. Current Disclosure Obligations of 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 in more detail above in sections II.B, II.C, and II.F, registered investment companies and BDCs are excluded from certain offering and communications rules available to operating companies. Affected funds currently 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.361 Affected funds currently can conduct shelf offerings under rule 415(a)(1)(x) if they meet the applicable eligibility criteria for Form S–3, even though affected funds register their securities offerings on Form N–2. Affected funds conducting shelf offerings, however, currently experience certain burdens not faced by operating companies.362 For example, affected funds conducting shelf offerings currently must file posteffective amendments to make certain updates to their registration statements, while operating companies conducting shelf offerings may update their registration statements through forward incorporation by reference. As a result, affected funds can incur additional expense or delay for shelf offerings, which can affect the timing of their capital-raising. Similarly, different rules apply to affected fund communications as opposed to operating company communications.363 These differences can impose additional costs or constraints on affected funds or others because, for example, underwriters may be more familiar with the operating company rules. Further, affected funds currently are required to deliver a final prospectus to investors.364 Final prospectuses can be lengthy, particularly for BDCs because they generally do not take advantage of backward incorporation by reference currently permitted for certain financial and related information. For example, the median page length of prospectuses filed by listed BDCs is approximately 234 pages.365 June 30, 2019. Data on prices and shares outstanding, which is used to calculate the public float, is taken from CRSP. 360 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 is 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. 361 See supra section II.C. 362 See supra section II.B.1. 363 See supra section II.F. 364 See supra section II.E. 365 This estimate is based on recent Form N–2 filings of the 49 listed BDCs. BDCs generally do not rely on existing Form N–2 backward incorporation by reference provisions because the form 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. 366 See supra footnote 314. As of September 2019, there were 7,995 mutual funds, 2,076 ETFs, and 4,758 UITs. Thus, together with the 791 affected funds, there is a total of 15,620 funds, affected and non-affected. This means that affected funds represent about 5.1% of the total number of funds. As of September 2019, mutual funds had approximately $20,156 billion in assets, ETFs had approximately $4,024 billion in assets, UITs had approximately $76 billion in assets, and affected funds had approximately $459 billion in assets. Thus, affected funds represent about 1.8% of total investment company assets. We use data from Morningstar and SEC filings to estimate the number of affected ETPs. We identify 68 such ETPs as of December 31, 2019. jbell on DSKJLSW7X2PROD with RULES2 2. Current Securities Offering Requirements for Affected Funds VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 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. 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).366 B. Potential Benefits Resulting From the Proposed Implementation of the Statutory Mandates As discussed, the 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 final rule will 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 E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations certain communications during a registered offering.367 Additionally, as discussed below, we believe that the final rule will 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 final rule will provide cost-saving options to affected fund issuers and underwriters. jbell on DSKJLSW7X2PROD with RULES2 1. Improved Access to Capital and Lower Cost of Capital We anticipate that the final rule will facilitate capital formation and possibly lower the cost of capital by improving access to the public capital markets for affected funds. The rule is 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 final rule will depend on the characteristics of the affected fund, 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 final rule than unlisted BDCs and unlisted registered CEFs, including unlisted interval funds. The final rule will 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 will benefit, albeit to a lesser degree, from the other revisions to the offering process and our communications rules. a. Benefits From WKSI Status The largest increase in capital formation and reduction in cost of capital that the final rule could generate will come from allowing affected funds to obtain WKSI status. Affected funds that qualify as WKSIs will enjoy additional flexibility compared to affected funds that are non-WKSIs.368 There are 100 affected funds (15 listed BDCs and 85 listed registered CEFs) that meet the $700 million dollar public float criterion as of June 30, 2019.369 A shelf registration statement and any subsequent amendments filed by a WKSI are automatically effective upon filing. This flexibility will allow affected funds that qualify as WKSIs to promptly tap favorable conditions in the public 367 See also infra section III.E (discussing benefits associated with our discretionary rule amendments). 368 See supra section II.C. 369 See supra section III.A.1. VerDate Sep<11>2014 21:47 May 29, 2020 Jkt 250001 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, because affected funds typically trade at a discount to their NAV,370 affected funds that are WKSIs will be able to act more quickly to raise capital when their shares are trading at a premium,371 thus increasing the amount of capital raised and enhancing capital formation. Additionally, WKSIs are not required to pay any registration fees at the time of filing a registration statement. They are only required to pay the registration filing fee at the time securities are taken down and sold off the shelf registration statement. This will 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 final rule may also lower the cost of capital because it will provide significant flexibility to affected funds that are WKSIs and their underwriters in marketing securities. The final communications rules will allow these funds to communicate at any time regarding an offering. Requiring an affected fund to have at least $700 million in public float to qualify as a WKSI will avoid providing affected funds with an advantage in the competition for capital over certain operating companies. For example, a lower public float threshold for affected funds would provide them with a competitive advantage over operating companies that may have similar characteristics to affected funds, such as listed REITs, but have public float below $700 million. In a similar vein, the use of alternative eligibility criteria for affected funds to qualify as WKSIs would put them at competitive advantage compared to similar operating companies without public float, such as unlisted REITs. Moreover, reducing the $700 million threshold or providing alternative eligibility criteria for affected funds to qualify as WKSIs would likely lead to potential higher incidences of disclosure and fund practices that may not comply with 370 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). 371 See supra footnote 37 (discussing restrictions on affected funds’ ability to sell their shares at a price below NAV). PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 33321 applicable law due to reduced staff review.372 Given the important benefits that WKSI status provides, 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, the 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.373 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 inhibit competition and negatively affect the number of investment opportunities available to investors if it leads to a reduction of the number of strategies funds employ. 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. Smaller funds, however, may have better access to investment opportunities in smaller companies because these investments may be too small to be economically viable for larger funds. At present, we are not able to estimate the effects of these competitive dynamics. b. Benefits From Shelf Registration Other provisions of the final rule 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–2.374 For example, 372 See also infra section III.D (discussing considerations related to an alternative of modifying the public float standards in the WKSI definition by changing the required level of public float or providing alternative eligibility criteria). 373 See, e.g., 17 CFR 270.17a–8 (Investment Company Act rule 17a–8). 374 See supra section II.B. E:\FR\FM\01JNR2.SGM 01JNR2 33322 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 the final rule generally allows these funds to more efficiently use the shelf registration process if, like operating companies, they meet the eligibility requirements of Form S–3.375 As of June 30, 2019, there were 499 affected funds that met the $75 million dollar public float criterion for primary offerings under Form S–3 (which criterion is incorporated into the short-form registration instruction of Form N–2).376 Affected funds that qualify will bear fewer costs associated with updating the information in their registration statements because information in the fund’s Exchange Act reports will be incorporated by reference into the fund’s registration statement. For example, for PRA purposes, we estimate that eligible affected funds will file approximately 128 fewer post-effective amendments annually as a result of the amendments, resulting in an annual aggregate cost reduction of approximately $5,726,592 for these funds.377 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 final rule, eligible BDCs will no longer file these prospectus supplements since their Exchange Act reports will 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 rule.378 We anticipate that eligible 375 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. 376 See supra section III.A.1. 377 See infra section IV.B.1. For purposes of the PRA, we estimate that the hour burden of preparing and filing a post-effective amendment is 125 hours. Reducing the number of post-effective amendments by 128 filings would decrease the aggregate annual burden of Form N–2 by 16,000 hours (125 hours × 128 post-effective amendments = 16,000 hours). We estimate that the monetized internal burden is $33,625 per post-effective amendment and the external burden is $11,114 per post-effective amendment. See infra section IV.B.1. The total annual cost is calculated by adding the monetized internal burden ($33,625 × 128 post-effective amendments = $4,304,000) to the cost of outside professionals ($11,114 × 128 post-effective amendments = $1,422,592). Although we have increased the expected reduction in the number of post-effective amendments discussed in the Proposing Release from 112 to 128 filings, the estimated annual aggregate cost reduction has decreased from $7,943,376 to $5,726,592 to better recognize how we have monetized internal burdens for purposes of the PRA. See Proposing Release, supra footnote 10, at n.359 and accompanying text; infra section IV.B.1. 378 This analysis assumes that a BDC would file a prospectus supplement for each Form 10–Q filing VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 registered CEFs also will be able to make fewer prospectus supplement filings under the final rule, although they likely will 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. While we believe that affected funds will likely file fewer prospectus supplements under the final amendments, we are unable to estimate any reduction in the number of prospectus supplements that affected funds will file under the final rule, and any associated cost savings for affected funds, due to certain counterbalancing factors. For example, if the final rule 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 final amendments, they may file fewer prospectus supplements.379 On average, we believe that affected funds will likely file fewer prospectus supplements under the final amendments since they will 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. In general, we believe affected funds that qualify for the short-form registration instruction will experience cost savings associated with making fewer filings and will be able to use a more efficient process to update their prospectus disclosure. This will decrease the costs of eligible funds’ registered offerings and will 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 shelf offerings also will be able to omit certain information from their prospectuses and use the same process as operating companies to provide omitted information by filing a prospectus supplement, which will generally make the shelf registration process less costly for these funds as compared to the baseline. The final rule also may provide incremental cost savings to affected funds that are eligible to file a shortform registration statement in certain other respects. For example, the final rule will 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.380 We do not anticipate that these cost savings will 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 amendment to rule 418 since they will no longer be required by that rule to furnish certain information to the Commission or its staff promptly on request.381 c. Other Benefits for Affected Funds The final rule will generate other benefits for affected funds generally, regardless of whether they are WKSIs or seasoned funds. For example, the amendment to require affected funds to follow the same process that operating companies follow to file prospectuses under rule 424 will require that affected funds file prospectus supplements when changes from or additions to a previously filed prospectus are substantive, whereas currently they are required to file every prospectus that varies from any previously filed prospectus under rule 497.382 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 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 final rule allows an affected fund to satisfy its obligation to deliver a final prospectus by filing it with the Commission and complying with certain other requirements, thus decreasing the cost of the offering.383 For example, the final rule will permit affected funds to save on printing and mailing costs for delivering the final prospectus in paper.384 380 See (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 Proposing Release, supra footnote 10, at n.415 and accompanying text (discussing the estimated number of Form 8–K filings per BDC per year). 379 See supra sections II.B.3.e and II.I.2.a. PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 supra section II.G.2. supra section II.G.1. 382 See supra section II.B.3.d. 383 See supra section II.D. 384 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 381 See E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations In general, commenters stated that the rule will generate benefits for affected funds. Several commenters stated that the proposed rule would lead to a more efficient capital-raising process.385 One commenter suggested that the proposed rule could also help encourage product development that would expand the universe of registered CEFs, but did not elaborate on the specific aspects of the rulemaking that would encourage product development.386 d. Benefits for Other Parties jbell on DSKJLSW7X2PROD with RULES2 The lower costs of registered offerings resulting from the final rule should benefit investors in affected funds because funds bear offering expenses. Lowering offering expenses may, all else equal, reduce the size of the discount or increase the size of the premium at which shares of the affected funds trade. Two commenters expressed similar views, arguing that the proposed rule would provide cost savings to funds’ shareholders.387 In addition, the final rule could reduce the cost to underwriters of participating in registered offerings of affected funds, and these potential cost savings could be passed on to the affected funds. Based on the sheer volume and number of transactions,388 underwriters may have more expertise and established procedures for operating companies’ registered offerings, which are subject to the rules we are extending to affected funds. In contrast, underwriters probably have less, or more concentrated, expertise regarding the current requirements for offerings by affected funds. Standardization in the registered offering space, by making the offerings of affected funds more similar to those of operating companies, could make it easier for underwriters to execute such offerings and may decrease their compliance costs. If underwriters pass some of the cost savings on to affected 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 rule. 385 See ACC Comment Letter; CBD Comment Letter; SIFMA Comment Letter. 386 See Invesco Comment Letter. 387 See ICI Comment Letter; Invesco Comment Letter. 388 For example, in 2017 non-fund issuers raised approximately $1.3 trillion in 1,846 registered debt offerings and $184 billion in 976 registered equity offerings. See Capital Raising in the U.S.: An Analysis of the Market for Unregistered Securities Offerings, 2009–2017, Division of Economic and Risk Analysis White Paper (Aug. 1, 2018), available at https://www.sec.gov/dera/staff-papers/whitepapers/dera_white_paper_regulation_d_082018. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 funds and their investors, this could result in cheaper registered offerings for affected funds, thus encouraging them to raise more capital, which would lead to enhanced capital formation. Lastly, standardization may encourage a broader set of underwriters to participate in this market, potentially decreasing costs for affected funds and investors in these funds. One commenter agreed that the proposed rule would make it easier for underwriters to execute offerings by affected funds, which could lead to decreased costs.389 The final rule could level the securities offering playing field between affected funds and operating companies and streamline the registration process for affected funds, consequently making them potentially more competitive in the market for capital raising. The final rule may also make certain affected funds more competitive compared to affected funds that either cannot or choose not to rely on these amendments. Thus, the final rule will likely enhance competition in the public capital markets. The increased competition for capital in turn could lead to potentially better allocation of capital. The final rule may also benefit companies in which affected funds invest. Small and mid-size companies, because of their size, type of assets, risk profile, and the general lack of information about their activities and financial condition, typically find it more difficult to raise funds from traditional sources of capital such as bank loans and registered offerings.390 This difficulty in sourcing more traditional financing constrains their ability to invest in profitable projects and grow. To the extent that the final rule improves capital-raising opportunities for affected funds that invest in these companies, this may result in investments in a greater number of small to mid-size U.S. companies, thus alleviating financial constraints of such companies and contributing to economic growth generally.391 Commenters generally 389 See SIFMA Comment Letter. e.g., Alan Berger and Gregory Udell, The Economics of Small Business Finance: The Roles of Private Equity and Debt Markets in the Financial Growth Cycle, Journal of Banking and Finance, Vol. 22, 613–673 (1998); Meghana Ayyagari, Asli Demirgu¨c¸-Kunt, and Vojislav Maksimovic, How Important are Financing Constraints? The Role of Finance in the Business Environment, World Bank Mimeo (2005); Crowdfunding, Securities Act Release No. 9974 (Oct. 30, 2015) [80 FR 71388 (Nov. 16, 2015)]. 391 See, e.g., Torsten Beck, Asli Demirgu ¨ c¸-Kunt, and Ross Levine, SMEs, Growth, and Poverty: CrossCountry Evidence, Journal of Economic Growth, Vol. 10, 197–227 (2005); Ryan Decker, John Haltiwanger, Ron Jarmin, and Javier Miranda, The 390 See, PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 33323 agreed that the proposed rule would facilitate capital formation, especially for small to mid-size businesses.392 One commenter stated that the proposed rule could potentially stimulate economic growth.393 2. Facilitated Communication With Investors The final rule will provide incremental flexibility to funds in their communications, which may increase the flow of information to investors.394 Currently, affected funds generally 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).395 This standardization in the communications processes of affected funds, by making them similar to those of operating companies, will make it easier for underwriters to execute offerings by affected funds and thus may decrease their compliance costs, which in turn may lead to lower offering costs and potentially enhance capital formation. Additionally, under the final rule, affected funds that qualify as WKSIs can engage in the widest range of communications, including free writing prospectus communications about an offering with any party before a registration statement is filed. More generally, affected funds will be able to engage in certain other pre-filing communications, use free writing prospectuses after a registration statement is filed, and use certain communications that are not subject to prospectus liability. The changes in the communications rules for affected funds may increase the amount of valuable information that could be provided to investors before they make investment decisions, particularly with respect to WKSIs. We believe that more information could be provided on a timelier basis because the amendments will eliminate regulatory barriers to the dissemination of that information, and the markets may provide incentives for issuers, underwriters, and brokerdealers to produce additional Role of Entrepreneurship in U.S. Job Creation and Economic Dynamism, Journal of Economic Perspectives, July, 3–24 (2014). 392 See SIFMA Comment Letter; ACC Comment Letter; CBD Comment Letter. 393 See ICI Comment Letter. 394 See supra section II.F. 395 But see supra footnote 144 (explaining that affected funds currently are permitted to engage in certain pre-filing test-the-waters communications under Securities Act rule 163B). E:\FR\FM\01JNR2.SGM 01JNR2 33324 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations information. We also believe that the increased flexibility of affected funds in their communications with investors under the free writing prospectus rules will maintain appropriate investor protection, consistent with the protections that apply to affected funds’ communications under rule 482. For example, the rules that allow affected funds to use free writing prospectuses are designed to assure that written issuer-provided or issuer-used information is publicly available. Additionally, the free writing prospectus will be a section 10(b) prospectus under the Securities Act and, as such, will be subject to liability under section 12(a)(2) as well as the anti-fraud provisions of the Federal securities laws. Increased information flow can help promote efficient capital markets because the market may be able to value securities more accurately. For example, the final rule will permit broker-dealers to disseminate research about an affected fund if certain conditions are met. While broker-dealers currently may disseminate such research under rule 482, the amendments to rule 138 will likely reduce certain costs to brokerdealers associated with rule 482 (e.g., filing costs and concerns associated with prospectus liability). This could allow more valuable information about affected funds to reach potential investors. Another benefit of increasing the information flow is that investors may become better informed in making portfolio allocation decisions in accordance with their particular riskreturn profiles. In addition, the final rule may benefit broker-dealers who provide research reports on affected funds by reducing their potential liability exposure associated with such reports, relative to the baseline, which may encourage them to provide additional research and enhance information flow. Commenters generally agreed that the proposed rule would provide more flexibility for affected funds to communicate and would increase information flow.396 jbell on DSKJLSW7X2PROD with RULES2 C. Potential Costs Resulting From the Proposed Implementation of the Statutory Mandates 1. Compliance Costs The amendments we are adopting to implement the statutory mandates could increase affected funds’ compliance costs in certain respects.397 We also are 396 See ACC Comment Letter; ICI Comment Letter; Invesco Comment Letter. 397 See also infra section III.E (discussing compliance and other costs associated with the proposed discretionary amendments). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 cognizant of the fact that such an increase could be passed on to funds’ investors. A potential cost of the final rule is that affected funds could incur increased filing or recordkeeping costs associated with issuer free writing prospectuses,398 although affected funds currently face many of the same filing and recordkeeping costs under rule 482. For example, the ability of affected funds that qualify as WKSIs to use free writing prospectuses may increase the level of these funds’ current communications (including certain communications prior to filing a registration statement that are presently prohibited), thus increasing the funds’ filing and recordkeeping costs.399 We estimate that affected funds that are WKSIs would have additional annual filing and recordkeeping costs of $200 per affected fund for free writing prospectuses used before the fund files a registration statement.400 To the extent affected funds use free writing prospectuses for communications that currently occur under rule 482, the costs associated with free writing prospectuses could increase, and the costs associated with rule 482 advertisements could decrease. We are unable to predict, however, whether affected funds will be more likely to use free writing prospectuses than rule 482 communications or to engage in more communications with investors in practice as a result of the amendments. Affected funds could also incur costs associated with adjusting their internal procedures for filing prospectus supplements.401 Such costs could stem from the need to augment funds’ information technology systems or train funds’ employees, although, as recognized above, affected funds likely will be able to file fewer prospectus supplements under the final rule. 398 See supra section II.F.1; infra section IV.B.4 (estimating the annual paperwork burden for free writing prospectuses under rules 163 and 433 for purposes of the PRA). 399 But see infra Table 14 footnote 1 (discussing that only 10 WKSIs relied on rule 163 for the Commission’s 2017 fiscal year). 400 For purposes of the PRA, we estimate that, on average, affected funds that are eligible to be WKSIs (estimated as 100 funds) would file two free writing prospectuses under the proposed amendments to rule 163 each year. We estimate the total incremental burden would be approximately 0.125 hours and $150 for the service of outside professionals. See infra section IV.B.4. We monetize the internal burden of preparing and filing a free writing prospectus by multiplying the burden hours by an estimated wage rate of $400 per hour (0.125 × $400 = $50). The estimated wage figure is based on analysis in previous rulemakings. The total annual cost is calculated by adding the monetized internal burden ($50) to the cost of outside professionals ($150). 401 See supra section II.B.3.d. PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 Parties that will be required to provide notices under rule 173,402 including underwriters and dealers in certain circumstances, may incur additional costs due to the requirement to notify affected fund investors that they have purchased shares in a registered offering. In addition, these same parties may incur costs to establish procedures for receiving and complying with requests for final prospectuses. We believe that providing the notice to investors will not impose a significant incremental cost because the notice can consist of a pre-printed message that is automatically delivered with or as part of the confirmation required by 17 CFR 240.10b–10 (Exchange Act rule 10b–10). Accordingly, we estimate that the cost of complying with rule 173 will be approximately $0.05 per notice.403 We estimate the annual cost of providing the notification will be approximately $831,729.404 For the parties that are required to provide such notices, these additional costs of complying with rule 173 will be mitigated to a certain degree by the elimination of the requirement to supply a final prospectus to each investor. 2. Other Costs Under the final rule, affected funds that qualify as WKSIs will be able to file shelf registration statements and posteffective amendments that become automatically effective. To the extent that investors previously benefited from the Commission staff’s review of these filings before they become effective, allowing these filings of affected funds that are WKSIs to become automatically effective may eliminate such reviews and, as a result, possibly increase the costs to investors. Allowing affected funds that file short-form registration statements on Form N–2 to forward incorporate by reference could have a similar potential impact on investors. However, issuers will still face liability under the Federal securities laws for registration statement disclosures (e.g., sections 12 and 17 of the Securities Act and section 10(b) of the Exchange Act 402 See supra section II.D. Commission has estimated the cost per rule 173 notice to be $0.05 for operating companies. See Securities Offering Reform Adopting Release, supra footnote 5, at 44795. We assume the same cost will apply to rule 173 notices provided to affected fund investors. 404 For the purpose of the PRA, we estimate that there will be 43,546 notices per year per affected fund with an effective Securities Act registration statement (estimated as 382 affected funds). The annual cost of providing rule 173 notification is calculated as the number of affected funds (382) × the number of notices per year (43,546) × the cost per notice ($0.05). See infra section IV.B.5. 403 The E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 and 17 CFR 240.10b-10 (rule 10b-5 under the Exchange Act)), which may ameliorate the potential costs associated with reduced staff review.405 More generally, allowing forward incorporation by reference under the short-form registration instruction could increase the analytical burden and search costs for potential investors. Currently, affected funds provide required information in the prospectus that is delivered to investors, and forward incorporation by reference is not allowed. Under the amendments, instead of having all the information available in one location, investors may need to separately access on a website or request the incorporated materials. As a result, costs to investors for assembling and assimilating necessary information could increase, with a potentially stronger effect for retail investors (e.g., because they generally may not have the technical capabilities or monetary resources to efficiently search through several information sources). We do not have data to assess if, and to what extent, this revision will burden investors. However, an affected fund making a shelf offering under rule 415(a)(1)(x) is required to file a new registration statement every three years, which provides investors with a periodic update of consolidated information.406 The final rule will require that affected funds provide in their annual reports certain information currently disclosed in their prospectuses to make the information more readily available in one document for investors.407 Further, Securities Act Forms S–3 and F–3 have long permitted incorporation by reference from the issuer’s Exchange Act reports, and investors have not indicated they are unduly burdened when investing in offerings registered on these Forms.408 Studies have shown, however, that the majority of investors in operating companies are institutional investors, whereas the majority of investors in the securities of affected funds are retail investors, who may face relatively higher costs associated with searching for information distributed across multiple documents.409 In 405 Certain of our discretionary amendments may also ameliorate these costs. See infra section III.E.3 (discussing the benefits and costs of the requirement to disclose material unresolved staff comments) and section III.E.2 (discussing the benefits and costs of the structured data requirements). 406 See supra footnote 29. 407 See supra section II.I.2.a. 408 See Securities Offering Reform Adopting Release, supra footnote 5, at 44796. 409 The average institutional holding is estimated to be approximately 30% for BDCs and 21% for registered CEFs. See Covered Investment Fund VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 addition, the requirement to backward and forward incorporate by reference certain information into a short-form registration statement could increase an affected fund’s liability with respect to information that has not previously been incorporated into its registration statement because this information will now be part of the registration statement. This could increase costs for relevant funds, including potential legal costs (e.g., those associated with additional review of materials that would be incorporated by reference into the fund’s registration statement, or counsel and other costs in connection with potential legal actions). These potential cost increases could be passed on to investors of affected funds. The final rule will allow an affected fund to not deliver final prospectuses directly to investors if the fund files the final prospectus with the Commission and certain other conditions are satisfied. We acknowledge, however, that while this procedure has become commonplace in many aspects of our capital markets, there may be some investors who would prefer to receive the prospectus directly. While an investor could request a copy of the final prospectus under rule 173, there will be burdens on an investor to make such a request (e.g., loss of time while making the request and a delay in receiving the prospectus). Thus, investors without home internet access, depending on their ability and preference to access fund information electronically, might experience a reduction in their ability to access a fund’s final prospectus. To the extent that a reduction in this information by such investors decreases how informed they are about affected funds, it could potentially decrease their ability to efficiently allocate capital across affected funds and other investments. However, an investor’s purchase commitment and the resulting contract of sale of securities to the investor in the offering generally occur before the final prospectus is required to be delivered under the Securities Act, and this is commonplace in other parts of our capital markets. Moreover, for sales occurring in the secondary market, as a result of our existing rules, investors in Research Reports Adopting Release, supra footnote 101, at 64199. The institutional ownership of U.S. public equities was approximately 67% as of 2010. See Marshall E. Blume and Donald B. Keim, Institutional Investors and Stock Market Liquidity: Trends and Relationships, Working Paper, The Wharton School, University of Pennsylvania (Aug. 21, 2012). PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 33325 securities of reporting issuers generally are not delivered a final prospectus.410 D. Alternatives to Adopted Approach To Implementing Statutory Mandates We considered certain alternative approaches to implementing the directives in the BDC Act and Registered CEF Act to allow affected funds to use the securities offering rules that are available to operating companies. Although the BDC Act identifies certain required amendments to our rules and forms, we could have, for example, made additional modifications to the relevant provisions for affected funds or further revised the current registration and offering framework affected funds use. For example, as discussed above, we considered modifying the public float standards in the WKSI definition or the short-form registration instruction by changing the required level of public float or providing alternative eligibility criteria, such as the aggregate NAV of a certain size for funds whose shares are not traded on an exchange.411 Several commenters supported changing the public float standards in the WKSI definition for affected funds.412 These alternatives could have allowed more affected funds to qualify as WKSIs or to file short-form registration statements, with the associated benefits (e.g., lower costs of registered offerings) and costs (e.g., potential higher incidence of disclosure and fund practices that may not comply with applicable law due to reduced staff review) discussed above. For example, most interval funds do not list their securities on an exchange and do not have ‘‘public float,’’ and these alternatives therefore could have permitted these interval funds, as well as other unlisted affected funds, to qualify as WKSIs or file short-form registration statements. However, modifying the eligibility criteria in the WKSI definition or the short-form registration instruction could give affected funds that do not have the requisite public float under the current WKSI definition or Form S–3 eligibility requirements an advantage over certain operating companies that do not have public float or do not meet the $700 million public float requirement. In addition, certain of the benefits that flow from WKSI status or the ability to use a short-form registration statement may be less relevant to unlisted affected funds that engage in continuous 410 See Securities Offering Reform Adopting Release, supra footnote 5, at 44782. 411 See supra section II.C. 412 See, e.g., ICI Comment Letter; ABA Comment Letter; Dechert Comment Letter; CBD Comment Letter; TIAA Comment Letter. E:\FR\FM\01JNR2.SGM 01JNR2 33326 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations offerings.413 Further, interval funds already have a tailored registration process that provides similar efficiencies. For example, certain of an interval fund’s post-effective amendments are immediately effective upon filing (e.g., filings solely to update the fund’s financial statements or to make non-material changes), while other post-effective amendments (e.g., filings to make material changes) are automatically effective 60 days after filing unless the fund designates a later date for effectiveness. In addition, we are extending this process to allow other continuously-offered unlisted affected funds to file immediately-effective posteffective amendments under the same circumstances as interval funds. Specifically, we are amending rule 486 to allow certain unlisted continuouslyoffered affected funds to maintain effective registration statements in a more efficient and cost-effective manner. We believe that amended rule 486 will provide these funds with benefits that are similar to the benefits we are providing to affected funds that qualify to file short-form registration statements or as WKSIs. Interval funds and other continuously-offered unlisted affected funds, however, will not experience the same efficiencies as affected funds that qualify to file shortform registration statements or as WKSIs when they make material changes to their registration statements. This is because these filings by interval funds and other continuously-offered unlisted affected will be subject to staff review and will not be immediately effective upon filing. Under the BDC Act and the Registered CEF Act, we could have extended the final rule only to BDCs, listed registered CEFs, and interval funds. Under this approach, unlisted registered CEFs would not have been able to take advantage of certain benefits of the amendments that would otherwise be available to unlisted BDCs, such as the cost savings associated with the final prospectus delivery reforms.414 This alternative also could have saved unlisted registered CEFs certain compliance costs stemming from the proposed rulemaking, such as the requirement to tag certain prospectus information using Inline XBRL. However, excluding unlisted registered CEFs from the final rule could create unnecessary competitive disparities between unlisted registered CEFs and unlisted BDCs and would not provide investors in unlisted registered CEFs with the benefits of the new investor protections we are adopting. E. Discussion of Discretionary Choices We discuss below the discretionary amendments that we are adopting, in light of the changes to implement the BDC Act and Registered CEF Act and the associated benefits and costs of those choices. We have tried to quantify the impact of each of the amendments, but in many cases, reliable, empirical evidence about the effects is not readily available to the Commission. With respect to the proposed discretionary amendments, one commenter stated that the proposal would impose regulatory and compliance costs on unlisted affected funds, while at the same time providing unlisted interval funds with only small benefits and providing no benefits to other unlisted affected funds (e.g., tender offer funds).415 We believe interval funds and other continuouslyoffered unlisted affected funds will directly benefit from two of our discretionary amendments.416 While the final rule also imposes certain costs on these funds, we believe those costs are warranted, as discussed in detail below. Moreover, we are not at this time adopting the proposed new reporting requirements on Form 8–K that would have imposed costs on unlisted affected funds.417 1. New Registration Fee Payment Method for Interval Funds and Issuers of Certain Exchange-Traded Products We are adopting a modernized approach to registration fee payment for interval funds that will require them to pay securities registration fees using the same method that mutual funds and ETFs use today. In response to comments, we also are allowing certain ETPs that are not registered under the Investment Company Act to use a similar method to pay registration fees. With respect to interval funds, the final rule requires these funds to pay their registration fees on a net basis once a year, rather than having to pay registration fees when the fund files its registration statement.418 We believe this approach will make the registration fee payment process for interval funds more efficient. For example, it will avoid the possibility that an interval fund will inadvertently sell more shares than it has registered and will not require the issuer to periodically register new shares. We believe the final rule could also benefit interval funds by reducing their initial registration fees. In the table below, we have attempted to quantify the potential initial cost-savings for interval funds under the modernized approach to registration fee payment over a 3-year period.419 TABLE 4 Current average registration fee (paid upon filing) 1 Year 1 .............................................................................................................................................. Year 2 .............................................................................................................................................. Year 3 .............................................................................................................................................. $31,501 .................................... .................................... Estimated average registration fee that will be paid under the amendments (paid at the end of the fiscal year) 2 $8,376 7,015 22,445 jbell on DSKJLSW7X2PROD with RULES2 Notes: 1. The current average registration fee paid in year 1 is the average of the actual fees reported by the interval funds in the Calculation of Registration Fee table in Form N–2 in the year of registration with the Commission. For purposes of this analysis, we assume that interval funds did not register additional securities in years 2 or 3. If they did, the average registration fees under the current framework would be higher than $31,501. 413 See supra paragraph accompanying footnotes 50–51. 414 As previously recognized, unlisted registered CEFs would not be eligible for certain of the amendments. See supra section II.A. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 415 See ABA Comment Letter. infra sections III.E.1 and III.E.5. 417 See supra section II.I.3. 418 See supra section II.G.3. 416 See PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 419 The estimates are based on data collected for interval funds that were active as of June 30, 2018. We used their Form N–2 filings and Form N–CSR filings to identify current registration fees, proceeds from shares issued, and cost of shares repurchased. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 33327 2. For each of the interval funds, the fees in years 1, 2, and 3 are estimated as [(dollar proceeds from shares issued + dollar cost of shares repurchased) / $1,000,000] × $129.80. The $129.80 is the fee rate (per million dollars) that funds pay to register shares for fiscal year 2020. Then we calculate the average fees per year. jbell on DSKJLSW7X2PROD with RULES2 Under the current regime, an interval fund would pay on average $31,501 at the time of filing, and then issue and repurchase securities over time. Under the regime we are adopting, the interval fund will pay its registration fees on a net basis once a year. Since the final rule allows interval funds to shift more of the fee payments to the future, it will decrease their cost of offering securities. An interval fund will, however, be required to annually file Form 24F–2.420 We estimate the annual burden of filing Form 24F–2 for interval funds will be $140 per fund.421 We believe the final rule will provide similar benefits to certain ETPs that are not registered under the Investment Company Act by allowing these ETPs to elect to register an indeterminate number of securities and to pay registration fees in arrears on an annual net basis. Since now ETPs pay registration fees in advance whether or not they sell any securities and may not factor in redemptions in reducing the amount of the registration fees owed, this change will allow them to reduce their registration fees and shift their payment obligations into future periods. The amendments will also avoid the possibility that such an ETP will inadvertently sell more shares than it has registered and will not require the issuer to periodically register new shares. Moreover, the amendments will allow ETPs that are not registered under the Investment Company Act to use a similar registration fee payment method as ETFs that are registered under the Investment Company Act. As an alternative, we considered allowing a wider range of affected funds, such as registered CEFs that are tender offer funds, to rely on rule 24f– 2. This approach would have extended the benefits of rule 24f–2 to additional affected funds. However, as discussed above, interval funds have structural similarities to mutual funds and ETFs that other affected funds do not. In particular, interval funds routinely repurchase shares at NAV and are 420 As discussed below, interval funds and other funds that file on Form 24F–2 will be required to file the form in a structured XML format under the amendments. 421 For PRA purposes, we estimate an annual burden per respondent of filing Form 24F–2 of two hours. See infra section IV.B.6. At an estimated wage rate of $70 per hour, the annual dollar cost for filing Form 24F–2 is $140 (2 hours × $70 per hour). This estimate does not account for burdens associated with filing Form 24F–2 in a structured XML format, which are discussed infra in section III.E.2. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 required to periodically offer to repurchase their shares, and therefore are more likely to realize the operational benefits of computing registration fees on a net annual basis than are funds that are not required to periodically offer to repurchase their shares at NAV. 2. Structured Data Requirements The final rule includes new structured data reporting requirements for affected funds. Specifically, all affected funds will be required to tag in Inline XBRL format certain Form N–2 prospectus disclosure items. All affected funds also will be required to tag the information on the cover page of Form N–2 using Inline XBRL. Finally, BDCs will be required to tag financial statement information using Inline XBRL. Under the final rule, affected funds will be required to tag the following Form N–2 prospectus disclosure items using Inline XBRL: Fee Table; Senior Securities Table; Investment Objectives and Policies; Risk Factors; Share Price Data; and Capital Stock, Long-Term Debt, and Other Securities.422 These items provide important information about an affected fund’s key features, costs, and risks and may be particularly useful to investors to inform their investment decisions. With respect to the requirement that BDCs tag financial statement information, unlike operating companies and registered investment companies, BDCs currently are not required to report any structured data.423 This requirement will extend to BDCs a requirement that currently applies to operating companies. Requiring BDCs to tag financial statement information using Inline XBRL, and all affected funds to tag in Inline XBRL format certain important prospectus disclosure items, will provide important benefits to investors seeking to access information about affected funds, both directly and through information intermediaries such as data aggregators and financial analysts. Providing a standardized, interactive, computer-based framework for reporting could further facilitate more efficient investor comparisons of important information across affected funds by making it easier to aggregate and analyze information through automated means, which could increase competition for investor capital. The Inline XBRL tagging requirements may 422 See 423 See PO 00000 supra section II.I.1.c. supra section II.I.1.a. Frm 00039 Fmt 4701 Sfmt 4700 also potentially increase the efficiency of capital formation to the extent that making disclosures available in a structured format reduces some of the information barriers facing prospective investors and makes it easier for affected funds to attract investors. One commenter expressed similar views.424 Smaller affected funds in particular may benefit more from enhanced exposure to investors. To the extent that reporting the disclosures in a structured format increases the availability, or reduces the cost of collecting and analyzing, key information about affected funds, smaller affected funds may benefit from improved coverage by information intermediaries. Further, requiring affected funds to tag certain prospectus disclosures using Inline XBRL would facilitate monitoring of these disclosures by investors and information intermediaries, potentially increasing transparency and mitigating the potential informational costs stemming from other aspects of the proposal such as automatic shelf registration statements for WKSIs and short-form registration statements for eligible funds, which may result in required disclosures being distributed across multiple regulatory filings and could thereby affect investor protection.425 The cover page tagging requirement includes new check boxes that will help identify whether a registration statement is, for example, an automatic shelf registration statement or a short-form registration statement.426 We already require registrants to tag all of the information on the cover page of Form 10–K, Form 10–Q, Form 8–K, Form 20– F, and Form 40–F using Inline XBRL.427 The requirement to tag the Form N–2 cover page in Inline XBRL is expected to benefit investors by enabling investors and information intermediaries to automate their use of the cover page information, including company name, the Act or Acts to which the registration statement relates, and check boxes relating to the effectiveness of the registration statement. This will enhance the ability of investors and information intermediaries to identify, count, sort, and analyze registrants and disclosures 424 See 425 See Calcbench Comment Letter. supra section III.C.2 (discussing these costs). 426 See supra section II.I.1.b. 427 See FAST Act Modernization Adopting Release, supra footnote 66. E:\FR\FM\01JNR2.SGM 01JNR2 33328 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 to the extent these data points otherwise would be formatted, for example, in HTML. The check boxes, which are required to be tagged in Inline XBRL format, will allow investors and information intermediaries to distinguish between different categories of registration statements in much the same way they are currently able to do for operating companies. The availability of information in Inline XBRL could enable investors and information intermediaries to capture and analyze cover page information more quickly and at a lower cost, as well as to search and analyze the information dynamically. It could also facilitate comparison of information across filers and reporting periods. Affected funds will incur some costs to tag and review the required information in Inline XBRL. Some filers may perform the tagging in-house while others may retain outside service providers. We expect filers will incur costs for the fees of the outside service providers. Various XBRL preparation solutions have been developed and used by operating companies and open-end fund filers, and some evidence suggests that, for operating companies, XBRL tagging costs have decreased over time.428 While this evidence is specific to XBRL tagging costs rather than Inline XBRL tagging costs, because Inline XBRL allows filers to embed XBRL data directly into an HTML document, we expect Inline XBRL costs to be even lower than XBRL costs since Inline XBRL eliminates the need to tag a copy of the information in a separate XBRL exhibit. Costs of Inline XBRL preparation may depend on the familiarity of the filer and/or its service provider with Inline XBRL. Filers that currently report information in Inline XBRL for other investment products they offer, such as open-end funds, filing affected fund information in Inline XBRL under the amendments will likely incur lower costs of compliance than filers adopting Inline XBRL for the first time. Those registrants affected by the requirement that have not had experience structuring disclosures in 428 See, e.g., Michael Cohn, AICPA sees 45% drop in XBRL costs for small companies, Accounting Today (Aug. 15, 2018), available at https:// www.accountingtoday.com/news/aicpa-sees-45drop-in-xbrl-costs-for-small-reporting-companies (stating that, according to an updated survey by AICPA and XBRL US, the cost of formatting financial statements in XBRL for smaller reporting companies has declined 45% since 2014 and that 68.6% of the companies paid $5,500 or less on an annual basis (as compared to 29.9% of companies in the 2014 survey) for fully outsourced creation and filing solutions for their XBRL filings, while 11.8% of the companies surveyed paid annual costs between $5,500 to as much as $8,000 for their fullservice outsourced solutions). VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 other contexts will likely incur initial costs to acquire the necessary expertise and/or software as well as ongoing costs of tagging required information in Inline XBRL, and any fixed costs of complying with the Inline XBRL requirement may have a relatively greater impact on smaller filers. On an ongoing basis, registrants are expected to expend time to tag and review the tagged information in Inline XBRL using their in-house staff. Some registrants may also incur an initial cost to license filing preparation software with Inline XBRL capabilities from a software vendor, and some may also incur an ongoing licensing cost. Other registrants may incur an initial cost to modify their existing filing preparation software to accommodate Inline XBRL preparation. Some registrants will incur the costs of filing agent services to rely on a filing agent to prepare their Inline XBRL filings. Initial costs involving investments in expertise and modifications to disclosure preparation solutions, or switching to a different software vendor or outside service provider, may result in a higher compliance cost during the first year of using Inline XBRL than in subsequent years. The costs of compliance with the Inline XBRL requirements are likely to vary across registrants. On average we estimate that the compliance cost to BDCs of tagging financial statement information, certain prospectus disclosure items, and Form N–2 cover page information using Inline XBRL will be approximately $161,179 per BDC per year in the 3 years following the adoption of the rule.429 We estimate that the compliance cost to registered CEFs of tagging in Inline XBRL format certain prospectus disclosure items and tagging Form N–2 cover page information will be approximately $8,855 per registered CEF per year in the 3 years following 429 For BDCs, for the purposes of the PRA, we estimated the average annual compliance costs in the 3 years following the adoption of the rule to be 33,028 burden hours of in-house Inline XBRL preparation (31,095 burden hours for tagging financial statement information, 1,828 burden hours for certain prospectus disclosure items, and 105 burden hours for Form N–2 cover page information using Inline XBRL) and $3,712,565 in outside services ($3,555,931 for tagging financial statement information, $156,634 for certain prospectus disclosure items, and $0 for Form N–2 cover page information using Inline XBRL). See infra section IV.B.2. We monetize the burden of in-house Inline XBRL preparation by multiplying the burden hours by an estimated wage rate of $400 per hour (33,028 × $400 = $13,211,200). The estimated wage figure is based on analysis in previous rulemakings. The average cost per BDC is calculated by adding the monetized internal burden ($13,211,200) to the cost of outside services ($3,712,565) and dividing by the number of BDCs (105). See also supra footnote 355. PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 the adoption of the rule.430 We note that some recent surveys based on operating companies suggest that these current PRA-based burden estimates may be overstated with respect to affected funds, and particularly smaller affected funds.431 One commenter cited a study by the European Securities and Markets Authority estimating the cost of preparing Inline XBRL in-house to be on average around 8,200 euros for the first filing and 2,400 euros for each subsequent filing.432 In case of outsourcing, the study estimates the costs to be on average around 13,000 euros for the first filing and 4,600 euros for each subsequent filing. However, we do not believe that these figures the commenter cited are salient to the structured data requirements we are adopting. For example, although not cited by the commenter, the same study mentions that in the United States, because of the detailed tagging and extended taxonomy, the average costs for outsourcing the preparation of the financial statements in XBRL is higher, between 9,000 euros and 19,000 euros.433 As an alternative, we could have allowed but not required affected funds to present cover page, financial statement, and certain prospectus disclosure information in Inline XBRL. Compared to the final rule, a fully voluntary Inline XBRL program would 430 For registered CEFs, for the purposes of the PRA, we estimated the average annual compliance costs in the 3 years following the adoption of the rule to be 12,628 burden hours of in-house Inline XBRL preparation (686 burden hours for Form N– 2 cover page information using Inline XBRL and 11,942 burden hours for certain prospectus disclosure items) and $1,023,345 in outside services ($0 for Form N–2 cover page information using Inline XBRL and $1,023,345 for certain prospectus disclosure items). See infra section IV.B.2. We monetize the burden of in-house Inline XBRL preparation by multiplying the burden hours by an estimated wage rate of $400 per hour (12,628 × $400 = $5,051,200). The estimated wage figure is based on analysis in previous rulemakings. The average cost per registered CEF is calculated by adding the monetized internal burden ($5,051,200) to the cost of outside services ($1,023,345) and dividing by the number of registered CEFs (686). 431 See American Institute of CPAs, XBRL Costs for Small Companies Have Declined 45%, According to AICPA Study (Aug. 18, 2018), available at https://www.aicpa.org/press/ pressreleases/2018/xbrl-costs-have-declinedaccording-to-aicpa-study.html; CFA Institute, The Cost of Structured Data: Myth vs. Reality (2017), available at https://www.cfainstitute.org/-/media/ documents/survey/the-cost-of-structured-datamyth-vs-reality-august-2017.ashx. 432 See XBRL US Comment Letter. 433 See European Securities and Markets Authority, Feedback Statement on the Consultation Paper on the Regulatory Technical Standard on the European Single Electronic Format (ESEF) (Dec. 21, 2016), available at https://www.esma.europa.eu/ sites/default/files/library/2016-1668_esma_ feedback_statement_on_the_rts_on_esef_0.pdf. E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations lower costs for those filers that do not find Inline XBRL to be cost efficient. We also could have required Inline XBRL tagging only for a subset of affected funds—for example, affected funds that file short-form registration statements on Form N–2 or WKSIs. We also could have permitted more than one structured data format or left the precise format unspecified. However, a voluntary program or the use of multiple structured data formats would also reduce potential data quality benefits compared to mandatory Inline XBRL, as would a program that captures only a subset of affected funds. If the information were not submitted by all affected funds in a standardized, structured, machine-readable format, investors who seek to instantly analyze, aggregate, and compare the data would have to incur the costs of paying a thirdparty service provider to manually rekey the data, review the data for data quality problems during the duplication process, and disseminate the data to the investors.434 Alternatively, investors unwilling to pay a third-party service provider would have to incur the time to do that process themselves. In either scenario, the data would not be usable in as timely a manner as if it were made machine-readable in a standardized format. In addition, under a voluntary program, data that is not submitted in Inline XBRL would not be validated, thus decreasing the overall data quality of the data submitted. Unlike the machine-readable Inline XBRL format, data submitted in unstructured formats (e.g., HTML, ASCII) is not machinereadable at the element level and thereby cannot be validated by EDGAR in any way. Thus, data submitted in the HTML format by affected funds that opted not to use Inline XBRL and XBRL data submitted by other affected funds could be different due to the level of pre-submission validation activities. Poor data quality reduces any data user’s ability to meaningfully analyze, aggregate, and compare data. One commenter supported the use of Inline XBRL compared to unstructured formats, arguing that Inline XBRL data is significantly less expensive to process and more timely than unstructured data.435 As another alternative, we could have required the disclosures to be filed in a different structured format, such as the XBRL or XML format. Compared to the Inline XBRL requirement that we are adopting, using the XBRL format would entail duplicative entry, which can adversely affect the quality and usability of the structured data as well as the efficiency and cost of preparation and review of the structured data. Compared to the requirement to use Inline XBRL, the alternative of requiring affected funds to use XML could result in lower costs. However, compared to the amendments, XML would provide less flexibility in tagging complex information as well as less extensive data quality validation capabilities. Given the complexity of the information required to be tagged and its importance to investors, we believe the benefits of using Inline XBRL outweigh the higher costs compared to XML.436 One commenter supported using Inline XBRL compared to XML, arguing that financial information is more efficiently reported in Inline XBRL.437 As another alternative, we could have expanded the scope of prospectus disclosure information required to be tagged in Inline XBRL under the final rule. Compared to the final rule, this alternative would improve the timeliness and usability of the required disclosure information, but would potentially impose additional costs on affected funds. To the extent that the other required prospectus disclosures of affected funds contain information that is more specific to individual funds without sufficient comparability or aggregation utility, the benefits of having those additional required disclosures in a structured format may be lower than the more limited subset of disclosures that we are requiring affected funds to file in Inline XBRL. As another alternative, we could have narrowed the scope of prospectus disclosure information required to be tagged in Inline XBRL under the rule. Compared to the final rule, this alternative could decrease the timeliness and usability of the information required to be disclosed, but could also potentially reduce costs for registrants. Overall, the prospectus disclosures that affected funds will be required to tag in Inline XBRL largely parallel the information that mutual funds and ETFs are required to disclose. We also believe these disclosures represent the information that will be 434 Some studies have shown that investors use XBRL files often, even preferring them to non-XBRL files when both are available. See Yu Cong, Hui Du, and Miklos A. Vasarhelyi, Are XBRL Files Being Accessed? Evidence from the SEC EDGAR Log File Dataset, Journal of Information Systems, Vol. 32–3, 23–29 (2018). 435 See XBRL US Comment Letter. 436 In contrast, the information provided in Form 24F–2 is less complex and is generally only used by fund issuers and Commission staff for purposes of calculating certain registered investment companies’ registration fees, so we have proposed to require Form 24F–2 information in a structured XML format rather than Inline XBRL. 437 See XBRL US Comment Letter. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 33329 most useful for investors that seek to use structured data to assist with investment decisions regarding affected funds. We also are requiring issuers that file Form 24F–2 (including mutual funds and ETFs, as well as interval funds) to submit the form in a structured XML format.438 We believe using a structured data format will make it easier for issuers to accurately prepare and submit the information Form 24F–2 requires and will make the submitted information more useful to Commission staff. Automated validation processes could help issuers compute registration fees accurately before submitting the filing, which could reduce administrative burdens associated with correcting inaccurate filings. A structured filing format could also facilitate pre-population of previouslyfiled information. We estimate the cost of tagging Form 24F–2 in a structured XML format to be $542 per fund.439 3. Periodic Reporting Requirements We are adopting certain new annual report requirements for affected funds that file a short-form registration statement on Form N–2. These funds must include in their annual reports certain information that they currently disclose in their prospectus—a table of fees and expenses, share price information, and a table of senior securities—and a discussion of material unresolved staff comments.440 In addition, all BDCs will be required to include financial highlights in their registration statements and annual reports.441 We also are requiring all registered CEFs to provide management’s discussion of fund performance in their annual reports.442 Finally, registered CEFs that rely on rule 8b–16(b) under the Investment Company Act to avoid annually updating their registration statements will be required to describe in their annual reports the fund’s current investment objectives and policies, and principal risks, and to provide more expansive disclosure about certain key changes that occurred during the relevant year in enough detail to allow investors to understand each change and how it may affect the fund.443 We believe these requirements will promote 438 See supra section II.I.1.d. assume that the burden of tagging Form 24F–2 in a structured XML format would be 2 hours for each filing. See infra section IV.B.6. At an estimated wage rate of $271 per hour, the dollar cost for filing Form 24F–2 in a structured XML format is $542 (2 hours × $271 per hour) per fund. 440 See supra section II.I.2.a and section II.I.2.d. 441 See supra section II.I.2.c. 442 See supra section II.I.2.b. 443 See supra section II.I.5. 439 We E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 33330 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations investor protection by making important information more readily accessible to investors. With respect to affected funds filing short-form registration statements on Form N–2, the annual report requirements will compile certain information that is already available in a fund’s registration statement. This could be beneficial to some investors in these funds since information will be readily available in one document instead of investors needing to compile it from several sources. As previously discussed, given the ability of affected funds to use forward incorporation by reference under the short-form registration instruction, these funds’ annual reports may become a more convenient and comprehensive source of information about a particular seasoned fund, relative to that fund’s registration statement. At the same time, the annual report requirements may increase the compliance costs for seasoned funds because new information items will have to be added to the annual report. However, because the annual report will be incorporated by reference into the fund’s prospectus, requiring disclosure in both the prospectus and annual report should not require duplicative disclosure. Moreover, specifying identical disclosure requirements in both places may facilitate forward incorporation by reference, by making clear that the same required disclosure will satisfy both requirements. Alternatively, we could have required affected funds to include in their annual reports more or less information from their registration statements. While requiring less information would reduce costs to affected funds by reducing the amount of required annual report disclosure, it could also make it more difficult for investors to find important fund information. Requiring affected funds to include more prospectus information in their annual reports could increase the length and complexity of annual reports and make them less useful to investors overall. This alternative would also increase affected funds’ compliance costs. The requirement to disclose material unresolved staff comments in the annual report is designed to mitigate the concern that other aspects of the amendments may reduce certain affected funds’ incentives to resolve staff comments in a timely manner. We believe disclosure of material unresolved staff comments will likely provide important information to investors. This requirement may, however, impose certain compliance costs to the extent a seasoned fund does VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 not timely resolve staff comments and hence will be required to provide such disclosure. We do not believe these disclosure costs will be significant because the information will be readily available to the affected fund. We recognize, however, there could be some costs to affected funds associated with compliance and legal review to the extent an affected fund wants to provide additional information in its annual report disclosure beyond that provided in the fund’s written response to the staff’s comment (which would typically already be publicly available on EDGAR). We also recognize, as some commenters suggested, that determining whether a particular comment is ‘‘material’’ or ‘‘unresolved’’ involves some subjective judgment, which may contribute to compliance and legal costs.444 With respect to the requirement that BDCs provide financial highlights information, we believe investors will benefit from disclosure summarizing a BDC’s financial statements. We believe the costs associated with this requirement should be minimal since we understand that it is general market practice for BDCs to include this information in their registration statements. We believe the requirement for registered CEFs to include MDFP disclosure in their annual shareholder reports will be beneficial to investors by helping them assess a fund’s performance over the prior year and complementing other information in the report, which may make the annual report disclosure more understandable as a whole. This requirement will also promote parity between different types of funds, as open-end funds and BDCs are already required to provide similar disclosure in their annual reports. This requirement will likely increase compliance burdens for registered CEFs, to the extent they do not voluntarily provide MDFP disclosure already. We believe that a majority of registered CEFs already provide MDFP-like disclosure in their annual shareholder reports. We estimate the annual cost of providing MDFP disclosure to be $6,400 per registered CEF,445 although this cost will likely be lower for affected funds 444 See ICI Comment Letter; Invesco Comment Letter. 445 For the purpose of the PRA, we estimate that the proposed amendments to require registered CEFs to provide MDFP in their annual reports will result in an additional 16 burden hours for registered CEFs. See infra section IV.B.3. We monetize the internal burden by multiplying the burden hours by an estimated wage rate of $400 per hour (16 × $400 = $6,400). PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 that already provide MDFP-like disclosure. We considered adopting additional MDFP requirements, such as requirements to: (1) Disclose the impact of particular investments (including large positions and/or significant investments) or investment types that contributed to or detracted from performance; (2) explain a fund’s performance in relation to its index; (3) explain how the use of leverage affected fund performance; (4) explain the reason for and effect of any large cash or temporary defensive positions on fund performance; (5) explain the effect of any tax strategies, or the effects of taxes, on fund performance; (6) explain the effect of non-recurring or non-cash income on fund performance; (7) include general discussion of purchases and sales of fund shares and the effects of any share repurchases or tender offers on fund performance; and/or (8) disclose whether the fund has high portfolio turnover and the effect of portfolio turnover on fund performance. We also considered changing the average annual total return table to provide additional or more useful information to investors, such as requiring total return based on per-share NAV, in addition to total return based on current market price. Although one or more of these changes could result in additional, potentially helpful information for investors, we also considered the administrative costs that additional disclosure requirements would impose and have determined not to adopt them at this time. Under the amendments to rule 8b–16, registered CEFs relying on paragraph (b) of the rule must describe in their annual reports the fund’s current investment objectives and policies, and principal risks, and certain key changes that occurred during the relevant year in enough detail to allow investors to understand each change and how it may affect the fund. We estimate that approximately 521 registered CEFs relied on rule 8b-16 as of December 31, 2019 and will therefore provide the new disclosure.446 These registered CEFs also will be required to preface disclosure of these key changes with a legend clarifying that the disclosures provide only a summary of certain changes that have occurred in the past year, and that the summary may not reflect all of the changes that have occurred. We believe these new disclosure requirements will allow investors in funds relying on rule 8b– 16(b) to more easily identify and understand key information about their 446 See E:\FR\FM\01JNR2.SGM infra footnote 561. 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations investments by providing such information in one place. Because these funds are already required to disclose in their annual reports the enumerated changes to specified Form N–2 disclosure items—and therefore already must have and maintain, among other things, updated information about the investment objectives, policies and principal risks that we are requiring them to disclose in full—the new requirement will likely add only a small incremental compliance burden. 4. Discretionary Amendments to Incorporation by Reference Requirements The final rule will modernize Form N–2’s requirements for backward incorporation by reference for all affected funds.447 Specifically, we are requiring that an affected fund make information that is incorporated by reference into its prospectus or SAI, as well as the corresponding prospectus and SAI, readily available and accessible on a website maintained by or for the fund and identified in the fund’s prospectus or SAI. We believe this new requirement will improve the information’s online accessibility for investors. In particular, this new requirement will make the incorporated information, prospectus, and SAI more accessible to retail investors online because we believe they may be more inclined to look at a fund’s website for information than to search the EDGAR system.448 We recognize that investors without home internet access, depending on their ability and preference to access fund information electronically, might experience a reduction in their ability to access information that is incorporated by reference into its prospectus or SAI. However, affected funds will also be required to provide incorporated materials upon request free of charge, in recognition that some investors may prefer to review these materials in paper.449 447 See supra section II.I.4. example, results from 2011 investor testing sponsored by the Commission suggest that an investor looking for a fund’s annual report is most likely to seek it out on the fund’s website. See Investor Testing of Selected Mutual Fund Annual Reports (Feb. 9, 2012), available at https:// www.sec.gov/comments/s7-08-15/s70815-3.pdf. Additionally, a 2018 report by the Investment Company Institute suggests that over 90% of U.S. households owning mutual funds used the internet extensively. See ICI Research Perspective, Ownership of Mutual Funds, Shareholder Sentiment, and Use of the internet, 2019 (Oct. 2019), available at https://www.ici.org/pdf/per2508.pdf. 449 See supra paragraph accompanying footnote 410 (recognizing the effects of allowing affected funds to not deliver final prospectuses directly to investors if they meet certain requirements). jbell on DSKJLSW7X2PROD with RULES2 448 For VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 This amendment also will facilitate the efficient use of incorporation by reference by affected funds. For example, if an investor requested a copy of the affected fund’s prospectus in accordance with rule 173, the fund would in some cases need to deliver a much longer document if we did not amend Form N–2’s backward incorporation by reference provisions.450 We do not, however, expect that the backward incorporation by reference amendment will substantially reduce the amount of information affected funds deliver to investors by mail or electronically. This is because we expect that most affected funds will rely on rules 172 and 173 to satisfy their prospectus delivery obligations. An issuer that uses these rules will satisfy its final prospectus delivery obligations by filing the prospectus with the Commission rather than delivering the prospectus and any incorporated material to investors.451 We do not believe the requirement to make a fund’s prospectus, SAI, and incorporated materials available on a website will generate significant compliance costs for affected funds because many funds currently post their annual and semi-annual reports and other fund information on their websites. We estimate the annual cost to comply with the website posting requirements to be $496 per fund.452 Affected funds may also incur printing and mailing costs under the final rule if some investors request paper copies of the prospectus 453 or of the information that has been incorporated by reference into the prospectus or SAI but not delivered with the prospectus or SAI.454 In another release, the Commission estimated that the annual printing and mailing cost associated with providing copies of prospectuses and other documents upon request would be approximately $500 per registrant.455 We are similarly adopting a requirement to send prospectuses and related information in this release, and we have no reason to assume significant 450 See, e.g., supra footnote 365 and accompanying text. 451 See supra section II.D. 452 For the purpose of the PRA, we estimate an average burden to comply with the website posting requirements of 2 hours per fund. See infra section IV.B.1. The expected compliance cost associated with the proposed website posting requirements is calculated by multiplying the 2-hour burden by the estimated hourly wage based on published rates for webmasters ($248). 453 See supra footnote 153. 454 See supra section II.I.4. 455 See Variable Contract Summary Prospectus Adopting Release, supra footnote 345, at n.1233 and accompanying text. PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 33331 differences in the average lengths of the associated materials or the frequency of investor requests under the amendments we are adopting. We estimate that the printing and mailing costs associated with the new requirements will be approximately $750 per fund in recognition that the requirement to deliver information that has been incorporated by reference may result in greater overall costs since affected funds that are eligible to file short-form registration statements under the final rule will be able to use incorporation by reference more frequently.456 We anticipate, however, that investors may be less likely to request copies of materials that have been incorporated by reference into an affected fund’s prospectus or SAI, so we believe this requirement will only incrementally increase costs. Alternatively, we could have retained Form N–2’s current backward incorporation by reference requirements and continued to require funds to deliver incorporated materials to new investors. Because current General Instruction F of Form N–2 does not require affected funds to make incorporated materials available online, funds would not have to incur costs associated with website posting. However, because affected funds that choose to rely on rules 172 and 173 will be deemed to have delivered their disclosures upon filing with the Commission instead of giving them to investors, the current backward incorporation delivery requirement will not result in delivery of incorporated materials to a fund’s investors, thus making less accessible the disclosure materials that might affect their investment decision. We are also modifying Form N–14 to decrease the disclosure burden of the form and reduce the length of Form N– 14 prospectuses in certain circumstances.457 The amendments will allow BDCs to incorporate by reference to the same extent as registered CEFs. This will provide for more consistent treatment between registered CEFs and BDCs. We also are eliminating the requirement that registrants file with the Form N–14 registration statement the documents containing the information that is incorporated by reference into the prospectus or SAI, thus decreasing 456 We requested data regarding how often investors may request copies of prospectuses or incorporated materials, how many materials affected funds would incorporate by reference into their prospectuses or SAIs, and how lengthy those materials would be. Commenters did not provide any data in response. 457 See supra section II.B.3.b. E:\FR\FM\01JNR2.SGM 01JNR2 33332 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations compliance costs. Commenters generally supported these changes.458 5. Automatic or Immediate Effectiveness of Filings by Affected Funds Conducting Certain Continuous Offerings In response to comments, the final rule will allow any registered CEF or BDC that conducts continuous offerings under rule 415(a)(1)(ix) to file posteffective amendments and certain registration statements that become effective immediately upon filing or automatically 60 days after filing.459 We believe this rule amendment will allow these unlisted continuously-offered affected funds to maintain effective registration statements in a more efficient, cost-effective manner, similar to the benefits the final rule provides to affected funds that file short-form registration statements or qualify as WKSIs. Under the amendments, continuously-offered unlisted affected funds, which generally will not qualify as WKSIs or be eligible to file short-form registration statements because they do not have public float, will be able to more efficiently update their financial statements under section 10(a)(3) of the Securities Act to maintain effective registration statements while they engage in continuous offerings. One commenter stated that allowing continuously-offered unlisted affected funds to rely on rule 486 would benefit investors in these funds by allowing the funds to avoid the time and expense of an annual staff review of registration statements where no changes are made beyond immaterial updates and updates to audited financial information.460 As an alternative, we could have continued to limit rule 486 to interval funds. Such an alternative would have made it less efficient for certain continuously-offered unlisted affected funds to update their financial statements or make other changes to their registration statements relative to the processes available to all other funds that conduct continuous or delayed offerings under the Commission’s rules. jbell on DSKJLSW7X2PROD with RULES2 IV. Paperwork Reduction Act Analysis A. Background Certain provisions of the final amendments contain ‘‘collection of information’’ requirements within the meaning of the Paperwork Reduction Act of 1995 (PRA).461 We are submitting the final amendments to the Office of Management and Budget (OMB) for 458 See Dechert Comment Letter; IPA Comment Letter. 459 See supra section II.D. 460 See ABA Comment Letter. 461 44 U.S.C. 3501 et seq. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The hours and costs associated with preparing disclosure, filing forms, and retaining records constitute reporting and cost burdens imposed by the collections of information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. The titles for the collection of information are summarized in Table 5 below. TABLE 5—COLLECTIONS OF INFORMATION OMB control No. Title Form N–2 .............................. Investment Company Interactive Data 1 ...................... Rule 30e–1 ........................... Form 10–K ............................ Family of rules under section 8(b) of the Investment Company Act of 1940 2 ..... Rule 163 ............................... Rule 433 ............................... Rule 173 ............................... Form 24F–2 .......................... Form S–1 .............................. Form S–3 .............................. Form N-14 ............................ Form F–1 .............................. Form F–3 .............................. 3235–0026 3235–0642 3235–0025 3235–0063 3235–0176 3235–0619 3235–0617 3235–0618 3235–0456 3235–0065 3235- 0073 3235–0336 3235–0258 3235–0256 Notes: 1. Recently, we issued a release that, among other things, retitled this collection of information (previously, ‘‘Mutual Fund Interactive Data’’) ‘‘Investment Company Interactive Data.’’ See Variable Contract Summary Prospectus Adopting Release, supra footnote 345. 2. The paperwork burdens for the rules under section 8(b) of the Investment Company Act are imposed through the forms and reports that are subject to the requirements in these rules and are reflected in the PRA burdens of those documents. To avoid a PRA inventory reflecting duplicative burdens and for administrative convenience, we assign a onehour burden to these rules. The rules, forms, and regulations listed above were adopted under the Securities Act, the Exchange Act, or the Investment Company Act. They set forth the disclosure requirements for registration statements, prospectuses, periodic reports, and certified shareholder reports that are prepared by registrants to help investors make informed investment and voting decisions. They also permit additional communications by registrants during a registered offering. The final amendments will allow affected funds to use the securities offering rules that are already available to operating companies. In addition, the final rule includes amendments to our rules and forms intended to tailor the disclosure PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 and regulatory framework to affected funds. The Investment Company Interactive Data collection of information references current requirements for certain registered investment companies to submit to the Commission information included in their registration statements, or information included in or amended by any posteffective amendments to such registration statements, in response to certain form items in interactive data format. It also references the requirement for funds to submit an Interactive Data File to the Commission for any form of prospectus filed pursuant to rule 497(c) or (e) that includes information in response to certain form items. The final amendment will include several new structured data requirements, including requirements for: (1) BDCs to submit financial statement information using Inline XBRL format; (2) affected funds to include structured cover page information in their registration statements on Form N–2 using Inline XBRL format; and (3) affected funds to tag certain prospectus information using Inline XBRL format.462 Although the interactive data filing requirements are included in the Form N–2 instructions, we are separately reflecting the hour and cost burdens for these requirements in the burden estimate for Investment Company Interactive Data and not in the estimate for Form N–2. The information collection requirements related to registration statements and Exchange Act reports are mandatory. In addition, there is no mandatory retention period for the information disclosed, and the information gathered will be made publicly available. The information collection requirements related to the communications and prospectus delivery rules we are adopting apply only to affected funds and other offering participants choosing to rely on them. There will be a mandatory record retention period with respect to the communications and prospectus delivery information collections. Under rule 433, issuers and offering participants must retain all free writing prospectuses that have been used, for three years following the date of the initial bona fide offering of the securities in question that were not filed with the Commission. Moreover, free writing prospectuses that are made by or on behalf of an affected fund, and free 462 We are also adopting new requirements for funds that file on Form 24F–2 to submit the form in XML format. We account for the burdens associated with this requirement in infra section IV.B.6. E:\FR\FM\01JNR2.SGM 01JNR2 33333 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations writing prospectuses that are broadly disseminated by another offering participant, will have to be filed and will be publicly available on EDGAR, whereas free writing prospectuses prepared by or on behalf of, or used or referred to, by offering participants other than the issuer will not have to be filed. B. Summary of the Amendments and Impact on Information Collections We are amending several rules and forms to modify the registration, communications, and offering processes for affected funds under the Securities Act and Investment Company Act. The amendments are designed to carry out the requirements of section 803 of the BDC Act and section 509 of the Registered CEF Act. The amendments generally will allow affected funds to use the securities offering rules that are already available to operating companies. The amendments principally affect five aspects of the application of our securities offering rules to affected funds. First, the amendments will streamline the registration process under the Securities Act for affected funds to allow them to sell securities more quickly and efficiently under a shelf registration process tailored to affected funds. Second, the amendments will allow affected funds to qualify as WKSIs under rule 405 under the Securities Act. Third, the amendments will allow affected funds to satisfy final prospectus delivery requirements using the same method as operating companies. Fourth, the amendments will allow affected funds to use communications rules currently available to operating companies, such as the use of the safe harbors for disseminating certain factual business information, forward-looking information, a ‘‘free writing prospectus,’’ and broker-dealer research reports. Finally, the amendments will tailor affected funds’ disclosure and regulatory framework in light of the amendments to the offering rules applicable to them. These amendments include new structured data requirements, new disclosure requirements for annual reports, and a requirement for interval funds to pay securities registration fees using the same method that mutual funds and ETFs use today. We anticipate that several provisions of the amendments will increase the burdens and costs for affected funds that will be subject to the amendments. We have estimated the average number of hours an affected fund will spend to prepare and file the information collections and the average hourly rate for the services of outside professionals. In deriving our estimates, we recognize that the burdens will likely vary among individual affected funds based on a number of factors, including their size and the nature of their investment activities.463 In addition, some affected funds may experience costs in excess of our estimates, and some may experience less than the estimated average costs. In addition to these amendments relating to affected funds, we are amending several rules and forms to enable certain ETPs that are not registered under the Investment Company Act to elect to register offerings of an indeterminate amount of exchange-traded vehicle securities and pay registration fees for these offerings on an annual net basis. We have estimated the average number of additional hours that such ETPs will spend when filing registration statements for these offerings to prepare and file the information collections and the average hourly rate for the services of outside professionals. We anticipate that the amendments will result in a decrease in the number of registration statements filed by these issuers and that, overall, these amendments will reduce the burdens and costs for these issuers. 1. Amendments to Form N–2 Registration Statement Form N–2 is the form used by an affected fund to register offerings under the Securities Act and, as applicable, to register as an investment company under the Investment Company Act. The amendments to Form N–2 will increase the existing disclosure burdens of the form by requiring: • Affected funds to use new check boxes on the cover page to provide information about the fund, the purpose of the filing, and the type of offering, including whether the form is being used for automatic shelf registration; 464 • BDCs to include financial highlights disclosure in their registration statements, as registered CEFs are currently required to do; 465 • Affected funds to provide new undertakings to be furnished in registration statements being filed pursuant to rule 415; 466 and • Affected funds to make certain documents available online if they incorporate them by reference, including the prospectus, SAI, and any Exchange Act reports filed under section 13 or section 15(d) of the Exchange Act that are incorporated by reference into the fund’s prospectus or SAI.467 At the same time, the amendments to Form N–2 will decrease existing burdens for the form by: • Permitting eligible affected funds to forward incorporate by reference Exchange Act reports, which will reduce the need for such funds to file a post-effective amendment or a prospectus supplement to update information in the registration statement.468 TABLE 6—CURRENTLY APPROVED FORM N–2 PRA ESTIMATES 1 Internal burden Cost of internal burden Wage rate 2 Annual external cost burden jbell on DSKJLSW7X2PROD with RULES2 Burden per Initial Registration Statement Total burden per registration statement ...................... 517.6 hours Number of annual initial registration statements ......... × 136 463 See supra footnotes 355 and 357. supra section II.I.1.b; see also amended cover page of Form N–2. 464 See VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 × $269 (blended rate of $365 for compliance attorney and $172 for intermediate accountant). ................................................... 465 See supra section II.I.2.c; see also Instruction 1 to Item 4 of amended Form N–2. 466 See supra footnote 63 and accompanying paragraph; see also Items 34.3–7 of amended Form N–2. PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 $139,234 .......... $32,241 × 136 ................ × 136 467 See supra section II.I.4; see also General Instruction F.4.a of amended Form N–2. 468 See supra section II.B.3.e; see also General Instruction F.3.b of amended Form N–2. E:\FR\FM\01JNR2.SGM 01JNR2 33334 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations TABLE 6—CURRENTLY APPROVED FORM N–2 PRA ESTIMATES 1—Continued Wage rate 2 Cost of internal burden ................................................... $18,935,824 ..... $4,384,776 Internal burden Total annual burden ............................................. 70,394 hours Annual external cost burden Burden per Post-Effective Amendment Total burden per post-effective amendment ............... 125 hours Number of annual post-effective amendments ........... Total annual burden ............................................. × $33,625 ............ $11,114 × 30 $269 (blended rate of $365 for compliance attorney and $172 for intermediate accountant). ................................................... × 30 .................. × 30 3,751 hours ................................................... $1,008,750 ....... $333,420 Total Burden Total initial registration statement burden ................... Total post-effective amendment burden ...................... 70,394 hours 3,751 hours ................................................... ................................................... $18,935,824 ..... $1,008,750 ....... $4,384,776 $333,420 Total annual burden ............................................. 74,145 hours ................................................... 19,944,574 ....... 4,718,196 Notes: 1. These estimates were previously submitted to OMB in connection with a revision of the then-currently-approved collection in 2020. 2. Derived from SIFMA’s Management & Professional Earnings in the Securities Industry 2013 (modified to account for an 1,800-hour work year; multiplied by 5.35 to account for bonuses, firm size, employee benefits and overheard, and adjusted for inflation). TABLE 7—PROPOSED FORM N–2 PRA ESTIMATES 1 Internal burden Cost of internal burden Wage rate 2 Annual external cost burden Burden for Initial Registration Statement Preparing and filing initial registration statement. Total burden per registration statement ..... Number of annual initial registration statements. Total annual burden ............................ 171.67 hours × $401 (attorney) ........................................... $68,838.33 ....... $31,941 171.67 hours 171.67 hours 515 hours × 138 × × $210 (paralegal) ......................................... $449 (assistant general counsel) ............... .................................................................... .................................................................... $36,050 ............ $77,078.33 ....... $181,966.67 ..... × 138 ................ $31,941 × 138 .................................................................... $25,111,399.08 $4,407,858 71,070 hours Burden for Post–Effective Amendment Preparing and filing post-effective amendments. Total burden per post-effective amendment. Number of annual post-effective amendments. Total annual burden ............................ 35.67 hours × $401 (attorney) ........................................... $14,302.33 ....... $10,814 35.67 hours 35.67 hours 107 hours × × $210 (paralegal) ......................................... $449 (assistant general counsel) ............... .................................................................... $7,490 .............. $16,014.33 ....... $37,806.67 ....... $10,814 × 190 .................................................................... × 190 ................ × 190 20,330 hours .................................................................... $7,183,266.70 .. $2,054,660 $352 (compliance attorney) ....................... $319 (senior programmer) ......................... $239 (webmaster) ...................................... $352 (compliance attorney) ....................... $319 (senior programmer) ......................... $239 (webmaster) ...................................... .................................................................... .................................................................... $58.67 .............. $53.17 .............. $39.83 .............. $234.67. $212.67 ............ $159.33 ............ $758.33 ............ × 807 ................ $0 $0 × 807 .................................................................... $611,975 .......... $0 $176 ................. $159.50 ............ $0 Additional Burden for Affected Funds Proposed new check box requirements ..... Total additional burden per affected fund .. Number of affected funds ........................... 0.1667 0.1667 0.1667 0.67 hours 0.67 hours 0.67 hours 2.5 hours × 807 Total annual burden ............................ 2,018 hours jbell on DSKJLSW7X2PROD with RULES2 Proposed online availability requirement ... × × × × × × $0 Additional Burden for BDCS Financial highlights requirement ................ VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 0.5 hours 0.5 hours PO 00000 Frm 00046 × × $352 (compliance attorney) ....................... $319 (senior programmer) ......................... Fmt 4701 Sfmt 4700 E:\FR\FM\01JNR2.SGM 01JNR2 33335 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations TABLE 7—PROPOSED FORM N–2 PRA ESTIMATES 1—Continued Wage rate 2 Cost of internal burden $239 (webmaster) ...................................... .................................................................... .................................................................... $119.50 ............ $455 ................. × 103 ................ $0 × 103 .................................................................... $46,865 ............ $0 Internal burden Total additional burden per BDC ............... Number of BDCs ........................................ 0.5 hours 1.5 hours × 103 Total annual burden ............................ 155 hours × Annual external cost burden Total Burden Total Total Total Total initial registration statement burden .. post-effective amendment burden .... additional burden for affected funds additional burden for BDCs ............... Total annual burden ............................ 71,070 20,330 2,018 155 hours hours hours hours .................................................................... .................................................................... .................................................................... .................................................................... $25,111,399.08 $7,183,266.70 .. $611,975 .......... $46,865 ............ $4,407,858 $2,054,660 $0 $0 93,573 hours .................................................................... $32,953,505.78 $6,462,518 Notes: 1. See Proposing Release, supra footnote 10, at section IV.B.1. 2. See supra Table 6, at footnote 2. TABLE 8—FINAL FORM N–2 PRA ESTIMATES Internal burden Cost of internal burden Wage rate 1 Annual external cost burden Burden for Initial Registration Statement Total burden per registration statement ..... 517.6 hours Number of annual initial registration statements. × 1402 3 Total annual burden ............................ 72,464 hours × $269 (blended rate of $365 for compliance attorney and $172 for intermediate accountant). $139,234 .......... $32,241 × 140 2 3 ............ × 140 2 3 $19,492,760 ..... $4,513,740 $33,625 ............ $11,114 × 158 2 4 ............ × 158 2 4 $5,312,750 ....... $1,756,012 $60.85 .............. $55.18 .............. $41.34 .............. $496 ................. $653.37 ............ × 791 ................ $0 $0 $0 × 791 $516,815.67 ..... $0 $182.50 ............ $165.50. $124. $472 ................. $0 $0 Burden for Post-Effective Amendment Total burden per post-effective amendment. 125 hours Number of annual post-effective amendments. × 1582, 4 Total annual burden ............................ 19,750 hours × $269 (blended rate of $365 for compliance attorney and $172 for intermediate accountant). Additional Burden for Affected Funds New check box requirements ..................... Online availability requirement ................... Total additional burden per affected fund .. Number of affected funds ........................... Total annual burden ............................ 0.1667 0.1667 0.1667 2 2.5 × × × × hours hours hours hours hours × 791 $365 $331 $248 $248 (compliance attorney) 2 ..................... (senior programmer) 2 ....................... (webmaster) 2 .................................... (webmaster) 2 4 .................................. 1,978 hours Additional Burden for BDCS Financial highlights requirement ................ jbell on DSKJLSW7X2PROD with RULES2 Total additional burden per BDC ............... 0.5 0.5 0.5 1.5 × × × hours hours hours hours $365 (compliance attorney) 2 ..................... $331 (senior programmer) 2 ....................... $248 (webmaster) 2 .................................... Number of BDCs ........................................ × 105 × 105 ................ × 105 Total annual burden ............................ 158 hours 49,560 .............. $0 $19,492,760 ..... 5,312,750 ......... 516,815.67 ....... $4,513,740 1,756,012 0 Total Burden Total initial registration statement burden .. Total post-effective amendment burden .... Total additional burden for affected funds VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 72,464 hours 19,750 hours 1,978 hours PO 00000 .... .... Frm 00047 .................................................................... .................................................................... Fmt 4701 Sfmt 4700 E:\FR\FM\01JNR2.SGM 01JNR2 33336 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations TABLE 8—FINAL FORM N–2 PRA ESTIMATES—Continued Internal burden Total additional burden for BDCs ............... Total annual burden ............................ 158 hours 94,350 hours Cost of internal burden Wage rate 1 .... .................................................................... 49,560 .............. $25,371,885.70 Annual external cost burden 0 $6,269,752 jbell on DSKJLSW7X2PROD with RULES2 Notes: 1. See supra Table 6, at footnote 2. In a change from the Proposing Release, we have revised the wage rate categories for existing Form N–2 burdens, consistent with the currently-approved Form N–2 PRA burden estimates. 2. Estimate revised to reflect updated industry data. 3. We considered whether deeming interval funds to have registered an indefinite number of shares under the amendments to rules 23c–3 and 24f–2 will result in fewer registration statement filings since these funds will no longer need to file registration statements to register additional shares. Based on staff analysis of interval fund filings between January 1, 2017 and December 31, 2019, interval funds very rarely filed registrations statements on Form N–2 solely to register additional shares (i.e., the filing typically also updated the fund’s financial statements or included other changes). On average, interval funds filed seven Form N–2 registration statements each year during this period that, among other things, registered additional shares. As a result, for purposes of this PRA estimate, we are not reducing the estimated number of Form N–2 filings to account for the change in how interval funds register additional shares. 4. Estimate revised to reflect the average number of post-effective amendments filed between January 1, 2017 and December 31, 2019 (286 post-effective amendments), minus an estimated reduction of 128 post-effective amendments resulting from the ability of affected funds that are eligible to file short-form registration statements to forward incorporate by reference information into their registration statements. The estimated reduction in the number of post-effective amendment filings has been increased from 112 to 128 filings to account for an increase in the percentage of affected funds that will be eligible to file short-form registration statements (based on updated industry data) and to account for post-effective amendments under rule 486(b) filed by funds that have received relevant staff no-action letters (an average of approximately 29 filings per year over the three-year period). See supra Section II.D (discussing relevant staff no-action letters); Proposing Release, supra footnote 10, at n.447 (discussing the initial estimated reduction in the number of post-effective amendments of 112). 2. Structured Data Reporting Requirements Table 6 above summarizes the current PRA estimates associated with the requirements of Form N–2. Table 7 summarized the proposed PRA estimates included in the Proposing Release.469 Table 8 summarizes the final PRA estimates associated with Form N– 2 as amended. We did not receive public comment on our proposed PRA estimates, but we are revising our estimates as a result of updated industry data. Specifically, we are revising the estimated wage rates, the estimated number of affected funds, and the estimated number of annual initial registration statement and post-effective amendment filings to reflect updated industry data. As summarized in Table 8 above, we estimate that the total hour burdens and time costs associated with Form N–2 will be an aggregate annual burden of 94,350 hours at an aggregate annual cost of internal burden of $25,371,886. We estimate an aggregate annual external time cost of $6,269,752. We are amending Form N–2, as well as Regulation S–K and Regulation S– T,470 to require certain new structured data reporting requirements for registered CEFs and BDCs.471 Specifically, the amendments will require: • BDCs to submit financial statement information using Inline XBRL format, as is currently required of operating companies.472 The respondents for this collection of information are an estimated 105 BDCs. • Affected funds to include structured cover page information in their registration statements on Form N– 2 using Inline XBRL, including the tagging of the new check boxes to the cover page of Form N–2.473 The respondents for this collection of information are an estimated 791 affected funds. As demonstrated in Table 9 below, we do not believe the 469 See Proposing Release, supra footnote 10, at section IV.B.1. 470 See 17 CFR part 229 [OMB Control No. 3235– 0071] (Regulation S–K specifies the requirements for exhibits to registration statements and reports); 17 CFR part 232 [OMB Control No. 3235–0424] (Regulation S–T specifies the requirements that govern the electronic submission of documents). Specifically, we are amending rule 601 of Regulation S–K, and rules 11 and 405 of Regulation S–T. The additional collection of information burden that will result from the amendments to rule 601 of Regulation S–K, rules 11 and 405 of Regulation S–T, and Forms N–2 and N–CSR to require structured data reporting for affected funds are included in our burden estimates for the ‘‘Investment Company Interactive Data’’ collection of information, and do not impose any separate burden aside from that described in our discussion of the burden estimates for this collection of information. 471 We also are amending Form 24F–2 to require submission of this filing in a structured XML format. We discuss the PRA burdens of this and other amendments to the form below. See infra section IV.B.6. 472 See supra section II.I.1.a; see also amended rule 601(b)(101) of Regulation S–K; amended rule 405(b)(3)(i) of Regulation of S–T. 473 See supra section II.I.1.b; see also General Instruction I.1 of amended Form N–2; amended rule 405(b)(3)(ii) of Regulation S–T. 474 See supra section II.I.1.c; see also General Instruction I.2–3 of amended Form N–2; amended VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 cover page tagging requirement will result in significant additional burdens for affected funds. • Affected funds to tag certain Form N–2 disclosure items using Inline XBRL.474 The respondents for this collection of information are an estimated 791 affected funds. The purposes of these information collections are to make financial information easier for investors to analyze and to help automate regulatory filings and business information processing, and to reduce the current disparity between operating companies and BDCs with respect to the accessibility of information they provide to the market. These collections of information are mandatory for the relevant respondents, discussed for each collection below. Confidential information will not be disclosed pursuant to these new reporting requirements. rule 405(b)(3)(iii) of Regulation S–T. The amendments will require the following prospectus disclosure items be tagged using Inline XBRL: Fee Table; Senior Securities Table; Investment Objectives and Policies; Risk Factors; Share Price Data; and Capital Stock, Long-Term Debt, and Other Securities. A seasoned fund filing a short-form registration statement on Form N–2 also will be required to tag any information that is incorporated by reference from an Exchange Act report, such as those on Form N–CSR, 10–K, 10–Q, or 8–K, in response to a disclosure item of the registration statement that is required to be tagged. See supra footnote 241 and accompanying text. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 33337 TABLE 9—PROPOSED AND FINAL STRUCTURED DATA REPORTING PRA ANALYSIS Annual hours 1 Initial cost burden Annual cost burden 81 ........................ ........................ 0 65.81 hours ............ × 463.5 2 ................. 30,503 hours .......... 1 hour .................... $9,262.50 ........................ ........................ $0 $7,525.78 × 463.5 2 $3,488,199.03 $0 ........................ ........................ 15.25 × 807 ...................... 807 hours ............... 12.8 hours .............. ........................ ........................ $1,350.00 × 807 $0 $1,096.88 ........................ ........................ ........................ × 1097.5 ................. 14,048.26 hours ..... 45,358.26 hours ..... ........................ ........................ ........................ × 1097.5 $1,203,825.80 $4,692,024.83 81 hours ........................ ........................ ........................ 65.81 ...................... × 472.5 ................... 31,095 hours .......... 1 hour .................... $9,262.50 ........................ ........................ ........................ $7,525.78 × 472.5 $3,555,931 $0 ........................ ........................ 15.25 ........................ ........................ ........................ × 791 ...................... 791 hours ............... 12.8 hours .............. × 1,076 ................... 13,773 hours .......... 45,659 hours .......... ........................ ........................ $1,350.00 ........................ ........................ ........................ × 791 $0 $1,097 × 1,076 $1,180,372 $4,736,303 Initial hours PROPOSED ESTIMATES 2 BDC Financial Statement Information—Per BDC Response (I) ............ Number of BDC Responses Per Year .................................................... Total Annual Burden ........................................................................ Affected Funds Cover Page Information on Form N 2—Per Affected Fund Response (II). Number of Affected Fund Responses Per Year ..................................... Total Annual Burden ........................................................................ Affected Funds Form N–2 Disclosure Items—Per Affected Fund Response (III). Number of Affected Fund Responses Per Year ..................................... Total Annual Burden ........................................................................ Combined Total Annual Burden ...................................................... FINAL ESTIMATES BDC Financial Statement Information—Per BDC Response (I) ............ Number of BDC Responses Per Year .................................................... Total Annual Burden ........................................................................ Affected Funds Cover Page Information on Form N–2—Per Affected Fund Response (II). Number of Affected Fund Responses Per Year ..................................... Total Annual Burden ........................................................................ Affected Funds Form N–2 Disclosure Items (III) .................................... Number of Affected Fund Responses Per Year ..................................... Total Annual Burden ........................................................................ Combined Total Annual Burden ...................................................... Notes: 1. Includes initial and ongoing burden estimates annualized over a three-year period. Here, as discussed in the Proposing Release, supra footnote 10, at section V.B.2, we assumed that the one-time cost would result in a 50% incremental increase in the internal burdens and external costs of the BDC financial information and Form N–2 disclosure requirements (items I and III in the chart above) during the first year, and would subsequently decline in the second and third years by 75% from the immediately-preceding year. 2. The proposed estimates are discussed in additional detail in the Proposing Release, supra footnote 10, at section V.B.2. Table 9 summarizes the proposed PRA estimates included in the Proposing Release and the final PRA estimates for the structured data reporting requirements. We did not receive public comment on our proposed PRA estimates, but we are revising our estimates as a result of updated industry data. Specifically, we are revising the estimated number of BDCs and affected funds to reflect updated industry data. As summarized in Table 9, we estimate that the total hour burdens and time costs associated with the structured data reporting requirements will be an aggregate annual burden of 45,659 hours. We estimate an aggregate annual external time cost of $4,736,303. jbell on DSKJLSW7X2PROD with RULES2 3. New Annual Reporting Requirements Under Rule 30e-1 and Exchange Act Periodic Reporting Requirements for BDCs Several of the amendments, such as the amendments that would allow certain affected funds to use an automatic shelf registration statement or to forward incorporate by reference Exchange Act reports, may raise the importance of an affected fund’s VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 Exchange Act reports to investors.475 In light of this, we are adopting new disclosure requirements for affected funds’ annual reports. Specifically, we are amending: • Form N–2 to require affected funds using the short-form registration statement to disclose in their annual reports a fee and expense table, share price data, a senior securities table, and unresolved staff comments regarding the fund’s periodic or current reports or registration statement; 476 • Form N–2 to require registered CEFs to provide MDFP in their annual reports; 477 • Form N–2 to require BDCs to include financial highlights in their annual reports on Form 10–K; 478 and 475 See supra section II.I.2. supra section II.I.2.a; see also new Instructions 4.h.(1) (senior securities table), 4.h.(2) (fee and expense table), 4.h.(3) (share price data), and 4.h.(4) (unresolved staff comments) to Item 24 of amended Form N–2. 477 See supra section II.I.2.b; see also new Instruction 4.g to Item 24 of amended Form N–2. 478 See supra section II.I.2.c; see also Instruction 1 to Item 4 of amended Form N–2; new Instruction 10 to Item 24 of amended Form N–2. As discussed above, BDCs also will be required to include financial highlights in their registration statements on Form N–2. See supra section IV.B.1. 476 See PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 • Rule 8b-16 to require a registered CEF that relies on paragraph (b) of that rule to describe in its annual reports its current investment objectives and policies, and principal risks, and certain key changes that occurred during the relevant year in enough detail to allow investors to understand each change and how it may affect the fund.479 The collection of information burdens under these amendments correspond to information collections under rule 30e– 1 for registered CEFs and Form 10–K for BDCs. Rule 30e–1 generally requires registered investment companies to transmit to their shareholders, at least semi-annually, reports containing the information that is required to be included in such reports by the fund’s registration statement form under the Investment Company Act. BDCs, like operating companies, are required to file annual reports on Form 10–K pursuant to section 13 or 15(d) of the Exchange Act. The burden estimates were calculated by multiplying the estimated number of responses by the estimated average amount of time it would take an affected 479 See supra section II.I.5; see also amended rule 8b-16. E:\FR\FM\01JNR2.SGM 01JNR2 33338 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations fund to prepare and review disclosure required under the amendments. For purposes of the PRA, the burden is allocated between internal burden hours and outside professional costs. For these purposes, we estimate that 75% of the burden of preparing annual reports under rule 30e–1 and on Form 10–K is undertaken by the fund internally, while 25% of this burden is undertaken by outside professionals, such as outside counsel and independent auditors, retained by the fund at an average cost of $400 per hour.480 TABLE 10—RULE 30E–1 INCREMENTAL BURDEN ESTIMATES Number of estimated affected responses Burden hour increase per current affected response Increase in burden hours for current affected responses Increase in company hours for current affected responses Increase in professional hours for current affected responses Increase in professional costs for current affected responses (A) (B) (C) = (A) × (B) (D) = (C) × 0.75 (E) = (C) × 0.25 (F) = (E) × $400 PROPOSED ESTIMATES 1 MDFP requirement ................................... Requirements to disclose fee and expense table, share price data, a senior securities table, and unresolved staff comments ............................................. Amendments to rule 8b–16(b) ................. 704 16 11,264 8,448 2,816 $1,126,400 457 704 3 4 1,371 2,816 1,028 2,112 343 704 137,200 281,600 Total estimated burdens ................... 2 $1,545,200 11,588 hours FINAL ESTIMATES 3 686 MDFP requirement ................................... Requirements to disclose fee and expense table, share price data, a senior securities table, and unresolved staff comments ............................................. Amendments to rule 8b–16(b) ................. 16 10,976 8,232 2,744 1,097,600 3 455 3 3 4 521 55 1,365 2,605 1,024 1,954 341 651 136,400 260,400 Total estimated burdens ................... 11,210 hours 1,494,400 jbell on DSKJLSW7X2PROD with RULES2 Notes: 1. See Proposing Release, supra footnote 10, at section V.B.3. 2. The Proposing Release reflected an estimate of $1,545,100. Since we are rounding internal burden and external cost estimates to the nearest whole number in this section, this table reflects an estimated annual cost burden of $1,545,200. 3. Revised to reflect updated industry data. 4. Revised to recognize that not all registered CEFs rely on rule 8b–16(b). 5. Revised to reflect a change from the proposed requirements. Table 10 summarizes the proposed incremental PRA burden estimates and the final incremental PRA burden estimates associated with the new annual report requirements for registered CEFs. We did not receive comments on our proposed estimates, but we have revised them as a result of updated industry data and changes to the proposed amendments. Specifically, we are revising the estimated number of registered CEFs that will be subject to the new annual report requirements to reflect updated industry data and the estimated burden hours associated with the amendments to rule 8b–16(b). As summarized in Table 10 above, the revised additional burdens associated with the new annual report requirements for registered CEFs for purposes of the rule 30e–1 collection of information is 11,210 hours for internal time and external costs of $1,494,400. 480 We recognize that the costs of retaining outside professionals may vary depending on the nature of the professional services but, for purposes of this PRA analysis for rule 30e–1 and Form 10– K, we estimate that such costs would be an average of $400 per hour. This estimate is based on consultations with several registrants, law firms, and persons who regularly assist registrants in preparing and filing reports with the Commission. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 E:\FR\FM\01JNR2.SGM 01JNR2 33339 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations TABLE 11—FORM 10–K INCREMENTAL BURDEN ESTIMATES Number of estimated affected responses Burden hour increase per current affected response Increase in burden hours for current affected responses Increase in company hours for current affected responses Increase in professional hours for current affected responses Increase in professional costs for current affected responses (A) (B) (C) = (A) × (B) (D) = (C) × 0.75 (E) = (C) × 0.25 (F) = (E) × $400 PROPOSED ESTIMATES 1 Requirements to disclose fee and expense table, share price data, a senior securities table, and unresolved staff comments ............................................. Financial highlights requirement .............. 43 103 3 1.5 129 155 Total estimated burdens ................... 97 116 32 39 $12,800 15,600 213 hours 28,400 FINAL ESTIMATES Requirements to disclose fee and expense table, share price data, a senior securities table, and unresolved staff comments ............................................. Financial highlights requirement .............. 2 44 3 1.5 2 105 132 158 Total estimated burdens ................... 99 119 33 40 13,200 16,000 218 hours 29,200 Notes: 1. See Proposing Release, supra footnote 10, at section V.B.3. 2. Revised to reflect updated industry data. Table 11 summarizes the proposed incremental PRA burden estimates and the final incremental PRA burden estimates associated with the new annual report requirements for BDCs. We did not receive comments on our proposed estimates, but we have revised them as a result of updated industry data. Specifically, we are revising the estimated number of BDCs that will be subject to the new annual report requirements to reflect updated industry data. As summarized in Table 11 above, the revised additional burdens associated with the new annual report requirements for BDCs for purposes of the Form 10–K collection of information is 218 hours for internal time and external costs of $29,200. TABLE 12—REQUESTED PAPERWORK BURDEN UNDER THE AMENDMENTS TO ANNUAL REPORT DISCLOSURE Rule or form Current annual responses Current burden hours Current cost burden Number of affected responses Increase in company hours Increase in professional costs Annual responses Burden hours Cost burden (A) (B) (C) (D) (E) (F) (G) = (A) (H) = (B) + (E) (I) = (C) + (F) Current Burden 1 Program Change Requested Change in Burden 30e–1 .. 23,784 1,028,658 $147,750,391 Varies (see Table 10) 2. 11,210 $1,494,400 23,784 1,039,868 $149,244,791 10–K .... 8,137 14,198,780 $1,895,224,719 Varies (see Table 11) 2. 218 $29,200 8,137 14,198,998 1,895,253,919 jbell on DSKJLSW7X2PROD with RULES2 Notes: 1. The rule 30e–1 estimates are based on the last time the rule’s information collections were approved, pursuant to a submission for a PRA extension in 2019. The Form 10–K estimates are based on the last time the form’s information collections were approved, pursuant to a submission for a PRA extension in 2019. 2. As reflected in Table 10 and Table 11, the number of registered CEFs and the number of BDCs that will need to comply with the new annual report disclosure requirements will vary depending on the type of new disclosure, although all registered CEFs (686) and all BDCs (105) will be required to provide some additional annual report disclosure. As summarized above in Table 12, the revised aggregate estimates, including the new amendments, for rule 30e–1 are 1,039,868 hours and $149,244,791 in external costs. The revised aggregate estimates for Form 10–K, including the new amendments, are 14,198,998 hours and $1,895,253,919 in external costs. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 4. Securities Offering Communications Rule 163 permits WKSIs to make unrestricted oral and written offers before filing a registration statement, but any written offer will be considered a free writing prospectus and will generally have to be filed upon filing a registration statement or amendment covering the securities. Rule 433 governs the use of free writing PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 prospectuses by WKSIs and non-WKSI issuers after the filing of a registration statement. A free writing prospectus used by or on behalf of an affected fund, or free writing prospectuses that are broadly disseminated by another offering participant, are required to be filed with the Commission. We have adopted amendments to rules 163 and 433 that will permit affected funds to E:\FR\FM\01JNR2.SGM 01JNR2 33340 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations rely on these rules to use a free writing prospectus. We did not receive public comment on our proposed estimates, but we have revised them as a result of updated industry data. Specifically, we are revising the estimated number of firms that will be subject to the rule to reflect updated industry data. The burden estimates were calculated by multiplying the estimated number of responses by the estimated average amount of time it would take a registrant to prepare and review disclosure required under the proposed amendments. For purposes of the PRA, the burden is to be allocated between internal burden hours and outside professional costs. Table 13 below sets forth the percentage estimates we typically use for the burden allocation for each rule.481 We also estimate that the average cost of retaining outside professional to be $400 per hour.482 TABLE 13—STANDARD ESTIMATED BURDEN ALLOCATION FOR SECURITIES ACT RULES 163 AND 433 Internal Outside professionals ESTIMATED BURDEN ALLOCATION Rule 163 .................................................................................................................................................................. Rule 433 .................................................................................................................................................................. The table below illustrates the incremental change to the total annual compliance burden of affected rules, in 25% 25% 75% 75% hours and costs, as a result of the proposed amendments. TABLE 14—CALCULATION OF THE INCREMENTAL CHANGE IN BURDEN ESTIMATES OF CURRENT RESPONSES RESULTING FROM THE AMENDMENTS Number of estimated affected responses Burden hour increase per current affected response Increase in burden hours for current affected responses Increase in company hours for current affected responses Increase in professional hours for current affected responses Increase in professional costs for current affect responses (A) 1 2 (B) 3 (C) = (A) × (B) (D) = (C) × 0.25 or 0.75 (E) = (C) × 0.75 or 0.25 (F) = (E) × $400 Incremental Change in Burden Estimates 163 ............................... 433 ............................... 2 4,271 0.25 1.28 0.50 5,467 0.125 1,367 0.375 4,100 $150 $1,640,000 jbell on DSKJLSW7X2PROD with RULES2 Notes: 1. For a number of reasons, many issuers that are currently eligible to be WKSIs do not make use of free writing prospectuses in reliance on rule 163. At the time the Commission adopted rule 163, it estimated that 53 free writing prospectuses would be filed under rule 163 per year. However, during the Commission’s 2017 fiscal year, only 10 free writing prospectuses in reliance on rule 163 were filed with the Commission. We estimate that 100 affected funds would be eligible to be WKSIs. See supra section III.A.1. If current practices regarding the use of free writing prospectuses under rule 163 continue with respect to affected funds, we do not believe that these affected funds would significantly increase the number of free writing prospectuses under rule 163. Accordingly, we estimate that, on average, affected funds that are eligible to be WKSIs would file 2 free writing prospectuses under the amendments to rule 163 each year. 2. The most recent data that we have available shows that each operating company files an average of approximately 5.4 free writing prospectuses per year in reliance on rule 433. We estimate that there will be 791 affected funds filing approximately 4,271 free writing prospectuses. See supra section III.A.1. 3. The burden hour estimates for rules 163 and 433 are based on the last time the rules’ information collections were approved, pursuant to a submission for a PRA extension in 2017. The conditions under rule 433 to use a free writing prospectus, require a free writing prospectus to contain more information and contribute to the greater burden hour than for a rule 163 free writing prospectus. The following table summarizes the requested paperwork burden, including the estimated total reporting burdens and costs, under the proposed amendments. 481 We estimate that 25% of the burden of preparing and filing a free writing prospectus pursuant to rule 163 or rule 433 is undertaken by the issuer internally and that 75% of the burden is undertaken by outside professionals retained by the issuer. 482 We recognize the costs of retaining outside professionals may vary depending on the nature of the professional services, but for purposes of this PRA analysis, we estimate that such costs would be an average of $400 per hour. This estimate is based on consultations with several registrants, law firms, VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 and other persons who regularly assist registrants in preparing and filing reports with the Commission. E:\FR\FM\01JNR2.SGM 01JNR2 33341 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations TABLE 15—REQUESTED PAPERWORK BURDEN UNDER THE AMENDMENTS TO SECURITIES ACT RULES 163 AND 433 Current annual responses Current burden hours Current cost burden Number of affected responses Increase in company hours Increase in professional costs Annual responses Burden hours Cost burden (A) (B) (C) (D) (E) (F) (G) = (A) (H) = (B) + (E) (I) = (C) + (F) Current Burden Program Change Requested Change in Burden 163 ................................ 10 1 $720 2 0.125 $150 12 1.125 $870 433 ................................ 15,700 5,024 $6,028,800 4,271 1,367 $1,640,000 19,971 6,391 $7,668,800 As summarized above in Table 15, the revised aggregate estimates, including the new amendments, for rule 163 are 1.125 hours, and $870 in external costs. The revised aggregate estimates for rule 433, including the new amendments, are 6,391 hours and $7,669,017 in external costs. 5. Prospectus Delivery Requirements Rule 173 requires the delivery of a copy of a final prospectus, or in lieu of a final prospectus, a notice to purchasers stating that a sale of securities was made based on a registration statement or in a transaction in which a final prospectus would have been required to have been delivered in the absence of rule 172.483 We have adopted amendments to rule 173 to remove the exclusion for offerings of affected funds.484 We did not receive public comment on our proposed PRA estimates for rule 173. We have revised our estimates regarding the number of funds likely to rely on rule 173, and to reflect updated industry data.485 Specifically, based on a review of Form N–2 filings made with the Commission, we are revising downward the proposed estimate of the number of affected funds expected to rely on rule 173 as a result of the amendments, and thus incur burdens associated with the rule. The burden estimates were calculated by multiplying the estimated number of registrants likely to rely on rule 173 by the number of responses per registrant by the estimated time it would take compile the necessary information and data, prepare and review disclosure, file documents and retain records for issuers that choose to rely on rule 173. We assume, similar to operating companies that rely on rule 173, that each affected fund will incur 100% of the burden. The table below illustrates the incremental change to the total annual burden for affected funds as a result of the amendments. TABLE 16—RULE 173 (CALCULATION OF THE INCREMENTAL CHANGE IN BURDEN ESTIMATES OF CURRENT RESPONSES RESULTING FROM THE AMENDMENTS) Number of estimated affected responses Burden hour per current affected response Burden hours for current affected responses (A) 1 (B) 2 (C) = (A) × (B) 173 ................................................................... 16,634,572 0.0167 Increase in professional hours for current affected responses Increase in professional costs for current affect responses 0 $0 277,797 Notes: 1. In the Proposing Release we estimated that all 807 affected funds would rely on rule 173. See supra footnote 10 at section V.B.5. However, because only a fund with an effective Securities Act registration statement may rely on rule 173, we are revising our estimates. Based on our staff’s review of Form N–2 Securities Act registration statements filed annually between 2017 and 2019, we estimate 382 annual filings, each by a different affected fund. We estimate that each such fund will provide 43,546 responses annually, for a total of 16,634,572 annual responses per year (382 funds × 43,546 responses annually = 16,634,572). 2. The estimated burden hour per response of 0.0167 hours derives from the most recently-approved rule 173 PRA submission (2017). The following table summarizes the total PRA burden, including the estimated total reporting burdens and costs, for rule 173 as a result of the amendments. As reflected below, the revised aggregate hourly burden associated with rule 173 as a result of the amendments is 4,159,688 internal burden hours, with no external costs. TABLE 17—RULE 173 (REQUESTED PAPERWORK BURDEN UNDER THE AMENDMENTS) Current annual responses Current burden hours Current cost burden Number of affected responses Increase in company hours Increase in professional costs Annual responses Burden hours Cost burden (A) (B) (C) (D) (E) (F) (A) + (D) (B) + (E) (C) + (F) jbell on DSKJLSW7X2PROD with RULES2 Current Burden 173 ......... 483 See 484 See 232,448,548 3,881,891 supra footnote 153. supra section II.D. VerDate Sep<11>2014 Program Change 20:35 May 29, 2020 $0 + 16,634,572 + 277,797 Requested Change in Burden $0 249,083,120 485 This estimate is based on the last time rule 173’s information collections were approved, in 2017. Jkt 250001 PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 E:\FR\FM\01JNR2.SGM 01JNR2 4,159,688 $0 33342 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 6. Form 24F–2 Rule 24f–2 requires any open-end management company, unit investment trust, or face-amount certificate company deemed to have registered an indefinite amount of securities to file a Form 24F–2 not later than 90 days after the end of any fiscal year in which it has publicly offered such securities. Form 24F–2 is the annual notice of securities sold by these funds that accompanies the payment of registration fees with respect to the securities sold during the fiscal year, net of securities redeemed or repurchased during the year. We are amending rules 23c–3 and 24f–2 so that interval funds will pay registration fees on the same annual basis using Form 24F–2. We are also adopting a requirement that funds submit reports on Form 24F–2 in an XML structured data format. TABLE 18—FORM 24F–2 PRA ESTIMATES Internal burden Cost of internal burden Wage rate 1 Annual external cost burden Currently Approved Estimates 2 Clerical work to file Form 24F-2 ..................... Number of annual responses ......................... 2 hours × 7,284 Total annual burden ................................ 14,568 hours × $66 (compliance clerk) ................................... ......................................................................... $132 × 7,284 $0 × 7,284 ......................................................................... *$961,488 $0 $67 (compliance clerk) ................................... $261 (programmer) ......................................... ......................................................................... ......................................................................... $134 $522 $656 × 6,177 $0 $0 $0 × 6,177 ......................................................................... $4,052,112 $0 $70 (compliance clerk) 4 ................................. $271 (programmer) 4 ...................................... ......................................................................... ......................................................................... $140 $542 $682 4 × 6,794 $0 $0 $0 4 × 6,794 ......................................................................... $4,633,508 $0 Proposed Estimates 3 Clerical work to file Form 24F–2 .................... Submission in a structured data format .......... Total annual burden per response ................. Number of annual responses ......................... Total annual burden ................................ 2 2 4 × hours hours hours 6,177 × × 24,708 hours Final Estimates Clerical work to file Form 24F–2 .................... Submission in a structured data format .......... Total annual burden per response ................. Number of annual responses ......................... 2 hours 2 hours 4 hours × 6,7944 Total annual burden ................................ 27,176 hours × × Notes: 1. See supra Table 6, at footnote 2. 2. This estimate was previously submitted to OMB in connection with the renewal of approval for the collection of information required by Form 24F-2 in 2018. 3. Proposing Release, supra footnote 10, at section IV.B.7. 4. Estimate revised to reflect updated data. Based on a review of Form 24F–2 filings for the period 2017–2019, the staff estimates that 6,741 filings will be made annually, and that 53 interval funds (representing the 3-year average of interval funds registered with the Commission) will file Form 24F–2 as a result of the final amendments (6,741 + 53 = 6,794). jbell on DSKJLSW7X2PROD with RULES2 Table 18 above summarizes the current PRA estimates, the proposed PRA estimates, and the final PRA estimates associated with the requirement to file reports on Form 24F–2.486 We did not receive public comment on our proposed estimates, but we have revised them as a result of updated industry data. Specifically, we are revising the estimated wage rates and estimated number of funds that will be subject to the requirements of Form 24F–2 to reflect updated industry data. As summarized in Table 18 above, the revised aggregate estimates for Form 24F–2, including the new amendments, are 27,176 hours, with no external costs. 7. Amendments Permitting the Registration of Offerings of an Indeterminate Number of ExchangeTraded Vehicle Securities and the Payment of Registration Fees for Such Offerings on an Annual Net Basis The amendments to certain Securities Act rules and to Forms S–1, S–3, F–1 and F–3 will allow issuers of exchangetraded vehicle securities to elect to register offerings of an indeterminate number of such securities and pay registration fees for these offerings on an annual net basis. We estimate that the amendments will increase the paperwork burden for registration statements on Form S–1 and Form S–3 for such offerings due to the requirement to calculate and pay registration fees on an annual net basis within 90 days after the end of the fiscal 486 See Proposing Release, supra footnote 10, at section IV.B.7. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 year.487 However, because these issuers will have the ability to elect to register offerings of an indeterminate number of such securities, we also estimate that the amendments will result in a decrease in the number of registration statements on these forms filed by these issuers and that, overall, the amendments will reduce the paperwork burdens associated with Form S–1 and Form S–3. The amendments to Forms F–1 and F–3 are not expected to affect the burdens associated with those forms, in that we do not anticipate that any issuers at this time will use Form F–1 or Form F–3 to register offerings of an indeterminate number of exchange487 The paperwork burdens for 17 CFR 230.400 through 230.498A (Regulation C) are imposed through the forms, schedules and reports that are subject to the requirements in these regulations and are reflected in the analysis of those documents. To avoid a PRA inventory reflecting duplicative burdens and for administrative convenience, we assign a one-hour burden to Regulation C. E:\FR\FM\01JNR2.SGM 01JNR2 33343 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations traded vehicle securities and pay registration fees for these offerings on an annual net basis. Based on a review of registration statements filed by ETPs for the period 2017–2019, the staff estimates that, after the effectiveness of these amendments, an average of five registration statements on each of Form S–1 and Form S–3 will be filed each year for offerings of an indeterminate number of exchangetraded vehicle securities with the payment of registration fees on an annual net basis.488 We estimate that the incremental increase in burden for these registration statements will be two hours, consistent with the estimated burden for Form 24F–2. We would expect there to be only a minimal initial burden of establishing a system for calculating fee payments in this manner, in that these issuers already track the issuances and redemptions of their securities on an ongoing basis. When paying registration fees, these issuers will file prospectus supplements under rule 424 and provide disclosures modeled after Form 24F–2. We estimate that, in filing these prospectus supplements in connection with registration statements on Form S–1 or Form S–3, 25% of the burden of preparation is carried by the issuer internally and that 75% of the burden of preparation is carried by outside professionals retained by the issuer at an average cost of $400 per hour. TABLE 19—INCREMENTAL PAPERWORK BURDEN UNDER THE AMENDMENTS FOR REGISTRATION STATEMENTS Current burden Annual reponses S–1 .............................. S–3 .............................. Estimated increase in burden for affected responses Burden hours 901 1,657 Costs 147,208 193,626 In addition, we estimate that seven fewer Forms S–1 and ten fewer Forms S–3 will be filed by these issuers each year as a result of the ability to register Estimated number of affected responses Burden hour change per affected response Change in burden hours for affected responses Change in company hours for affected responses Change in professional hours for affected responses (A) (B) (C) = (A) × (B) (D) = (C) × 0.25 (E) = (C) × 0.75 $180,319,975 236,198,036 5 5 2 2 10 10 offerings of an indeterminate number of exchange-traded vehicle securities, which could result in lower costs for these issuers through a reduction in the 2.5 2.5 Change in professional costs 7.5 7.5 $3,000 3,000 number of registration statements filed by these issuers. TABLE 20—ESTIMATED DECREASE IN BURDEN AS A RESULT OF THE DECREASE IN THE NUMBER OF ANNUAL RESPONSES Current burden Annual reponses S–1 ............................................... S–3 ............................................... Burden hours 901 1,657 The following table illustrates the total annual compliance burden, in hours and in costs, of the affected Estimated decrease in burden as a result of the decrease in the number of annual responses Estimated decrease in the number of annual responses Costs 147,208 193,626 $180,319,975 236,198,036 Estimated decrease in burden hours 7 10 1,144 1,169 Estimated decrease in costs $1,400,932 1,425,456 collections of information resulting from the amendments to these forms. TABLE 21—CURRENT AND REVISED BURDENS UNDER THE AMENDMENTS TO SECURITIES ACT REGISTRATION STATEMENTS Current burden jbell on DSKJLSW7X2PROD with RULES2 S–1 S–3 F–1 F–3 Burden hours Costs Burden hours Costs (A) (B) (C) (D) ....................................................................................................... ....................................................................................................... ....................................................................................................... ....................................................................................................... 488 While we believe that the number of such registration statements to register an indeterminate number of exchange-traded vehicle securities will VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 147,208 193,626 26,692 4,441 $180,319,975 236,198,036 32,275,375 5,703,600 be higher immediately following the effectiveness of these amendments, we estimate that the number of registration statements for such offerings after PO 00000 Frm 00055 Revised burden Fmt 4701 Sfmt 4700 146,067 192,460 26,692 4,441 $178,922,043 234,775,580 32,275,375 5,703,600 this initial period will average a total of approximately 10 registration statements each year. E:\FR\FM\01JNR2.SGM 01JNR2 33344 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 8. Amendments to Form N–14 amendments to Form N–14 will decrease the existing disclosure burden of the form by allowing BDCs to incorporate by reference to the same extent as is currently permitted for registered CEFs and eliminating the Form N–14 is the form used by an affected fund for the registration of securities issued in business combination transactions. The requirement for affected funds to file with the Form N–14 registration statement the documents that contain the information that is incorporated by reference into the prospectus or SAI.489 TABLE 22—CURRENTLY APPROVED FORM N–14 PRA ESTIMATES 1 Internal burden Cost of internal burden Wage rate 2 Annual external cost burden Burden per Initial Filing 310 248 62 620 Preparing and filing initial filing ....................... Total burden per initial filing ........................... Number of annual initial filings ....................... Total annual burden ................................ hours hours hours hours × 156 × × × 96,720 hours $401 (attorney) ............................................... $209 (senior accountant) ................................ $210 (paralegal) ............................................. ......................................................................... ......................................................................... $124,310 $51,832 $13,020 $189,162 × 156 $27,500 ......................................................................... $29,509,272 $4,290,000 $401 (attorney) ............................................... $209 (senior accountant) ................................ $210 (paralegal) ............................................. ......................................................................... ......................................................................... $60,150 $25,080 $6,300 $91,530 × 97 .................... $16,000 .................... $16,000 × 97 ......................................................................... $8,878,410 $1,552,000 $27,500 × 156 Burden per Amendment 150 120 30 300 Preparing and filing amendments ................... Total burden per amendment ......................... Number of annual amendments ..................... Total annual burden ................................ hours hours hours hours × 97 × × × 29,100 hours Total Burden Total initial filing burden .................................. Total amendment burden ............................... 96,720 hours 29,100 hours ......................................................................... ......................................................................... $29,509,272 $8,878,410 $4,290,000 $1,552,000 Total annual burden ................................ 125,820 hours ......................................................................... $38,387,682 $5,842,000 Notes: 1. These estimates were previously submitted to OMB in connection with the renewal of approval for the collection of information required by Form N-2 in 2019. 2. See supra Table 6, at footnote 2. TABLE 23—FINAL FORM N–14 PRA ESTIMATES Internal burden Cost of internal burden Wage rate 2 Annual external cost burden Burden per Initial Filing Current burden for preparing and filing initial filing. Burden reduction from incorporation by reference amendments. Total burden per initial filing ........................... Number of annual initial filings ....................... Total annual burden ................................ 310 hours 248 hours 62 hours 3 (10 hours) × × × × 2 $415 (attorney) ............................................. (senior accountant) ............................. 2 $218 (paralegal) ........................................... 2 $218 (paralegal) ........................................... $128,650 $53,568 $13,516 $(2,180) $27,500 2 $216 $(0) 610 hours × 2 156 .... .... ......................................................................... ......................................................................... $193,554 × 2 156 $27,500 × 2 156 96,160 hours .... ......................................................................... $29,181,672 $4,290,000 (attorney) ............................................. (senior accountant) ............................. 2 $218 (paralegal) ........................................... 2 $218 (paralegal) ........................................... $62,250 $25,920 $6,540 $(2,180) $16,000 Burden per Amendment jbell on DSKJLSW7X2PROD with RULES2 Current burden for preparing and filing amendments. Burden reduction from incorporation by reference amendments. Total burden per amendment ......................... Number of annual amendments ..................... Total annual burden ................................ 489 See 150 hours 120 hours 30 hours 3 (10 hours) × × × × 2 $415 2 $216 290 hours 2 × 97 .... .... ......................................................................... ......................................................................... $92,530 2 × 97 $16,000 2 × 97 29,100 hours .... ......................................................................... $8,674,710 $1,552,000 supra section II.B.3.b. VerDate Sep<11>2014 21:47 May 29, 2020 Jkt 250001 $(0) PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 33345 TABLE 23—FINAL FORM N–14 PRA ESTIMATES—Continued Internal burden Wage rate 2 Cost of internal burden Annual external cost burden Total Burden Total initial filing burden .................................. Total amendment burden ............................... 96,160 hours 29,100 hours .... .... ......................................................................... ......................................................................... $29,181,672 8,674,710 $4,290,000 $1,552,000 Total annual burden ................................ 125,260 hours .... ......................................................................... $37,856,382 $5,842,000 Notes: 1. See supra Table 6, at footnote 2. 2. Estimate revised to reflect updated industry data. 3. Estimate revised to reflect modifications from the proposal. Table 22 above summarizes the current PRA estimates associated with the requirements of Form N–14. Table 23 summarizes the final PRA amendments associated with Form N– 14 as amended. We are revising our estimates as a result of updated industry data and modifications from the proposal. Specifically, we are deducting 10 hours of internal burden per filing to reflect the burden reduction associated with the incorporation by reference amendments affecting filings on Form N–14. In addition, we are revising the estimated wage rates to reflect updated industry data. As summarized in Table 23 above, we estimate that the total hour burdens and time costs associated with Form N–14 will be an aggregate burden of 125,260 hours at an aggregate annual cost of internal burden of $37,856,382. We estimate an aggregate annual external time cost of $5,842,000. jbell on DSKJLSW7X2PROD with RULES2 V. Final Regulatory Flexibility Analysis The Commission has prepared the following Final Regulatory Flexibility Analysis (‘‘FRFA’’) in accordance with section 4(a) of the Regulatory Flexibility Act (‘‘RFA’’),490 regarding the final rule modifications to the registration, communications, and offering processes for affected funds under the Securities Act and the rules and forms under the Exchange Act and Investment Company Act, that will allow affected funds to use the securities offering rules that are already available to operating companies. An Initial Regulatory Flexibility Analysis (‘‘IRFA’’) was prepared in accordance with the RFA and is included in the Proposing Release.491 A. Need and Objectives of the Final Rule The BDC Act directs us to allow a BDC to use the securities offering rules that are available to other issuers required to file reports under section 490 See 5 U.S.C. 603. Proposing Release, supra footnote 10, at section VI. 491 See VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 13(a) or section 15(d) of the Exchange Act and specifically enumerates the required revisions. Similarly, the Registered CEF Act directs us to allow any listed registered CEF or interval fund to use the securities offering rules that are available to other issuers that are required to file reports under section 13(a) or section 15(d) of the Exchange Act, subject to appropriate conditions.492 Pursuant to both Acts, the final rule will modify the registration, communications, and offering processes for affected funds to allow them to use the securities offering rules that are available to other issuers required to file reports under section 13(a) or section 15(d) of the Exchange Act. We are also adopting amendments to our rules and forms, to tailor the disclosure and regulatory framework for affected funds, in light of the amendments to the offering rules applicable to them. The reasons for, and objectives of, the final rule are further discussed in more detail in Section II above. The costs and burdens of these requirements on smaller affected funds are discussed below as well as above in our Economic Analysis and Paperwork Reduction Act Analysis, which discusses the costs and burdens of the final rule on all affected funds. B. Significant Issues Raised by Public Comments In the Proposing Release, we requested comment on every aspect of the IRFA, including the number of small entities that would be affected by the proposed rule and form amendments, the existence or nature of the potential impact of the proposals on small entities discussed in the analysis, and how to quantify the impact of the proposed amendments. We also requested comment on the proposed compliance burdens and the effect these burdens would have on smaller entities. 492 As discussed above, we apply the final rule to all registered CEFs (and BDCs), with certain conditions and exceptions. PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 Although we did not receive comments specifically addressing the IRFA, several commenters stated in their comment letters the impact they believed certain aspects of the proposed amendments would have on small affected funds.493 Specifically, one commenter stated that the proposed rules would disadvantage smaller affected funds relative to larger affected funds that have obtained WKSI status, because smaller funds that would benefit from the ability to use automatic effective registration statements to quickly come to market during periods when their shares trade at a premium, may miss the opportunity to raise capital that the proposed rules were designed to facilitate. The commenter stated that this disparity was unnecessary because shareholders of smaller funds would not likely be disadvantaged by a lower level of market commentary about those funds as compared to larger funds given the investor protections afforded to those shareholders by the Investment Company Act.494 Similarly, another commenter stated that the Commission should reconsider the public float requirement in order to encourage new CEF issuances and give smaller CEFs the opportunity to grow through the issuance of additional shares, because the offering size of most of the recent offerings by public CEFs have been relatively small, making them ineligible for treatment as a ‘‘seasoned fund’’ or WKSI.495 The second commenter stated that forward incorporation by reference, which is allowed when an affected fund has met the requirements to use a shortform registration statement, should be made available to smaller affected funds.496 However, as discussed below, commenters defined smaller funds as those funds that did not meet the WKSI 493 See e.g., ABA Comment Letter; Invesco Comment Letter; White Comment Letter; XBRL US Comment Letter. 494 See e.g., ABA Comment Letter. 495 See e.g., Invesco Comment Letter. 496 See e.g., White Comment Letter. E:\FR\FM\01JNR2.SGM 01JNR2 33346 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations public float threshold of $700 million or more for purposes of using an automatic registration statement, or did not meet the seasoned public float threshold of $75 million or more for purposes of forward incorporation by reference. Another commenter voiced support for the XBRL format proposed for certain filings by affected funds and recommended expanded use of the format for other disclosures.497 The commenter noted that a study it conducted along with the AICPA in 2014 and again in 2017 evaluating the annual cost of XBRL preparation for small reporting companies had decreased from $10,000 in 2014 to $5,500 in 2017.498 In citing to the Council of Institutional Investors (CII) July 19, 2018 comment letter in response to the SEC Draft Strategic Plan 2018–2022, the commenter stated that inline XBRL is an improvement to EDGAR functionality and makes disclosure documents more valuable and cost-effective for a broad range of users including market analysts and data vendors that conduct research on smaller companies.499 In response to the Commission’s request for comment regarding whether the current burdens of preparing financial statements and notes in XBRL format have changed over time for small reporting companies, the commenter reiterated that the cost of XBRL preparation has declined 45% for small reporting companies.500 After considering the comments we received on the proposed rule and form amendments, we are adopting the amendments, substantially as proposed, with two modifications intended to reduce the operational challenges commenters identified. Specifically, we are expanding the scope of rule 486 to any registered CEF or BDC conducting continuous offerings under rule 415(a)(1)(ix), and we are not adopting our proposed amendments to Form 8– K.501 However, we do not believe there would be any meaningful reporting, recordkeeping, or other compliance costs associated with these modifications that would impact small entities. jbell on DSKJLSW7X2PROD with RULES2 C. Small Entities Subject to the Rule An investment company is a small entity if, together with other investment companies in the same group of related investment companies, it has net assets of $50 million or less as of the end of 497 See e.g., XBRL US Comment Letter. at 13. 499 Id. at 10. 500 Id. at 13. 501 See supra sections II.D and II.I.3. 498 Id. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 its most recent fiscal year.502 Commission staff estimates that, as of June 2019, 16 BDCs and 33 registered CEFs are small entities.503 A broker-dealer is a small entity if it has total capital (net worth plus subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its audited financial statements were prepared pursuant to 17 CFR 240.17a-5(d) (Exchange Act rule 17a–5),504 and it is not affiliated with any person (other than a natural person) that is not a small business or small organization.505 Commission staff estimates that, as of June 30, 2019, there are approximately 942 broker-dealers that may be considered small entities.506 To the extent a small broker-dealer participates in a securities offering or prepares research reports, it may be affected by the final rule. Generally, we believe larger broker-dealers engage in these activities, and we did not receive comments on whether or how the proposed amendments to rule 138 affect small broker-dealers.507 The final rule will also affect ETPs, permitting them to register offerings of 502 17 CFR 270.0–10(a) (Investment Company Act rule 0–10(a)). 503 These estimates, reflecting the net assets of registered CEFs and of BDCs, are based on staff review of Forms N–CEN and N–Q filed with the Commission as of June 2019 and are based on the definition of small entity under Investment Company Act rule 0–10. Such funds will not necessarily be able to meet the transaction requirement to qualify to file a short-form registration statement on Form N–2 (i.e., generally those affected funds with a public float of $75 million) or to be a WKSI (i.e., generally those affected funds with a public float of $700 million). See supra section II.B.3 and II.C. Based on data as of June 2019 from Morningstar Direct, Forms 10–K and 10–Q that are filed with the Commission by BDCs, and closed-end fund data reported on Forms N–CSR, N–Q, and N–PORT filed with the Commission, we estimate, of the 16 BDCs that are small entities, 3 were traded on an exchange with market capitalization below the $75 million public float threshold for qualifying to file a short-form registration statement on Form N–2, and 5 small BDCs traded on the over-the-counter (OTC) market with market capitalization below this same $75 million threshold. Likewise, of the 33 registered CEFs that qualified as small entities, 4 traded on an exchange with market capitalizations below this same $75 million threshold; while 3 were traded on the OTC market with market capitalizations below $75 million. 504 See 17 CFR 240.0–10(c)(1) (Exchange Act rule 0–10(c)(1)). Alternatively, if a broker-dealer is ‘‘not required to file such statements, a broker or dealer that had total capital (net worth plus subordinated liabilities) of less than $500,000 on the last business day of the preceding fiscal year (or in the time that it has been in business, if shorter).’’ See id. 505 See Exchange Act rule 0–10(c)(2). 506 This estimate is derived from an analysis of data for the period ending June 30, 2019 obtained from Financial and Operational Combined Uniform Single (FOCUS) Reports that broker-dealers generally are required to file with the Commission and/or SROs pursuant to Exchange Act rule 17a-5. 507 See supra section II.F.2. PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 an indeterminate number of exchangetraded vehicle securities and pay registration fees for such offerings on an annual net basis. For purposes of the RFA, 17 CFR 230.157 (Securities Act rule 157) defines an issuer, other than an investment company, to be a ‘‘small business’’ or ‘‘small organization’’ if it had total assets of $5 million or less on the last day of its most recent fiscal year and is engaged or proposing to engage in an offering of securities not exceeding $5 million.508 Exchange Act rule 0–10(a) defines an issuer, other than an investment company, to be a ‘‘small business’’ or ‘‘small organization’’ if it had total assets of $5 million or less on the last day of its most recent fiscal year. Commission staff estimates that, as of February 2020, there are approximately 7 ETPs that are issuers, other than an investment company, that may be considered small entities.509 D. Projected Reporting, Recordkeeping, and Other Compliance Requirements The final rule will create, amend, or eliminate current requirements for affected funds and broker-dealers, including those that are small entities discussed in section V.C above.510 1. Registration Process and Final Prospectus Delivery The amendments to the registration process for affected funds will create a short-form registration statement on Form N–2 that will function like a registration statement filed on Form S– 3.511 An affected fund eligible to file the short-form registration statement can use it to register shelf offerings, including shelf registration statements (filed by a WKSI) that become effective 508 See 17 CFR 230.157. on data as of February 2020 from Morningstar Direct and Form S–1 and Form S–3 registration statements filed with the Commission within the past three years. As discussed above, we do not anticipate that any issuers at this time will use Form F–1 to register offerings of an indeterminate number of exchange-traded vehicle securities and pay registration fees for these offerings on an annual net basis. See supra section IV.B.7. Consequently, our figures do not reflect F– 1 filers as a ‘‘small business’’ or ‘‘small organization.’’ 510 See also supra section IV (discussing the skills necessary to perform the recordkeeping, reporting, and compliance requirements of the final rule, including those to be performed internally by a fund, and those to be performed externally by professionals). The PRA provides for the hours, costs, and skill level associated with preparing disclosures, filing forms, and retaining records in compliance with our adopted rules. These skills would apply for compliance with the adopted rules by all funds, large and small, and Commission staff further estimates that small funds will incur approximately the same initial and ongoing costs as large funds. 511 See supra section II.B.3. 509 Based E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations automatically.512 Such a fund also can satisfy Form N–2’s disclosure requirement by incorporating by reference information from the fund’s Exchange Act reports. 513 In addition, the final rule will allow certain affected funds eligible to register a primary offering under the adopted short-form registration instruction to rely on rule 430B to omit information from their base prospectuses, and to permit affected funds to use the process operating companies follow to file prospectus supplements.514 Affected funds that choose to forward incorporate information by reference into their registration statements will also be able to include additional information in their periodic reports that is not required to be included in these reports in order to update their registration statements.515 The amendments to the WKSI definition in rule 405 will also permit affected funds to qualify for enhanced offering and communication benefits under our rules.516 In order for an issuer to qualify as a WKSI, the issuer must meet the registrant requirements of Form S–3, i.e., it must be ‘‘seasoned,’’ and generally must have at least $700 million in public float.517 Qualifying as a WKSI will allow such funds to file a registration statement or amendment that becomes effective automatically in a broader variety of contexts than nonWKSIs, and to communicate at any time, including through a free writing prospectus, without violating the ‘‘gunjumping’’ provisions of the Securities Act.518 Smaller affected funds will not be able to avail themselves of the aspects of the adopted rule amendments streamlining the registration process for affected funds or that make available the WKSI designation to affected funds. The adopted short-form registration instruction is designed to provide affected funds parity with operating companies by permitting them to use the instruction to register the same transactions that an operating company can register on Form S–3.519 In order to qualify to use the short-form registration statement under Form N–2, General Instruction A.2 of Form N–2 generally requires an affected fund to meet the public float requirement of $75 million under the transaction requirements for jbell on DSKJLSW7X2PROD with RULES2 512 Id. 513 Id. 514 See supra section II.B.3.d. supra section II.B.3.e. 516 See supra section II.C. 517 Id. 518 Id. 519 See supra section II.B.3.a; see also supra footnote 51 and accompanying and preceding text. 515 See VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 Form S–3.520 Likewise, the WKSI provision of rule 405 contains a public float requirement of $700 million, as discussed above. Smaller funds will not generally meet the public float thresholds to file a short-form registration statement or qualify as a WKSI and therefore will not generally be subject to either of these amendments.521 However, smaller affected funds may be affected by these amendments in other ways. For example, smaller affected funds may be more likely to merge to obtain WKSI status, and could experience competitive disadvantages compared to larger funds that qualify as WKSIs or that file short-form registration statements on Form N–2.522 The final rule will also apply the delivery method for operating company final prospectuses to offerings of affected funds. As a result, an affected fund, broker, or dealer will be allowed to satisfy the final prospectus delivery obligations if a final prospectus is or will be on file with the Commission within the time required by the rules and other conditions are satisfied.523 These requirements will apply to all affected funds, as well as all brokers or dealers.524 2. Communications Rules For offerings of smaller affected funds, we are not adopting any new restrictions on communications. As discussed above, the amendments to Securities Act rules 134, 138, 156, 163, 163A, 164, 168, 169, and 433 will make available the use of certain types of communications that were previously not available to affected funds.525 Except as otherwise discussed below, we believe that there are no significant reporting, recordkeeping, or other compliance requirements associated with these amendments. As such, except as otherwise discussed below, we believe that there are no attendant costs and administrative burdens for 520 See supra sections II.B.3.a and III.B.1. supra sections II.B.3 and III.B.1. 522 See supra section III.B.1. 523 See supra sections IV.B.5 and II.E. 524 Affected funds using the new approach to prospectus delivery will be required to provide a notice to purchasers stating that a sale of securities was made pursuant to a registration statement or in a transaction in which a final prospectus would have been required to have been delivered in the absence of Securities Act rule 172. See supra footnote 153 and accompanying text. 525 See supra sections II.F, III.B.2, III.C.1, and IV.B.4. The amendments to Securities Act rules 163 and 433, regarding the use of a free writing prospectus, create new recordkeeping, filing, and compliance requirements that are addressed further below. 521 See PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 33347 small affected funds associated with these amendments. In addition, the communications rules themselves do not create any new restrictions for smaller affected funds. Instead, smaller affected funds now may be able to take advantage of new communications options not previously afforded to them.526 We also note that rule 163, and the new amendments, apply only to WKSIs. Consequently, these amendments to rule 163 will not produce any benefit, or create any burden, for small affected funds because they would not qualify as WKSIs, as discussed above.527 To the extent that an affected fund uses a free writing prospectus under the adopted rules, any affected fund—large or small—will incur the burden of the requirement to file a free writing prospectus, or retain a record of the free writing prospectus for three years if it was not filed with the Commission.528 However, we believe that the burden here will be negligible. Affected funds currently use rule 482 of the Securities Act to engage in communications similar to those that will be permitted under the amendments to rule 433, and these funds are required to file their rule 482 communication with either the Commission or, alternatively, with the Financial Industry Regulatory Authority (‘‘FINRA’’).529 The burden associated with the filing requirements that the amendments to rule 433 will entail will therefore not be meaningfully different than the burden associated with the filing requirement for rule 482 communications. Rule 433 also creates a recordkeeping requirement. We do not believe that this requirement will create any significant burden given that records of rule 482 communications must also be retained for a period that 526 See supra sections II.F, III.B.2, III.C.1, and IV.B.4. These include, for example, amendments to rule 163A of the Securities Act, which provides a bright-line rule permitting communications more than 30 days before filing a registration statement, and amendments to rule 169 of the Securities Act, which provides affected funds the ability to engage in regular factual business communications. 527 See supra section V.D.1. 528 See amended rule 433(d) and (g). Paragraph (d) of the rule provides for the various conditions and exclusions applicable to the general requirement of 433(d)(1) that an issuer or offering participant file its free writing prospectus. Paragraph (g) requires that if a free writing prospectus is not filed pursuant to paragraph (d) or (f) of rule 433, issuers and offering participants must retain all free writing prospectuses that have been used, for three years following the initial bona fide offering of the securities in question. 529 See note to paragraph (h) of Securities Act rule 482. Rule 482 requires that advertisements used in reliance on rule 482 are required to be filed in accordance with the requirements of rule 497, unless they are filed with FINRA. See supra footnote 528 and sections III.C and IV.B.4.; see also Securities Act rule 497(a) and (i). E:\FR\FM\01JNR2.SGM 01JNR2 33348 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 will generally exceed that required under rule 433.530 In addition, the recordkeeping requirement will apply only to affected funds (both large and small) that elect to use rule 433, as adopted. The final rule also will affect brokerdealers participating in a registered offering. Specifically, the amended rules will affect: (1) Broker-dealers’ publication and distribution of research reports on affected funds; and (2) broker-dealers’ use of free writing prospectuses on affected funds. The amendments to rule 138 will affect both large and small brokerdealers. These amendments will now permit broker-dealers to publish or distribute research reports with respect to a broader class of issuers and securities without this publication or distribution being an offer that otherwise could be a non-conforming prospectus in violation of section 5 of the Securities Act.531 Broker-dealers that once used rule 482 ads styled as research reports, and instead rely on rule 138, as adopted, to publish or distribute similar communications, will no longer be subject to any filing requirement for these communications. Consequently, we expect that the amendments to rule 138 will result in fewer rule 482 communications being filed with FINRA.532 This in turn will reduce filing-related administrative costs for broker-dealers publishing or distributing research reports on affected funds under the amendments to rule 138. However, large and smaller brokerdealers will not be affected differently by the amendments to rule 138. In addition, the free writing prospectus rule amendments will permit broker-dealers to engage in these communications on behalf of the affected fund issuer.533 This will require 530 See 17 CFR 270.31a–2(a)(3) (Investment Company Act rule 31a-2(a)(3)) (requiring every registered investment company to preserve for no less than six years from the end of the fiscal year last used, any advertisement, pamphlet, circular form letter, or other sales literature addressed to or intended for distribution to prospective investors). Securities Act rule 433(g) requires an issuer and offering participants to retain all free writing prospectuses that have been used, and that have not been filed pursuant to paragraphs (d) or (f) of the rule, for three years following the initial bona fide offering of the securities in question. However, for a broker or dealer utilizing a free writing prospectus, rule 433 defers to the recordkeeping requirements under 17 CFR 240.17a–4 (Exchange Act rule 17a–4) (requiring sales literature to be retained for not less than three years). 531 See amended Securities Act rule 138. 532 See supra footnote 529 and FINRA rule 2210(c)(7)(F) (requiring a broker-dealer to file with FINRA an investment company prospectus published pursuant to Securities Act rule 482). 533 See amended rule 433(b). Paragraph (b)(1) states that for WKSIs and seasoned issuers, both an VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 broker-dealers, both large and small, to file the free writing prospectuses that they use with the Commission, or maintain records of any free writing prospectuses used if it was not filed with the Commission.534 However, certain of these broker-dealers are already required to file communications made under rule 482.535 Broker-dealers that once used rule 482 ads and instead now choose to rely on adopted amended rule 433 to publish or distribute similar communications, will no longer be required to file these communications with FINRA. Consequently, the amendments to rule 433 could result in fewer rule 482 communications being filed with FINRA and a potential increase in filings of free writing prospectuses by affected funds with the Commission.536 However, those brokerdealers that have not previously used rule 482 to publish or distribute the types of communications that the amendments to rule 433 permit, will newly be subject to both the filing and recordkeeping requirements of rule 433. 3. New Registration Fee Payment Method for Interval Funds Interval funds, like other affected funds, are not currently permitted to pay registration fees on this same annual ‘‘net’’ basis as mutual funds and ETFs, and pay the registration fee at the time of filing the registration statement.537 As discussed above, we believe that interval funds will benefit from the ability to pay their registration fees in the same manner as mutual funds and ETFs, and that this approach is appropriate in light of interval funds’ operations.538 In addition, in response to comments to the Proposing Release, we also are adopting amendments to enable ETPs to register an indeterminate number of securities and to pay registration fees in arrears on an annual issuer or offering participant may use a free writing prospectus, while paragraph (b)(2) states that for non-reporting and unseasoned issuers, any person participating in the offer or sale of the issuer’s securities may use a free writing prospectus. Although the term ‘‘offering participant’’ is not defined, paragraph (h)(3) of rule 433 gives some context to this term. 534 See supra footnote 528. 535 See supra footnote 529. 536 See supra section III.C.1 and IV.B.4 (noting that we are unable to predict whether affected funds will engage in more communications with investors as a result of the final rule). To the extent affected funds or broker-dealers will use a free writing prospectus for communications that currently occur under rule 482, we would expect an increase in such filings of free writing prospectuses as well as an increase in the number of rule 138 research reports, and a decrease in the number of rule 482 ads filed with FINRA. See supra footnote 532 and accompanying text. 537 See supra section II.H and III.E.1. 538 See supra section II.H. PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 net basis.539 As we discussed above, ETPs operate in a manner substantially similar to that of ETFs, and as commenters noted, share similar attributes with interval funds, which we highlighted in extending to interval funds the ability to pay registration fees on an annual net basis, including routine repurchases of shares at NAV and avoiding the possibility of inadvertently selling more shares than it had registered.540 As a result, the final rule will require interval funds and allow ETPs to pay securities registration fees using the same method that mutual funds and ETFs use.541 We believe this will benefit small interval funds and ETPs as well as larger interval funds and ETPs equally, and will make the registration fee payment process for all interval funds and ETPs more efficient as discussed above.542 4. Disclosure and Reporting Requirements We also are adopting amendments, substantially as proposed, to our rules and forms that are intended to tailor the disclosure and regulatory framework for affected funds in light of our amendments to the offering rules applicable to them.543 These amendments include: Structured data requirements; new periodic requirements; amendments to provide affected funds additional flexibility to incorporate information by reference; and enhancements to the disclosures that registered CEFs make to investors when the funds are not updating their registration statements.544 Structured Data Requirements The amendments will require BDCs, like operating companies, to submit financial statement information using Inline XBRL format; to require that affected funds include structured cover page information in their registration statements on Form N–2 using Inline XBRL format; to require that certain information required in an affected fund’s prospectus be tagged using Inline XBRL format; 545 and to require that 539 Id. 540 Id. 541 Id. 542 Id.; see also section III.E.1. supra section II.I. Some of the amendments reflect our consideration of the availability of information to investors, as required by the Registered CEF Act. See section 509(a) of the Registered CEF Act. 544 See supra sections II.I.1–II.I.5. 545 See supra footnote 241 and accompanying text noting that a seasoned fund filing a short-form registration statement on Form N–2 also will be required to tag information appearing in Exchange Act reports, such as those on Forms N–CSR, 10–K, or 8–K, if that information is required to be tagged in the fund’s prospectus. 543 See E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations filings on Form 24F–2 be submitted in XML format.546 Large and small affected funds will both incur on a proportional basis, the costs associated with these adopted structured data requirements. Furthermore, as noted above, based on our experience implementing the XBRL format, we recognize that some registrants affected by the adopted requirement, particularly filers with no Inline XBRL experience, likely will incur initial costs to acquire the necessary expertise and/or software as well as ongoing costs of tagging required information in Inline XBRL, and the incremental effect of any fixed costs, including ongoing fixed costs, of complying with the Inline XBRL requirement may be greater for smaller filers.547 However, we believe that smaller affected funds in particular may benefit more from enhanced exposure to investors that could result from these adopted requirements.548 If reporting the disclosures in a structured format increases the availability of, or reduces the cost of collecting and analyzing, key information about affected funds, smaller affected funds may benefit from improved coverage by third-party information providers and data aggregators. jbell on DSKJLSW7X2PROD with RULES2 Periodic Reporting Requirements The final rule also will require registered CEFs to provide the MDFP in their annual reports to shareholders, BDCs to provide financial highlights in their registration statements and annual reports, and affected funds filing a short-form registration statement on Form N–2 to disclose material unresolved staff comments.549 These requirements are intended to modernize and harmonize our periodic reporting disclosure requirements for affected funds with those applicable to operating companies and mutual funds and ETFs. The final rule requirement for registered CEFs to include an MDFP section in the annual report and for BDCs to provide financial highlights in their registration statement and annual reports will apply to all applicable affected funds, large and small. We do not believe it would be appropriate to treat large and small entities differently for purposes of the MDFP requirement because such disclosures helps investors assess fund performance over the prior year and complements other information in the report, which may 546 See supra sections II.I.1 and III.E.1. supra section III.E.2. But see supra footnote 428 (noting that since 2014, costs incurred utilizing XBRL have significantly reduced for smaller companies). 548 Id. 549 See supra sections II.I.2.b, II.I.2.c, and II.I.2.d. 547 See VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 make the annual report disclosure more understandable as a whole.550 Such investor protection benefits are equally significant to investors in smaller affected funds as well as larger affected funds.551 For similar reasons, we believe that the informational benefit of BDCs’ inclusion of the financial highlights in their registration statements should apply equally to investors in large and small BDCs. We also believe the costs associated with this adopted requirement should be minimal for both large and small BDCs, since we understand that it is general market practice for BDCs to include this information in their registration statements.552 Finally, the final rule will require affected funds that file a short-form registration statement on Form N–2 to disclose material unresolved staff comments. Such a requirement will apply only to those entities that qualify for the short-form registration statement, which generally would not include smaller affected funds.553 Online Availability of Information Incorporated by Reference The final rule will modernize Form N–2’s requirements for backward incorporation by reference by all affected funds. Affected funds will no longer be required to deliver to new investors information that they have incorporated by reference.554 Instead, we are adopting new requirements that these funds make the incorporated materials and corresponding prospectus and SAI readily available and accessible on a website maintained by or for the fund and identified in the fund’s prospectus or SAI.555 We do not believe this requirement will generate significant compliance costs for affected funds because many funds currently post their annual and semi-annual reports and other fund information on their websites.556 Nor do we think it would be appropriate to treat large and small entities differently for these purposes. The adopted requirement will make the incorporated information, prospectus, and SAI more accessible to retail investors, who we believe may be more inclined to look at a fund’s 550 See supra section III.E.3. supra section II.I.2.b and II.I.2.c; see also supra section IV.B.3 (discussing the burden hours associated with complying with the adopted disclosure requirements for both small and large affected funds). 552 Id.; see also supra sections IV.B.1 and IV.B.3. 553 See supra footnote 503. 554 See supra sections II.I.4 and IV.E.5. 555 Id. 556 See supra section III.E.4. 551 See PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 33349 website for information than to search the EDGAR system.557 The final rule also will increase the likelihood that fund investors view the information in their preferred format, and thereby increase their use of the information to make investment decisions.558 We believe that these investor protection benefits should be available equally for investors in smaller and larger affected funds. Enhancements to Certain Registered CEFs’ Annual Report Disclosure Finally, the amendments to rule 8b– 16(b) under the Investment Company Act will require a fund relying on that rule to describe in its annual report the fund’s current investment objectives, policies, and principal risks.559 The amendments also will require a fund to describe in its annual report certain key changes that occurred during the relevant year in enough detail to allow investors to understand each change and how it may affect the fund, and to preface such disclosures with a legend.560 The amendments to rule 8b– 16(b) will only affect that portion of registered CEFs that rely on the rule.561 We do not think it would be appropriate to treat large and small entities differently for purposes of the amendments to rule 8b–16(b), as this new requirement will allow investors in funds relying on the rule to more easily identify and understand key information about their investments.562 We believe that this investor protection benefit should be available equally for investors in smaller and larger affected funds. In addition, the adopted new requirement will likely add only a small incremental compliance burden because funds relying on rule 8b–16(b) are already required to disclose the enumerated changes.563 The amendments described in section II.I above will apply to affected funds that are small entities as well as other affected funds unless noted otherwise.564 557 Id. 558 Id. 559 See supra sections II.I.5 and III.E.3. 560 Id. 561 See supra section III.E.3. Based on staff review of data derived from Morningstar Direct and Commission filings for the period ending June 30, 2019, approximately 521 registered CEFs currently rely on rule 8b–16(b). Of these, we estimate that 22 will be small issuers based on net assets of $50 million or less. 562 See supra section III.E.3. 563 Id. 564 See also supra sections III.E.3 and IV.B.3 (discussing the economic impact, and the estimated compliance costs and burdens, of the final rule described in section II.I). E:\FR\FM\01JNR2.SGM 01JNR2 33350 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 5. Automatic or Immediate Effectiveness for Filings by Affected Funds Conducting Certain Continuous Offerings As we discussed above, the amendments we are adopting to rule 486 will permit any registered CEF or BDC that conducts continuous offerings under rule 415(a)(1)(ix), including unlisted continuously-offered affected funds such as tender offer funds, to rely on rule 486.565 Our amendment to rule 486 will allow such funds to file posteffective amendments and registration statements that become effective immediately upon filing or automatically effective 60 days after filing, depending on the substance of the disclosure changes.566 In doing so, we believe that such funds will be able to more efficiently update their financial statements under section 10(a)(3) of the Securities Act to maintain effective registration statements while they engage in continuous offerings.567 These amendments will benefit both large and small continuously-offered unlisted affected funds, and we believe that they provide benefits similar to the benefits the adopted rule offers affected funds that will file short-form registration statements or qualify as WKSIs.568 Because the amended rule applies only to those affected funds that conduct continuous offerings under rule 415(a)(1)(ix), we expect this subset of affected funds to be limited.569 In addition, although reliance on rule 486 is voluntary for continuously-offered affected funds who are newly permitted to rely on the rule, we expect many will rely on it due to the cost efficiencies sustained from a regime providing immediate or automatic effectiveness for post-effective amendments and certain registration statements. Notwithstanding this increased use, and because it will provide greater efficiencies, we do not believe the final rule will create any new meaningful reporting, recordkeeping, or other compliance costs in relation to how affected funds currently file post-effective amendments or registration statements. In addition, immediate or automatic effectiveness would permit smaller funds the ability to engage in offerings that meet investor 565 See supra section II.D. jbell on DSKJLSW7X2PROD with RULES2 566 Id. 567 Id.; see also supra section III.E.5. supra section III.E.5. 569 Based on staff review of fund filings, as of August 2019, we estimate that approximately 65 continuously-offered unlisted affected funds (that are not interval funds) conduct continuous offerings under rule 415(a)(1)(ix), of which 14 are BDCs, and 51 are registered CEFs. 568 See VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 demand, on a timely basis, for such offerings. E. Agency Action To Minimize Effect on Small Entities The RFA directs the Commission to consider significant alternatives that would accomplish our stated objective, while minimizing any significant economic impact on small entities. Although the BDC Act and Registered CEF Act required certain amendments to our rules and forms, we could have, for example, made additional modifications to the relevant provisions with respect to affected funds that are small entities. Alternatively, we also could have limited the scope to BDCs (as the BDC Act specified) and to interval funds and listed registered CEFs (as the Registered CEF Act specified), which would have excluded from the scope of the adopted rules certain small entities that are registered CEFs but that are not interval funds or listed registered CEFs.570 Where our final rules reflect an exercise of discretion, we considered the following alternatives for small entities in relation to our amendments: • Exempting affected funds that are small entities from the adopted disclosure, reporting, or recordkeeping requirements, to account for resources available to small entities; • Establishing different compliance or reporting requirements or frequency to account for resources available to small entities; • Clarifying, consolidating, or simplifying the compliance requirements under the amendments for small entities; and • Using performance rather than design standards. 1. Alternatives to the Adopted Approach to Implementing Statutory Mandates In accordance with the BDC Act and Registered CEF Act, to the final rule modifies the restrictions regarding offerings and communications permitted around the time of a Securities Act registered offering. The flexibility provided by our amendments will be greatest for larger and seasoned affected funds, but will also provide greater flexibility to all affected funds and broker-dealers, including small entities. We considered modifying the public float standards in the WKSI definition or the short-form registration instruction by reducing the required level of public float or providing alternative eligibility criteria, such as an aggregate NAV of a certain size for funds whose shares are not traded on an exchange or through the use of ‘‘performance’’ rather than ‘‘design’’ standards.571 These alternatives would have allowed more affected funds, potentially including small entities, to qualify as WKSIs or file short-form registration statements. However, we believe that modifying the eligibility criteria in the WKSI definition or the short-form registration instruction could weaken the investor protection benefits provided by those criteria. We also considered extending the adopted rule amendments only to BDCs, listed registered CEFs, and interval funds.572 However, excluding unlisted registered CEFs from the adopted rule amendments will create unnecessary competitive disparities between unlisted registered CEFs (which will potentially include smaller funds) and unlisted BDCs and will not provide investors in unlisted registered CEFs with the benefits of the new investor protections we are adopting.573 2. Alternative Approaches to Discretionary Choices New Registration Fee Payment Method for Interval Funds We considered, but are not adopting, provisions allowing a wider range of affected funds, such as registered CEFs that are tender offer funds, to rely on rule 24f–2.574 To the extent that this alternative would have brought in additional small affected funds, it could have extended the benefits of this fee payment method to additional small entities. However, we did not adopt this alternative approach because interval funds and ETPs have structural similarities to mutual funds and ETFs that other affected funds do not.575 Structured Data Requirements As an alternative, we could have adopted amendments requiring the Inline XBRL requirements only for a subset of affected funds—for example, affected funds that file short-form registration statements on Form N–2 or WKSIs.576 This would have lessened the burden associated with the structured data requirements on smaller affected funds. However, a structured data program that captures only a subset of affected funds would reduce potential data quality benefits compared to mandatory Inline XBRL requirements 571 See 572 See supra section II.C. supra section III.D. 573 Id. 574 See supra section III.E.1. id. 576 See supra section IV.B.2. 575 See 570 See PO 00000 supra section II.A. Frm 00062 Fmt 4701 Sfmt 4700 E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations for all affected funds.577 This in turn would reduce data users’ ability to meaningfully analyze, aggregate, and compare data. However, we are adopting an extended compliance period for the new XBRL reporting requirements we adopted for affected funds that are not eligible to file a short-form registration statement. This extended compliance period—which will apply to affected funds that do not meet the transaction requirement to qualify to file a shortform registration statement on Form N– 2 (i.e., generally those affected funds with a public float of $75 million), and which encompasses the small entities subject to the adopted rule amendments discussed above—should enable small entities to defer the burden of additional cost associated with the adopted XBRL requirements and learn from affected funds that comply earlier. jbell on DSKJLSW7X2PROD with RULES2 Periodic Reporting Requirements and Online Availability of Information Incorporated by Reference funds.579 We also believe that the investor protection benefits stemming from the adopted requirement to make materials incorporated by reference available on a website should be available equally for investors in smaller and larger affected funds, and therefore this adopted rule applies equally to large and small affected funds.580 VI. Other Matters Pursuant to the Congressional Review Act,581 the Office of Information and Regulatory Affairs has designated this rule a ‘‘major rule,’’ as defined by 5 U.S.C. 804(2). If any of the provisions of these rules, or the application thereof to any person or circumstance, is held to be invalid, such invalidity shall not affect other provisions or application of such provisions to other persons or circumstances that can be given effect without the invalid provision or application. VII. Statutory Authority We also considered a partial or complete exemption from the adopted periodic reporting requirements, and for the adopted requirements to make information incorporated by reference available on a website, for small entities.578 With respect to the periodic reporting requirements, small entities that are not affected funds currently follow the same requirements that large entities do when filing periodic reports, and we believe that establishing different reporting requirements or frequency for small entities that are affected funds would not be consistent with the Commission’s goal of investor protection and industry oversight. For example, we could have adopted amendments to require smaller affected funds to include in their annual reports less information from their registration statements. While requiring less information would reduce costs to smaller affected funds by reducing the amount of required annual report disclosure, it could also make it more difficult for investors in these funds to find important fund information. Similarly, we believe that the investor protection benefits associated with the other adopted periodic reporting requirements that apply to large and small affected funds—for example, the MDFP requirement for registered CEFs and the inclusion of BDCs’ financial highlights in their registration statement—should apply equally to investors in large and small affected The amendments contained in this release are being adopted under the authority set forth in the Securities Act, particularly sections 6, 7, 8, 10, 19, and 28 thereof [15 U.S.C. 77a et seq.]; the Exchange Act, particularly sections 3, 4, 10, 12, 13, 14, 15, 17, 23, 35A, and 36 thereof [15 U.S.C. 78a et seq.]; the Investment Company Act, particularly sections 6, 8, 20, 23, 24, 30, 31, and 38 thereof [15 U.S.C. 80a et seq.]; the BDC Act, particularly section 803(b) thereof [Pub. L. 115–141, div. S, title VIII, 132 Stat. 348 (2018)]; and the Registered CEF Act, particularly section 509(a) thereof [Pub. L. 115–174, title V, 132 Stat. 1296 (2018)]. List of Subjects 17 CFR Part 229 Reporting and recordkeeping requirements, Securities. Advertising, Confidential business information, Investment Companies, Reporting and recordkeeping requirements, Securities. 17 CFR Part 232 Administrative practice and procedure, Confidential business information, Reporting and recordkeeping requirements, Securities. 17 CFR Part 239 Reporting and recordkeeping requirements, Securities. supra section V.D.4. id. 581 5 U.S.C. 801 et seq. id. 578 See supra section III.E.3. VerDate Sep<11>2014 20:35 May 29, 2020 580 See Jkt 250001 PO 00000 Frm 00063 Fmt 4701 17 CFR Part 240 Brokers, Confidential business information, Fraud, Reporting and recordkeeping requirements, Securities. 17 CFR Part 243 Reporting and recordkeeping requirements, Securities. 17 CFR Part 249 Brokers, Reporting and recordkeeping requirements, Securities 17 CFR Part 270 Confidential business information, Fraud, Investment companies, Reporting and recordkeeping requirements, Securities. 17 CFR Part 274 Investment companies, Reporting and recordkeeping requirements, Securities. Text of Rule and Form Amendments For reasons set forth in the preamble, we are amending title 17, chapter II of the Code of Federal Regulations as follows: PART 229—STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975— REGULATION S–K 1. The authority citation for part 229 continues to read as follows: ■ Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78j–3, 78l, 78m, 78n, 78n–1, 78o, 78u–5, 78w, 78ll, 78 mm, 80a–8, 80a–9, 80a–20, 80a–29, 80a–30, 80a– 31(c), 80a–37, 80a–38(a), 80a–39, 80b–11 and 7201 et seq.; 18 U.S.C. 1350; sec. 953(b), Pub. L. 111–203, 124 Stat. 1904 (2010); and sec. 102(c), Pub. L. 112–106, 126 Stat. 310 (2012). 2. Amend § 229.601 by revising paragraphs (b)(101)(i) introductory text, (b)(101)(i)(C), (b)(101)(ii)(A), and (b)(101)(iii) to read as follows: ■ 17 CFR Part 230 579 See 577 See 33351 Sfmt 4700 § 229.601 (Item 601) Exhibits. * * * * * (b) * * * (101) * * * (i) Required to be submitted. Required to be submitted to the Commission in the manner provided by § 232.405 of this chapter if the registrant is not registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), except that an Interactive Data File: * * * * * (C) Is required for a Form 8–K (§ 249.308 of this chapter): E:\FR\FM\01JNR2.SGM 01JNR2 33352 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations (1) Only when the Form 8–K contains audited annual financial statements that are a revised version of financial statements that previously were filed with the Commission and that have been revised pursuant to applicable accounting standards to reflect the effects of certain subsequent events, including a discontinued operation, a change in reportable segments or a change in accounting principle. In such case, the Interactive Data File will be required only as to such revised financial statements regardless of whether the Form 8–K contains other financial statements; and (2) Except that a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a– 2(a)(48)) also is required to submit an Interactive Data File to the extent required by § 232.405(b)(3)(iii) of this chapter. (ii) * * * (A) Registrant is not registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.); and * * * * * (iii) Not permitted to be submitted. Not permitted to be submitted to the Commission if the registrant is registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.). * * * * * PART 230—GENERAL RULES and REGULATIONS, SECURITIES ACT OF 1933 3. The authority citation for part 230 continues to read, in part, as follows: ■ Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o–7 note, 78t, 78w, 78ll(d), 78mm, 80a–8, 80a–24, 80a– 28, 80a–29, 80a–30, and 80a–37, and Pub. L. 112–106, sec. 201(a), sec. 401, 126 Stat. 313 (2012), unless otherwise noted. * * * * Sections 230.400 to 230.499 issued under secs. 6, 8, 10, 19, 48 Stat. 78, 79, 81, and 85, as amended (15 U.S.C. 77f, 77h, 77j, 77s). Sec. 230.457 also issued under secs. 6 and 7, 15 U.S.C. 77f and 77g. * * * * * ■ 4. Amend § 230.134 by revising paragraph (g) to read as follows: jbell on DSKJLSW7X2PROD with RULES2 * § 230.134 Communications not deemed a prospectus. * * * * * (g) This section does not apply to a communication relating to an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), other than a VerDate Sep<11>2014 21:47 May 29, 2020 Jkt 250001 registered closed-end investment company. ■ 5. Amend § 230.138 by: ■ a. Removing Instruction to paragraph (a)(1); ■ b. Adding paragraph (a)(1)(iii); and ■ c. Revising paragraph (a)(2)(i). The addition and revision read as follows: § 230.138 Publications or distributions of research reports by brokers or dealers about securities other than those they are distributing. (a) * * * (1) * * * (iii) Note: If the issuer has filed a shelf registration statement under § 230.415(a)(1)(x) (Rule 415(a)(1)(x)) or pursuant to General Instruction I.D. of Form S–3, General Instruction I.C. of Form F–3 (§ 239.13 or § 239.33 of this chapter), or pursuant to General Instructions A.2 and B of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) with respect to multiple classes of securities, the conditions of paragraph (a)(1) of this section must be satisfied for the offering in which the broker or dealer is participating or will participate. (2) * * * (i)(A) Is required to file reports, and has filed all periodic reports required during the preceding 12 months (or such shorter time that the issuer was required to file such reports) on Forms 10–K (§ 249.310 of this chapter), 10–Q (§ 249.308a of this chapter), and 20–F (§ 249.220f of this chapter) pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); or (B)(1) Is a registered closed-end investment company; and (2) Is required to file reports, and has filed all periodic reports required during the preceding 12 months (or such shorter time that the issuer was required to file such reports) on Forms N–CSR (§§ 249.331 and 274.128 of this chapter), N–PORT (§ 274.150 of this chapter), and N–CEN (§§ 249.330 and 274.101 of this chapter) pursuant to Section 30 of the Investment Company Act; or * * * * * ■ 6. Amend § 230.156 by adding paragraph (d) to read as follows: § 230.156 Investment company sales literature. * * * * * (d) Nothing in this section may be construed to prevent a business development company or a registered closed-end investment company from qualifying for an exemption under § 230.168 or § 230.169. ■ 7. Amend § 230.163 by: PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 a. In paragraph (b)(3)(i): i. Removing ‘‘Rule 165 (§ 230.165) or Rule 166 (§ 230.166)’’ and adding ‘‘§ 230.165 (Rule 165) or § 230.166 (Rule 166)’’ in its place; and ■ ii. Adding ‘‘or’’ after the semicolon at the end of the paragraph; ■ b. Revising paragraph (b)(3)(ii); and ■ c. Removing paragraph (b)(3)(iii). The revision reads as follows: ■ ■ § 230.163 Exemption from section 5(c) of the Act for certain communications by or on behalf of well-known seasoned issuers. * * * * * (b) * * * (3) * * * (ii) Communications by an issuer that is an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), other than a registered closed-end investment company. * * * * * ■ 8. Amend § 230.163A by revising paragraph (b)(4) to read as follows: § 230.163A Exemption from section 5(c) of the Act for certain communications made by or on behalf of issuers more than 30 days before a registration statement is filed. * * * * * (b) * * * (4) Communications made by an issuer that is an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), other than a registered closedend investment company. * * * * * ■ 9. Amend § 230.164 by revising paragraph (f) to read as follows: § 230.164 Post-filing free writing prospectuses in connection with certain registered offerings. * * * * * (f) Excluded issuers. This section and Rule 433 are not available if the issuer is an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), other than a registered closed-end investment company. * * * * * ■ 10. Amend § 230.168 by revising paragraphs (b)(1) introductory text, (b)(2) introductory text, and (d)(3) to read as follows: § 230.168 Exemption from sections 2(a)(10) and 5(c) of the Act for certain communications of regularly released factual business information and forwardlooking information. * * * * * (b) * * * (1) Factual business information means some or all of the following E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations information that is released or disseminated under the conditions in paragraph (d) of this section, including, without limitation, such factual business information contained in reports or other materials filed with, furnished to, or submitted to the Commission pursuant to the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.): * * * * * (2) Forward-looking information means some or all of the following information that is released or disseminated under the conditions in paragraph (d) of this section, including, without limitation, such forwardlooking information contained in reports or other materials filed with, furnished to, or submitted to the Commission pursuant to the Securities Exchange Act of 1934 or pursuant to the Investment Company Act of 1940: * * * * * (d) * * * (3) The issuer is not an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), other than a registered closed-end investment company. ■ 11. Amend § 230.169 by revising paragraph (d)(4) to read as follows: § 230.169 Exemption from sections 2(a)(10) and 5(c) of the Act for certain communications of regularly released factual business information. * * * * * (d) * * * (4) The issuer is not an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), other than a registered closed-end investment company. ■ 12. Amend § 230.172 by: ■ a. Revising paragraph (d)(1); ■ b. Removing paragraph (d)(2); ■ c. Redesignating paragraphs (d)(3) and (4) as paragraphs (d)(2) and (3); and ■ d. In newly redesignated paragraph (d)(2), removing ‘‘Rule 165(f)(1) (§ 230.165(f)(1)’’ and adding ‘‘§ 230.165(f)(1) (Rule 165(f)(1))’’ in its place. The revision reads as follows: § 230.172 Delivery of prospectuses. jbell on DSKJLSW7X2PROD with RULES2 * * * * * (d) * * * (1) Offering of any investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), other than a registered closed-end investment company; * * * * * VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 13. Amend § 230.173 by: a. Revising paragraph (f)(2); b. Removing paragraph (f)(3); c. Redesignating paragraphs (f)(4) and (5) as paragraphs (f)(3) and (4); and ■ d. In newly redesignated paragraph (f)(3), removing ‘‘Rule 165(f)(1) (§ 230.165(f)(1))’’ and adding ‘‘§ 230.165(f)(1) (Rule 165(f)(1))’’ in its place. The revision reads as follows: ■ ■ ■ ■ § 230.173 Notice of registration. * * * * * (f) * * * (2) Offering of an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), other than a registered closed-end investment company; * * * * * ■ 14. Amend § 230.405 by: ■ a. Revising the definition of ‘‘Automatic shelf registration statement’’; ■ b. Adding the definition for ‘‘Exchange-traded vehicle security’’ in alphabetical order; ■ c. In the definition of ‘‘Ineligible issuer’’: ■ i. Revising paragraph (1)(i); ■ ii. In paragraph (1)(vii), removing the word ‘‘or’’ at the end of the paragraph; ■ iii. In paragraph (1)(viii), removing the period and adding in its place ‘‘; or’’; and ■ iv. Adding paragraph (1)(ix); ■ d. Adding the definition for ‘‘Registered closed-end investment company’’ in alphabetical order; and ■ e. In the definition ‘‘Well-known seasoned issuer’’, revising paragraphs (1)(i) introductory text, (1)(i)(B)(2), (1)(v), and (2)(iii). The additions and revisions read as follows: § 230.405 Definitions of terms. * * * * * Automatic shelf registration statement. The term automatic shelf registration statement means a registration statement filed on Form S– 3, Form F–3, or Form N–2 (§ 239.13, § 239.33, or §§ 239.14 and 274.11a–1 of this chapter) by a well-known seasoned issuer pursuant to General Instruction I.D. of Form S–3, General Instruction I.C. of Form F–3, or General Instruction B of Form N–2. * * * * * Exchange-traded vehicle security. The term exchange-traded vehicle security means a security: (1) Of an issuer: (i) That is not a registered investment company under the Investment Company Act of 1940; and PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 33353 (ii) The assets of which consist primarily of commodities, currencies, or derivative instruments that reference commodities or currencies, or interests in the foregoing; (2) Offered or sold in a registered offering on a continuous basis pursuant to § 230.415 (Rule 415) by or on behalf of the issuer; (3) Of a class of securities that is listed for trading on a national securities exchange at or immediately after the time of effectiveness of the registration statement; and (4) Which is able to be purchased or redeemed, subject to conditions or limitations as described in the registration statement for the offering of such security, by the issuer for a ratable share of the issuer’s assets (or the cash equivalent thereof) at their net asset value each business day. * * * * * Ineligible issuer. (1) * * * (i) Any issuer that is required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) or section 30 of the Investment Company Act of 1940 (15 U.S.C. 80a–29) that has not filed all reports and other materials required to be filed during the preceding 12 months (or for such shorter period that the issuer was required to file such reports pursuant to sections 13 or 15(d) of the Securities Exchange Act of 1934 or section 30 of the Investment Company Act of 1940), other than reports on Form 8–K (§ 249.308 of this chapter) required solely pursuant to an item specified in General Instruction I.A.3(b) of Form S– 3 (§ 239.13 of this chapter) or General Instruction A.2.a of Form N–2 (§§ 239.14 and 274.11a-1 of this chapter) (or in the case of an asset-backed issuer, to the extent the depositor or any issuing entity previously established, directly or indirectly, by the depositor (as such terms are defined in § 229.1101 of this chapter (Item 1101 of Regulation AB) are or were at any time during the preceding 12 calendar months required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 with respect to a class of assetbacked securities involving the same asset class, such depositor and each such issuing entity must have filed all reports and other material required to be filed for such period (or such shorter period that each such entity was required to file such reports), other than reports on Form 8–K required solely pursuant to an item specified in General Instruction I.A.2 of Form SF–3); * * * * * (ix) In the case of an issuer that is a registered closed-end investment E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 33354 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations company or a business development company, within the past three years any person or entity that at the time was an investment adviser to the issuer, including any sub-adviser, was made the subject of any judicial or administrative decree or order arising out of a governmental action that determines that the investment adviser aided, abetted or caused the issuer to have violated the anti-fraud provisions of the Federal securities laws. * * * * * Registered closed-end investment company. The term registered closedend investment company means a closed-end company, as defined in section 5(a)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a– 5(a)(2)), that is registered under the Investment Company Act. * * * * * Well-known seasoned issuer. * * * (1)(i) Meets all the registrant requirements of General Instruction I.A. of Form S–3 or Form F–3 (§ 239.13 or § 239.33 of this chapter), or General Instructions A.2.a and A.2.b of Form N– 2 (§§ 239.14 and 274.11a–1 of this chapter) and either: * * * * * (B) * * * (2) Will register only non-convertible securities, other than common equity, and full and unconditional guarantees permitted pursuant to paragraph (1)(ii) of this definition unless, at the determination date, the issuer also is eligible to register a primary offering of its securities relying on General Instruction I.B.1. of Form S–3 or Form F–3 or is eligible to register a primary offering described in General Instruction I.B.1. of Form S–3 relying on General Instruction A.2 of Form N–2. * * * * * (v) Is not an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), other than a registered closedend investment company. (2) * * * (iii) In the event that the issuer has not filed a shelf registration statement or amended a shelf registration statement for purposes of complying with section 10(a)(3) of the Act for sixteen months, the time of filing of the issuer’s most recent annual report on Form 10–K (§ 249.310 of this chapter), Form 20–F (§ 249.220f of this chapter), or Form N– CSR (§§ 249.331 and 274.128 of this chapter) (or if such report has not been filed by its due date, such due date). * * * * * ■ 15. Amend § 230.415 by revising paragraphs (a)(1)(x) and (xi), adding VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 paragraph (a)(1)(xiii), and revising paragraph (a)(2) to read as follows: § 230.415 Delayed or continuous offering and sale of securities. (a) * * * (1) * * * (x) Securities registered (or qualified to be registered) on Form S–3 or Form F–3 (§ 239.13 or § 239.33 of this chapter), or on Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) pursuant to General Instruction A.2 of that form, which are to be offered and sold on an immediate, continuous or delayed basis by or on behalf of the registrant, a majority-owned subsidiary of the registrant or a person of which the registrant is a majority-owned subsidiary; or (xi) Shares of common stock which are to be offered and sold on a delayed or continuous basis by or on behalf of a registered closed-end investment company or business development company that makes periodic repurchase offers pursuant to § 270.23c– 3 of this chapter. * * * * * (xiii) Exchange-traded vehicle securities which are to be offered and sold on a continuous basis by or on behalf of the registrant in accordance with § 230.456(d) (Rule 456(d)). (2) Securities in paragraphs (a)(1)(viii) and (ix) of this section that are not registered on Form S–3 or Form F–3 (§ 239.13 or § 239.33 of this chapter), or on Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) pursuant to General Instruction A.2 of that form, may only be registered in an amount which, at the time the registration statement becomes effective, is reasonably expected to be offered and sold within two years from the initial effective date of the registration. * * * * * ■ 16. Amend § 230.418 by revising paragraph (a)(3) introductory text to read as follows: § 230.418 Supplemental information. (a) * * * (3) Except in the case of a registrant eligible to use Form S–3 (§ 239.13 of this chapter), or Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) under General Instruction A.2 of that form, any engineering, management or similar reports or memoranda relating to broad aspects of the business, operations or products of the registrant, which have been prepared within the past twelve months for or by the registrant and any affiliate of the registrant or any principal underwriter, as defined in § 230.405 PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 (Rule 405), of the securities being registered except for: * * * * * ■ 17. Amend § 230.424 by revising paragraph (f) and adding paragraph (i) to read as follows: § 230.424 Filing of prospectuses, number of copies. * * * * * (f) This section shall not apply with respect to prospectuses of an investment company registered under the Investment Company Act of 1940, other than a registered closed-end investment company. References to ‘‘form of prospectus’’ in paragraphs (a), (b), and (c) of this section shall be deemed also to refer to the form of Statement of Additional Information. * * * * * (i)(1) A form of prospectus filed pursuant to this section that operates to reflect the payment of filing fees for an offering of an indeterminate amount of exchange-traded vehicle securities pursuant to §§ 230.456(d) and 230.457(u) (Rule 456(d) and Rule 457(u)) shall be filed with the Commission within the time period set forth in Rule 456(d). The form of prospectus must be accompanied by the appropriate registration fee. (2) The form of prospectus must include the following information: (i) The name and address of issuer; (ii) The name of the securities for which the prospectus is filed; (iii) The Securities Act file number(s) of the registration statement(s) associated with the offering; (iv) The last day of the fiscal year for the issuer for which the prospectus is filed; (v) The calculation of registration fee information calculated pursuant to Rule 457(u); and (vi) The total interest due pursuant to Rule 456(d)(5) and the total amount of registration fee due including any such interest, if the prospectus is being filed more than 90 days after the end of the issuer’s fiscal year. ■ 18. Amend § 230.430A by revising paragraph (a)(2) to read as follows: § 230.430A Prospectus in a registration statement at the time of effectiveness. (a) * * * (2) The registrant furnishes the undertakings required by § 229.512(i) of this chapter (Item 512(i) of Regulation S–K), or the undertakings required by Item 34.4 of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter); and * * * * * ■ 19. Amend § 230.430B by revising paragraphs (b) introductory text, (f)(4) E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations introductory text, (f)(4)(ii), and (i) to read as follows: § 230.430B Prospectus in a registration statement after effective date. jbell on DSKJLSW7X2PROD with RULES2 * * * * * (b) A form of prospectus filed as part of a registration statement for offerings pursuant to Rule 415(a)(1)(i) by an issuer eligible to use Form S–3 or Form F–3 (§ 239.13 or § 239.33 of this chapter) for primary offerings pursuant to General Instruction I.B.1 of such forms, or an issuer eligible to register such a primary offering under General Instruction A.2 of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter), may omit the information specified in paragraph (a) of this section, and may also omit the identities of selling security holders and amounts of securities to be registered on their behalf if: * * * * * (f) * * * (4) Except for an effective date resulting from the filing of a form of prospectus filed for purposes of including information required by section 10(a)(3) of the Act or pursuant to § 229.512(a)(1)(ii) of this chapter (Item 512(a)(1)(ii) of Regulation S–K) or Item 34.3.a(2) of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter), the date a form of prospectus is deemed part of and included in the registration statement pursuant to this paragraph (f)(4) shall not be an effective date established pursuant to paragraph (f)(2) of this section as to: * * * * * (ii) Any person signing any report or document incorporated by reference into the registration statement, except for such a report or document incorporated by reference for purposes of including information required by section 10(a)(3) of the Act or pursuant to Item 512(a)(1)(ii) of Regulation S–K or Item 34.3.a(2) of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) (such person except for such reports being deemed not to be a person who signed the registration statement within the meaning of section 11(a) of the Act). * * * * * (i) Issuers relying on this section shall furnish the undertakings required by Item 512(a) of Regulation S–K or Item 34.3 of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) as applicable. ■ 20. Amend § 230.433 by revising paragraphs (b)(1)(i) and (iv) and (c)(1)(ii) to read as follows: § 230.433 Conditions to permissible postfiling free writing prospectuses. * * * VerDate Sep<11>2014 * * 20:35 May 29, 2020 Jkt 250001 (b) * * * (1) * * * (i) Offerings of securities registered on Form S–3 (§ 239.33 of this chapter) pursuant to General Instruction I.B.1, I.B.2, I.C., or I.D. thereof or on Form SF– 3 (§ 239.45 of this chapter) or on Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) pursuant to General Instruction A.2 with respect to the same transactions; * * * * * (iv) Any other offering not excluded from reliance on this section and Rule 164 of securities of an issuer eligible to use Form S–3 or Form F–3 for primary offerings pursuant to General Instruction I.B.1 of such Forms or an issuer eligible to use General Instruction A.2 of Form N–2 to register a primary offering described in General Instruction I.B.1 of Form S–3. * * * * * (c) * * * (1) * * * (ii) Information contained in the issuer’s periodic and current reports filed or furnished to the Commission pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) that are incorporated by reference into the registration statement and not superseded or modified, or pursuant to section 30 of the Investment Company Act of 1940 (15 U.S.C. 80a–29). * * * * * ■ 21. Effective August 1, 2021, amend § 230.456 by adding paragraph (d) to read as follows: § 230.456 Date of filing; timing of fee payment. * * * * * (d)(1) Notwithstanding paragraph (a) of this section, where a registration statement relates to an offering of exchange-traded vehicle securities, an issuer may elect to register an offering of an indeterminate amount of such securities if it meets the following conditions: (i) The issuer must state in the ‘‘Calculation of Registration Fee’’ table that it is offering an indeterminate amount of such securities; and (ii) The issuer must, not later than 90 days after the end of any fiscal year during which it has publicly offered such securities, pay a registration fee to the Commission calculated in accordance with § 230.457(u) (Rule 457(u)) and file a prospectus in accordance with § 230.424(i) (Rule 424(i)). Instruction 1 to paragraph (d)(1)(ii): To determine the date on which the registration fee must be paid, the first PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 33355 day of the 90-day period is the first calendar day of the fiscal year following the fiscal year for which the registration fee is to be paid. If the last day of the 90-day period falls on a Saturday, Sunday, or Federal holiday, the registration fee is due on the first business day thereafter. (2) If a registrant elects to register an offering of an indeterminate amount of exchange-traded vehicle securities pursuant to paragraph (d)(1) of this section, the securities sold will be considered registered, for purposes of section 6(a) of the Act, if the registration fee has been paid and a prospectus is filed pursuant to paragraph (d)(1) not later than the end of the 90-day period. (3) A registration statement filed relying on the registration fee payment provisions of paragraph (d)(1) of this section will be considered filed as to the securities identified in the registration statement for purposes of this section and section 5 of the Act when it is received by the Commission, if it complies with all other requirements under the Act, including this part. (4) For purposes of this section, if an issuer ceases operations, the date the issuer ceases operations will be deemed to be the end of its fiscal year. In the case of a liquidation, merger, or sale of all or substantially all of the assets (‘‘merger’’) of the issuer, the issuer will be deemed to have ceased operations for the purposes of this section on the date the merger is consummated; provided, however, that in the case of a merger of an issuer or a series of an issuer (‘‘Predecessor Issuer’’) with another issuer or a series of an issuer (‘‘Successor Issuer’’), the Predecessor Issuer will not be deemed to have ceased operations and the Successor Issuer will assume the obligations, fees, and redemption credits of the Predecessor Issuer incurred pursuant to this section if the Successor Issuer: (i) Had no assets or liabilities, other than nominal assets or liabilities, and no operating history immediately prior to the merger; (ii) Acquired substantially all of the assets and assumed substantially all of the liabilities and obligations of the Predecessor Issuer; and (iii) The merger is not designed to result in the Predecessor Issuer merging with, or substantially all of its assets being acquired by, an issuer (or a series of an issuer) that would not meet the conditions of paragraph (d)(4)(i) of this section. (5) An issuer paying the fee required by paragraph (d)(1) of this section or any portion thereof more than 90 days after the end of the fiscal year of the issuer shall pay to the Commission interest on E:\FR\FM\01JNR2.SGM 01JNR2 33356 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations unpaid amounts, calculated based on the interest rate in effect at the time of the interest payment by reference to the ‘‘current value of funds rate’’ on the Treasury Department’s Financial Management Service internet site at https://www.fms.treas.gov, or by calling (202) 874–6995, and using the following formula: I = (X) (Y) (Z/365), where: I = Amount of interest due; X = Amount of registration fee due; Y = Applicable interest rate, expressed as a fraction; Z = Number of days by which the registration fee payment is late. The payment of interest pursuant to this paragraph (d)(5) shall not preclude the Commission from bringing an action to enforce the requirements of this paragraph (d). (6) An immaterial or unintentional failure to comply with a requirement of this paragraph (d) will not result in a violation of section 6(a) of the Act (15 U.S.C. 77f(a)), so long as: (i) A good faith and reasonable effort was made to comply with the requirement; and (ii) In the case of a late payment of a registration fee, the issuer pays the registration fee and any interest due thereon as soon as practicable after discovery of the failure to pay the registration fee. ■ 22. Effective August 1, 2021, amend § 230.457 by adding paragraph (u) to read as follows: § 230.457 Computation of fee. jbell on DSKJLSW7X2PROD with RULES2 * * * * * (u) Where an issuer elects to register an offering of an indeterminate amount of exchange-traded vehicle securities in accordance with § 230.456(d) (Rule 456(d)), the registration fee is to be calculated in the following manner: (1) Determine the aggregate sale price of securities sold during the fiscal year. (2) Determine the sum of: (i) The aggregate redemption or repurchase price of securities redeemed or repurchased during the fiscal year; and (ii) The aggregate redemption or repurchase price of securities redeemed or repurchased during any prior fiscal year ending no earlier than August 1, 2021, that were not used previously to reduce registration fees payable to the Commission. (3) Subtract the amount in paragraph (u)(2) of this section from the amount in paragraph (u)(1) of this section. If the resulting amount is positive, the amount is the net sales amount. If the resulting amount is negative, it is the amount of redemption credits available for use in future years to offset sales. (4) The registration fee is calculated by multiplying the net sales amount by VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 the fee payment rate in effect on the date of the fee payment. If the issuer determines that it had net redemptions or repurchases for the fiscal year, no registration fee is due. ■ 23. Amend § 230.462 by revising paragraph (f) to read as follows: § 230.462 Immediate effectiveness of certain registration statements and posteffective amendments. * * * * * (f) A post-effective amendment filed pursuant to paragraph (e) of this section for purposes of adding a new issuer and its securities as permitted by § 230.413(b) (Rule 413(b)) that satisfies the requirements of Form S–3, Form F– 3, or General Instruction A.2 of Form N– 2 (§ 239.13, § 239.33, or §§ 239.14 and 274.11a–1 of this chapter), as applicable, including the signatures required by § 230.402(e) (Rule 402(e)), and contains a prospectus satisfying the requirements of § 230.430B (Rule 430B), shall become effective upon filing with the Commission. ■ 24. Amend § 230.486 by: ■ a. Revising paragraphs (a), (b) introductory text, and (b)(1)(iv); ■ b. Removing ‘‘and’’ at the end of paragraph (b)(1)(v); ■ c. Redesignating paragraph (b)(1)(vi) as paragraph (b)(1)(vii); ■ d. Adding new paragraph (b)(1)(vi); ■ e. Revising the introductory text to paragraph (b)(2); and ■ f. Adding paragraph (g). The revisions and additions read as follows: § 230.486 Effective date of post-effective amendments and registration statements filed by certain closed-end management investment companies. (a) Automatic effectiveness. Except as otherwise provided in this section, a post-effective amendment to a registration statement, or a registration statement described in paragraph (g) of this section, filed by a registered closedend management investment company or business development company which makes periodic repurchase offers under § 270.23c–3 of this chapter or which offers securities under § 230.415(a)(1)(ix), shall become effective on the sixtieth day after the filing thereof, or a later date designated by the registrant on the facing sheet of the amendment or registration statement, which date shall not be later than eighty days after the date on which the amendment or registration statement is filed, Provided, that the Commission, having due regard to the public interest and the protection of investors, may declare an amendment or registration statement filed under this paragraph (a) effective on an earlier date. PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 (b) Immediate effectiveness. Except as otherwise provided in this section, a post-effective amendment to a registration statement, or a registration statement, filed by a registered closedend management investment company or business development company which makes periodic repurchase offers under § 270.23c–3 of this chapter or which offers securities under § 230.415(a)(1)(ix), shall become effective on the date on which it is filed with the Commission, or a later date designated by the registrant on the facing sheet of the amendment or registration statement, which date shall be not later than thirty days after the date on which the amendment or registration statement is filed, except that a post-effective amendment including a designation of a new effective date under paragraph (b)(1)(iii) of this section shall become effective on the new effective date designated therein, Provided, that the following conditions are met: (1) * * * (iv) Disclosing or updating the information required by Item 9.1.c of Form N–2 [17 CFR 239.14 and 274.11a– 1]; * * * * * (vi) Complying with § 230.415(a)(5) and (6); and * * * * * (2) The registrant represents that the amendment is filed solely for one or more of the purposes specified in paragraph (b)(1) of this section and that no material event requiring disclosure in the prospectus, other than one listed in paragraph (b)(1) or one for which the Commission has approved a filing under paragraph (b)(1)(vii) of this section, has occurred since the latest of the following three dates: * * * * * (g) Registration statements. A registration statement can become effective under paragraph (a) of this section if it is filed for the purpose of: (1) Registering additional shares of common stock for which a registration statement filed on Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) is effective; or (2) Complying with § 230.415(a)(5) and (6). ■ 25. Amend § 230.497 by: ■ a. Remove from paragraphs (c) and (e) the text ‘‘Form N–2 (§§ 239.14 and 274.11a–1 of this chapter),’’; ■ b. Removing the heading from paragraph (k); ■ c. Adding paragraph (l); and ■ d. Removing the parenthetical authority citation at the end of the section. E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations The addition reads as follows: § 230.497 Filing of investment company prospectuses—number of copies. * * * * * (l) Except for an investment company advertisement deemed to be a section 10(b) prospectus pursuant to § 230.482, this section shall not apply with respect to prospectuses of a registered closedend investment company, or a business development company. PART 232—REGULATION S–T— GENERAL RULES AND REGULATIONS FOR ELECTRONIC FILINGS 26. The general authority citation for part 232 continues to read as follows: ■ Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29, 80a–30, 80a–37, 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. * * * * * 27. Amend § 232.11 by revising the section heading and the definition of ‘‘Related Official Filing’’ to read as follows: ■ § 232.11 part. Definition of terms used in this jbell on DSKJLSW7X2PROD with RULES2 * * * * * Related Official Filing. The term Related Official Filing means the ASCII or HTML format part of the official filing with which all or part of an Interactive Data File appears as an exhibit or, in the case of a filing on Form N–1A (§§ 239.15A and 274.11A of this chapter), Form N–2 (§§ 239.14 and 274.11a–1 of this chapter), Form N–3 (§§ 239.17a and 274.11b of this chapter), Form N–4 (§§ 239.17b and 274.11c of this chapter), Form N–6 (§§ 239.17c and 274.11d of this chapter), and Form N– CSR (§ 274.128 of this chapter), and, to the extent required by § 232.405 [Rule 405 of Regulation S–T] for a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a– 2(a)(48)), Form 10–K (§ 249.310 of this chapter), Form 10–Q (§ 249.308a of this chapter), and Form 8–K (§ 249.308 of this chapter), the ASCII or HTML format part of an official filing that contains the information to which an Interactive Data File corresponds. * * * * * ■ 28. Amend § 232.405 by: ■ a. Revising the introductory text and paragraphs (a)(2), (a)(3)(i) introductory text, (a)(3)(ii), and (a)(4); ■ b. Adding a heading for paragraph (b); ■ c. Removing the heading and revising the introductory text of paragraph (b)(1); ■ d. Adding paragraph (b)(3); and VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 e. Redesignating the note to § 232.405 as note 2 to § 232.405 and revising the last sentence of newly redesignated note 2 to § 232.405. The revisions and addition read as follows: ■ § 232.405 Interactive Data File submissions. This section applies to electronic filers that submit Interactive Data Files. Section 229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S–K), paragraph (101) of Part II—Information Not Required to be Delivered to Offerees or Purchasers of Form F–10 (§ 239.40 of this chapter), paragraph 101 of the Instructions as to Exhibits of Form 20– F (§ 249.220f of this chapter), paragraph B.(15) of the General Instructions to Form 40–F (§ 249.240f of this chapter), paragraph C.(6) of the General Instructions to Form 6–K (§ 249.306 of this chapter), General Instruction C.3.(g) of Form N–1A (§§ 239.15A and 274.11A of this chapter), General Instruction I of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter), General Instruction C.3.(h) of Form N–3 (§§ 239.17a and 274.11b of this chapter), General Instruction C.3.(h) of Form N–4 (§§ 239.17b and 274.11c of this chapter), General Instruction C.3.(h) of Form N–6 (§§ 239.17c and 274.11d of this chapter), and General Instruction C.4 of Form N–CSR (§ 274.128 of this chapter) specify when electronic filers are required or permitted to submit an Interactive Data File (§ 232.11), as further described in note 2 to this section. This section imposes content, format, and submission requirements for an Interactive Data File, but does not change the substantive content requirements for the financial and other disclosures in the Related Official Filing (§ 232.11). (a) * * * (2) Be submitted only by an electronic filer either required or permitted to submit an Interactive Data File as specified by § 229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S–K), paragraph (101) of Part II— Information Not Required to be Delivered to Offerees or Purchasers of Form F–10 (§ 239.40 of this chapter), paragraph 101 of the Instructions as to Exhibits of Form 20–F (§ 249.220f of this chapter), paragraph B.(15) of the General Instructions to Form 40–F (§ 249.240f of this chapter), paragraph C.(6) of the General Instructions to Form 6–K (§ 249.306 of this chapter), General Instruction C.3.(g) of Form N–1A (§§ 239.15A and 274.11A of this chapter), General Instruction I of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter), General Instruction C.3.(h) of Form N–3 (§§ 239.17a and 274.11b of PO 00000 Frm 00069 Fmt 4701 Sfmt 4700 33357 this chapter), General Instruction C.3.(h) of Form N–4 (§§ 239.17b and 274.11c of this chapter), General Instruction C.3.(h) of Form N–6 (§§ 239.17c and 274.11d of this chapter), or General Instruction C.4 of Form N–CSR (§ 274.128 of this chapter), as applicable; (3) * * * (i) If the electronic filer is neither a management investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a et seq.), nor a separate account as defined in Section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment Company Act of 1940, nor a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)(48)), and is not within one of the categories specified in paragraph (f)(1)(i) of this section, as partly embedded into a filing with the remainder simultaneously submitted as an exhibit to: * * * * * (ii) If the electronic filer is either a management investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a et seq.), or a separate account (as defined in Section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment Company Act of 1940, or a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)(48)), and is not within one of the categories specified in paragraph (f)(1)(ii) of this section, as partly embedded into a filing with the remainder simultaneously submitted as an exhibit to a filing that contains the disclosure this section requires to be tagged; and (4) Be submitted in accordance with the EDGAR Filer Manual and, as applicable, either Item 601(b)(101) of Regulation S–K (§ 229.601(b)(101) of this chapter), paragraph (101) of Part II—Information Not Required to be Delivered to Offerees or Purchasers of Form F–10 (§ 239.40 of this chapter), paragraph 101 of the Instructions as to Exhibits of Form 20–F (§ 249.220f of this chapter), paragraph B.(15) of the General Instructions to Form 40–F (§ 249.240f of this chapter), paragraph C.(6) of the General Instructions to Form 6–K (§ 249.306 of this chapter), General Instruction C.3.(g) of Form N–1A (§§ 239.15A and 274.11A of this chapter), General Instruction I of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter), General Instruction C.3.(h) of Form N–3 (§§ 239.17a and 274.11b of this chapter), General Instruction C.3.(h) of Form N–4 (§§ 239.17b and 274.11c of E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 33358 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations this chapter), General Instruction C.3.(h) of Form N–6 (§§ 239.17c and 274.11d of this chapter); or General Instruction C.4 of Form N–CSR (§ 274.128 of this chapter). (b) Content—categories of information presented. (1) If the electronic filer is neither a management investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a et seq.), nor a separate account (as defined in Section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment Company Act of 1940, nor a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)(48)) an Interactive Data File must consist of only a complete set of information for all periods required to be presented in the corresponding data in the Related Official Filing, no more and no less, from all of the following categories: * * * * * (3) If the electronic filer is either a closed-end management investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a et seq.) or a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a– 2(a)(48)), an Interactive Data File must consist only of a complete set of information for all corresponding data in the Related Official Filing, no more and no less, as follows: (i) For a business development company, for all periods required to be presented: (A) The complete set of the electronic filer’s financial statements (which includes the face of the financial statements and all footnotes); and (B) All schedules set forth in §§ 210.12–01 through 210.12–29 of this chapter (Article 12 of Regulation S–X) related to the electronic filer’s financial statements; (ii) All of the information required on the cover page of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) except the Calculation of Registration Fee table; and (iii) As applicable, all of the information provided in response to Items 3.1, 4.3, 8.2.b, 8.2.d, 8.3.a, 8.3.b, 8.5.b, 8.5.c, 8.5.e, 10.1.a–d, 10.2.a–c, 10.2.e, 10.3, and 10.5 of Form N–2 in any registration statement or posteffective amendment thereto filed on Form N–2; or any form of prospectus filed pursuant to § 230.424 of this chapter (Rule 424 under the Securities Act); or, if a Registrant is filing a registration statement pursuant to VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 General Instruction A.2 of Form N–2, any filing on Form N–CSR, Form 10–K, Form 10–Q, or Form 8–K to the extent such information appears therein. * * * * * Note 2 to § 232.405: * * * For an issuer that is a management investment company or separate account registered under the Investment Company Act of 1940 (15 U.S.C. 80a et seq.) or a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)(48)), General Instruction C.3.(g) of Form N–1A (§§ 239.15A and 274.11A of this chapter), General Instruction I of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter), General Instruction C.3.(h) of Form N–3 (§§ 239.17a and 274.11b of this chapter), General Instruction C.3.(h) of Form N– 4 (§§ 239.17b and 274.11c of this chapter), General Instruction C.3.(h) of Form N–6 (§§ 239.17c and 274.11d of this chapter), and General Instruction C.4 of Form N–CSR (§ 274.128 of this chapter), as applicable, specifies the circumstances under which an Interactive Data File must be submitted. PART 239—FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933 29. The authority citation for part 239 continues to read, in part, as follows: ■ Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z–2, 77z–3, 77sss, 78c, 78l,78m,78n, 78o(d), 78o–7 note, 78u–5, 78w(a), 78ll,78mm, 80a–2(a), 80a–3, 80a–8, 80a–9, 80a–10, 80a–13, 80a–24, 80a–26, 80a–29, 80a–30, and 80a–37; and sec. 107, Pub. L. 112–106, 126 Stat. 312, unless otherwise noted. Sections 239.31, 239.32 and 239.33 are also issued under 15 U.S.C. 78l, 78m, 78o, 78w, 80a–8, 80a–29, 80a–30, 80a–37 and 12 U.S.C. 241. * * * * * 30. Effective August 1, 2021, amend Form S–1 (referenced in § 239.11) by revising the note that immediately follows the ‘‘Calculation of Registration Fee’’ table to read as follows: ■ Note: The text of Form S–1 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM S–1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * PO 00000 * * Frm 00070 * Fmt 4701 * Sfmt 4700 CALCULATION OF REGISTRATION FEE * * * * * Note: Specific details relating to the fee calculation shall be furnished in notes to the table, including references to provisions of Rule 457 (§ 230.457 of this chapter) relied upon, if the basis of the calculation is not otherwise evident from the information presented in the table. If the filing fee is calculated pursuant to Rule 457(o) under the Securities Act, only the title of the class of securities to be registered, the proposed maximum aggregate offering price for that class of securities and the amount of registration fee need to appear in the Calculation of Registration Fee table. If an offering of an indeterminate amount of exchangetraded vehicle securities is being registered, state that the registration statement covers an indeterminate amount of securities to be offered or sold and that the filing fee will be calculated and paid in accordance with Rule 456(d) and Rule 457(u) (§ 230.456(d) and § 230.457(u) of this chapter), respectively. Any difference between the dollar amount of securities registered for such offerings and the dollar amount of securities sold may be carried forward on a future registration statement pursuant to Rule 429 under the Securities Act. * * * * * ■ 31. Effective August 1, 2021, amend Form S–3 (referenced in § 239.13) by adding Instruction 5 to the notes that immediately follow the ‘‘Calculation of Registration Fee’’ table to read as follows: Note: The text of Form S–3 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM S–3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * CALCULATION OF REGISTRATION FEE * * * * * 5. If an offering of an indeterminate amount of exchange-traded vehicle securities is being registered, the Fee Table must state that the registration statement covers an indeterminate amount of securities to be offered or sold and the filing fee will be calculated and paid in accordance with Rule E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 456(d) and Rule 457(u) (§ 230.456(d) and § 230.457(u) of this chapter), respectively. * * * * * ■ 32. Amend Form N–14 (referenced in § 239.23) by revising the first and second undesignated paragraphs of General Instruction G to read as follows: Note: The text of Form N–14 does not, and these amendments will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM N–14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * GENERAL INSTRUCTIONS * * * * * jbell on DSKJLSW7X2PROD with RULES2 G. Incorporation by Reference and Delivery of Prospectuses or Reports Filed With the Commission If any party to a transaction registered on Form N–14 is registered under the 1940 Act or is a business development company as defined by Section 2(a)(48) of the 1940 Act and has a current prospectus which meets the requirements of Section 10(a)(3) of the 1933 Act or is current in its reports filed pursuant to Section 13(a) or 15(d) of the 1934 Act and Section 30 of the 1940 Act, the registrant may, if it so elects, incorporate by reference the prospectus, the corresponding Statement of Additional Information, or reports, or any information in the prospectus, the corresponding Statement of Additional Information, or reports, which satisfies the disclosure required by Items 5, 6, and 11 through 14 of this Form. If the registrant elects to incorporate information by reference into the prospectus, a copy of each document from which information is incorporated by reference must accompany the prospectus, except that a prospectus from which information has been incorporated by reference need not be sent to an investor if the obligation to deliver a prospectus under Section 5(b)(2) of the Securities Act [15 U.S.C. 77e] has already been satisfied with respect to that investor pursuant to Rule 498A(j) for the offering described in the prospectus being incorporated by reference. Notwithstanding the foregoing the registrant may, at its discretion, incorporate any or all of the Statement of Additional Information into the prospectus delivered to VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 investors, without delivering the Statement with the prospectus, so long as the Statement of Additional Information is available to investors as provided in General Instruction F. The registrant also may incorporate by reference into the prospectus information about the company being acquired without delivering the information with the prospectus under certain conditions pursuant to Item 6 of Form N–14, and in accordance with the requirements of Instruction F. If the registrant elects to incorporate information by reference into the Statement of Additional Information, a copy of each document from which information is incorporated by reference must accompany the Statement of Additional Information sent to shareholders. * * * * * ■ 33. Effective August 1, 2021, amend Form F–1 (referenced in § 239.31) by revising the note that immediately follows the ‘‘Calculation of Registration Fee’’ table to read as follows: Note: The text of Form F–1 does not, and this amendment will not, appear in the Code of Federal Regulations. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM F–1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * CALCULATION OF REGISTRATION FEE * * * * * Note: Specific details relating to the fee calculation shall be furnished in notes to the table, including references to provisions of Rule 457 (§ 230.457 of this chapter) relied upon, if the basis of the calculation is not otherwise evident from the information presented in the table. If the filing fee is calculated pursuant to Rule 457(o) under the Securities Act, only the title of the class of securities to be registered, the proposed maximum aggregate offering price for that class of securities and the amount of registration fee need to appear in the Calculation of Registration Fee table. If an offering of an indeterminate amount of exchangetraded vehicle securities is being registered, state that the registration statement covers an indeterminate amount of securities to be offered or sold and that the filing fee will be calculated and paid in accordance with PO 00000 Frm 00071 Fmt 4701 Rule 456(d) and Rule 457(u) (§ 230.456(d) and § 230.457(u) of this chapter), respectively. Any difference between the dollar amount of securities registered for such offerings and the dollar amount of securities sold may be carried forward on a future registration statement pursuant to Rule 429 under the Securities Act. * * * * * ■ 34. Effective August 1, 2021, amend Form F–3 (referenced in § 239.33) by adding Instruction 5 to the notes that immediately follow the ‘‘Calculation of Registration Fee’’ table to read as follows: Note: The text of Form F–3 does not, and this amendment will not, appear in the Code of Federal Regulations. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM F–3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 * * * * * GENERAL INSTRUCTIONS UNITED STATES * 33359 Sfmt 4700 * * * * * 5. If an offering of an indeterminate amount of exchange-traded vehicle securities is being registered, the Fee Table must state that the registration statement covers an indeterminate amount of securities to be offered or sold and that the filing fee will be calculated and paid in accordance with Rule 456(d) and Rule 457(u) (§ 230.456(d) and § 230.457(u) of this chapter), respectively. * * * * * PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 35. The general authority citation for part 240 continues to read as follows: ■ Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q, 78q–1, 78s, 78u–5, 78w, 78x, 78dd, 78ll, 78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b– 3, 80b–4, 80b–11, and 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; Pub. L. 111–203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112–106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted. * * * * * 36. Amend § 240.14a–101 by: a. Revising paragraph E of the ‘‘Notes’’ section; and ■ ■ E:\FR\FM\01JNR2.SGM 01JNR2 33360 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations b. Revising paragraph (b)(1) of ‘‘Item 13. Financial and other information. (See Notes D and E at the beginning of this Schedule.)’’. The revisions read as follows: ■ § 240.14a–101 Schedule 14A. Information required in proxy statement. Schedule 14A Information Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 * * * * ■ jbell on DSKJLSW7X2PROD with RULES2 Notes: * * * E. In Item 13 of this Schedule, the reference to ‘‘meets the requirement of Form S–3’’ or ‘‘meets the requirements of General Instruction A.2 of Form N– 2’’ shall refer to a registrant who meets the following requirements: (a) A registrant meets the requirements of Form S–3 if: (1) The registrant meets the requirements of General Instruction I.A. of Form S–3 (§ 239.13 of this chapter); and (2) One of the following is met: (i) The registrant meets the aggregate market value requirement of General Instruction I.B.1 of Form S–3; or (ii) Action is to be taken as described in Items 11, 12, and 14 of this schedule which concerns non-convertible debt or preferred securities issued by a registrant meeting the requirements of General Instruction I.B.2. of Form S–3 (referenced in 17 CFR 239.13); or (iii) The registrant is a majorityowned subsidiary and one of the conditions of General Instruction I.C. of Form S–3 is met. (b) A registrant meets the requirements of General Instruction A.2 of Form N–2 (§§ 239.14 and 274.11a–1 of this chapter) if the registrant meets the conditions included in such General Instruction, provided that General Instruction A.2.c of Form N–2 is subject to the same limitations described in paragraph (a)(2) of this Note E. * * * * * Item 13. Financial and other information. (See Notes D and E at the beginning of this Schedule.) * * * * * (b) * * * (1) S–3 registrants and certain N–2 registrants. If the registrant meets the requirements of Form S–3 or General Instruction A.2 of Form N–2 (see Note E to this Schedule), it may incorporate by reference to previously-filed documents any of the information required by paragraph (a) of this Item, provided that the requirements of 20:35 May 29, 2020 PART 243—REGULATION FD 37. The authority citation for part 243 continues to read as follows: * Notes VerDate Sep<11>2014 paragraph (c) are met. Where the registrant meets the requirements of Form S–3 or General Instruction A.2 of Form N–2 and has elected to furnish the required information by incorporation by reference, the registrant may elect to update the information so incorporated by reference to information in subsequently-filed documents. * * * * * Jkt 250001 Authority: 15 U.S.C. 78c, 78i, 78j, 78m, 78o, 78w, 78mm, and 80a–29, unless otherwise noted. 38. Amend § 243.103 by revising paragraph (a) to read as follows: ■ § 243.103 No effect on Exchange Act reporting status. * * * * * (a) For purposes of Forms S–3 (17 CFR 239.13), S–8 (17 CFR 239.16b) and SF–3 (17 CFR 239.45) under the Securities Act of 1933 (15 U.S.C. 77a et seq.), or Form N–2 (17 CFR 239.14 and 274.11a–1) under the Securities Act of 1933 (15 U.S.C. 77a et seq.) and the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), an issuer is deemed to have filed all the material required to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) or where applicable, has made those filings in a timely manner; or * * * * * PART 270—RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940 39. The authority citation for part 270 continues to read, in part, as follows: ■ Authority: 15 U.S.C. 80a–1 et seq., 80a– 34(d), 80a–37, 80a–39, and Pub. L. 111–203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted. * * * * * Section 270.23c–3 also issued under 15 U.S.C. 80a–23(c). Section 270.24f–2 also issued under 15 U.S.C. 80a–24(f)(4). * * * * * ■ 40. Amend § 270.8b–16 by revising paragraphs (b)(2) and (4) and adding paragraph (e) to read as follows: § 270.8b–16 statement. Amendments to registration * * * * * (b) * * * (2) The company’s investment objectives and policies (described in Item 8.2 of Form N–2), and any material PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 changes to same that have not been approved by shareholders; * * * * * (4) The principal risk factors associated with investment in the company (described in Item 8.3 of Form N–2), and any material changes to same; and * * * * * (e) The changes required to be disclosed by paragraphs (b)(2) through (5) of this section must be described in enough detail to allow investors to understand each change and how it may affect the fund. Such disclosures must be prefaced with the following legend: ‘‘The following information [in this annual report] is a summary of certain changes since [date]. This information may not reflect all of the changes that have occurred since you purchased [this fund].’’ ■ 41. Effective August 1, 2021, amend § 270.23c–3 by adding paragraph (e) to read as follows: § 270.23c–3 Repurchase offers by closedend companies. * * * * * (e) Registration of an indefinite amount of securities. A company that makes repurchase offers pursuant to paragraph (b) of this section shall be deemed to have registered an indefinite amount of securities pursuant to Section 24(f) of the Act (15 U.S.C. 80a–24(f)) upon the effective date of its registration statement. ■ 42. Effective August 1, 2021, amend § 270.24f–2 by revising the first sentence of paragraph (a) to read as follows: § 270.24f–2 Registration under the Securities Act of 1933 of certain investment company securities. (a) General. Any face-amount certificate company, open-end management company, closed-end management company that makes periodic repurchase offers pursuant to § 270.23c–3(b), or unit investment trust (‘‘issuer’’) that is deemed to have registered an indefinite amount of securities pursuant to Section 24(f) of the Act (15 U.S.C. 80a–24(f)) must not later than 90 days after the end of any fiscal year during which it has publicly offered such securities, file Form 24F– 2 (17 CFR 274.24) with the Commission. * * * * * * * * PART 274—FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT of 1940 43. The authority citation for part 274 continues to read as follows: ■ E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 Section 274.128 is also issued under 15 U.S.C. 78j–1, 7202, 7233, 7241, 7264, and 7265; and 18 U.S.C. 1350. ■ 44. Revise Form N–2 (referenced in §§ 239.14 and 274.11a–1) to read as follows: PO 00000 Frm 00073 Fmt 4701 Sfmt 4725 Note: The text of Form N–2 does not, and this amendment will not, appear in the Code of Federal Regulations. BILLING CODE 8011–01–P E:\FR\FM\01JNR2.SGM 01JNR2 ER01JN20.000</GPH> jbell on DSKJLSW7X2PROD with RULES2 Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 78n, 78o(d), 80a–8, 80a–24, 80a–26, 80a–29, and Pub. L. 111–203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted. 33361 VerDate Sep<11>2014 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00074 Fmt 4701 Sfmt 4725 E:\FR\FM\01JNR2.SGM 01JNR2 ER01JN20.001</GPH> jbell on DSKJLSW7X2PROD with RULES2 33362 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 33363 BILLING CODE 8011–01–C CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933 jbell on DSKJLSW7X2PROD with RULES2 Instructions. Complete the Registration Fee table and provide the following (unless payment will be provided using Form 24F–2 [17 CFR 274.24]). If the registration statement or amendment is filed under only one of the Acts, omit reference to the other Act from the facing sheet. Include the ‘‘Approximate Date of Commencement of Proposed Public Offering’’ and the table showing the calculation of the registration fee only where shares are being registered under the Securities Act. If the filing fee is calculated pursuant to Rule 457(o) under the Securities Act [17 CFR 230.457], only the title of the class of securities to be registered, the proposed maximum aggregate offering price for that class of securities, and the amount of registration fee need to appear in the Calculation of Registration Fee table. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 Proposed maximum offering price per unit If the filing fee is calculated pursuant to Rule 457(r) under the Securities Act, the Calculation of Registration Fee table must state that it registers an unspecified amount of securities of each identified class of securities and must provide that the Registrant is relying on Rule 456(b) [17 CFR 230.456] and Rule 457(r). If the Calculation of Registration Fee table is amended in a post-effective amendment to the registration statement or in a prospectus filed in accordance with Rule 456(b)(1)(ii), the table must specify the aggregate offering price for all classes of securities in the referenced offering or offerings and the applicable registration fee. Any difference between the dollar amount of securities registered for such offerings and the dollar amount of securities sold may be carried forward on a future registration statement pursuant to Rule 457 under the Securities Act. PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 Proposed maximum aggregate offering price Amount of registration fee Fill in the 811–lll, 814–lll and 33–lll blanks only if these filing numbers (for the Investment Company Act registration and/or the Securities Act registration, respectively) have already been assigned by the Securities and Exchange Commission. Form N–2 is to be used by closed-end management investment companies, except small business investment companies licensed as such by the United States Small Business Administration, to register under the Investment Company Act and to offer their shares under the Securities Act. The Commission has designed Form N– 2 to provide investors with information that will assist them in making a decision about investing in an investment company eligible to use the Form. The Commission also may use the information provided on Form N–2 in its regulatory, disclosure review, inspection, and policy making roles. E:\FR\FM\01JNR2.SGM 01JNR2 ER01JN20.002</GPH> Amount being registered Title of securities being registered 33364 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations A Registrant is required to disclose the information specified by Form N–2, and the Commission will make this information public. A Registrant is not required to respond to the collection of information contained in Form N–2 unless the Form displays a currently valid Office of Management and Budget (‘‘OMB’’) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. 3507. Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. Contents of Form N–2 jbell on DSKJLSW7X2PROD with RULES2 General Instructions A. Use of Form N–2 B. Automatic Shelf Offerings by WellKnown Seasoned Issuers C. Registration Fees D. Application of General Rules and Regulations E. Amendments F. Incorporation by Reference G. Documents Composing the Registration Statement or Amendment H. Preparation of the Registration Statement or Amendment I. Interactive Data Files J. Registration of Additional Securities Part A: The Prospectus Part B: Statement of Additional Information General Instructions for Parts A and B Part A—Information Required in a Prospectus Item 1. Outside Front Cover Item 2. Cover Pages; Other Offering Information Item 3. Fee Table and Synopsis Item 4. Financial Highlights Item 5. Plan of Distribution Item 6. Selling Shareholders Item 7. Use of Proceeds Item 8. General Description of the Registrant Item 9. Management Item 10. Capital Stock, Long-Term Debt, and Other Securities Item 11. Defaults and Arrears on Senior Securities Item 12. Legal Proceedings Item 13. [Removed and reserved.] Part B—Information Required in a Statement of Additional Information Item 14. Cover Page Item 15. Table of Contents VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 Item 16. General Information and History Item 17. Investment Objective and Policies Item 18. Management Instructions Item 19. Control Persons and Principal Holders of Securities Item 20. Investment Advisory and Other Services Item 21. Portfolio Managers Item 22. Brokerage Allocation and Other Practices Item 23. Tax Status Item 24. Financial Statements Part C—Other Information Item 25. Financial Statements and Exhibits Item 26. Marketing Arrangements Item 27. Other Expenses of Issuance and Distributions Item 28. Persons Controlled by or Under Common Control Item 29. Number of Holders of Securities Item 30. Indemnification Item 31. Business and Other Connections of Investment Adviser Item 32. Location of Accounts and Records Item 33. Management Services Item 34. Undertakings Signatures General Instructions A. Use of Form N–2 1. General. Form N–2 is used by all closed-end management investment companies (‘‘Registrant’’ or ‘‘Fund’’), except small business investment companies licensed as such by the United States Small Business Administration, to file: (1) An initial registration statement under Section 8(b) of the Investment Company Act and any amendments to the registration statement, including amendments required by Rule 8b–16 under the Investment Company Act [17 CFR 270.8b–16]; (2) a registration statement under the Securities Act and any amendment to it; or (3) any combination of these filings. 2. Optional Use of Form for Certain Registrants. A Registrant may elect to file a registration statement pursuant to this General Instruction A.2, including a registration statement used in connection with an offering pursuant to Rule 415(a)(1)(x) under the Securities Act [17 CFR 230.415], if it meets all of the following requirements: a. The Registrant meets the requirements of General Instruction I.A. of Form S–3 [17 CFR 239.13]; b. if the Registrant is registered under the Investment Company Act, it has been registered for a period of at least twelve calendar months immediately PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 preceding the filing of the registration statement on this Form, and has timely filed all reports required to be filed pursuant to Section 30 of the Investment Company Act during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement; and c. the registration statement to be filed pursuant to this General Instruction A.2 relates to a transaction specified in General Instruction I.B. or I.C of Form S–3, as applicable, and meets all of the conditions to the transaction specified in the applicable instruction. A registration statement filed pursuant to this instruction shall specifically incorporate by reference into the prospectus and statement of additional information (‘‘SAI’’) all of the materials specified in General Instruction F.3, pursuant to the requirements set forth in that instruction. A Registrant must indicate that the registration statement is being filed pursuant to this instruction by checking the appropriate box on the facing sheet. Note to General Instruction A.2. Attention is directed to the General Instructions of Form S–3, including General Instructions II.D, F, and G, which contain general information regarding the preparation and filing of automatic and non-automatic shelf registration statements. B. Automatic Shelf Offerings by WellKnown Seasoned Issuers Any Registrant that is a Well-Known Seasoned Issuer as defined in Rule 405 of the Securities Act [17 CFR 230.405] at the most recent eligibility determination date specified in paragraph (2) of that definition may use a registration statement filed under General Instruction A.2 of this Form as an automatic shelf registration statement for registration under the Securities Act of securities offerings, other than pursuant to Rule 415(a)(1)(vii) or (viii) of the Securities Act, only for the transactions that are described in, and consistent with the requirements of, General Instruction I.D. of Form S–3. Note to General Instruction B. Attention is directed to the General Instructions of Form S–3, including General Instructions II.E, F, G, and IV.B, which contain general information regarding the preparation and filing of automatic shelf registration statements. C. Registration Fees Section 6(b) of the Securities Act and Rule 457 thereunder set forth the fee requirements under the Securities Act. Registrants that are required to pay registration fees on an annual net basis E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations pursuant to Rule 24f–2 under the Investment Company Act must provide payment using Form 24F–2. jbell on DSKJLSW7X2PROD with RULES2 D. Application of General Rules and Regulations If the registration statement is being filed under both the Securities and Investment Company Acts or under only the Securities Act, the General Rules and Regulations under the Securities Act, particularly Regulation C, shall apply. If the registration statement is being filed under only the Investment Company Act, the General Rules and Regulations under the Investment Company Act, particularly those under Section 8(b), shall apply. E. Amendments 1. Paragraph (a) of Rule 8b–16 under the Investment Company Act requires closed-end management investment companies to annually amend the Investment Company Act registration statement. Paragraph (b) of Rule 8b–16 exempts a closed-end management investment company from this requirement if it provides certain information specified by that rule to shareholders in its annual report. 2. If Form N–2 is used to file a registration statement under both the Securities and Investment Company Acts, any amendment of that registration statement shall be deemed to be filed under both Acts unless otherwise indicated on the facing sheet. 3. Registrants offering securities on a delayed or continuous basis in reliance upon Rule 415 under the Securities Act must provide the undertakings with respect to post-effective amendments required by Item 34 of Form N–2. 4. A post-effective amendment to a registration statement on this Form, or a registration statement filed for the purpose of registering additional shares of common stock for which a registration statement filed on this Form is effective or for the purpose of complying with Rule 415(a)(5) and (a)(6), filed on behalf of a Registrant which makes periodic repurchase offers pursuant to Rule 23c–3 under the Investment Company Act [17 CFR 270.23c–3] or which makes a continuous offering of securities pursuant to Rule 415(a)(1)(ix) under the Securities Act may become effective automatically in accordance with Rule 486 under the Securities Act [17 CFR 230.486], as applicable. In accordance with Rule 429 under the Securities Act [17 CFR 230.429], a Registrant filing a new registration statement for the purpose of registering additional shares of common stock may use a prospectus with respect to the additional shares VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 also in connection with the shares covered by earlier registration statements if such prospectus includes all of the information which would currently be required in a prospectus relating to the securities covered by the earlier statements. The filing fee required by the Securities Act and Rule 457 under the Securities Act shall be paid with respect to the additional shares only. F. Incorporation by Reference 1. General Requirements. All incorporation by reference must comply with the requirements of this Form and the following rules on incorporation by reference: Rule 411 under the Securities Act [17 CFR 230.411] (general rules on incorporation by reference in a prospectus); Rule 303 of Regulation S– T [17 CFR 232.303] (specific requirements for electronically filed documents); and Rule 0–4 [17 CFR 270.0–4], (additional rules on incorporation by reference for investment companies). 2. Specific Requirements for Incorporation by Reference for Registrants Not Relying on General Instruction A.2. a. A Registrant may not incorporate by reference into a prospectus information that Part A of this Form requires to be included in a prospectus, except as specifically permitted by Part A of this Form or paragraph F.2.d below. b. A Registrant may incorporate by reference any or all of the SAI into the prospectus (but not to provide any information required by Part A to be included in the prospectus) without delivering the SAI with the prospectus. c. A Registrant may incorporate by reference into the SAI or its response to Part C, information that Parts B and C require to be included in the Registrant’s registration statement. d. A Registrant may incorporate by reference into the prospectus or the SAI in response to Items 4.1 or 24 of this Form the information contained in Form N–CSR [17 CFR 249.331 and 274.128] or any report to shareholders meeting the requirements of Section 30(e) of the Investment Company Act and Rule 30e– 1 [17 CFR 270.30e–1] thereunder (and a Registrant that has elected to be regulated as a business development company may so incorporate into Items 4.1, 4.2, 8.6.c, or 24 of this Form the information contained in its annual report under the Exchange Act), provided: (1) The material incorporated by reference is prepared in accordance with, and covers the periods specified by, this Form; and PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 33365 (2) the Registrant states in the prospectus or the SAI, at the place where the information required by Items 4.1, 4.2, 8.6.c., or 24 of this Form would normally appear, that the information is incorporated by reference from a report to shareholders or a report on Form N– CSR or an annual report on Form 10– K [17 CFR 249.310]. (The Registrant also may describe briefly, in either the prospectus, the SAI, or Part C of the registration statement (in response to Item 25.1) those portions of the report to shareholders or report on Form N– CSR or Form 10–K that are not incorporated by reference and are not a part of the registration statement.) 3. Specific Requirements for Incorporation by Reference for Certain Registrants. If a Registrant is filing a registration statement pursuant to General Instruction A.2, the following requirements apply: a. Backward Incorporation by Reference. The documents listed in (1) and (2) below shall be specifically incorporated by reference into the prospectus and SAI by means of a statement to that effect in the prospectus and SAI listing all such documents: (1) The Registrant’s latest annual report filed pursuant to Section 13(a) or Section 15(d) of the Exchange Act that contains financial statements for the Registrant’s latest fiscal year for which a Form N–CSR or Form 10–K was required to be filed; (2) all other reports filed pursuant to Section 13(a) or Section 15(d) of the Exchange Act since the end of the fiscal year covered by the annual report referred to in (1) above; and (3) if capital stock is to be registered and securities of the same class are registered under Section 12 of the Exchange Act, the description of such class of securities which is contained in a registration statement filed under the Exchange Act, including any amendment or reports filed for the purpose of updating such description. b. Forward Incorporation by Reference. The prospectus and SAI shall also state that all documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act, prior to the termination of the offering shall be deemed to be incorporated by reference into the prospectus and SAI. c. Use of Information to be Incorporated. Any information required in the prospectus and SAI in response to Items 3–12 and Items 16–24 of this Form may be included in the prospectus and SAI through documents filed pursuant to Sections 13(a), 14, or 15(d) of the Exchange Act that are incorporated or deemed incorporated by E:\FR\FM\01JNR2.SGM 01JNR2 33366 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 reference into the prospectus and SAI that are part of the registration statement. Instruction. Attention is directed to Rule 439 under the Securities Act [17 CFR 230.439] regarding consent to use of material incorporated by reference. 4. Disclosure. a. The Registrant must make its prospectus, SAI, and any periodic and current reports filed pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference readily available and accessible on a website maintained by or for the Registrant and containing information about the Registrant. b. The Registrant must state in its prospectus and SAI: (1) That it will provide to each person, including any beneficial owner, to whom a prospectus or SAI is delivered, a copy of any or all information that has been incorporated by reference into the prospectus or SAI but not delivered with the prospectus or SAI; (2) that it will provide this information upon written or oral request; (3) that it will provide this information at no charge; (4) the name, address, telephone number, and email address, if any, to which the request for this information must be made; and (5) the Registrant’s website address where the prospectus, SAI, and any incorporated information may be accessed. Instruction. If the Registrant sends any of the information that is incorporated by reference into the prospectus or SAI to security holders, it also must send any exhibits that are specifically incorporated by reference into that information. c. The Registrant also must: (1) Identify the reports and other information that it files with the SEC; and (2) state that the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC and state the address of that site (https://www.sec.gov). G. Documents Composing the Registration Statement or Amendment 1. A registration statement or an amendment to it filed under both the Securities and Investment Company Acts consists of the facing sheet of the Form, Part A, Part B, Part C, required signatures, all other documents filed as a part of the registration statement, and documents or information permitted to be incorporated by reference. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 2. A registration statement or amendment to it that is filed under only the Securities Act shall contain all the information and documents specified in paragraph 1 of this Instruction G. 3. A registration statement or an amendment to it that is filed under only the Investment Company Act shall consist of the facing sheet of the Form, responses to all items of Parts A and B except Items 1, 2, 3.2, 4, 5, 6, and 7 of Part A, responses to all items of Part C except Items 25.2.h, 25.2.l, 25.2.n, and 25.2.o, required signatures, and all other documents that are required or which the Registrant may file as part of the registration statement. H. Preparation of the Registration Statement or Amendment The following instructions for completing Form N–2 are divided into three parts. Part A relates to the prospectus required by Section 10(a) of the Securities Act. Part B relates to the SAI that must be provided upon request to recipients of the prospectus. Part C relates to other information that is required to be in the registration statement. I. Interactive Data Files 1. An Interactive Data File as defined in Rule 11 of Regulation S–T [17 CFR 232.11] is required to be submitted to the Commission in the manner provided by Rule 405 of Regulation S–T [17 CFR 232.405] for any registration statement or post-effective amendment thereto filed on Form N–2 that contains the cover page information specified in Rule 405 of Regulation S–T. The Interactive Data File must be submitted either with the filing, or as an amendment to the registration statement to which it relates that is submitted on or before the date the registration statement or posteffective amendment that contains the related information becomes effective. 2. An Interactive Data File is required to be submitted to the Commission in the manner provided by Rule 405 of Regulation S–T for any registration statement or post-effective amendment thereto filed on Form N–2 or for any form of prospectus filed pursuant to Rule 424 under the Securities Act [17 CFR 230.424] that includes or amends information provided in response to Items 3.1, 4.3, 8.2.b, 8.2.d, 8.3.a, 8.3.b, 8.5.b, 8.5.c, 8.5.e, 10.1.a–d, 10.2.a–c, 10.2.e, 10.3, or 10.5. The Interactive Data File must be submitted either with the filing, or as an amendment to the registration statement to which it relates, on or before the date the registration statement or post-effective amendment that contains the related information becomes effective. PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 Interactive Data Files must be submitted with the filing made pursuant to Rule 424. 3. If a Registrant is filing a registration statement pursuant to General Instruction A.2, an Interactive Data File is required to be submitted to the Commission in the manner provided by Rule 405 of Regulation S–T for any of the documents listed in General Instruction F.3.(a) or General Instruction F.3.(b) that include or amend information provided in response to Items 3.1, 4.3, 8.2.b, 8.2.d, 8.3.a, 8.3.b, 8.5.b, 8.5.c, 8.5.e, 10.1.a–d, 10.2.a–c, 10.2.e, 10.3, or 10.5. The Interactive Data File must be submitted with the filing of the document(s) listed in General Instruction F.3.(a) or General Instruction F.3.(b). 4. The Interactive Data Files must be submitted in accordance with the specifications in the EDGAR Filer Manual, and must be submitted in such a manner that—for any information that does not relate to all of the classes of a Registrant—will permit each class of the Registrant to be separately identified. J. Registration of Additional Securities With respect to the registration of additional securities for an offering pursuant to Rule 462(b) under the Securities Act [17 CFR 230.462], the Registrant may file a registration statement consisting only of the following: the facing page; a statement that the contents of the earlier registration statement, identified by file number, are incorporated by reference; required opinions and consents; the signature page; and any price-related information omitted from the earlier registration statement in reliance on Rule 430A [17 CFR 230.430A] that the Registrant chooses to include in the new registration statement. The information contained in such a Rule 462(b) registration statement shall be deemed to be part of the earlier registration statement as of the date of effectiveness of the Rule 462(b) registration statement. Any opinion or consent required in such a registration statement may be incorporated by reference from the earlier registration statement with respect to the offering, if: (i) Such opinion or consent expressly provides for such incorporation; and (ii) such opinion relates to the securities registered pursuant to Rule 462(b). See Rules 411(c), 439(b), and 483(c) under the Securities Act [17 CFR 230.483]. Part A: The Prospectus The purpose of the prospectus is to provide essential information about the Registrant in a way that will help investors make informed decisions E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations about whether to purchase the securities being offered. THE INFORMATION IN THE PROSPECTUS SHOULD BE CLEAR, CONCISE, AND UNDERSTANDABLE. AVOID THE USE OF TECHNICAL OR LEGAL TERMS, COMPLEX LANGUAGE, OR EXCESSIVE DETAIL. Responses to the items of Part A should be as simple and direct as possible and should include only information needed to understand the fundamental characteristics of the Registrant. Descriptions of practices that are required by law generally should not include detailed discussions of the law itself. No response is required for inapplicable items. Part B: Statement of Additional Information jbell on DSKJLSW7X2PROD with RULES2 The items in Part B call for additional information about the Registrant that may be of interest to some investors. Part B also allows the Registrant to augment discussions of matters described in the prospectus with additional information the Registrant believes may be of interest to some investors. If information is included in the prospectus, it need not be repeated in the SAI, and a Registrant need not prepare a SAI or refer to it in the prospectus (or provide the undertaking required by Item 34.7 as to the SAI) if all of the information required to be in the SAI is included in the prospectus. A Registrant placing information in Part B should not repeat information that is in the prospectus, except where necessary to make Part B understandable. Information in the SAI need not be included in the prospectus or be sent to investors with the prospectus provided that the cover page of the prospectus states that the SAI is available upon oral or written request and without charge, and includes a toll-free telephone number and email address, if any, for use by prospective investors to request the SAI. If the request is made prior to delivery of a confirmation with respect to a security offered by the prospectus, the SAI must be sent in a manner reasonably calculated for it to arrive prior to the confirmation. The SAI may be sent to the address to which the prospectus was delivered, unless the requester provides an alternate address for delivery of the SAI. General Instructions for Parts A and B 1. The information in the prospectus and the SAI should be organized to make it easy to understand the organization and operation of the Registrant. The information need not be in any particular order, with the exception that Items 1, 2, 3, and 4 must appear in order in the prospectus and may not be preceded or separated by any other information. 2. The prospectus or the SAI may contain more information than called for by this Form, provided the information is not incomplete, inaccurate, or misleading and does not, because of its nature, quantity, or manner of presentation, obscure or impede understanding of required information. 3. The requirements for dating the prospectus apply equally to dating the SAI for purposes of Rule 423 under the Securities Act [17 CFR 230.423]. The SAI should be made available at the same time that the prospectus becomes available for purposes of Rules 430 and 460 under the Securities Act [17 CFR 230.430 and 230.460]. 4. The prospectus should not be presented in fold-out or road-map type fashion. 5. Instructions for charts, graphs, and sales literature: (a) A registration statement may include any chart, graph, or table that is not misleading; however, only the fee table and the table of contents (required by Rule 481(c) under the Securities Act [17 CFR 230.481]) may precede the financial highlights specified in Item 4. (b) If ‘‘sales literature’’ is included in the prospectus, (1) it should not significantly lengthen the prospectus nor obscure essential disclosure, and (2) members of the Financial Industry Regulatory Authority (‘‘FINRA’’) are not relieved of the filing and other FINRA requirements for investment company sales literature. (See Securities Act Release No. 5359, Jan. 26, 1973 [38 FR 7220 (Mar. 19, 1973)].) Part A—Information Required in a Prospectus Item 1. Outside Front Cover 1. The outside front cover must contain the following information: a. the Registrant’s name; b. identification of the type of Registrant (e.g., bond fund, balanced Price to public Sales load fund, business development company, etc.) or a brief statement of the Registrant’s investment objective(s); c. the title and amount of securities offered and a brief description of such securities (unless not necessary to indicate the material terms of the securities, as in the case of an issue of common stock with full voting rights and the dividend and liquidation rights usually associated with common stock); d. a statement that (A) the prospectus sets forth concisely the information about the Registrant that a prospective investor ought to know before investing; (B) the prospectus should be retained for future reference; and (C) additional information about the Registrant has been filed with the Commission and is available upon written or oral request and without charge (this statement should explain how to obtain the SAI, and whether any of it has been incorporated by reference into the prospectus). This statement should also explain how to obtain the Registrant’s annual and semi-annual reports to shareholders. Provide a toll-free (or collect) telephone number for investors to call, and email address, if any, to request the Registrant’s SAI; annual report; semi-annual report; or other information about the Registrant; and to make shareholder inquiries. Also state whether the Registrant makes available its SAI and annual and semi-annual reports, free of charge, on or through the Registrant’s website at a specified internet address. If the Registrant does not make its SAI and shareholder reports available in this manner, disclose the reasons why it does not do so (including, where applicable, that the Registrant does not have an internet website). Also include the information that the Commission maintains a website (https://www.sec.gov) that contains the SAI, material incorporated by reference, and other information regarding Registrants; e. the date of the prospectus and the date of the Statement of Additional Information; f. if any of the securities being registered are to be offered for the account of shareholders, a statement to that effect; g. information in substantially the tabular form indicated as to all securities being registered that are to be offered for cash (estimate, if necessary): Proceeds to registrant or other persons Per Share ........................................................... Total .................................................................... VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 33367 E:\FR\FM\01JNR2.SGM 01JNR2 33368 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations Instructions. 1. If it is impracticable to state the price to the public, briefly explain how the price will be determined (e.g., by reference to net asset value). If the securities will be offered at the market, indicate the market involved and the market price as of the latest practicable date. 2. The term ‘‘sales load’’ is defined in Section 2(a)(35) of the Investment Company Act. Subject to Instruction 3, only include the portion of the sales load that consists of underwriting discounts and commissions, and include any commissions paid by selling shareholders (the term ‘‘commissions’’ is defined in paragraph 17 of Schedule A of the Securities Act [15 U.S.C. 77aa(17)]). Commissions paid by other persons and other consideration to underwriters shall be noted in the second column and briefly described in a footnote. 3. Include in the table as sales load amounts borrowed to pay underwriting discounts and commissions or any other offering costs that are required to be repaid in less than one year. Exclude from the table, but include in a note thereto, the amount of funds borrowed to pay such costs that are required to be repaid in more than one year, and provide a cross-reference to the prospectus discussion of the borrowed amounts and the effect of repayment on fund assets available for investment. 4. Where an underwriter has received an over-allotment option, present maximum-minimum information in the Price to public Sales load price table or in a note thereto, based on the purchase of all or none of the shares subject to the option. The terms of the option may be described briefly in response to Item 5 rather than on the prospectus cover page. 5. If the securities are to be offered on a best efforts basis, set forth the termination date of the offering, any minimum required purchase, and any arrangements to place the funds received in an escrow, trust, or similar arrangement. If no arrangements have been made, so state. Set forth the following table in lieu of the ‘‘Total’’ information called for by the required table. Proceeds to registrant or other persons jbell on DSKJLSW7X2PROD with RULES2 Total Minimum .................................................... Total Maximum ................................................... 6. Set forth in a note to the proceeds column the total of other expenses of issuance and distribution called for by Item 27, stated separately for the Registrant and for the selling shareholders, if any. h. the statements required by paragraphs (1) and (2) of Rule 481(b) under the Securities Act; i. if the Registrant’s securities have no history of public trading, a prominent statement to that effect and a statement describing the tendency of closed-end fund shares to trade frequently at a discount from net asset value and the risk of loss this creates for investors purchasing shares in the initial public offering; Instruction. A Registrant may omit the discount statement if it believes that, as a result of its investment or other policies, its capital structure, or the markets in which its shares trade, its shares are unlikely to trade at a discount from net asset value. j. a cross-reference to the prospectus discussion of any factors that make the offering speculative or one of high risk, printed in bold face common type at least as large as ten point modern type and at least two points leaded; and Instruction. No cross-reference is required where the risks associated with securities in which the Registrant is authorized to invest are only the basic risks of investing in securities (e.g., the risk that the value of portfolio securities may fluctuate depending upon market conditions, or the risks that debt securities may be prepaid and the proceeds from the prepayments invested VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 in debt instruments with lower interest rates). Include the cross-reference if the nature of the Registrant’s investment objectives, investment policies, capital structure, or the trading markets for the Registrant’s securities increase the likelihood that an investor could lose a significant portion of his or her investment. k. any other information required by Commission rules or by any other governmental authority having jurisdiction over the Registrant or the issuance of its securities. l. A statement to the following effect, if applicable: Beginning on [date], as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Registrant’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Registrant [or from your financial intermediary, such as a broker-dealer or bank]. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Registrant [or your financial intermediary] electronically by [insert instructions]. You may elect to receive all future reports in paper free of charge. You can PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 inform the Registrant [or your financial intermediary] that you wish to continue receiving paper copies of your shareholder reports by [insert instructions]. Your election to receive reports in paper will apply to all funds held with [the fund complex/your financial intermediary]. 2. The cover page may include other information if it does not, by its nature, quantity, or manner of presentation impede understanding of the required information. Item 2. Cover Pages; Other Offering Information 1. Disclose whether any national securities exchange or the Nasdaq Stock Market lists the securities offered, naming the particular market(s), and identify the trading symbol(s) for those securities on the inside front or outside back cover page of the prospectus, unless the information appears on the front cover page. 2. Provide the information required by paragraph (d) of Rule 481 under the Securities Act in an appropriate place in the prospectus. 3. Provide the information required by paragraph (e) of Rule 481 under the Securities Act on the outside back cover page of the prospectus. Item 3. Fee Table and Synopsis 1. If the prospectus offers common stock of the Registrant, include information about the costs and expenses that the investor will bear directly or indirectly, using the captions and tabular format illustrated below: E:\FR\FM\01JNR2.SGM 01JNR2 Instructions. General Instructions 1. Immediately after the table, provide a brief narrative explaining that the purpose of the table is to assist the investor in understanding the various costs and expenses that an investor in the fund will bear directly or indirectly. Include, where appropriate, crossreferences to the relevant sections of the prospectus for more complete descriptions of the various costs and expenses. 2. Any caption not applicable to the Registrant may be omitted from the table. 3. Round all dollar figures to the nearest dollar and all percentages to the nearest hundredth of one percent. jbell on DSKJLSW7X2PROD with RULES2 Shareholder Transaction Expenses 4. ‘‘Dividend Reinvestment and Cash Purchase Plan Fees’’ include all fees (except brokerage commissions) that are charged to participating shareholder accounts. The basis on which such fees are imposed should be described briefly in a note to the table. 5. If the Registrant (or any other party under an agreement with the Registrant) charges any other transaction fee, add another caption describing it, and list VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 the maximum amount of the fee or basis on which the fee is deducted. Underwriters’ compensation that is paid with the proceeds of debt that is not to be repaid within one year need not be identified as sales load, but should be set forth as a shareholder transaction expense with a brief narrative following the table explaining the nature of such payments. Annual Expenses 6. State the basis on which payments will be made. ‘‘Other Expenses’’ should be estimated and stated (after any expense reimbursement or waiver) as a percentage of net asset value attributable to common shares. State in the narrative following the table that ‘‘Other Expenses’’ are based on estimated amounts for the current fiscal year. 7.a. ‘‘Management Fees’’ include investment advisory fees (including any component thereof based on the performance of the Registrant), any other management fees payable to the investment adviser or its affiliates, and administrative fees payable to the investment adviser or its affiliates not included as ‘‘Other Expenses,’’ and any expenses incurred within the Registrant’s own organization in connection with the research, selection, PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 33369 and supervision of investments. Where management fees are ‘‘tiered’’ or based on a ‘‘sliding scale,’’ they should be calculated based on the fund’s asset size after giving effect to the anticipated net proceeds of the present offering. In the case of a performance fee arrangement, assume the base fee. With respect to a best-efforts offering with breakpoints, assume the maximum fee will be payable. b. In lieu of the information about management fees required by Item 3.1, a business development company with a fee structure that is not based solely on the aggregate amount of assets under management should provide disclosure concerning the fee arrangement to allow investors to assess its impact on the Registrant’s expenses; a business development company may use any appropriate expense categories and may include items that may not, for accounting purposes, be treated as expenses. A business development company with special fee arrangements should provide a cross-reference, where applicable, to the discussion in Item 9.1.a of special management compensation plans. 8. ‘‘Interest Payments on Borrowed Funds’’ include all interest paid in connection with outstanding loans E:\FR\FM\01JNR2.SGM 01JNR2 ER01JN20.003</GPH> Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 33370 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations (including interest paid on funds borrowed to pay underwriting expenses), bonds, or other forms of debt. Show interest expenses as a percentage of net assets attributable to common shares and not the face amount of debt. 9. ‘‘Other Expenses’’ include all expenses (except fees and expenses reported in other items in the table) that are deducted from the Registrant’s assets and will be reflected as expenses in the Registrant’s statement of operations (including increases resulting from complying with paragraph 2(g) of Rule 6–07 [17 CFR 210.6–07] of Regulation S–X). 10. a. If the Registrant invests, or intends to invest based upon the anticipated net proceeds of the present offering, in shares of one or more ‘‘Acquired Funds,’’ add a subcaption to the ‘‘Annual Expenses’’ portion of the table directly above the subcaption titled ‘‘Total Annual Expenses.’’ Title the additional subcaption: ‘‘Acquired Fund Fees and Expenses.’’ Disclose in the subcaption fees and expenses incurred indirectly by the Registrant as a result of investment in shares of one or more Acquired Funds. For purposes of this Item, an ‘‘Acquired Fund’’ means any company in which the Registrant invests or intends to invest (A) that is an investment company or (B) that would be an investment company under Section 3(a) of the Investment Company Act but for the exceptions to that definition provided for in Sections 3(c)(1) and 3(c)(7) of the Investment Company Act. If a Registrant uses another term in response to other requirements of this Form to refer to Acquired Funds, it may include that term in parentheses following the subcaption title. In the event the fees and expenses incurred indirectly by the Registrant as a result of investment in shares of one or more Acquired Funds do not exceed 0.01 percent (one basis point) of average net assets of the Registrant, the Registrant may include these fees and expenses under the subcaption ‘‘Other Expenses’’ in lieu of this disclosure requirement. b. Determine the ‘‘Acquired Fund Fees and Expenses’’ according to the following formula: AFFE = [(F1/FY)*AI1* D1]+[(F2/FY)*AI2* D2]+[(F3/FY)*AI3* D3] + TRANSACTION FEES + INCENTIVE ALLOCATIONS Average Net Assets of the Registrant Where: AFFE ................................................ F1, F2, F3, . . . ................................. FY ..................................................... AI1, AI2, AI3, . . . ............................. D1, D2, D3, . . . ................................ ‘‘Transaction Fees’’ .......................... jbell on DSKJLSW7X2PROD with RULES2 ‘‘Incentive Allocations’’ ..................... Acquired Fund fees and expenses; Total annual operating expense ratio for each Acquired Fund; Number of days in the relevant fiscal year; Average invested balance in each Acquired Fund; Number of days invested in each Acquired Fund; The total amount of sales loads, redemption fees, or other transaction fees paid by the Registrant in connection with acquiring or disposing of shares in any Acquired Funds during the most recent fiscal year; and Any allocation of capital from the Acquiring Fund to the adviser of the Acquired Fund (or its affiliate) based on a percentage of the Acquiring Fund’s income, capital gains and/or appreciation in the Acquired Fund. c. Calculate the average net assets of the Registrant for the most recent fiscal year, as provided in Item 4.1 (see Instruction 15 to Item 4.1), and include the anticipated net proceeds of the present offering. d. The total annual operating expense ratio used for purposes of this calculation (F1) is the annualized ratio of operating expenses to average net assets for the Acquired Fund’s most recent fiscal period as disclosed in the Acquired Fund’s most recent shareholder report. If the ratio of expenses to average net assets is not included in the most recent shareholder report or the Acquired Fund is a newly formed fund that has not provided a shareholder report, then the ratio of expenses to average net assets of the Acquired Fund is the ratio of total annual operating expenses to average annual net assets of the Acquired Fund for its most recent fiscal period as disclosed in the most recent communication from the Acquired Fund to the Registrant. If the Registrant has a written fee agreement with the Acquired Fund that would affect the ratio of expenses to average net assets as disclosed in the Acquired Fund’s most VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 recent shareholder report, the Registrant should determine the ratio of expenses to average net assets for the Acquired Fund’s most recent fiscal period using the written fee agreement. For purposes of this instruction: (i) Acquired Fund expenses include increases resulting from brokerage service and expense offset arrangements and reductions resulting from fee waivers or reimbursements by the Acquired Funds’ investment advisers or sponsors; and (ii) Acquired Fund expenses do not include any expenses (i.e., performance fees) that are calculated solely upon the realization and/or distribution of gains, or the sum of the realization and/or distribution of gains and unrealized appreciation of assets distributed inkind. If an Acquired Fund has no operating history, include in the Acquired Funds’ expenses any fees payable to the Acquired Fund’s investment adviser or its affiliates stated in the Acquired Fund’s registration statement, offering memorandum or other similar communication without giving effect to any performance. e. If a Registrant has made investments in the most recent fiscal year, to determine the average invested PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 balance (AI1), the numerator is the sum of the amount initially invested in an Acquired Fund during the most recent fiscal year (if the investment was held at the end of the previous fiscal year, use the amount invested as of the end of the previous fiscal year) and the amounts invested in the Acquired Fund no less frequently than monthly during the period the investment is held by the Registrant (if the investment was held through the end of the fiscal year, use each month-end through and including the fiscal year-end). Divide the numerator by the number of measurement points included in the calculation of the numerator (i.e., if an investment is made during the fiscal year and held for 3 succeeding months, the denominator would be 4). f. For investments based upon the anticipated net proceeds from the present offering, base the ‘‘Acquired Fund Fees and Expenses’’ on: (i) Assumptions about specific funds in which the Registrant expects to invest, (ii) estimates of the amount of assets the Registrant expects to invest in each of those Acquired Funds, and (iii) an assumption that the investment was held for all of the Registrant’s most E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations recent fiscal year and was subject to the Acquired Funds’ fees and expenses for that year. Disclose in a footnote to the table that Acquired Fund fees and expenses are based on estimated amounts for the current fiscal year. g. If an Acquired Fund charges an Incentive Allocation or any other fee based on income, capital gains and/or appreciation (i.e., performance fee), the Registrant must include a footnote to the ‘‘Acquired Fund Fees and Expenses’’ subcaption that: (1) discloses the typical Incentive Allocation or such other fee (expressed as a percentage) to be paid to the investment advisers of the Acquired Funds (or an affiliate); (2) discloses that Acquired Funds’ fees and expenses are based on historic fees and expenses; and (3) states that future Acquired Funds’ fees and expenses may be substantially higher or lower because certain fees are based on the performance of the Acquired Funds, which may fluctuate over time. h. If the Registrant is a Feeder Fund, reflect the aggregate expenses of the Feeder Fund and the Master Fund in the ‘‘Acquired Fund Fees and Expenses.’’ The aggregate expenses of the MasterFeeder Fund must include the fees and expenses incurred indirectly by the Feeder Fund as a result of the Master Fund’s investment in shares of one or more companies (A) that are investment companies or (B) that would be investment companies under Section 3(a) of the Investment Company Act but for the exceptions to that definition provided for in Sections 3(c)(1) and 3(c)(7) of the Investment Company Act. For purposes of this instruction, a ‘‘Master-Feeder Fund’’ means a twotiered arrangement in which one or more investment companies registered under the Investment Company Act (each a ‘‘Feeder Fund’’) holds shares of a single management investment company registered under the Investment Company Act (the ‘‘Master Fund’’) in accordance with Section 12(d)(1)(E) of the Investment Company Act. i. The Registrant may clarify in a footnote to the fee table that the total annual expenses item under Item 3.1 is different from the ratio of expenses to average net assets given in response to Item 4.1, which reflects the operating expenses of the Registrant and does not include Acquired Fund fees and expenses. Example 11. For purposes of the Example in the table: VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 a. assume that the rates listed under ‘‘Annual Expenses’’ remain the same each year, except to reduce annual expenses to reflect the scheduled maturity of outstanding debt or the completion of organization expense amortization; b. assume reinvestment of all dividends and distributions at net asset value; c. reflect all recurring and nonrecurring fees including underwriting discounts and commissions; and d. prominently disclose that the Example should not be considered a representation of future expenses and that actual expenses may be greater or lesser than those shown. 2. Include a synopsis of information contained in the prospectus when the prospectus is long or complex. Normally, a synopsis should not be provided where the prospectus is twelve or fewer printed pages. Instruction. The synopsis should provide a clear and concise description of the key features of the offering and the Registrant, with cross-references to relevant disclosures elsewhere in the prospectus or Statement of Additional Information. 3. In the case of a business development company, include the information required by Item 101(e) of Regulation S–K [17 CFR 229.101] (concerning reports and other information filed with the Commission). Item 4. Financial Highlights 1. General. Furnish the following information for the Registrant, or for the Registrant and its subsidiaries, consolidated as prescribed in Rule 6–03 of Regulation S–X [17 CFR 210.6–03]: Financial Highlights Per Share Operating Performance a. Net Asset Value, Beginning of Period (1) Net Investment Income (2) Net Gains or Losses on Securities (both realized and unrealized) b. Total From Investment Operations c. Less Distributions (1) Dividends (from net investment income) (A) To Preferred Shareholders (B) To Common Shareholders (2) Distributions (from capital gains) (A) To Preferred Shareholders (B) To Common Shareholders (3) Returns of Capital (A) To Preferred Shareholders (B) To Common Shareholders d. Total Distributions e. Net Asset Value, End of Period f. Per Share Market Value, End of PO 00000 Frm 00083 Fmt 4701 Sfmt 4700 33371 Period g. Total Investment Return Ratios/Supplemental Data h. Net Assets, End of Period i. Ratio of Expenses to Average Net Assets j. Ratio of Net Income to Average Net Assets k. Portfolio Turnover Rate Instructions. General Instructions 1. [Removed and reserved.] 2. Briefly explain the nature of the information contained in the table and its source. The auditor’s report as to the financial highlights need not be included in the prospectus. Note that the auditor’s report is contained elsewhere in the registration statement, specify its location, and state that it can be obtained by shareholders. 3. Present the information in comparative columns for each of the last ten fiscal years of the Registrant (or for the life of the Registrant and its immediate predecessors, if less), but only for periods subsequent to the effective date of the Registrant’s first Securities Act registration statement. In addition, present the information for the period between the end of the latest fiscal year and the date of the latest balance sheet or statement of assets and liabilities. Where the period for which the Registrant provides financial highlights is less than a full fiscal year, the ratios set forth in the table may be annualized but the fact of this annualization must be disclosed in a note to the table. 4. List per share amounts at least to the nearest cent. If the offering price is computed in tenths of a cent or more, state the amounts on the table in tenths of a cent. Present all information using a consistent number of decimal places. 5. Provide all information in the table, including distributions to preferred shareholders, on a common share equivalent basis. 6. Make, and indicate in a note, appropriate adjustments to reflect any stock split or stock dividend during the period. 7. If the investment adviser has been changed during the period covered by this Item, indicate the date(s) of the change(s) in a note. 8. The financial highlights for at least the latest five fiscal years must be audited and must so state. Per Share Operating Performance 9. Derive the amount for caption a(1) by adding (deducting) the increase (decrease) per share in undistributed net investment income for the period to E:\FR\FM\01JNR2.SGM 01JNR2 33372 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations (from) dividends from net investment income per share for the period. The increase (decrease) may be derived by comparing the per share figures obtained by dividing undistributed net investment income at the beginning and end of the period by the number of shares outstanding on those dates. Other methods may be acceptable but should be explained briefly in a note to the table. 10. The amount shown at caption a(2) is the balancing figure derived from the other figures in the statement. The amount shown at this caption for a share outstanding throughout the year may not agree with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of sales and repurchases of the Registrant’s shares in relation to fluctuating market values for the portfolio. 11. For any distributions made from sources other than net investment income and capital gains, state the per share amounts thereof separately at caption c(3) and note the nature of the distributions. 12. In caption e, use the net asset value for the end of each period for which information is being provided. If the Registrant has not been in operation for a full fiscal year, state its net asset value immediately after the closing of its first public offering in a note to the caption. jbell on DSKJLSW7X2PROD with RULES2 Total Investment Return 13. When calculating ‘‘total investment return’’ for caption g: a. Assume a purchase of common stock at the current market price on the first day and a sale at the current market price on the last day of each period reported on the table; b. note that the total investment return does not reflect sales load; and c. assume reinvestment of dividends and distributions at prices obtained by the Registrant’s dividend reinvestment plan or, if there is no plan, at the lower of the per share net asset value or the closing market price of the Registrant’s shares on the dividend/distribution date. 14. A Registrant also may include, as a separate caption, total return based on per share net asset value, provided the Registrant briefly explains in a note the differences between this calculation and the calculation required by caption g. Ratios and Supplemental Data 15. Compute ‘‘average net assets’’ for captions i and j based on the value of net assets determined no less frequently than the end of each month. Indicate in a note that the expense ratio and net investment income ratio do not reflect the effect of dividend payments to preferred shareholders. 16. Compute the ‘‘ratio of expenses to average net assets’’ using the amount of expenses shown in the Registrant’s statement of operations for the relevant fiscal year, including increases resulting from complying with paragraph 2(g) of Rule 6–07 of Regulation S–X, and including reductions resulting from complying with paragraphs 2(a) and (f) of Rule 6–07 regarding fee waivers and reimbursements. If a change in the methodology for determining the ratio of expenses to average net assets results from applying paragraph 2(g) of Rule 6– 07, explain in a note that the ratio reflects fees paid with brokerage commissions and fees reduced in connection with specific agreements only for fiscal years ending after September 1, 1995. 17. Compute portfolio turnover rate as follows: a. Divide (A) the lesser of purchases or sales of portfolio securities for the fiscal year by (B) the monthly average of the value of portfolio securities owned by the Registrant during the fiscal year. Calculate the monthly average by totaling the values of portfolio securities as of the beginning and end of the first month of the fiscal year and as of the end of each of the succeeding eleven months and dividing the sum by 13. b. Exclude from both the numerator and denominator all securities, including options, whose maturity or expiration date at the time of acquisition was one year or less. Include all longterm securities, including U.S. Government securities. Purchases include cash paid upon conversion of one portfolio security into another and the cost of rights or warrants. Sales include net proceeds of the sale of rights or warrants and net proceeds of portfolio securities that have been called or for which payment has been made through redemption or maturity. c. If during the fiscal year the Registrant acquired the assets of another investment company or of a personal holding company in exchange for its own shares, exclude from purchases the value of securities so acquired, and, from sales, all sales of the securities made following a purchase-of-assets transaction to realign the Registrant’s portfolio. Appropriately adjust the denominator of the portfolio turnover computation, and disclose the exclusions and adjustments. d. Include in purchases and sales short sales that the Registrant intends to maintain for more than one year and put and call options with expiration dates more than one year from the date of acquisition. Include proceeds from a short sale in the value of portfolio securities sold during the period; include the cost of covering a short sale in the value of portfolio securities purchased during the period. Include premiums paid to purchase options in the value of portfolio securities purchased during the reporting period; include premiums received from the sale of options in the value of portfolio securities sold during the period. 2. Business Development Companies. If the Registrant is regulated as a business development company under the Investment Company Act, furnish in a separate section the information required by Items 301, 302, and 303 of Regulation S–K. 3. Senior Securities. Furnish the following information as of the end of the last ten fiscal years for each class of senior securities (including bank loans) of the Registrant. If consolidated statements were prepared as of any of the dates specified, furnish the information on a consolidated basis: Year Total amount outstanding exclusive of treasury securities Asset coverage per unit Involuntary liquidating preference per unit Average market value per unit (exclude bank loans) (1) (2) (3) (4) (5) Instructions. 1. Instructions 2, 3, and 8 to Item 4.1 also apply to this sub-item. 2. Use the method described in Section 18(h) of the Investment VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 Company Act to calculate the asset coverage to be set forth in column (3). However, in lieu of expressing asset coverage in terms of a ratio, as described in Section 18(h), express it for each PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 class of senior securities in terms of dollar amounts per share (in the case of preferred stock) or per $1,000 of indebtedness (in the case of senior indebtedness). E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 3. Column (4) need be included only with respect to senior stock. 4. Set forth in a note to the table the method used to determine the averages called for by column (5) (e.g., weighted, monthly, daily, etc.). 5. Briefly explain the terms used in the headings of the columns. Item 5. Plan of Distribution Briefly describe how the securities being registered will be distributed. Include the following information: 1. For each principal underwriter distributing the securities being offered set forth: a. Its name and principal business address; b. a brief discussion of the nature of any material relationship with the Registrant (other than that of principal underwriter), including any arrangement under which a principal underwriter or its affiliates will perform administrative or custodial services for the Registrant; Instruction. Any material relationship between the underwriter (or its affiliates) and the investment adviser (or its affiliates) of the Registrant relating to the business or operation of the Registrant constitutes a material relationship of the underwriter with the Registrant. c. the amount of securities underwritten; and d. the nature of the obligation to distribute the Registrant’s securities. Instruction. All that is required to be disclosed as to the nature of the underwriter’s obligation is whether the underwriter will be committed to take and pay for all the securities if any are taken, or whether it is merely an agency or ‘‘best-efforts’’ arrangement under which the underwriter is required to take and pay for only such securities as it may sell to the public. Conditions precedent to the underwriter’s taking the securities, including ‘‘market outs,’’ need not be described, except in the case of an agency or ‘‘best-efforts’’ arrangement. 2. The price to the public. Instructions. 1. If it is impracticable to state the price to the public, concisely explain the manner in which the price will be determined, including a description of the valuation procedure used by the Registrant in determining the price. If the securities are to be offered at the market price, or if the offering price is to be determined by a formula related to market price, indicate the market involved and the market price as of the latest practicable date. 2. For restrictions on distributions and repurchases of closed-end company VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 securities, see Section 23 of the Investment Company Act, and Investment Company Act Rel. No. 3187 (Feb. 6, 1961) [26 FR 1275 (Feb. 15, 1961)]. 3. Briefly explain the basis for any differences in the price at which securities are offered to the public, as individuals and/or as groups, and to officers, directors and employees of the Registrant, its adviser or underwriter. 3. To the extent not set forth on the cover page of the prospectus, state the amount of the sales load, if any, as a percentage of the public offering price, and concisely describe the commissions to be allowed or paid to (i) underwriters, including all other items that would be deemed by FINRA to constitute underwriting compensation for purposes of FINRA’s rules regarding securities offerings, underwriting and compensation, and (ii) dealers, including all cash, securities, contracts, and/or other considerations to be realized by any dealer in connection with the sale of securities. Instruction. If any dealers are to act in the capacity of sub-underwriters and are allowed or paid any additional discounts or commission for acting in such capacity, a general statement to that effect will suffice without giving the additional amounts to be sold. 4. If the underwriting agreement provides for indemnification by the Registrant of the underwriters or their controlling persons against any liability arising under the Securities Act or Investment Company Act, briefly describe such indemnification provisions. 5. Provide the identity of any finder and, if applicable, concisely describe the nature of any material relationship between such finder and the Registrant, its officers, directors, principal shareholders, finders or promoters or the principal underwriter(s), or the managing underwriter(s), if any, and, in each case, the affiliates or associates thereof. 6. Indicate the date by which investors must pay for the securities. 7. If the securities are being offered in conjunction with any retirement plan, provide a statement regarding the manner in which further information about the plan can be obtained. 8. If investors’ funds will be forwarded to an escrow account, identify the escrow agent, and briefly describe the conditions for release of the funds, whether such funds will accrue interest while in escrow, and the manner in which the monies in such account will be distributed if such conditions are not satisfied, including PO 00000 Frm 00085 Fmt 4701 Sfmt 4700 33373 how accrued interest, if any, will be distributed to investors. 9. If the securities offered by the Registrant are not being listed on a national securities exchange, disclose whether any of the underwriters intends to act as a market maker with respect to such unlisted securities. 10. Briefly outline the plan of distribution of any securities that are to be offered other than through underwriters. a. If the securities are to be offered through the selling efforts of brokers or dealers, concisely describe the plan of distribution and the terms of any agreement, arrangement, or understanding entered into with broker(s) or dealer(s) prior to the effective date of the registration statement, including volume limitations on sales, parties to the agreement, and the conditions under which the agreement may be terminated. If known, identify the broker(s) or dealer(s) that will participate in the offering, and state the amount to be offered through each. b. If any of the securities being registered are to be offered other than for cash, describe briefly the general purposes of the distribution, the basis upon which the securities are to be offered, the amount of compensation and other expenses of distribution, and the person(s) responsible for such expenses. c. If the distribution is to be made under a plan of acquisition, reorganization, readjustment, or succession, provide a statement regarding the general effect of the plan and when it becomes operative. As to any material amount of assets to be acquired under the plan, furnish the information required by Instruction 4 to Item 7.1 below. Item 6. Selling Shareholders If any securities being registered are to be offered for the account of shareholders, furnish the information required by Item 507 of Regulation S–K [17 CFR 229.507]. Item 7. Use of Proceeds 1. State the principal purposes for which the net proceeds of the offering are intended to be used and the approximate amount intended to be used for each purpose. Instructions. 1. If any substantial portion of the proceeds will not be allocated in accordance with the investment objectives and policies of the Registrant, a statement to that effect should be made together with a statement of the amount involved and an indication of how that amount will be invested. E:\FR\FM\01JNR2.SGM 01JNR2 33374 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 2. If a material part of the proceeds will be used to discharge indebtedness, state the interest rate and maturity of the indebtedness. 3. If the Registrant intends to incur loans to pay underwriting commissions or any other organizational or offering expenses, disclose this fact and state the name of the lender, the amount of the first installment, the rate of interest, the date on which payments will begin, the dates and amounts of subsequent installments, and the final maturity date. Explain that the interest paid on such borrowing will not be available for investment purposes and will increase the expenses of the fund. 4. If any material part of the proceeds will be used to acquire assets other than in the ordinary course of business, briefly describe the assets, the names of the persons from whom they are to be acquired, the cost of the assets to the Registrant, and how the costs were determined. 2. Disclose how long it is expected to take to fully invest net proceeds in accordance with the Registrant’s investment objectives and policies, the reasons for any anticipated lengthy delay in investing the net proceeds, and the consequences of any delay. Item 8. General Description of the Registrant Concisely discuss the organization and operation, or proposed operation, of the Registrant. Include the information specified below. 1. General. Briefly describe the Registrant, including: a. The date and form of organization and the name of the state or other jurisdiction under whose laws it is organized; and b. the classification and subclassification under Sections 4 and 5 of the Investment Company Act. 2. Investment Objectives and Policies. Concisely describe the investment objectives and policies of the Registrant that will constitute its principal portfolio emphasis, including the following: a. If these objectives may be changed without a vote of the holders of a majority of voting securities, a brief statement to that effect; b. how the Registrant proposes to achieve its objectives, including: (1) The types of securities in which the Registrant invests or will invest principally; (2) the identity of any particular industry or group of industries in which the Registrant proposes to concentrate. Instruction. Concentration, for purposes of this Item, is deemed 25 percent or more of the value of the Registrant’s total assets invested or proposed to be invested in a particular industry or group of industries. The policy on concentration should not be inconsistent with the Registrant’s name. c. identify other policies of the Registrant that may not be changed without the vote of a majority of the outstanding voting securities, including those policies that the Registrant deems to be fundamental within the meaning of Section 8(b) of the Investment Company Act; and d. briefly describe the significant investment practices or techniques that the Registrant employs or intends to employ (such as risk arbitrage, reverse repurchase agreements, forward delivery contracts, when-issued securities, stand-by commitments, options and futures contracts, options on futures contracts, currency transactions, foreign securities, investing for control of management, and/or lending of portfolio securities) that are not described pursuant to subparagraph 2.c above or subparagraph 3 below. jbell on DSKJLSW7X2PROD with RULES2 Assumed Return on Portfolio (Net of Expenses) ................ Corresponding Return to Common Stockholder ................. Instructions. 1. Round all percentages to the nearest hundredth of one percent. 2. A Registrant may assume additional rates of return on its portfolio; however, to the extent a Registrant shows an additional positive rate of return, it must also show an additional negative rate of return of the same magnitude. A Registrant may show the positive rate of return at which the corresponding rate of return to the common stockholder is zero without showing the corresponding negative rate of return. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 ¥10% % ¥5% % 3. Compute the ‘‘corresponding return to common stockholder’’ as follows: Multiply the total amount of fund assets at the beginning of the period by the assumed rate of return; subtract from the resulting product all interest accrued or dividends declared on senior securities that would be made during the year following the offering; and divide the resulting difference by the total amount of fund assets attributable to common stock. If payments will vary because the interest or dividend rate is variable, use PO 00000 Frm 00086 Fmt 4701 Sfmt 4700 3. Risk Factors. Concisely describe the risks associated with an investment in the Registrant, including the following: a. General. Discuss the principal risk factors associated with investment in the Registrant specifically as well as those factors generally associated with investment in a company with investment objectives, investment policies, capital structure, or trading markets similar to the Registrant’s. b. Effects of Leverage. If the prospectus offers common stock of the Registrant and the Registrant has outstanding or is offering a class of senior securities as defined in Section 18 of the Investment Company Act, then: (1) Set forth the annual rate of interest or dividend payments on the senior securities; Instruction. If payments will vary because the interest or dividend rate is variable, provide the initial rate or, if the security is currently outstanding, the current rate. (2) Set forth the annual return that the Registrant’s portfolio must experience in order to cover annual interest or dividend payments on senior securities; and (3) provide a table illustrating the effect on return to a common stockholder of leverage (using senior securities) in the format illustrated below, using the captions provided, and assuming annual returns on the Registrant’s portfolio (net of expenses) of minus ten, minus five, zero, five, and ten percent. (4) The table should be accompanied by a brief narrative explaining that the purpose of the table is to assist the investor in understanding the effects of leverage. Indicate that the figures appearing in the table are hypothetical and that actual returns may be greater or less than those appearing in the table. 0% % 5% % 10% % the initial rate or, if the security is currently outstanding, the current rate. 4. Other Policies. Briefly discuss the types of investments that will be made by the Registrant, other than those that will constitute its principal portfolio emphasis (as discussed in Item 8.2 above), and any policies or practices relating to those investments. Instructions. 1. This discussion should receive less emphasis in the prospectus than that required by Item 8.2 and, if appropriate in light of Instructions 2 and 3 below, may be omitted or limited to the E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations information necessary to identify the type of investment, policy, or practice. 2. Do not discuss a policy that prohibits a particular practice or permits a practice that the Registrant has not used within the past twelve months (or since its initial public offering, if that period is shorter) and does not intend to use in the future. 3. If a policy limits a particular practice so that no more than five percent of the Registrant’s net assets are at risk, or if the Registrant has not followed that practice within the last year (or since its initial public offering, if such period is shorter) in such a manner that more than five percent of net assets were at risk and does not intend to follow such practice so as to put more than five percent of net assets at risk, limit the prospectus disclosure about such practice to that necessary to identify the practice. Disclose whether or not the Registrant will provide prior notice to security holders of its intention to commence or expand the use of such practice. The amount of the Registrant’s net assets that are at risk for purposes of determining whether ‘‘more than five percent of net assets are at risk’’ is not limited to the initial amount of the Registrant’s assets that are invested in a particular practice, e.g., the purchase price of an option. The amount of net assets at risk is determined by reference to the potential liability or loss that may be incurred by the Registrant in connection with a particular practice. 5. Share Price Data. If the prospectus offers common stock or other type of common equity security (collectively ‘‘common stock’’) and if the Registrant’s common stock is publicly held, provide the following information: a. Identify the principal United States market or markets in which the common stock is being traded. Where there is no established public trading market, furnish a statement to that effect. Instruction. The existence of limited or sporadic quotations should not itself be deemed to constitute an ‘‘established public trading market.’’ b. If the principal United States market for the common stock is an exchange, state the high and low sales prices for the stock for each full quarterly period within the two most recent fiscal years and each full fiscal quarter since the beginning of the current fiscal year, as reported in the consolidated transaction reporting system or, if not so reported, as reported on the principal exchange market for the stock. If the principal United States market for the common stock is not an exchange, state the range of high and low bid information for the common VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 stock for the periods described in the preceding sentence, as regularly quoted in the automated quotation system of a registered securities association or, if not so quoted, the range of reported high and low bid quotations, indicating the source of the quotations. Instructions. 1. This information should be set forth in tabular form. 2. Indicate, as applicable, that such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions. 3. Where there is an absence of an established public trading market, qualify reference to quotations by an appropriate explanation. 4. With respect to each quotation, disclose the net asset value and the discount or premium to net asset value (expressed as a percentage) represented by the quotation. 5. Where the shares of the Registrant trade at their high or low share price for more than one day during the period, the Registrant should provide the discount or premium information for the day on which the premium or discount was greatest. c. Include share price and corresponding net asset value and premium/discount information as of the latest practicable date. d. Disclose whether the Registrant’s common stock has historically traded for an amount less than, equal to, or exceeding net asset value. Disclose any methods undertaken or to be undertaken by the Registrant that are intended to reduce any discount (such as the repurchase of fund shares, providing for the ability to convert to an open-end investment company, guaranteed distribution plans, etc.), and briefly discuss the effects that these measures have or may have on the Registrant. e. If the shares of the Registrant have no history of public trading, discuss the tendency of closed-end fund shares to trade frequently at a discount from net asset value and the risk of loss this creates for investors purchasing shares in the initial public offering. If the Registrant has omitted the statement required by Item 1.i, describe the basis for the Registrant’s belief that its shares will not trade at a discount from net asset value. 6. Business Development Companies. A Registrant that is a business development company should, in addition, provide the following information: a. Portfolio Companies. For each portfolio company in which the Registrant is investing, disclose: (1) The PO 00000 Frm 00087 Fmt 4701 Sfmt 4700 33375 name and address; (2) nature of business; (3) title, class, percentage of class, and value of portfolio company securities held by the Registrant; (4) amount and general terms of all loans to portfolio companies; and (5) the relationship of the portfolio companies to the Registrant. Instructions. 1. The description of the nature of the business of a portfolio company in which the Registrant is investing may vary according to the extent of the Registrant’s investment in the particular portfolio company. The Registrant need only briefly identify the nature of the business of a portfolio company in which the Registrant’s investment constitutes less than five percent of the Registrant’s assets. 2. In describing the nature of the business of a portfolio company, include matters such as the competitive conditions of the business of the company; its market share; dependence on a single or small number of customers; importance to it of any patents, trademarks, licenses, franchises, or concessions held; key operating personnel; and particular vulnerability to changes in government regulation, interest rates, or technology. 3. In describing the relationship of portfolio companies to the Registrant, include a discussion of the extent to which the Registrant makes available significant managerial assistance to its portfolio companies. Disclose any other material business, professional, or family relationship between the officers and directors of the Registrant and any portfolio company, its officers, directors, and affiliates (as defined in Rule 12b–2 under the Exchange Act [17 CFR 240.12b–2]). b. Certain Subsidiaries. If the Registrant has a wholly-owned small business investment company subsidiary, disclose: (1) Whether the subsidiary is regulated as a business development company or investment company under the Investment Company Act; (2) the percentage of the Registrant’s assets invested in the subsidiary; and (3) material information about the small business investment company’s operations, including the special risks of investing in a portfolio heavily invested in securities of small and developing or financially troubled businesses. c. Financial Statements. Unless the business development company has had less than one fiscal year of operations, provide the financial statements of the Registrant. Instructions. 1. a. Furnish, in a separate section following the responses to the above E:\FR\FM\01JNR2.SGM 01JNR2 33376 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations items in Part A of the registration statement, the financial statements and schedules required by Regulation S–X [17 CFR 210]. A business development company should comply with the provisions of Regulation S–X generally applicable to registered management investment companies. (See Section 210.3–18 and Sections 210.6–01 through 210.6–10 of Regulation S–X.) b. A business development company should provide an indication in its Schedule of Investments of those investments that are not qualifying investments under Section 55(a) of the Investment Company Act and, in a footnote, briefly explain the significance of non-qualification. 2. Notwithstanding the requirements of Instruction 1 above, the following statements and schedules required by Regulation S–X may be omitted from Part A and included in Part C of the Registration statement: a. The statement of any subsidiary that is not a majority-owned subsidiary; and b. columns C and D of Schedule IV [17 CFR 210.12–03] in support of the most recent balance sheet. 3. A business development company with less than one fiscal year of operations should provide its financial statements in the Statement of Additional Information in response to Item 24. d. Prior Operations. If the Registrant has had an operating history prior to electing to be regulated as a business development company, disclose any anticipated changes in its operations as a result of coming into compliance with Section 55(a) of the Investment Company Act. This information may be omitted in a prospectus used a sufficient time after election to be regulated as a business development company so that it is no longer material. e. Special Risk Factors. To the extent not disclosed in response to this Item or Item 8.3, concisely describe the special risks of investing in a business development company, including the risks associated with investing in a portfolio of small and developing or financially troubled businesses. (See Section 64(b)(1) of the Investment Company Act.) jbell on DSKJLSW7X2PROD with RULES2 Item 9. Management 1. General. Describe concisely how the business of the Registrant is managed, including: a. Board of Directors. A description of the responsibilities of the board of directors with respect to the management of the Registrant; Instructions. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 1. In responding to this Item, it is sufficient to include a general statement as to the responsibilities of the board of directors under the applicable laws of the Registrant’s jurisdiction of organization. 2. A Registrant that has elected to be regulated as a business development company should briefly describe the terms of any special compensation plans available to management. b. Investment Advisers. For each investment adviser of the Registrant: (1) Its name and principal business address, a description of its experience as an investment adviser, and, if the investment adviser is controlled by another person, the name of that person and the general nature of its business; Instruction. If the investment adviser is subject to more than one level of control, it is sufficient to provide the name of the ultimate control person. (2) A description of the services provided by the investment adviser; Instructions. 1. If, in addition to providing investment advice, the investment adviser or persons employed by or associated with the investment adviser are subject to the authority of the board of directors, responsible for overall management of the Registrant’s business affairs, it is sufficient to state that fact instead of listing all services provided. 2. A Registrant that has elected to be regulated as a business development company should describe briefly the type of managerial assistance that is or will be provided to the businesses in which it is investing and the qualifications of the investment adviser to render such management assistance. (3) A description of its compensation; and Instructions. 1. State generally what the adviser’s fee is or will be as a percentage of average net assets, including any breakpoint. It is not necessary to include precise details as to how the fee is computed or paid. 2. If the investment advisory fee is paid in some manner other than on the basis of average net assets, briefly describe the basis of payment. (4) A statement, adjacent to the disclosure required by paragraph 1(b)(3) of this Item, that a discussion regarding the basis for the board of directors approving any investment advisory contract of the Registrant is available in the Registrant’s annual or semi-annual report to shareholders, as applicable, and providing the period covered by the relevant annual or semi-annual report. c. Portfolio Management. The name, title, and length of service of the person or persons employed by or associated PO 00000 Frm 00088 Fmt 4701 Sfmt 4700 with the Registrant or an investment adviser of the Registrant who are primarily responsible for the day-to-day management of the Registrant’s portfolio (‘‘Portfolio Manager’’). Also state each Portfolio Manager’s business experience during the past 5 years. Include a statement, adjacent to the foregoing disclosure, that the SAI provides additional information about the Portfolio Manager’s(s’) compensation, other accounts managed by the Portfolio Manager(s), and the Portfolio Manager’s(s’) ownership of securities in the Registrant. Instruction. If a committee, team, or other group of persons associated with the Registrant or an investment adviser of the Registrant is jointly and primarily responsible for the day-to-day management of the Registrant’s portfolio, information in response to this Item is required for each member of such committee, team, or other group. For each such member, provide a brief description of the person’s role on the committee, team, or other group (e.g., lead member), including a description of any limitations on the person’s role and the relationship between the person’s role and the roles of other persons who have responsibility for the day- to-day management of the Registrant’s portfolio. If more than five persons are jointly and primarily responsible for the day-to-day management of the Registrant’s portfolio, the Registrant need only provide information for the five persons with the most significant responsibility for the day-to-day management of the Registrant’s portfolio. d. Administrators. The identity of any other person who provides significant administrative or business affairs management services (e.g., an ‘‘Administrator’’ or ‘‘SubAdministrator’’), a description of the services provided, and the compensation to be paid; e. Custodians. The name and principal business address of the custodian(s), transfer agent, and dividend paying agent; f. Expenses. The type of expenses for which the Registrant is responsible, and, if organization expenses of the Registrant are to be paid out of its assets, how the expenses will be amortized and the period over which the amortization will occur; and g. Affiliated Brokerage. If the Registrant pays (or will pay) brokerage commissions to any broker that is an (1) affiliated person of the Registrant, (2) affiliated person of such person, or (3) affiliated person of an affiliated person of the Registrant, its investment adviser, E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 or its principal underwriter, a statement to that effect. 2. Non-Resident Managers. If any nonresident officer, director, underwriter, investment adviser, or expert named in the registration statement has a substantial portion of its assets located outside the United States, identify each person, and state how the enforcement by investors of civil liabilities under the federal securities laws may be affected. This disclosure should indicate whether: a. Investors will be able to effect service of process within the United States upon these persons; b. investors will be able to enforce, in United States courts, judgments against these persons obtained in such courts predicated upon the civil liability provisions of the federal securities laws; c. the appropriate foreign courts would enforce judgments of United States courts obtained in actions against these persons predicated upon the civil liability provisions of the federal securities laws; and d. the appropriate foreign courts would enforce, in original actions, liabilities against these persons predicated solely upon the federal securities laws. Instruction. If any portions of this disclosure are stated to be based upon an opinion of counsel, name the counsel in the prospectus, and include an appropriate manually signed consent to the use of counsel’s name and opinion as an exhibit to the registration statement. 3. Control Persons. Identify each person who, as of a specified date no more than 30 days prior to the date of filing the registration statement (or amendment to it), controls the Registrant. Instruction. For the purposes of this Item, ‘‘control’’ means (1) the beneficial ownership, either directly or through one or more controlled companies, of more than 25 percent of the voting securities of a company; (2) the acknowledgment or assertion by either the controlled or controlling party of the existence of control; or (3) an adjudication under Section 2(a)(9) of the Investment Company Act, which has become final, that control exists. Item 10. Capital Stock, Long-Term Debt, and Other Securities 1. Capital Stock. For each class of capital stock of the Registrant, state the title of the class and briefly describe all of the matters listed in paragraphs 1.a through 1.f that are relevant: a. concisely discuss the nature and most significant attributes, including, where applicable, (1) dividend rights, VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 policies, or limitations; (2) voting rights; (3) liquidation rights; (4) liability to further calls or to assessments by the Registrant; (5) preemptive rights, conversion rights, redemption provisions, and sinking fund provisions; and (6) any material obligations or potential liability associated with ownership of the security (not including investment risks); Instructions. 1. A complete legal description of the securities should not be given. 2. If the Registrant has a policy of making distribution or dividend payments at predetermined times and minimum rates, disclosure should include a statement that, if the fund’s investments do not generate sufficient income, the fund may be required to liquidate a portion of its portfolio to fund these distributions, and therefore these payments may represent a reduction of the shareholders’ principal investment. The tax consequences of such payments also should be described briefly. b. with respect to preferred stock, (1) state whether there are any restrictions on the Registrant while there is an arrearage in the payment of dividends or sinking fund installments, and, if so, concisely describe the restrictions and (2) briefly describe provisions restricting the declaration of dividends, requiring the maintenance of any ratio or assets, requiring the creation or maintenance of reserves, or permitting or restricting the issuance of additional securities; c. if the rights of holders of the security may be modified other than by a vote of a majority or more of the shares outstanding, voting as a class, so state, and briefly explain; d. if rights evidenced by, or the amounts payable with respect to, any class of securities being described are, or may be, materially limited or qualified by the rights of any other authorized class of securities, include sufficient information regarding the other securities to enable investors to understand such rights and limitations; e. if the Registrant has a dividend reinvestment plan, briefly discuss the material aspects of the plan including, but not limited to, whether the plan is automatic or whether shareholders must affirmatively elect to participate; (2) the method by which shareholders can elect to reinvest stock dividends or, if the plan is automatic, to receive cash dividends; (3) from whom additional information about the plan may be obtained (including a telephone number or address); (4) the method of determining the number of shares that will be distributed in lieu of a cash dividend; (5) the income tax PO 00000 Frm 00089 Fmt 4701 Sfmt 4700 33377 consequences of participation in the plan (i.e., that capital gains and income are realized, although cash is not received by the shareholder); (6) how to terminate participation in the plan and rights upon termination; (7) if applicable, that an investor holding shares that participate in the dividend reinvestment plan in a brokerage account may not be able to transfer the shares to another broker and continue to participate in the dividend reinvestment plan; (8) the type and amount (if known) of fees, commissions, and expenses payable by participants in connection with the plan; and (9) if a cash purchase plan option is available, any minimum or maximum investment required; and f. briefly describe any provision of the Registrant’s charter or bylaws that would have an effect of delaying, deferring, or preventing a change of control of the Registrant and that would operate only with respect to an extraordinary corporate transaction involving the Registrant, such as a merger, reorganization, tender offer, sale or transfer of substantially all of its assets, or liquidation. Instruction. Provisions and arrangements required by law or imposed by governmental or judicial authority need not be discussed. Provisions or arrangements adopted by the Registrant to effect or further compliance with laws or governmental or judicial mandate must be described where compliance does not require the specific provisions or arrangements adopted. 2. Long-Term Debt. If the Registrant is issuing or has outstanding a class of long-term debt, state the title of the debt securities and their principal amount, and concisely describe any of the matters listed in paragraphs 2.a through 2.e that are relevant: a. provisions concerning maturity, interest, conversion, redemption, amortization, sinking fund, and/or retirement; b. provisions restricting the declaration of dividends, requiring the maintenance of any ratio or assets, and/ or requiring the creation or maintenance of reserves; c. provisions permitting or restricting the issuance of additional securities, the ability to incur additional debt, the release or substitution of assets securing the issue, and/or the modification of the terms of the securities; Instruction. A complete legal description of the securities should not be given. d. for each trustee, its name, the nature of any material relationship it has with the Registrant or any of its affiliates, the percentage of securities E:\FR\FM\01JNR2.SGM 01JNR2 33378 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 necessary to require the trustee to take action, and any indemnification the trustee may require before proceeding against assets of the Registrant; and e. to the extent not otherwise disclosed in response to this Item, whether the rights evidenced by the long-term debt are, or may be, materially limited or qualified by the rights of any other authorized class of securities, and, if so, include sufficient information regarding such other securities to enable investors to understand such rights and limitations. 3. General. Concisely describe the significant attributes of each other class of the Registrant’s authorized securities. The description should be comparable to that called for by paragraphs 1 and 2 of this Item. If the securities are subscription warrants or rights, state the title and amount of securities called for and the period during which, and the prices at which, the warrants or rights are exercised. 4. Taxes. Concisely describe the tax consequences to investors of an investment in the securities being offered. If the Registrant intends to qualify for treatment under Subchapter M of the Internal Revenue Code of 1986 [26 U.S.C. 851–856], it is sufficient, in the absence of special circumstances, to state that: (i) the Registrant will distribute all of its net investment income and gains to shareholders and that these distributions are taxable as ordinary income or capital gains; (ii) shareholders may be proportionately liable for taxes on income and gains of the Registrant but shareholders not subject to tax on their income will not be required to pay tax on amounts distributed on them: and (iii) the Registrant will inform shareholders of the amount and nature of the income or gains. Instructions. 1. The description should not include detailed discussions of applicable law. 2. The Registrant should specifically address whether shareholders will be subject to the alternative minimum tax. 5. Outstanding Securities. Furnish the following information, in substantially the tabular form indicated, for each class of authorized securities of the Registrant. The information must be current within 90 days of the filing of this registration statement or amendment to it. Title of class Amount authorized Amount held by registrant or for its account Amount outstanding exclusive of amount shown under (3) (1) (2) (3) (4) 6. Securities Ratings. If the prospectus relates to senior securities of the Registrant that have been assigned a rating by a nationally recognized securities rating organization and the rating is disclosed in the prospectus, briefly discuss the significance of the rating, the basis upon which ratings are issued, any conditions or guidelines imposed by the NRSRO for the Registrant to maintain the rating, and whether or not the Registrant intends, or has any contractual obligation, to comply with these conditions or guidelines. In addition, disclose the material terms of any agreement between the Registrant or any of its affiliates and the NRSRO under which the NRSRO provides such rating. If the prospectus relates to securities other than senior securities of the Registrant that have been assigned a rating by a NRSRO, the information required by this paragraph may be provided in the Statement of Additional Information unless the rating criteria will materially affect the investment policies of the Registrant (e.g., if the rating agency establishes criteria for selection of the Registrant’s portfolio securities with which the Registrant intends to comply), in which case it should be included in the prospectus. Instructions. 1. The term ‘‘nationally recognized securities rating organization’’ has the same meaning as used in Rule 15c3– 1(c)(2)(vi)(F) under the Exchange Act [17 CFR 240.15c3–1]. 2. Rule 436(g)(1) of Regulation C under the Securities Act [17 CFR VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 230.436] provides that a security rating assigned by an NRSRO to a class of debt securities, a class of convertible debt securities, or a class of preferred stock is not considered a part of the registration statement for purposes of Sections 7 and 11 of the Securities Act. Therefore, in the case of disclosure of a rating assigned to these types of securities issued by the Registrant, the Registrant need not include a written consent of the NRSRO as an exhibit to the registration statement as required by Item 25.2.n but must provide the disclosure called for by this Item. 3. Reference should be made to the statement of the Commission’s policy on security ratings set forth under the section ‘‘General’’ in Regulation S–K [17 CFR 229.10] for the Commission’s views on other important matters to be considered in disclosing securities ratings. Item 11. Defaults and Arrears on Senior Securities 1. State the nature, date, and amount of default of payment of principal, interest, or amortization for each issue of long-term debt of the Registrant that is in default on the date of filing. 2. If an issue of capital stock has any accumulated dividend in arrears at the date of filing, state the title of each issue and the amount per share in arrears. Item 12. Legal Proceedings Describe briefly any material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Registrant, any PO 00000 Frm 00090 Fmt 4701 Sfmt 4700 subsidiary of the Registrant, or the Registrant’s investment adviser or principal underwriter is a party. Include the name of the court where the case is pending, the date instituted, the principal parties, a description of the factual basis alleged to underlie the proceeding, and the relief sought. Include similar information as to any proceeding instituted by a governmental authority or known to be contemplated by a governmental authority. Instruction. Legal Proceedings, for purposes of this Item, are material only to the extent that they are likely to have a material adverse effect upon: (1) the ability of the investment adviser or principal underwriter to perform its contract with the Registrant; or (2) the Registrant. Item 13. [Removed and reserved.] Part B—Information Required in a Statement of Additional Information Item 14. Cover Page 1. The outside cover page must contain the following information: a. the Registrant’s name; b. a statement or statements (1) that the Statement of Additional Information is not a prospectus, (2) that the Statement of Additional Information should be read with the prospectus, and (3) how a copy of the prospectus may be obtained; c. the date of the Statement of Additional Information; d. the date of the related prospectus and any other identifying information E:\FR\FM\01JNR2.SGM 01JNR2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations that the Registrant deems appropriate; and e. the statement required by paragraph (b)(2) of Rule 481 under the Securities Act. 2. The cover page may include other information, provided that it does not, by its nature, quantity, or manner of presentation, impede understanding of required information. Item 15. Table of Contents List the contents of the Statement of Additional Information, and, where useful, provide a cross-reference to related disclosure in the prospectus. jbell on DSKJLSW7X2PROD with RULES2 Item 16. General Information and History If the Registrant has engaged in a business other than that of an investment company during the past five years, state the nature of the other business and give the approximate date on which the Registrant commenced business as an investment company. If the Registrant’s name was changed during that period, state its former name and the approximate date on which it was changed. If the change in the Registrant’s business or name occurred in connection with any bankruptcy, receivership, or similar proceeding or any other material reorganization, readjustment, or succession, briefly describe the nature and results of the same. Item 17. Investment Objective and Policies 1. Describe clearly and concisely the investment policies of the Registrant. It is not necessary to repeat information contained in the prospectus, but, in augmenting the disclosure about those types of investments, policies, or practices that are briefly discussed or identified in the prospectus, the Registrant should refer to the prospectus when necessary to clarify the additional information called for by this Item. 2. Concisely describe any fundamental policy of the Registrant not described in the prospectus with respect to each of the following activities: a. the issuance of senior securities; b. short sales, purchases on margin, and the writing of put and call options; c. the borrowing of money (describe briefly any fundamental policy that limits the Registrant’s ability to borrow money, and state the purpose for which the proceeds will be used); d. the underwriting of securities of other issuers (include any fundamental VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 policy concerning the acquisition of restricted securities, i.e., securities that must be registered under the Securities Act before they may be offered or sold to the public); e. the concentration of investments in a particular industry or groups of industries; f. the purchase or sale of real estate and real estate mortgage loans; g. the purchase or sale of commodities or commodity contracts, including futures contracts; h. the making of loans (for purposes of this Item, the term ‘‘loans’’ does not include the purchase of a portion of an issue of publicly distributed bonds, debentures, or other securities, whether or not the purchase was made upon the original issuance of the securities; however, the term ‘‘loan’’ includes the loaning of cash or portfolio securities to any person); and i. any other policy that the Registrant deems fundamental. Instructions. 1. For purposes of this Item, the term ‘‘fundamental policy’’ is defined as any policy that the Registrant has deemed to be fundamental or that may not be changed without the approval of a majority of the Registrant’s outstanding voting securities. 2. If the Registrant reserves freedom of action with respect to any of the foregoing activities (other than the activity described in paragraph e), it must disclose the maximum percentage of assets to be devoted to the particular activity. 3. Describe fully any significant investment policies of the Registrant not described in the prospectus that are not deemed fundamental and that may be changed without the approval of the holders of a majority of the voting securities (e.g., investing for control of management, investing in foreign securities, or arbitrage activities). Instruction. The Registrant should disclose the extent to which it may engage in the above policies and the risks inherent in such policies. 4. Briefly explain any significant change in the Registrant’s portfolio turnover rates over the last two fiscal years. If the Registrant anticipates a significant change in the portfolio turnover rate from that reported under caption k of Item 4.1 for its most recent fiscal year, so state. In the case of a new registration, the Registrant should state its policy with respect to portfolio turnover. PO 00000 Frm 00091 Fmt 4701 Sfmt 4700 33379 Item 18. Management General Instructions. 1. For purposes of this Item 18, the terms below have the following meanings: a. The term ‘‘family of investment companies’’ means any two or more registered investment companies that: (1) Share the same investment adviser or principal underwriter; and (2) Hold themselves out to investors as related companies for purposes of investment and investor services. b. The term ‘‘fund complex’’ means two or more registered investment companies that: (1) Hold themselves out to investors as related companies for purposes of investment and investor services; or (2) Have a common investment adviser or have an investment adviser that is an affiliated person of the investment adviser of any of the other registered investment companies. c. The term ‘‘immediate family member’’ means a person’s spouse; child residing in the person’s household (including step and adoptive children); and any dependent of the person, as defined in Section 152 of the Internal Revenue Code [26 U.S.C. 152]. d. The term ‘‘officer’’ means the president, vice-president, secretary, treasurer, controller, or any other officer who performs policy-making functions. 2. When providing information about directors, furnish information for directors who are interested persons of the Registrant, as defined in Section 2(a)(19) of the Investment Company Act and the rules thereunder, separately from the information for directors who are not interested persons of the Registrant. For example, when furnishing information in a table, you should provide separate tables (or separate sections of a single table) for directors who are interested persons and for directors who are not interested persons. When furnishing information in narrative form, indicate by heading or otherwise the directors who are interested persons and the directors who are not interested persons. 1. Provide the information required by the following table for each director and officer of the Registrant, and, if the Registrant has an advisory board, member of the board. Explain in a footnote to the table any family relationship between the persons listed. E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 33380 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations Name, address, and age Position(s) held with registrant Term of office and length of time served Principal occupation(s) during past 5 years Number of portfolios in fund complex overseen by director Other directorships held by director (1) (2) (3) (4) (5) (6) Instructions. 1. For purposes of this paragraph, the term ‘‘family relationship’’ means any relationship by blood, marriage, or adoption, not more remote than first cousin. 2. For each director who is an interested person of the Registrant, as defined in Section 2(a)(19) of the Investment Company Act and the rules thereunder, describe, in a footnote or otherwise, the relationship, events, or transactions by reason of which the director is an interested person. 3. State the principal business of any company listed under column (4) unless the principal business is implicit in its name. 4. Indicate in column (6) directorships not included in column (5) that are held by a director in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act, and name the companies in which the directorships are held. Where the other directorships include directorships overseeing two or more portfolios in the same fund complex, identify the fund complex and provide the number of portfolios overseen as a director in the fund complex rather than listing each portfolio separately. 2. For each individual listed in column (1) of the table required by paragraph 1 of this Item 18, except for any director who is not an interested person of the Registrant, as defined in Section 2(a)(19) of the Investment Company Act and the rules thereunder, describe any positions, including as an officer, employee, director, or general partner, held with affiliated persons or principal underwriters of the Registrant. Instruction. When an individual holds the same position(s) with two or more registered investment companies that are part of the same fund complex, identify the fund complex and provide the number of registered investment companies for which the position(s) are held rather than listing each registered investment company separately. 3. Describe briefly any arrangement or understanding between any director or officer and any other person(s) (naming VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 the person(s)) pursuant to which he was selected as a director or officer. Instruction. Do not include arrangements or understandings with directors or officers acting solely in their capacities as such. 4. For each non-resident director or officer of the Registrant listed in column (1) of the table required by paragraph 1, disclose whether he has authorized an agent in the United States to receive notice and, if so, disclose the name and address of the agent. 5. a. Briefly describe the leadership structure of the Registrant’s board, including whether the chairman of the board is an interested person of the Registrant, as defined in Section 2(a)(19) of the Investment Company Act. If the chairman of the board is an interested person of the Registrant, disclose whether the Registrant has a lead independent director and what specific role the lead independent director plays in the leadership of the Registrant. This disclosure should indicate why the Registrant has determined that its leadership structure is appropriate given the specific characteristics or circumstances of the Registrant. In addition, disclose the extent of the board’s role in the risk oversight of the Registrant, such as how the board administers its oversight function, and the effect that this has on the board’s leadership structure. b. Identify the standing committees of the Registrant’s board of directors, and provide the following information about each committee: (1) A concise statement of the functions of the committee; (2) The members of the committee; (3) The number of committee meetings held during the last fiscal year; and (4) If the committee is a nominating or similar committee, state whether the committee will consider nominees recommended by security holders and, if so, describe the procedures to be followed by security holders in submitting recommendations. 6. a. Unless disclosed in the table required by paragraph 1 of this Item 18, describe any positions, including as an officer, employee, director, or general partner, held by any director who is not an interested person of the Registrant, as defined in Section 2(a)(19) of the PO 00000 Frm 00092 Fmt 4701 Sfmt 4700 Investment Company Act and the rules thereunder, or immediate family member of the director, during the two most recently completed calendar years with: (1) The Registrant; (2) An investment company, or a person that would be an investment company but for the exclusions provided by Sections 3(c)(1) and 3(c)(7) of the Investment Company Act, having the same investment adviser or principal underwriter as the Registrant or having an investment adviser or principal underwriter that directly or indirectly controls, is controlled by, or is under common control with an investment adviser or principal underwriter of the Registrant; (3) An investment adviser, principal underwriter, or affiliated person of the Registrant; or (4) Any person directly or indirectly controlling, controlled by, or under common control with an investment adviser or principal underwriter of the Registrant. b. Unless disclosed in the table required by paragraph 1 of this Item 18 or in response to paragraph 6.a of this Item 18, indicate any directorships held during the past five years by each director in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act, and name the companies in which the directorships were held. Instruction. When an individual holds the same position(s) with two or more portfolios that are part of the same fund complex, identify the fund complex and provide the number of portfolios for which the position(s) are held rather than listing each portfolio separately. 7. For each director, state the dollar range of equity securities beneficially owned by the director as required by the following table: a. In the Registrant; and b. On an aggregate basis, in any registered investment companies overseen by the director within the same family of investment companies as the Registrant. E:\FR\FM\01JNR2.SGM 01JNR2 33381 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations Name of director Dollar range of equity securities in the registrant Aggregate dollar range of equity securities in all registered investment companies overseen by director in family of investment companies (1) (2) (3) a director in columns (2) and (3), use the following ranges: none, $1–$10,000, $10,001–$50,000, $50,001–$100,000, or over $100,000. 8. For each director who is not an interested person of the Registrant, as defined in Section 2(a)(19) of the Investment Company Act and the rules thereunder, and his immediate family members, furnish the information required by the following table as to each class of securities owned beneficially or of record in: a. An investment adviser or principal underwriter of the Registrant; or b. person (other than a registered investment company) directly or indirectly controlling, controlled by, or under common control with an investment adviser or principal underwriter of the Registrant: jbell on DSKJLSW7X2PROD with RULES2 Instructions. 1. Information should be provided as of the end of the most recently completed calendar year. Specify the valuation date by footnote or otherwise. 2. Determine ‘‘beneficial ownership’’ in accordance with Rule 16a–1(a)(2) under the Exchange Act [17 CFR 240.16a–1]. 3. In disclosing the dollar range of equity securities beneficially owned by Name of director Name of owners and relationships to director Company Title of class Value of securities Percent of class (1) (2) (3) (4) (5) (6) Instructions. 1. Information should be provided as of the end of the most recently completed calendar year. Specify the valuation date by footnote or otherwise. 2. An individual is a ‘‘beneficial owner’’ of a security if he is a ‘‘beneficial owner’’ under either Rule 13d–3 [17 CFR 240.13d–3] or Rule 16a– 1(a)(2) under the Exchange Act. 3. Identify the company in which the director or immediate family member of the director owns securities in column (3). When the company is a person directly or indirectly controlling, controlled by, or under common control with an investment adviser or principal underwriter, describe the company’s relationship with the investment adviser or principal underwriter. 4. Provide the information required by columns (5) and (6) on an aggregate basis for each director and his immediate family members. 9. Unless disclosed in response to paragraph 8 of this Item 18, describe any direct or indirect interest, the value of which exceeds $120,000, of each director who is not an interested person of the Registrant, as defined in Section 2(a)(19) of the Investment Company Act and the rules thereunder, or immediate family member of the director, during the two most recently completed calendar years, in: a. An investment adviser or principal underwriter of the Registrant; or b. A person (other than a registered investment company) directly or indirectly controlling, controlled by, or under common control with an investment adviser or principal underwriter of the Registrant. VerDate Sep<11>2014 21:47 May 29, 2020 Jkt 250001 Instructions. 1. A director or immediate family member has an interest in a company if he is a party to a contract, arrangement, or understanding with respect to any securities of, or interest in, the company. 2. The interest of the director and the interests of his immediate family members should be aggregated in determining whether the value exceeds $120,000. 10. Describe briefly any material interest, direct or indirect, of any director who is not an interested person of the Registrant, as defined in Section 2(a)(19) of the Investment Company Act and the rules thereunder, or immediate family member of the director, in any transaction, or series of similar transactions, during the two most recently completed calendar years, in which the amount involved exceeds $120,000 and to which any of the following persons was a party: a. The Registrant; b. An officer of the Registrant; c. An investment company, or a person that would be an investment company but for the exclusions provided by Sections 3(c)(1) and 3(c)(7) of the Investment Company, having the same investment adviser or principal underwriter as the Registrant or having an investment adviser or principal underwriter that directly or indirectly controls, is controlled by, or is under common control with an investment adviser or principal underwriter of the Registrant; d. An officer of an investment company, or a person that would be an investment company but for the PO 00000 Frm 00093 Fmt 4701 Sfmt 4700 exclusions provided by Sections 3(c)(1) and 3(c)(7) of the Investment Company Act, having the same investment adviser or principal underwriter as the Registrant or having an investment adviser or principal underwriter that directly or indirectly controls, is controlled by, or is under common control with an investment adviser or principal underwriter of the Registrant; e. An investment adviser or principal underwriter of the Registrant; f. An officer of an investment adviser or principal underwriter of the Registrant; g. A person directly or indirectly controlling, controlled by, or under common control with an investment adviser or principal underwriter of the Registrant; or h. An officer of a person directly or indirectly controlling, controlled by, or under common control with an investment adviser or principal underwriter of the Registrant. Instructions. 1. Include the name of each director or immediate family member whose interest in any transaction or series of similar transactions is described and the nature of the circumstances by reason of which the interest is required to be described. 2. State the nature of the interest, the approximate dollar amount involved in the transaction, and, where practicable, the approximate dollar amount of the interest. 3. In computing the amount involved in the transaction or series of similar transactions, include all periodic payments in the case of any lease or E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 33382 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations other agreement providing for periodic payments. 4. Compute the amount of the interest of any director or immediate family member of the director without regard to the amount of profit or loss involved in the transaction(s). 5. As to any transaction involving the purchase or sale of assets, state the cost of the assets to the purchaser and, if acquired by the seller within two years prior to the transaction, the cost to the seller. Describe the method used in determining the purchase or sale price and the name of the person making the determination. 6. Disclose indirect, as well as direct, material interests in transactions. A person who has a position or relationship with, or interest in, a company that engages in a transaction with one of the persons listed in paragraphs 10.a through 10.h of this Item 18 may have an indirect interest in the transaction by reason of the position, relationship, or interest. The interest in the transaction, however, will not be deemed ‘‘material’’ within the meaning of paragraph 10 of this Item 18 where the interest of the director or immediate family member arises solely from the holding of an equity interest (including a limited partnership interest, but excluding a general partnership interest) or a creditor interest in a company that is a party to the transaction with one of the persons specified in paragraphs 10.a through 10.h of this Item 18, and the transaction is not material to the company. 7. The materiality of any interest is to be determined on the basis of the significance of the information to investors in light of all the circumstances of the particular case. The importance of the interest to the person having the interest, the relationship of the parties to the transaction with each other, and the amount involved in the transaction are among the factors to be considered in determining the significance of the information to investors. 8. No information need be given as to any transaction where the interest of the director or immediate family member arises solely from the ownership of securities of a person specified in paragraphs 10.a through 10.h of this Item 18 and the director or immediate family member receives no extra or special benefit not shared on a pro rata basis by all holders of the class of securities. 9. Transactions include loans, lines of credit, and other indebtedness. For indebtedness, indicate the largest aggregate amount of indebtedness outstanding at any time during the VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 period, the nature of the indebtedness and the transaction in which it was incurred, the amount outstanding as of the end of the most recently completed calendar year, and the rate of interest paid or charged. 10. No information need be given as to any routine, retail transaction. For example, the Registrant need not disclose that a director has a credit card, bank or brokerage account, residential mortgage, or insurance policy with a person specified in paragraphs 10.a through 10.h of this Item 18 unless the director is accorded special treatment. 11. Describe briefly any direct or indirect relationship, in which the amount involved exceeds $120,000, of any director who is not an interested person of the Registrant, as defined in Section 2(a)(19) of the Investment Company Act and the rules thereunder, or immediate family member of the director, that existed at any time during the two most recently completed calendar years, with any of the persons specified in paragraphs 10.a through 10.h of this Item 18. Relationships include: a. Payments for property or services to or from any person specified in paragraphs 10.a through 10.h of this Item 18; b. Provision of legal services to any person specified in paragraphs 10.a through 10.h of this Item 18; c. Provision of investment banking services to any person specified in paragraphs 10.a through 10.h of this Item 18, other than as a participating underwriter in a syndicate; and d. Any consulting or other relationship that is substantially similar in nature and scope to the relationships listed in paragraphs 11.a through 11.c of this Item 18. Instructions. 1. Include the name of each director or immediate family member whose relationship is described and the nature of the circumstances by reason of which the relationship is required to be described. 2. State the nature of the relationship and the amount of business conducted between the director or immediate family member and the person specified in paragraphs 10.a through 10.h of this Item 18 as a result of the relationship during the two most recently completed calendar years. 3. In computing the amount involved in a relationship, include all periodic payments in the case of any agreement providing for periodic payments. 4. Disclose indirect, as well as direct, relationships. A person who has a position or relationship with, or interest in, a company that has a relationship PO 00000 Frm 00094 Fmt 4701 Sfmt 4700 with one of the persons listed in paragraphs 10.a through 10.h of this Item 18 may have an indirect relationship by reason of the position, relationship, or interest. 5. In determining whether the amount involved in a relationship exceeds $120,000, amounts involved in a relationship of the director should be aggregated with those of his immediate family members. 6. In the case of an indirect interest, identify the company with which a person specified in paragraphs 10.a through 10.h of this Item 18 has a relationship; the name of the director or immediate family member affiliated with the company and the nature of the affiliation; and the amount of business conducted between the company and the person specified in paragraphs 10.a through 10.h of this Item 18 during the two most recently completed calendar years. 7. In calculating payments for property and services for purposes of paragraph 11.a of this Item 18, the following may be excluded: a. Payments where the transaction involves the rendering of services as a common contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; or b. Payments that arise solely from the ownership of securities of a person specified in paragraphs 10.a through 10.h of this Item 18 and no extra or special benefit not shared on a pro rata basis by all holders of the class of securities is received. 8. No information need be given as to any routine, retail relationship. For example, the Registrant need not disclose that a director has a credit card, bank or brokerage account, residential mortgage, or insurance policy with a person specified in paragraphs 10.a through 10.h of this Item 18 unless the director is accorded special treatment. 12. If an officer of an investment adviser or principal underwriter of the Registrant, or an officer of a person directly or indirectly controlling, controlled by, or under common control with an investment adviser or principal underwriter of the Registrant, served during the two most recently completed calendar years, on the board of directors of a company where a director of the Registrant who is not an interested person of the Registrant, as defined in Section 2(a)(19) of the Investment Company Act and the rules thereunder, or immediate family member of the director, was during the two most recently completed calendar years, an officer, identify: a. The company; E:\FR\FM\01JNR2.SGM 01JNR2 33383 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations b. The individual who serves or has served as a director of the company and the period of service as director; c. The investment adviser or principal underwriter or person controlling, controlled by, or under common control with the investment adviser or principal underwriter where the individual named in paragraph 12.b of this Item 18 holds or held office and the office held; and d. The director of the Registrant or immediate family member who is or was an officer of the company; the office held; and the period of holding the office. 13. In the case of a Registrant that is not a business development company, provide the following for all directors of the Registrant, all members of the advisory board of the Registrant, and for each of the three highest paid officers or any affiliated person of the Registrant with aggregate compensation from the Registrant for the most recently completed fiscal year in excess of $60,000 (‘‘Compensated Persons’’). a. Furnish the information required by the following table: jbell on DSKJLSW7X2PROD with RULES2 COMPENSATION TABLE Name of person, position Aggregate compensation from fund Pension or retirement benefits accrued as part of fund expenses Estimated annual benefits upon retirement Total compensation from fund and fund complex paid to directors (1) (2) (3) (4) (5) Instructions. 1. For column (1), indicate, if necessary, the capacity in which the remuneration is received. For Compensated Persons that are directors of the Registrant, compensation is amounts received for service as a director. 2. If the Registrant has not completed its first full year since its organization, furnish the information for the current fiscal year, estimating future payments that would be made pursuant to an existing agreement or understanding. Disclose in a footnote to the Compensation Table the period for which the information is furnished. 3. Include in column (2) amounts deferred at the election of the Compensated Person, whether pursuant to a plan established under Section 401(k) of the Internal Revenue Code [26 U.S.C. 401(k)] or otherwise for the fiscal year in which earned. Disclose in a footnote to the Compensation Table the total amount of deferred compensation (including interest) payable to or accrued for any Compensated Person. 4. Include in columns (3) and (4) all pension or retirement benefits proposed to be paid under any existing plan in the event of retirement at normal retirement date, directly or indirectly, by the Registrant, any of its subsidiaries, or other companies in the Fund Complex. Omit column (4) where retirement benefits are not determinable. 5. For any defined benefit or actuarial plan under which benefits are determined primarily by final compensation (or average final compensation) and years of service, provide the information required in column (4) in a separate table showing estimated annual benefits payable upon retirement (including amounts attributable to any defined benefit supplementary or excess pension award plans) in specified compensation and VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 years of service classifications. Also provide the estimated credited years of service for each Compensated Person. 6. Include in column (5) only aggregate compensation paid to a director for service on the board and all other boards of investment companies in a Fund Complex specifying the number of such other investment companies. b. Describe briefly the material provisions of any pension, retirement, or other plan or any arrangement other than fee arrangements disclosed in paragraph (a) pursuant to which Compensated Persons are or may be compensated for any services provided, including amounts paid, if any, to the Compensated Person under any such arrangements during the most recently completed fiscal year. Specifically include the criteria used to determine amounts payable under the plan, the length of service or vesting period required by the plan, the retirement age or other event which gives rise to payments under the plan, and whether the payment of benefits is secured or funded by the Registrant. 14. In the case of a Registrant that is a business development company, provide the information required by Item 402 of Regulation S–K [17 CFR 229.402]. 15. Codes of Ethics. Provide a brief statement disclosing whether the Registrant and its investment adviser and principal underwriter have adopted codes of ethics under Rule 17j–1 under the Investment Company Act [17 CFR 270.17j–1] and whether these codes of ethics permit personnel subject to the codes to invest in securities, including securities that may be purchased or held by the Registrant. Also, explain in the statement that these codes of ethics are available on the EDGAR Database on the Commission’s internet site at https:// www.sec.gov, and that copies of these PO 00000 Frm 00095 Fmt 4701 Sfmt 4700 codes of ethics may be obtained, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov. Instruction. A Registrant that is not required to adopt a code of ethics under Rule 17j–1 under the Investment Company Act is not required to respond to this Item. 16. Unless the Registrant invests exclusively in non-voting securities, describe the policies and procedures that the Registrant uses to determine how to vote proxies relating to portfolio securities, including the procedures that the Registrant uses when a vote presents a conflict between the interests of the Registrant’s shareholders, on the one hand, and those of the Registrant’s investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act and the rules thereunder) of the Registrant, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the Registrant’s investment adviser, or any other third party, that the Registrant uses, or that are used on the Registrant’s behalf, to determine how to vote proxies relating to portfolio securities. Also, state that information regarding how the Registrant voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request, by calling a specified toll-free (or collect) telephone number; sending an email to a specified email address, if any; or on or through the Registrant’s website at a specified internet address; and (ii) on the Commission’s website at https://www.sec.gov. Instructions. 1. A Registrant may satisfy the requirement to provide a description of the policies and procedures that it uses to determine how to vote proxies E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 33384 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations relating to portfolio securities by including a copy of the policies and procedures themselves. 2. If a Registrant discloses that the Registrant’s proxy voting record is available by calling a toll-free (or collect) telephone number or sending an email to a specified email address, if any, and the Registrant (or financial intermediary through which shares of the Registrant may be purchased or sold) receives a request for this information, the Registrant (or financial intermediary) must send the information disclosed in the Registrant’s most recently filed report on Form N– PX [17 CFR 274.129], within 3 business days of receipt of the request, by firstclass mail or other means designed to ensure equally prompt delivery. 3. If a Registrant discloses that the Registrant’s proxy voting record is available on or through its website, the Registrant must make available free of charge the information disclosed in the Registrant’s most recently filed report on Form N–PX on or through its website as soon as reasonably practicable after filing the report with the Commission. The information disclosed in the Registrant’s most recently filed report on Form N–PX must remain available on or through the Registrant’s website for as long as the Registrant remains subject to the requirements of Rule 30b1–4 under the Investment Company Act [17 CFR 270.30b1–4] and discloses that the Registrant’s proxy voting record is available on or through its website. 17. For each director, briefly discuss the specific experience, qualifications, attributes, or skills that led to the conclusion that the person should serve as a director for the Registrant at the time that the disclosure is made, in light of the Registrant’s business and structure. If material, this disclosure should cover more than the past five years, including information about the person’s particular areas of expertise or other relevant qualifications. is organized. List all parents of each control person. Instructions. 1. The term ‘‘control’’ is defined in the instruction to Item 9.3 of this Form. 2. A Registrant that is controlled by its adviser or underwriter(s) before the effective date of the registration statement need not respond to this Item if, immediately after the public offering, there will be no control person. 2. State the name, address, and percentage of ownership of each person who owns of record or is known by the Registrant to own of record or beneficially five percent or more of any class of the Registrant’s outstanding equity securities. Instructions. 1. Calculate the percentages on the basis of the amount of common stock outstanding. 2. If securities are being registered in connection with or pursuant to a plan of acquisition, reorganization, readjustment, or succession, indicate, to the extent practicable, the status to exist upon consummation of the plan on the basis of present holdings and commitments. 3. If, to the knowledge of the Registrant or any principal underwriter of its securities, five percent or more of any class of voting securities of the Registrant are or will be held subject to any voting trust or other similar agreement, disclose this fact. 4. Indicate whether the securities are owned both of record and beneficially, or of record only, or beneficially only, and disclose the respective percentage owned in each manner. 3. Disclose all equity securities of the Registrant owned by all officers, directors, and members of the advisory board of the Registrant as a group, without naming them. In any case where the amount owned by directors and officers as a group is less than one percent of the class, a statement to that effect is sufficient. Item 19. Control Persons and Principal Holders of Securities Furnish the following information as of a specified date no more than 30 days prior to the date of filing of the registration statement or amendment to it. 1. State the name and address of each person who controls the Registrant, and briefly explain the effect of such control on the voting rights of other shareholders. For each control person, state the percentage of the Registrant’s voting securities owned or any other basis of control. If the control person is a company, disclose the state or other jurisdiction under the laws of which it Item 20. Investment Advisory and Other Services 1. Furnish the following information about each investment adviser: a. The names of all controlling persons, the basis of such control, and, if material, the business history of any organization that controls the adviser; b. the names of any affiliated person of the Registrant who is also an affiliated person of the investment adviser and a list of all capacities in which such person named is affiliated with the Registrant and/or with the investment adviser; and Instruction. If an affiliated person of the Registrant, either alone or together VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 with others, is a controlling person of the investment adviser, the Registrant must disclose that fact but need not supply the specific amount of percentage of the outstanding voting securities of the investment adviser that are owned by the controlling person. c. The method of computing the advisory fee payable by the Registrant, including: (1) The total dollar amounts paid to the adviser by the Registrant under the investment advisory contract for the last three fiscal years; (2) if applicable, any credits that reduced the advisory fee for any of the last fiscal years; and (3) any expense limitation provision. Instructions. 1. If the advisory fee payable by the Registrant varies depending on the Registrant’s investment performance in relation to some standard, set forth the standard along with a fee schedule in tabular form. The Registrant may include examples showing the fees the adviser would earn at various levels of performance, but such examples must include calculations showing the maximum and minimum fee percentages that could be earned under the contract. 2. State each type of credit or offset separately. 3. Where the Registrant is subject to more than one expense limitation provision, describe only the most restrictive provision. 2. Concisely describe all services performed for or on behalf of the Registrant that are supplied or paid for wholly or in substantial part by the investment adviser in connection with the investment advisory contract. 3. Describe briefly all fees, expenses, and costs of the Registrant that are to be paid by persons other than the investment adviser or the Registrant, and identify such persons. 4. Summarize any managementrelated service contract under which services are provided to the Registrant that is not otherwise disclosed in response to an Item of this Form and may be of interest to a purchaser of the Registrant’s securities, indicating the parties to the contract and the total dollars paid, and by whom, for the past three years. Instructions. 1. A ‘‘management-related service contract’’ includes any agreement whereby another person contracts with the Registrant to keep, prepare, and/or file accounts, books, records, or other documents that the Registrant may be required to keep under federal or state law, or to provide any similar services with respect to the daily administration E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations of the Registrant, but does not include the following: (1) Any contract with the Registrant to provide investment advice; (2) any agreement to act as custodian, transfer agent, or dividend-paying agent; and (3) bona fide contracts for outside legal or auditing services, or bona fide contracts for personal employment entered into in the ordinary course of business. 2. No information is required about the service of mailing proxies or periodic reports to shareholders of the Registrant. 3. In summarizing the substantive provisions of a management-related service contract, include: (1) The name of the person providing the service; (2) any direct or indirect relationship of that person with the Registrant, its investment adviser, or its principal underwriter; (3) the nature of the services provided; and (4) the basis of the compensation paid for the last three fiscal years. 5. If any person (other than a bona fide director, officer, member of an advisory board, employee of the Registrant, or a person named as an investment adviser in response to paragraph 1 of this Item), pursuant to any understanding, whether formal or informal, regularly furnishes advice to the Registrant or the investment adviser of the Registrant with respect to the desirability of the Registrant’s investing in, purchasing, or selling securities or other property, or is empowered to determine which securities or other property should be purchased or sold by the Registrant, and receives direct or indirect remuneration from the Registrant, furnish the following information: a. The name of the person; b. a description of the nature of the arrangement and the advice or information given; and c. any remuneration (including, for example, participation, directly or indirectly, in commissions or other compensation paid in connection with transactions in the Registrant’s portfolio securities) paid for the advice or information, and a statement as to how and by whom such remuneration was paid for the last three fiscal years. Instruction. No information is required with respect to any of the following: 1. Persons whose advice was furnished solely through uniform publications distributed to subscribers; 2. persons who furnished only statistical and other factual information, advice regarding economic factors and trends, or advice as to occasional transactions in specific securities, but without generally furnishing advice or VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 making recommendations regarding the purchase or sale of securities by the Registrant; 3. a company that is excluded from the definition of ‘‘investment adviser’’ of an investment company by reason of Section 2(a)(20)(iii) of the Investment Company Act; 4. any person the character and amount of whose compensation for such service must be approved by a court; or 5. such other persons as the Commission has by rules and regulations or order determined not to be an ‘‘investment adviser’’ of an investment company. 6. Furnish the name and principal business address of each of the Registrant’s custodians, the nature of the business of each such person, and a general description of the services performed by each. 7. Furnish the name and principal business address of the Registrant’s independent public accountant, and provide a general description of the services performed by such person. 8. If an affiliated person of the Registrant, or an affiliated person of an affiliated person of the Registrant, acts as custodian, transfer agent, or dividend-paying agent for the Registrant, furnish a description of the services performed by that person and the basis for remuneration (e.g., the method by which that person’s fee is calculated). Item 21. Portfolio Managers 1. Other Accounts Managed. If a Portfolio Manager required to be identified in response to Item 9.1.c is primarily responsible for the day-to-day management of the portfolio of any other account, provide the following information: a. The Portfolio Manager’s name; b. The number of other accounts managed within each of the following categories and the total assets in the accounts managed within each category: (1) Registered investment companies; (2) Other pooled investment vehicles; and (3) Other accounts. c. For each of the categories in Item 21.1.b, the number of accounts and the total assets in the accounts with respect to which the advisory fee is based on the performance of the account; and d. A description of any material conflicts of interest that may arise in connection with the Portfolio Manager’s management of the Registrant’s investments, on the one hand, and the investments of the other accounts included in response to Item 21.1.b, on the other. This description would include, for example, material conflicts PO 00000 Frm 00097 Fmt 4701 Sfmt 4700 33385 between the investment strategy of the Registrant and the investment strategy of other accounts managed by the Portfolio Manager and material conflicts in allocation of investment opportunities between the Registrant and other accounts managed by the Portfolio Manager. Instructions. 1. Provide the information required by Item 21.1 as of the end of the Registrant’s most recently completed fiscal year, except that, in the case of an initial registration statement or an update to the Registrant’s registration statement that discloses a new Portfolio Manager, information with respect to any newly identified Portfolio Manager must be provided as of the most recent practicable date. Disclose the date as of which the information is provided. 2. If a committee, team, or other group of persons that includes the Portfolio Manager is jointly and primarily responsible for the day-to-day management of the portfolio of an account, include the account in responding to Item 21.1. 2. Compensation. Describe the structure of, and the method used to determine, the compensation of each Portfolio Manager required to be identified in response to Item 9.1.c. For each type of compensation (e.g., salary, bonus, deferred compensation, retirement plans and arrangements), describe with specificity the criteria on which that type of compensation is based, for example, whether compensation is fixed, whether (and, if so, how) compensation is based on the Registrant’s pre- or after-tax performance over a certain time period, and whether (and, if so, how) compensation is based on the value of assets held in the Registrant’s portfolio. For example, if compensation is based solely or in part on performance, identify any benchmark used to measure performance and state the length of the period over which performance is measured. Instructions. 1. Provide the information required by Item 21.2 as of the end of the Registrant’s most recently completed fiscal year, except that, in the case of an initial registration statement or an update to the Registrant’s registration statement that discloses a new Portfolio Manager, information with respect to any newly identified Portfolio Manager must be provided as of the most recent practicable date. Disclose the date as of which the information is provided. 2. Compensation includes, without limitation, salary, bonus, deferred compensation, and pension and retirement plans and arrangements, E:\FR\FM\01JNR2.SGM 01JNR2 33386 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 whether the compensation is cash or non-cash. Group life, health, hospitalization, medical reimbursement, and pension and retirement plans and arrangements may be omitted, provided that they do not discriminate in scope, terms, or operation in favor of the Portfolio Manager or a group of employees that includes the Portfolio Manager and are available generally to all salaried employees. The value of compensation is not required to be disclosed under this Item. 3. Include a description of the structure of, and the method used to determine, any compensation received by the Portfolio Manager from the Registrant, the Registrant’s investment adviser, or any other source with respect to management of the Registrant and any other accounts included in the response to Item 21.1.b. This description must clearly disclose any differences between the method used to determine the Portfolio Manager’s compensation with respect to the Registrant and other accounts, e.g., if the Portfolio Manager receives part of an advisory fee that is based on performance with respect to some accounts but not the Registrant, this must be disclosed. 3. Ownership of Securities. For each Portfolio Manager required to be identified in response to Item 9.1.c, state the dollar range of equity securities in the Registrant beneficially owned by the Portfolio Manager using the following ranges: none; $1–$10,000; $10,001– $50,000; $50,001–$100,000; $100,001– $500,000; $500,001–$1,000,000; or over $1,000,000. Instructions. 1. Provide the information required by Item 21.3 as of the end of the Registrant’s most recently completed fiscal year, except that, in the case of an initial registration statement or an update to the Registrant’s registration statement that discloses a new Portfolio Manager, information with respect to any newly identified Portfolio Manager must be provided as of the most recent practicable date. Specify the valuation date. 2. Determine ‘‘beneficial ownership’’ in accordance with Rule 16a–1(a)(2) under the Exchange Act. Item 22. Brokerage Allocation and Other Practices 1. Concisely describe how transactions in portfolio securities are or will be effected. Provide a general statement about brokerage commissions and mark-ups on principal transactions and the aggregate amount of any brokerage commissions paid by the Registrant during the three most recent VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 fiscal years. Concisely explain any material change in brokerage commissions paid by the Registrant during the most recent fiscal year as compared to the two prior fiscal years. 2. a. State the total dollar amount, if any, of brokerage commissions paid by the Registrant during the three most recent fiscal years to any broker that: (1) Is an affiliated person of the Registrant; (2) is an affiliated person of an affiliated person of the Registrant; or (3) has an affiliated person that is an affiliated person of the Registrant, its investment adviser, or principal underwriter. In the case of an initial public offering, disclose whether or not the Registrant intends to use any brokers described in this subparagraph, a. Identify each broker, and state the relationships that cause the broker to be identified in this Item. b. State for each broker identified in response to paragraph 2.a of this Item: (1) The percentage of the Registrant’s aggregate brokerage commissions paid to the broker during the most recent fiscal year; and (2) the percentage of the Registrant’s aggregate dollar amount of transactions involving the payment of commissions effected through the broker during the most recent fiscal year. c. Where there is a material difference in the percentage of brokerage commissions paid to, and the percentage of transactions effected through, any broker identified in response to paragraph 2.a of this Item, state the reasons for the difference. 3. Describe briefly how brokers will be selected to effect securities transactions for the Registrant and how evaluations will be made of the overall reasonableness of brokerage commissions paid, including the factors considered. Instructions. 1. If the receipt of products or services other than brokerage or research services is a factor considered in the selection of brokers, specify the products and services. 2. If the receipt of research services is a factor in selecting brokers, identify the nature of the research services. 3. State whether persons acting on behalf of the Registrant are authorized to pay a broker a commission in excess of that which another broker might have charged for effecting the same transaction because of the value of brokerage or research services provided by the broker. 4. If applicable, explain that research services furnished by brokers through whom the Registrant effects securities transactions may be used by the Registrant’s investment adviser in PO 00000 Frm 00098 Fmt 4701 Sfmt 4700 servicing all of its accounts and that not all the services may be used by the investment adviser in connection with the Registrant; or, if other policies or practices are applicable to the Registrant with respect to the allocation of research services provided by brokers, concisely explain the policies and practices. 5. Registrants should refer to Rule 17e–1 under the Investment Company Act [17 CFR 270.17e–1] with respect to securities transactions executed by exchange members. 4. If during the last fiscal year the Registrant or its investment adviser, pursuant to an agreement or understanding with a broker or otherwise through an internal allocation procedure, directed the Registrant’s brokerage transactions to a broker because of research services provided, state the amount of the transactions and related commissions. 5. If the Registrant has acquired during its most recent fiscal year or during the period of time since organization, whichever is shorter, securities of its regular brokers or dealers, as defined in Rule 10b–1 under the Investment Company Act [17 CFR 270.10b-1], or their parents, identify those brokers or dealers, and state the value of the Registrant’s aggregate holdings of the securities of each subject issuer as of the close of the Registrant’s most recent fiscal year. Instruction. The Registrant need only disclose information with respect to the parent of a broker or dealer that derived more than fifteen percent of its gross revenues from the business of a broker, a dealer, an underwriter, or an investment adviser. Item 23. Tax Status Provide information about the Registrant’s tax status that is not required to be in the prospectus but that the Registrant believes is of interest to investors, including, but not limited to, an explanation of the legal basis for the Registrant’s tax status. If the Registrant is qualified or intends to qualify under Subchapter M of the Internal Revenue Code and has not disclosed that fact in the prospectus, then disclosure of that fact will be sufficient. If not otherwise disclosed, concisely describe any special or unusual tax aspects of the Registrant, e.g., taxes resulting from foreign investment or from status as a personal holding company, or any tax loss carry-forward to which the Registrant may be entitled. Item 24. Financial Statements Provide the financial statements of the Registrant. Instructions. E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 1. a. Furnish, in a separate section following the responses to the above items in Part B of the registration statement, the financial statements and schedules required by Regulation S–X [17 CFR 210]. (See Section 210.3–18 and Sections 210.6–01 through 210.6–10 of Regulation S–X.) b. A business development company that has had at least one fiscal year of operations need provide financial statements under Item 8.6.c of Part A only. A business development company with less than one fiscal year of operations should refer to Item 8.6.c of Part A and Instructions 1 and 2 thereunder in responding to this Item 24. 2. Notwithstanding the requirements of Instruction 1 above, the following statements and schedules required by Regulation S–X may be omitted from Part B and included in Part C of the registration statement: a. The statement of any subsidiary that is not a majority-owned subsidiary; and b. Columns C and D of Schedule III [17 CFR 210.12–14]. 3. In addition to the requirements of Rule 3–18 of Regulation S–X [17 CFR 210.3–18], any company registered under the Investment Company Act that has not previously had an effective registration statement under the Securities Act shall include in its initial registration statement under the Securities Act such additional financial statements and financial highlights (which need not be audited) as are necessary to make the financial statements and financial highlights included in the registration statement as of a date within 90 days prior to the date of filing. 4. Every annual report to shareholders required by Section 30(e) of the Investment Company Act and Rule 30e– 1 thereunder shall contain the following information: a. The audited financial statements required by Regulation S–X for the periods specified by Regulation S–X, modified to permit the omission of the statements and schedules that may be omitted from Part B of the registration statement by Instruction 2 above and as permitted by Instruction 7 below; b. the financial highlights required by Item 4.1 of this Form, for the five most recent fiscal years, with at least the most recent year audited; c. unless shown elsewhere in the report as part of the financial statements required by a above, the aggregate remuneration paid by the company during the period covered by the report (1) to all directors and to all members of any advisory board for regular VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 compensation; (2) to each director and to each member of an advisory board for special compensation; (3) to all officers; and (4) to each person of whom any officer or director of the company is an affiliated person; d. the information concerning changes in and disagreements with accountants and on accounting and financial disclosure required by Item 304 of Regulation S–K [17 CFR 229.304]; e. the management information required by paragraph 1 of Item 18; and f. a statement that the SAI includes additional information about directors of the Registrant and is available, without charge, upon request, and a tollfree (or collect) telephone number and email address, if any, for shareholders to use to request the SAI. g. Management’s Discussion of Fund Performance. Disclose the following information: (1) Discuss the factors that materially affected the Fund’s performance during the most recently completed fiscal year, including the relevant market conditions and the investment strategies and techniques used by the Fund. The information presented may include tables, charts, and other graphical depictions. (2) (A) Provide a line graph comparing the initial and subsequent account values at the end of each of the most recently completed 10 fiscal years of the Fund (or for the life of the Fund, if shorter), but only for periods subsequent to the effective date of the Fund’s registration statement. Assume a $10,000 initial investment at the beginning of the first fiscal year in an appropriate broad-based securities market index for the same period. 1. Line Graph Computation. (a) Assume that the initial investment was made at the offering price last calculated on the business day before the first day of the first fiscal year. (b) Base subsequent account values on the market price (or, if shares are not listed, the net asset value) of the Fund on the last business day of the first and each subsequent fiscal year. (c) Calculate the final account value by assuming the account was closed and sale was at the market price (or, if shares are not listed, the net asset value) on the last business day of the most recent fiscal year. (d) Base the line graph on the Fund’s required minimum initial investment if that amount exceeds $10,000. 2. Multiple Class Funds. The Fund can select which Class to include, consistent with the requirements of Instruction 3(a) to Item 4(b)(2) of Form N–1A [17 CFR 274.11A]. PO 00000 Frm 00099 Fmt 4701 Sfmt 4700 33387 (B) In a table placed within or next to the graph, provide the Fund’s average annual total returns for the 1-, 5-, and 10- year periods as of the end of the last day of the most recent fiscal year (or for the life of the Fund, if shorter), but only for periods subsequent to the effective date of the Fund’s registration statement. Average annual total returns should be computed in accordance with Item 26(b)(1) of Form N–1A, except with respect to reinvestments of dividends and distributions, which must be calculated consistent with Item 4 of this Form. Include a statement accompanying the graph and table to the effect that past performance does not predict future performance and that the graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares. (C) Sales Load. Reflect any sales load (or any other fees charged at the time of purchasing shares or opening an account) by beginning the line graph at the amount that actually would be invested (i.e., assume that the maximum sales load, and other charges deducted from payments, is deducted from the initial $10,000 investment). For a Fund whose shares are subject to a contingent deferred sales load, assume the deduction of the maximum deferred sales load (or other charges) that would apply for a complete sale that received the market price (or, if shares are not listed, the net asset value) on the last business day of the most recent fiscal year. For any other deferred sales load, repurchase fee, or withdrawal charge, assume that the deduction is in the amount(s) and at the time(s) that the sales load, repurchase fee, or withdrawal charge actually would have been deducted. (D) Dividends and Distributions. Assume reinvestment of all of the Fund’s dividends and distributions on the reinvestment dates during the period, and reflect any sales load imposed upon reinvestment of dividends or distributions or both. (E) Account Fees. Reflect recurring fees that are charged to all accounts. 1. For any account fees that vary with the size of the account, assume a $10,000 account size. 2. Reflect, as appropriate, any recurring fees charged to shareholder accounts that are paid other than by sale of the Fund’s shares. 3. Reflect an annual account fee that applies to more than one Fund by allocating the fee in the following manner: Divide the total amount of account fees collected during the year by the Funds’ total average market price, multiply the resulting percentage by the E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 33388 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations average account value for each Fund and reduce the value of each hypothetical account at the end of each fiscal year during which the fee was charged. (F) Appropriate Index. For purposes of this Item, an ‘‘appropriate broadbased securities market index’’ is one that is administered by an organization that is not an affiliated person of the Fund, its investment adviser, or principal underwriter, unless the index is widely recognized and used. Adjust the index to reflect the reinvestment of dividends on securities in the index, but do not reflect the expenses of the Fund. (G) Additional Indexes. A Fund is encouraged to compare its performance not only to the required broad-based index, but also to other more narrowly based indexes that reflect the market sectors in which the Fund invests. A Fund also may compare its performance to an additional broad-based index, or to a non-securities index (e.g., the Consumer Price Index), so long as the comparison is not misleading. (H) Change in Index. If the Fund uses an index that is different from the one used for the immediately preceding fiscal year, explain the reason(s) for the change and compare the Fund’s annual change in the value of an investment in the hypothetical account with the new and former indexes. (I) Other Periods. The line graph may cover earlier fiscal years and may compare the ending values of interim periods (e.g., monthly or quarterly ending values), so long as those periods are after the effective date of the Fund’s registration statement. (J) Scale. The axis of the graph measuring dollar amounts may use either a linear or a logarithmic scale. (K) New Funds. A New Fund is not required to include the information specified by this Item in its prospectus (or annual report), unless Form N–2 (or the annual report) contains audited financial statements covering a period of at least 6 months. (L) Change in Investment Adviser. If the Fund has not had the same investment adviser for the previous 10 fiscal years, the Fund may begin the line graph on the date that the current adviser began to provide advisory services to the Fund so long as: 1. Neither the current adviser nor any affiliate is or has been in ‘‘control’’ of the previous adviser under Section 2(a)(9) of the Investment Company Act; 2. The current adviser employs no officer(s) of the previous adviser or employees of the previous adviser who were responsible for providing investment advisory or portfolio management services to the Fund; and VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 3. The graph is accompanied by a statement explaining that previous periods during which the Fund was advised by another investment adviser are not shown. (3) Discuss the effect of any policy or practice of maintaining a specified level of distributions to shareholders on the Fund’s investment strategies and per share net asset value during the last fiscal year. Also discuss the extent to which the Fund’s distribution policy resulted in distributions of capital. h. If the Registrant has filed a registration statement pursuant to General Instruction A.2: (1) Senior Securities. Include the information required by Item 4.3. (2) Fee and Expense Table. Include the information required by Item 3.1. (3) Share Price Data. Include the information required by Item 8.5. (4) Unresolved Staff Comments. If the Registrant has received written comments from the Commission staff regarding its periodic or current reports under the Exchange Act or Investment Company Act or its registration statement not less than 180 days before the end of its fiscal period to which the annual report relates, and such comments remain unresolved, disclose the substance of any such unresolved comments that the Registrant believes are material. Such disclosure may provide other information including the position of the Registrant with respect to any such comment. 5. Every report to shareholders required by Section 30(e) of the Investment Company Act and Rule 30e– 1 thereunder, except the annual report, shall contain the following information (which need not be audited): a. The financial statements required by Regulation S–X for the period commencing either with (1) the beginning of the company’s fiscal year (or date of organization, if newly organized); or (2) a date not later than the date after the close of the period included in the last report conforming with the requirements of Rule 30e–1 and the most recent preceding fiscal year, modified to permit the omission of the statements and schedules that may be omitted from Part B of the registration statement by Instruction 2 above and as permitted by Instruction 7 below; b. the financial highlights required by Item 4.1 of this Form, for the period of the report as specified by subparagraph a of this instruction, and the most recent preceding fiscal year; c. unless shown elsewhere in the report as part of the financial statements required by subparagraph a of this instruction, the aggregate remuneration PO 00000 Frm 00100 Fmt 4701 Sfmt 4700 paid by the company during the period covered by the report (1) to all directors and to all members of any advisory board for regular compensation; (2) to each director and to each member of an advisory board for special compensation; (3) to all officers; and (4) to each person of whom an officer or director of the company is an affiliated person; and d. the information concerning changes in and disagreements with accountants and on accounting and financial disclosure required by Item 304 of Regulation S–K. 6. Every annual and semi-annual report to shareholders required by Section 30(e) of the Investment Company Act and Rule 30e–1 thereunder shall contain the following information: a. One or more tables, charts, or graphs depicting the portfolio holdings of the Registrant by reasonably identifiable categories (e.g., type of security, industry sector, geographic region, credit quality, or maturity) showing the percentage of net asset value or total investments attributable to each. The categories and the basis of presentation (e.g., net asset value or total investments) should be selected, and the presentation should be formatted, in a manner reasonably designed to depict clearly the types of investments made by the Fund, given its investment objectives. If the Fund depicts portfolio holdings according to credit quality, it should include a description of how the credit quality of the holdings were determined, and if credit ratings, as defined in Section 3(a)(60) of the Exchange Act, assigned by a credit rating agency, as defined in Section 3(a)(61) of the Exchange Act, are used, explain how they were identified and selected. This description should be included near, or as part of, the graphical representation. b. Statement Regarding Availability of Quarterly Portfolio Schedule. A statement that: (i) The Registrant files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N–PORT [17 CFR 274.150]; (ii) the Registrant’s Form N– PORT reports are available on the Commission’s website at https:// www.sec.gov; (iii) if the Registrant makes the information on Form N– PORT available to shareholders on its website or upon request, a description of how the information may be obtained from the Registrant. c. A statement that a description of the policies and procedures that the Registrant uses to determine how to vote proxies relating to portfolio securities is E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations available (1) without charge, upon request, by calling a specified toll-free (or collect) telephone number or sending an email to a specified email address, if any; (2) on the Registrant’s website, if applicable; and (3) on the Commission’s website at https:// www.sec.gov; and d. A statement that information regarding how the Registrant voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling a specified toll-free (or collect) telephone number; sending an email to a specified email address, if any; or on or through the Registrant’s website at a specified internet address; and (2) on the Commission’s website at https:// www.sec.gov. e. If the Registrant’s board of directors approved any investment advisory contract during the Registrant’s most recent fiscal half-year, discuss in reasonable detail the material factors and the conclusions with respect thereto that formed the basis for the board’s approval. Include the following in the discussion: (1) Factors relating to both the board’s selection of the investment adviser and approval of the advisory fee and any other amounts to be paid by the Registrant under the contract. This would include, but not be limited to, a discussion of the nature, extent, and quality of the services to be provided by the investment adviser; the investment performance of the Registrant and the investment adviser; the costs of the services to be provided and profits to be realized by the investment adviser and its affiliates from the relationship with the Registrant; the extent to which economies of scale would be realized as the Registrant grows; and whether fee levels reflect these economies of scale for the benefit of the Registrant’s investors. Also indicate in the discussion whether the board relied upon comparisons of the services to be rendered and the amounts to be paid under the contract with those under other investment advisory contracts, such as contracts of the same and other investment advisers with other registered investment companies or other types of clients (e.g., pension funds and other institutional investors). If the board relied upon such comparisons, describe the comparisons that were relied on and how they assisted the board in concluding that the contract should be approved; and (2) If applicable, any benefits derived or to be derived by the investment adviser from the relationship with the Registrant such as soft dollar VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 arrangements by which brokers provide research to the Registrant or its investment adviser in return for allocating the Registrant’s brokerage. f. Board approvals covered by Instruction 6.e to this Item include both approvals of new investment advisory contracts and approvals of contract renewals. Investment advisory contracts covered by Instruction 6.e include subadvisory contracts. Conclusory statements or a list of factors will not be considered sufficient disclosure under Instruction 6.e. Relate the factors to the specific circumstances of the Registrant and the investment advisory contract and state how the board evaluated each factor. For example, it is not sufficient to state that the board considered the amount of the investment advisory fee without stating what the board concluded about the amount of the fee and how that affected its decision to approve the contract. If any factor enumerated in Instruction 6.e.(1) to this Item is not relevant to the board’s evaluation of an investment advisory contract, note this and explain the reasons why the factor is not relevant. g. Include on the front cover page or at the beginning of the annual or semiannual report a statement to the following effect, if applicable: Beginning on [date], as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Registrant’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Registrant [or from your financial intermediary, such as a broker-dealer or bank]. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Registrant [or your financial intermediary] electronically by [insert instructions]. You may elect to receive all future reports in paper free of charge. You can inform the Registrant [or your financial intermediary] that you wish to continue receiving paper copies of your shareholder reports by [insert instructions]. Your election to receive reports in paper will apply to all funds held with [the fund complex/your financial intermediary]. 7. Schedule IX—Summary schedule of investments in securities of unaffiliated issuers [17 CFR 210.12– PO 00000 Frm 00101 Fmt 4701 Sfmt 4700 33389 12C] may be included in the financial statements required under Instructions 4.a and 5.a of this Item in lieu of Schedule I—Investments in securities of unaffiliated issuers [17 CFR 210.12–12] if: a. The Registrant states in the report that the Registrant’s complete schedule of investments in securities of unaffiliated issuers is available (i) without charge, upon request, by calling a specified toll-free (or collect) telephone number or sending an email to a specified email address, if any; (ii) on the Registrant’s website, if applicable; and (iii) on the Commission’s website at https:// www.sec.gov; and b. whenever the Registrant (or financial intermediary through which shares of the Registrant may be purchased or sold) receives a request for the Registrant’s schedule of investments in securities of unaffiliated issuers, the Registrant (or financial intermediary) sends a copy of Schedule I— Investments in securities of unaffiliated issuers within 3 business days of receipt by first-class mail or other means designed to ensure equally prompt delivery. 8. a. When a Registrant (or financial intermediary through which shares of the Registrant may be purchased or sold) receives a request for a description of the policies and procedures that the Registrant uses to determine how to vote proxies, the Registrant (or financial intermediary) must send the information most recently disclosed in response to Item 18.16 of this Form or Item 7 of Form N–CSR within 3 business days of receipt of the request, by first-class mail or other means designed to ensure equally prompt delivery. b. If a Registrant discloses that the Registrant’s proxy voting record is available by calling a toll-free (or collect) telephone number or sending an email to a specified email address, if any, and the Registrant (or financial intermediary through which shares of the Registrant may be purchased or sold) receives a request for this information, the Registrant (or financial intermediary) must send the information disclosed in the Registrant’s most recently filed report on Form N– PX, within 3 business days of receipt of the request, by first-class mail or other means designed to ensure equally prompt delivery. c. If a Registrant discloses that the Registrant’s proxy voting record is available on or through its website, the Registrant must make available free of charge the information disclosed in the Registrant’s most recently filed report E:\FR\FM\01JNR2.SGM 01JNR2 33390 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations on Form N–PX on or through its website as soon as reasonably practicable after filing the report with the Commission. The information disclosed in the Registrant’s most recently filed report on Form N–PX must remain available on or through the Registrant’s website for as long as the Registrant remains subject to the requirements of Rule 30b1–4 under the Investment Company Act and discloses that the Registrant’s proxy voting record is available on or through its website. 9. See General Instruction F regarding Incorporation by Reference. 10. Every annual report filed under the Exchange Act by a business development company must contain the information required by Instructions 4.b and 4.h. Part C—Other Information jbell on DSKJLSW7X2PROD with RULES2 Item 25. Financial Statements and Exhibits List all financial statements and exhibits filed as part of the registration statement. 1. Financial statements. Instruction. Identify those financial statements that are included in Parts A and B of the registration statement. 2. Exhibits. Subject to General Instruction F regarding incorporation by reference and Rule 483 under the Securities Act [17 CFR 230.483], file the exhibits listed below as part of the registration statement. Letter or number the exhibits in the sequence indicated, unless otherwise required by Rule 483. Reflect any exhibit incorporated by reference in the list below and identify the previously filed document containing the incorporated material. a. Copies of the charter as now in effect. b. Copies of the existing bylaws or instruments corresponding thereto. c. Copies of any voting trust agreement with respect to more than five percent of any class of equity securities of the Registrant. d. Copies of the constituent instruments defining the rights of the holders of the securities. e. A copy of the document setting forth the Registrant’s dividend reinvestment plan, if any. f. Copies of the constituent instruments defining the rights of the holders of long-term debt of all subsidiaries for which consolidated or unconsolidated financial statements are required to be filed (The instrument relating to any class of long-term debt of the Registrant or any subsidiary need not be filed if the total amount of securities authorized thereunder VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 amounts to less than two percent of the total assets of the Registrant and its subsidiaries on a consolidated basis, and if the Registrant files an agreement to furnish such copies to the Commission upon request.). g. Copies of all investment advisory contracts relating to the management of the assets of the Registrant. h. Copies of each underwriting or distribution contract between the Registrant and a principal underwriter, and specimens or copies of all agreements between principal underwriters and dealers. i. Copies of all bonus, profit sharing, pension, or other similar contracts or arrangements wholly or partly for the benefit of directors or officers of the Registrant in their capacity as such (a reasonably detailed description of any plan that is not set forth in a formal document should be furnished). j. Copies of all custodian agreements and depository contracts entered into in conformance with Section 17(f) of the Investment Company Act or rules thereunder with respect to securities and similar investments of the Registrant, including the schedule of remuneration. k. Copies of all other material contracts not made in the ordinary course of business that are to be performed in whole or in part at or after the date of filing the registration statement. l. An opinion of counsel and consent to its use as to the legality of the securities being registered, indicating whether they will be legally issued, fully paid, and nonassessable. m. If a non-resident director, officer, investment adviser, or expert named in the registration statement has executed a consent to service of process within the United States, a copy of that consent to service. n. Copies of any other opinions, appraisals, or rulings, and consents to their use, relied on in preparing the registration statement, and consents to the use of accountants’ reports relating to audited financial statements required by Section 7 of the Securities Act. o. All financial statements omitted from Items 8.6 or 24. p. Copies of any agreements or understandings made in consideration for providing the initial capital between or among the Registrant, the underwriter, adviser, promoter, or initial stockholders and written assurance from the promoters or initial stockholders that their purchases were made for investment purposes without any present intention of reselling. q. Copies of the model plan used in the establishment of any retirement plan PO 00000 Frm 00102 Fmt 4701 Sfmt 4700 in conjunction with which the Registrant offers its securities, any instructions to it, and any other documents making up the model plan (such form(s) should disclose the costs and fees charged in connection with the plan). r. Copies of any codes of ethics adopted under Rule 17j-1 under the Investment Company Act and currently applicable to the Registrant (i.e., the codes of the Registrant and its investment advisers and principal underwriters). If there are no codes of ethics applicable to the Registrant, state the reason (e.g., the Registrant is a Money Market Fund). Instructions. 1. Subject to the rules on incorporation by reference and Instruction 2 below, the foregoing exhibits shall be filed as a part of the registration statement. Exhibits required by paragraphs 2.h, 2.l, 2.n, and 2.o above need to be filed only as part of a Securities Act registration statement. Exhibits shall be appropriately lettered or numbered for convenient reference. Exhibits incorporated by reference may bear the designation given in a previous filing. Where exhibits are incorporated by reference, the reference shall be made in the list of exhibits. The reference shall include the form, file number and date of the previous filing, and the exhibit number (i.e., exhibit 2.a, 2.b, etc.) under which the exhibit was previously filed. 2. A Registrant need not file an exhibit as part of a post-effective amendment, if the exhibit has been filed in the Registrant’s initial registration statement or in a previous post-effective amendment, unless there has been a change in the exhibit, or unless the exhibit is a copy of a consent required by Section 7 of the Securities Act or is a financial statement omitted from Items 8.6 or 24. The reference to this exhibit shall include the number of the previous filing (e.g., pre-effective amendment No. 1) where such exhibit was filed. 3. If an exhibit to a registration statement (other than an opinion or consent), filed in preliminary form, has been changed (1) only to insert information as to interest, dividend or conversion rates, redemption or conversion prices, purchase or offering prices, underwriters’ or dealers’ commissions, names, addresses or participation of underwriters or similar matters, which information appears elsewhere in an amendment to the registration statement or a prospectus filed pursuant to Rule 424(b) under the Securities Act or (2) to correct typographical errors, insert signatures or E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations make other similar immaterial changes, then, notwithstanding any contrary requirement of any rule or form, the Registrant need not refile the exhibit as so amended. Any incomplete exhibit may not, however, be incorporated by reference into any subsequent filing under any Act administered by the Commission. If an exhibit required to be executed (e.g., an underwriting agreement) is filed in final form, a copy of an executed copy shall be filed. 4. Schedules (or similar attachments) to the exhibits required by this Item are not required to be filed provided that they do not contain information material to an investment or voting decision and that information is not otherwise disclosed in the exhibit or the disclosure document. Each exhibit filed must contain a list briefly identifying the contents of all omitted schedules. Registrants need not prepare a separate list of omitted information if such information is already included within the exhibit in a manner that conveys the subject matter of the omitted schedules and attachments. In addition, the registrant must provide a copy of any omitted schedule to the Commission or its staff upon request. 5. The registrant may redact information from exhibits required to be filed by this Item if disclosure of such information would constitute a clearly unwarranted invasion of personal privacy (e.g., disclosure of bank account numbers, social security numbers, home addresses and similar information). 6. The registrant may redact provisions or terms of exhibits required to be filed by paragraph k. of this Item if those provisions or terms are both (1) not material and (2) would likely cause competitive harm to the registrant if publicly disclosed. If it does so, the registrant should mark the exhibit index to indicate that portions of the exhibit or exhibits have been omitted and include a prominent statement on the first page of the redacted exhibit that certain identified information has been excluded from the exhibit because it is both (1) not material and (2) would likely cause competitive harm to the registrant if publicly disclosed. The registrant also must indicate by brackets where the information is omitted from the filed version of the exhibit. If requested by the Commission or its staff, the registrant must promptly provide an unredacted copy of the exhibit on a supplemental basis. The Commission staff also may request the registrant to provide its materiality and competitive harm analyses on a supplemental basis. Upon evaluation of the registrant’s supplemental materials, the Commission or its staff may request VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 the registrant to amend its filing to include in the exhibit any previously redacted information that is not adequately supported by the registrant’s materiality and competitive harm analyses. The registrant may request confidential treatment of the supplemental material pursuant to Rule 83 [17 CFR 200.83] while it is in the possession of the Commission or its staff. After completing its review of the supplemental information, the Commission or its staff will return or destroy it at the request of the registrant, if the registrant complies with the procedures outlined in Rule 418 [17 CFR 230.418]. 7. Each exhibit identified in the exhibit index (other than an exhibit filed in eXtensible Business Reporting Language) must include an active link to an exhibit that is filed with the registration statement or, if the exhibit is incorporated by reference, an active hyperlink to the exhibit separately filed on EDGAR. If the registration statement is amended, each amendment must include active hyperlinks to the exhibits required with the amendment. Item 26. Marketing Arrangements Briefly describe any arrangements known to the Registrant or to any person named in response to Item 5, or to any person specified in Item 19.2, made for any of the following purposes: 1. to limit or restrict the sale of other securities of the same class as those to be offered for the period of distribution; 2. to stabilize the market for any of the securities to be offered; or 3. to hold each underwriter or dealer responsible for the distribution of his or her participation. Instruction. If the answer to this Item is contained in an exhibit, the Item may be answered by cross-reference to the relevant paragraph(s) of the exhibit. Item 27. Other Expenses of Issuance and Distribution Furnish a reasonably itemized statement of all expenses in connection with the issuance and distribution of the securities being registered, other than underwriting discounts and commissions. If any of the securities being registered are to be offered for the account of securityholders, indicate the portion of expenses to be borne by securityholders. Instruction. Insofar as practicable, separately itemize registration fees, federal taxes, state taxes and fees, trustees’ and transfer agents’ fees, costs of printing and engraving, rating agency fees, and legal and accounting fees. The information may be given subject to future contingencies. Provide estimates PO 00000 Frm 00103 Fmt 4701 Sfmt 4700 33391 if the amounts of any items are not known. Item 28. Persons Controlled by or Under Common Control Furnish a list or diagram of all persons directly or indirectly controlled by, or under common control with, the Registrant, and as to each of these persons indicate (1) if a company, the state or other jurisdiction under whose laws it is organized, and (2) the percentage of voting securities owned or other basis of control by the person, if any, immediately controlling it. Instructions. 1. The list or diagram shall include the Registrant and shall show clearly the relationship of each company named to the Registrant and to other companies named. If the company is controlled by the direct ownership of its securities by two or more persons, so indicate by appropriate cross-reference. 2. Identify, by appropriate symbols: (1) Subsidiaries for which separate financial statements are filed; (2) subsidiaries included in the respective consolidated financial statements; (3) subsidiaries included in the respective group financial statements filed for unconsolidated subsidiaries; and (4) other subsidiaries, indicating briefly why statements of these subsidiaries are not filed. Item 29. Number of Holders of Securities State in substantially the tabular form indicated, as of a specified date within 90 days prior to the date of filing, the number of record holders of each class of securities of the Registrant. Title of class Number of record holders (1) ......................................... (2) Item 30. Indemnification State the general effect of any contract, arrangement, or statute under which any director, officer, underwriter, or affiliated person of the Registrant is insured or indemnified in any manner against any liability that may be incurred in such capacity, other than insurance provided by any member of the board of directors, officer, underwriter, or affiliated person for his or her own protection. Instruction. In responding to this Item, the Registrant should note the requirements of Rules 461(c) and 484 under the Securities Act [17 CFR 230.461 and 230.484] and Section 17 of the Investment Company Act. (See Investment Company Act Rel. No. 11330 (Sept. 4, 1980) [45 FR 62423 (Sept. 19, E:\FR\FM\01JNR2.SGM 01JNR2 33392 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 1980)] and Investment Company Act Rel. No. 7221 (June 9, 1972) [37 FR 12790 (June 29, 1972)].) Item 31. Business and Other Connections of Investment Adviser Describe briefly any other business, profession, vocation, or employment of a substantial nature in which each investment adviser of the Registrant, and each director, executive officer, or partner of any such investment adviser, is or has been, at any time during the past two fiscal years, engaged for his or her own account or in the capacity of director, officer, employee, partner, or trustee. Instructions. 1. State the name and principal business address of any company with which any person specified above is connected in the capacity of director, officer, employee, partner, or trustee and the nature of the connection. 2. The names of investment advisory clients need not be provided. 3. For purposes of this Item, the term ‘‘executive officer’’ means the investment adviser’s president, any other officer who performs a policymaking function for the investment adviser in connection with its management of the closed-end fund, or any other person who performs a similar policy-making function for the investment adviser. Executive officers of subsidiaries of the investment adviser may be deemed executive officers of the investment adviser, if they perform such policy-making functions for the investment adviser. jbell on DSKJLSW7X2PROD with RULES2 Item 32. Location of Accounts and Records Furnish the name and address of each person maintaining physical possession of each account, book, or other document required to be maintained by Section 31(a) of the Investment Company Act and the rules thereunder. Instruction. The Registrant may omit this information to the extent it is provided in its most recent report on Form N–CEN [17 CFR 249.330]. Item 33. Management Services Furnish a summary of the substantive provisions of any management-related service contract not discussed in Part A or B of the registration statement (because the contract was not believed to be of interest to a purchaser of the Registrant’s securities), indicating the parties to the contract, the total dollars paid, and by whom, for the last three fiscal years. Instructions. 1. The instructions to Item 20.4 of this Form shall also apply to this Item. VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 2. Information need not be provided for any service for which total payments of less than $5,000 were made during each of the last three fiscal years. Item 34. Undertakings Furnish the following undertakings in substantially the following form in all registration statements filed under the Securities Act, as applicable: 1. An undertaking to suspend the offering of shares until the prospectus is amended if (1) subsequent to the effective date of its registration statement, the net asset value declines more than ten percent from its net asset value as of the effective date of the registration statement or (2) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus. Provided, however, that this paragraph does not apply if the registration statement is filed pursuant to General Instruction A.2 of this Form to register an offering in reliance on Rule 415 under the Securities Act. 2. An undertaking to file a posteffective amendment with certified financial statements showing the initial capital received before accepting subscriptions from more than 25 persons, if the Registrant proposes to raise its initial capital under Section 14(a)(3) of the Investment Company Act. 3. If the securities are being registered in reliance on Rule 415 under the Securities Act, an undertaking: a. to file, during any period in which offers or sales are being made, a posteffective amendment to the registration statement: (1) To include any prospectus required by Section 10(a)(3) of the Securities Act; (2) to reflect in the prospectus any facts or events after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the ‘‘Calculation of Registration Fee’’ table in the effective registration statement. PO 00000 Frm 00104 Fmt 4701 Sfmt 4700 (3) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. Provided, however, that paragraphs a(1), a(2), and a(3) of this section do not apply if the registration statement is filed pursuant to General Instruction A.2 of this Form and the information required to be included in a posteffective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference into the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement. b. that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof; c. to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; d. that, for the purpose of determining liability under the Securities Act to any purchaser: (1) if the Registrant is relying on Rule 430B [17 CFR 230.430B]: (A) Each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and (B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (x), or (xi) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in E:\FR\FM\01JNR2.SGM 01JNR2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or (2) if the Registrant is subject to Rule 430C [17 CFR 230.430C]: each prospectus filed pursuant to Rule 424(b) under the Securities Act as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. e. that for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distribution of securities: The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser: (1) Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424 under the Securities Act; VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 (2) free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrants; (3) the portion of any other free writing prospectus or advertisement pursuant to Rule 482 under the Securities Act [17 CFR 230.482] relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and (4) any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. 4. If the Registrant is filing a registration statement permitted by Rule 430A under the Securities Act, an undertaking that: a. for the purpose of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 424(b)(1) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and b. for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof. 5. Filings Incorporating Subsequent Exchange Act Documents by Reference. Include the following if the registration statement incorporates by reference any Exchange Act document filed subsequent to the effective date of the registration statement: The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference into the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 6. Request for acceleration of effective date or filing of registration statement becoming effective upon filing. Include the following if acceleration is requested of the effective date of the registration statement pursuant to Rule 461 under the Securities Act, or if a registration PO 00000 Frm 00105 Fmt 4701 Sfmt 4700 33393 statement filed pursuant to General Instruction A.2 of this Form will become effective upon filing with the Commission pursuant to Rule 462(e) or (f) under the Securities Act, and: a. Any provision or arrangement exists whereby the Registrant may indemnify a director, officer or controlling person of the Registrant against liabilities arising under the Securities Act, or b. The underwriting agreement contains a provision whereby the Registrant indemnifies the underwriter or controlling persons of the underwriter against such liabilities and a director, officer or controlling person of the Registrant is such an underwriter or controlling person thereof or a member of any firm which is such an underwriter, and c. The benefits of such indemnification are not waived by such persons: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 7. An undertaking to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any prospectus or Statement of Additional Information. Signatures Pursuant to the requirements of the Securities Act of 1933 and/or the Investment Company Act of 1940, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto E:\FR\FM\01JNR2.SGM 01JNR2 33394 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations duly authorized, in the City ofllll l, and State of lllll, on the ll lld day of lllll, llll. which this Form is filed (If the Form is being filed for all series and classes of securities of the issuer, check the box but do not list series of classes): * * * * * 5. Calculation of registration fee (if calculating on a class-by-class or seriesby-series basis, provide the EDGAR identifier for each such class or series): * * * * * 10. Explanatory Notes (if any): The issuer may provide any information it believes would be helpful in understanding the information reported in response to any item of this Form. To the extent responses relate to a particular item, provide the item number(s), as applicable. * * * * * lllllllllllllllllllll Registrant By lllllllllllllllllll lllllllllllllllllllll Signature lllllllllllllllllllll Title Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following person in the capacities and on the dates indicated. lllllllllllllllllllll Signature lllllllllllllllllllll Title lllllllllllllllllllll Date Instructions 45. Effective August 1, 2021, amend Form 24F–2 (referenced in § 274.24) by: ■ a. Amending Item 2 to add ‘‘and EDGAR identifier’’ after the word ‘‘name’’; ■ b. Amending Item 5 to add ‘‘(if calculating on a class-by-class or seriesby-series basis, provide the EDGAR identifier for each such class or series):’’; ■ c. Adding Item 10; ■ d. Revising paragraph A.1. of the ‘‘INSTRUCTIONS’’ section; and ■ e. Revising paragraph A.3. of the ‘‘INSTRUCTIONS’’ section. The addition and revisions read as follows: ■ Note: The text of Form 24F–2 does not, and these amendments will not, appear in the Code of Federal Regulations. United States Securities and Exchange Commission Washington, DC 20549 Form 24F–2 Annual Filing Under Rule 24f–2 of the Investment Company Act of 1940 * * * * 2. The name and EDGAR identifier of each series or class of securities for jbell on DSKJLSW7X2PROD with RULES2 * VerDate Sep<11>2014 20:35 May 29, 2020 Jkt 250001 A. * * * 1. This Form should be used by an open-end management investment company, closed-end management company that makes periodic repurchase offers pursuant to § 270.23c– 3(b) of this chapter, face amount certificate company, or unit investment trust (‘‘issuer’’) for annual filings required by rule 24f–2 under the Investment Company Act of 1940 [15 U.S.C. 80a] (‘‘Investment Company Act’’). If the issuer has registered more than one class or series of securities on the same registration statement under the Securities Act of 1933 [15 U.S.C. 77a–aa] (‘‘Securities Act’’), the issuer may file a single Form 24F–2 for those classes or series that have the same fiscal year end. Such an issuer may calculate its fees based on aggregate net sales of the series having the same fiscal year end. An issuer choosing to calculate registration fees on a class-byclass or series-by-series basis should make a single filing consisting of a separate Form 24F–2 for each class or series in a single EDGAR document and provide the EDGAR identifier for each such class or series. * * * * * PO 00000 Frm 00106 Fmt 4701 Sfmt 9990 3. Pursuant to rule 101(a)(1)(iv) of Regulation S–T [17 CFR 232.101(a)(1)(iv)] this Form must be submitted in electronic format using the Commission’s Electronic Data Gathering, Analysis, and Retrieval (‘‘EDGAR’’) system. Consult the EDGAR Filer Manual and Appendices for EDGAR filing instructions. * * * * * 46. Amend Form N–CSR (referenced in §§ 249.331 and 274.128) by adding new paragraph 4 to General Instruction C to read as follows: ■ Note: The text of Form N–CSR does not, and these amendments will not, appear in the Code of Federal Regulations. United States Securities and Exchange Commission Washington, DC 20549 Form N–CSR Certified Shareholder Report of Registered Management Investment Companies * * * * * General Instructions C. * * * 4. Interactive Data File. An Interactive Data File as defined in Rule 11 of Regulation S–T [17 CFR 232.11] is required to be submitted to the Commission in the manner provided by Rule 405 of Regulation S–T [17 CFR 232.405] by a closed-end management investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a et seq.) to the extent required by Rule 405 of Regulation S–T. By the Commission. Dated: April 8, 2020. Vanessa A. Countryman, Secretary. [FR Doc. 2020–07790 Filed 5–29–20; 8:45 am] BILLING CODE 8011–01–P E:\FR\FM\01JNR2.SGM 01JNR2

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 105 (Monday, June 1, 2020)]
[Rules and Regulations]
[Pages 33290-33394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07790]

[[Page 33289]]

Vol. 85

Monday,

No. 105

June 1, 2020

Part II

Securities and Exchange Commission

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

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

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

[[Page 33290]]

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SECURITIES AND EXCHANGE COMMISSION

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

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

Securities Offering Reform for Closed-End Investment Companies

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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

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

FOR FURTHER INFORMATION CONTACT: Asaf Barouk, Attorney-Adviser; Joel
Cavanaugh, Senior Counsel; Terri G. Jordan, Senior Counsel; Amy Miller,
Senior Counsel; Angela Mokodean, Senior Counsel; Amanda Hollander
Wagner, Branch Chief; David J. Marcinkus, Branch Chief; Jacob D.
Krawitz, Branch Chief; or Brian McLaughlin Johnson, Assistant Director,
at (202) 551-6792, Investment Company Regulation Office, Division of
Investment Management; Charles Kwon, Senior Counsel, Office of
Rulemaking, at (202) 551-3430, Division of Corporation Finance; U.S.
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549.

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

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

Table of Contents

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

[[Page 33291]]

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

I. Introduction

We are adopting rules that will modify the registration,
communications, and offering processes for business development
companies (``BDCs'') and registered closed-end investment companies
(``registered CEFs''), including interval funds (collectively,
``affected funds'') under the Securities Act.\4\ In 2005, the
Commission adopted securities offering reforms for operating companies
to modernize the securities offering and communication processes while
maintaining the protection of investors under the Securities Act.\5\ At
that time, the Commission specifically excluded all investment
companies--including affected funds--from the scope of the reforms.\6\
Now, as directed by Congress, we are adopting rules that will allow
affected funds to use the securities offering rules that are already
available to operating companies.
---------------------------------------------------------------------------

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

[[Page 33292]]

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

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

[[Page 33293]]

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

[[Page 33294]]

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

II. Discussion

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

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

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

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

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

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

[[Page 33295]]

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

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

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

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

B. Registration Process

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

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

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

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

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

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

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

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

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

[[Page 33296]]

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

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

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

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

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

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

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

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

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

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

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

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

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

[[Page 33297]]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[[Page 33298]]

which is substantively identical to a parallel item in Form S-3, will
give affected funds filing a short-form registration statement on Form
N-2 the option to either provide required disclosure directly in the
prospectus or SAI or to satisfy Form N-2's disclosure requirements with
information incorporated by reference.\62\ We did not receive any
comments on these particular amendments to Form N-2.
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\61\ See new General Instruction F.3 of amended Form N-2. The
amendments will permit a fund to use this incorporated information
to provide the disclosure required by Items 3-12 and Items 16-24 of
Form N-2. See new General Instruction F.3.c of amended Form N-2; cf.
Item 12(d) of Form S-3.
\62\ The BDC Act directed us to extend this parallel item in
Form S-3 (Item 12) to BDCs that meet Form S-3's requirements. See
supra footnote 58; Item 12(d) of Form S-3; see also section 509(a)
of the Registered CEF Act.
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We also are adopting, as proposed, conforming changes to Form N-2's
undertakings.\63\ Form N-2 currently requires an undertaking that would
prevent seasoned funds that file a short-form shelf registration
statement from incorporating information by reference as proposed,
because it requires funds to file post-effective amendments in certain
circumstances without providing an exception that would allow the
required information to be supplied via incorporation by reference.\64\
In contrast, operating companies registering an offering on Form S-3
are not required under the applicable undertaking to file post-
effective amendments if the required information is included in an
Exchange Act report incorporated by reference or a prospectus
supplement that is part of the registration statement.\65\ To implement
the statutory mandates and provide parity for affected funds, we are
adopting amendments to Form N-2's undertakings to provide the same
approach for affected funds filing a short-form registration statement
on that form that applies to operating companies that file on Form S-
3.\66\
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\63\ See section 803(b)(2)(P) of the BDC Act (directing us to
revise Item 34 of Form N-2 to require a BDC to provide undertakings
``that are no more restrictive than the undertakings that are
required of a registrant under [Item 512 of Regulation S-K],'' which
sets forth the undertakings an operating company must include in its
registration statement for certain offerings).
Commenters suggested that the Item 34.1 undertaking to suspend
an offering if a fund's NAV declines more than 10% from its NAV on
its registration statement effective date until the fund amends the
prospectus should not apply to continuous or delayed shelf offerings
conducted by affected funds pursuant to proposed General Instruction
A.2 of Form N-2. See Comment Letter of Dechert LLP (June 10, 2019)
(``Dechert Comment Letter''); IPA Comment Letter; see also Item 34.1
of current Form N-2. Commenters urged that the undertaking should
not apply in these circumstances because the shelf offering could
extend over 3-1/2 years, and the undertaking did not seem necessary
because the fund would amend its prospectus by incorporating by
reference the information from its Exchange Act reports. See Dechert
Comment Letter; IPA comment Letter. We agree, and are amending Item
34.1 to clarify that this undertaking is not applicable in the
circumstance described by commenters. See Item 34.1 of amended Form
N-2.
\64\ Form N-2 currently requires an affected fund registering an
offering under rule 415 to undertake to file, during any period in
which offers or sales are being made, a post-effective amendment to
the registration statement under certain circumstances, including to
provide any prospectus required by section 10(a)(3) of the
Securities Act. See Item 34.4.a of current Form N-2.
\65\ See 17 CFR 229.512(a)(1)(iii)(B) (Item 512(a)(1)(iii)(B) of
Regulation S-K).
\66\ Specifically, our amendments add a new provision to the
relevant undertaking stating that the requirement to undertake to
file a post-effective amendment does not apply if the registration
statement is filed under the short-form registration instruction and
the information required to be included in a post-effective
amendment is contained in Exchange Act reports that are incorporated
by reference into the fund's registration statement or is contained
in a form of prospectus that is part of the registration statement.
See Item 34.3.a of amended Form N-2; cf. Item 512(a) of Regulation
S-K.
We also are amending Item 34 to make conforming changes to
mirror parallel undertakings in Item 512 of Regulation S-K. See,
e.g., Item 34.3.a(2) of amended Form N-2; cf. Item 512(a)(1)(ii) of
Regulation S-K; Item 34.3.d(1) of amended Form N-2; cf. Item
512(a)(5)(i) of Regulation S-K; Item 34.3.e(2)-(3) of amended Form
N-2; cf. Item 512(a)(6)(ii)-(iii) of Regulation S-K; Item 34.5 of
amended Form N-2; cf. Item 512(b) of Regulation S-K; and Item 34.6
of amended Form N-2; cf. Item 512(h) of Regulation S-K.
Additionally, in response to comments, we are eliminating the
undertaking in Item 34.3 of current Form N-2, which requires
affected funds to undertake to supplement the prospectus or file a
post-effective amendment to disclose certain information if the
securities being registered are to be offered to existing
shareholders, and if not taken, to be reoffered to the public. See
Dechert Comment Letter; IPA Comment. The Commission recently
eliminated a parallel undertaking from Regulation S-K because other
requirements make the undertaking duplicative and unnecessary. See
FAST Act Modernization and Simplification of Regulation S-K,
Investment Company Act Release No. 33426 (Mar. 20, 2019) [84 FR
12674 (Apr. 2, 2019)] (``FAST Act Modernization Adopting Release''),
at n.171. We are eliminating this undertaking from Form N-2 for the
same reasons, and renumbering Item 34's sub-items accordingly.
---------------------------------------------------------------------------

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

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

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

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

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

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

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

[[Page 33299]]

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

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

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

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

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

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

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

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

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

[[Page 33300]]

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

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

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

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

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

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

C. Well-Known Seasoned Issuer Status

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

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

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

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

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

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

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

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

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

[[Page 33301]]

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

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

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

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

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

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

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

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

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

[[Page 33302]]

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

\112\ See Revisions to the Eligibility Requirements for Primary
Securities Offerings on Forms S-3 and F-3, Securities Act Release
No. 8878 (Dec. 19, 2007) [72 FR 73534 (Dec. 27, 2007)], at text
accompanying n.25; See also Securities Offering Reform Adopting
Release, supra footnote 5, at text accompanying n.52 (``High levels
of analyst coverage, institutional ownership, and trading volume are
useful indicators of the scrutiny that an issuer receives from the
market, although no one statistic can fully capture the extent to
which an issuer is followed by the market.'').
---------------------------------------------------------------------------

We also are not persuaded by commenters that allowing an affected
fund, including an unlisted affected fund, to qualify on the basis of
its aggregate NAV would be consistent with the requirements for an
issuer to qualify as a WKSI, which Congress directed us to extend to
affected funds.\113\ In addition, permitting unlisted affected funds to
qualify as WKSIs based on their aggregate NAVs would result in
disparate treatment between unlisted affected funds and similarly
situated operating companies under these rules. For example, unlisted
real estate investment trusts (``unlisted REITs'') do not have a public
float and therefore generally cannot qualify as WKSIs under the rules
for operating companies. Unlisted REITs, however, have many of the
characteristics that commenters cited in support of permitting unlisted
affected funds to use their aggregate NAVs to qualify as WKSIs.\114\
Nonetheless, unlisted REITs and other unlisted operating companies may
not qualify as WKSIs unless they have the requisite public float or
satisfy one of the alternative bases (which we also are adopting for
affected funds).
---------------------------------------------------------------------------

\113\ As discussed above, the Registered CEF Act, as enacted,
requires us to allow only interval funds and listed registered CEFs
to use the securities offering rules available to operating
companies See supra section II.A. To provide parity of treatment for
similarly situated affected funds, we are exercising our discretion
to extend certain of these rules to unlisted registered CEFs that
are not interval funds. We do not believe, however, that it would be
consistent with the Registered CEF Act to provide these unlisted
registered CEFs with new criteria for qualifying as WKSIs. Indeed,
legislative language that preceded the passage of the Registered CEF
Act would have applied to all registered closed-end investment
companies, but the legislation enacted as the Registered CEF Act was
subsequently narrowed in scope to apply only to listed closed-end
funds and interval funds. Compare the Financial CHOICE Act of 2017,
H.R. 10, 115th Cong. section 499A(a) (June 8, 2017) (directing us to
revise rules to the extent necessary to allow a closed-end company,
as defined in section 5(a)(2) of the Investment Company Act, that is
registered as an investment company under the Act to use the
securities offering and proxy rules that are available to other
issuers that are required to file reports under section 13(a) or
section 15(d) of the Exchange Act) with section 509(a) of Registered
CEF Act. See also 163 Cong. Rec. H4791, H4792 (2017) (daily ed. June
8, 2017) (statement of Rep. Ellison) (stating that the prior bill
would ``allow even illiquid, nontraded funds to claim multiple
exemptions,'' making it ``harder for the . . . Commission . . . to
police these products for investors'').
\114\ For example, both unlisted REITS and unlisted affected
funds sell their shares through intermediaries and both types of
entities' financial disclosures have been made directly accessible
to investors through advances in technology.
---------------------------------------------------------------------------

Moreover, many of the distinctions between affected funds and
operating companies that commenters raised are based on the
characteristics of registered funds and BDCs generally, and are not
unique to affected funds. We believe that the particular
characteristics of registered funds, including affected funds, may be
appropriate for the Commission to examine as part of a more
comprehensive consideration of whether the securities offering rules
for funds should be modified rather than in this rulemaking related to
affected funds specifically.\115\
---------------------------------------------------------------------------

\115\ As discussed at infra section III.A.1, affected funds
represent approximately 5.1% of all registered investment companies
by number of funds and approximately 2% by assets. In addition, as
discussed at infra section III.D, we believe that providing affected
funds with specific WKSI-eligibility criteria would not provide
affected funds parity with similarly-situated operating companies
that do not have public float or do not meet the $700 million public
float requirement and thus cannot qualify as WKSIs under the rules
for operating companies.
---------------------------------------------------------------------------

We do not agree with the commenters who stated that changing or
eliminating the WKSI requirements for affected funds would be
consistent with the intent of the Acts. We do not believe, as
commenters suggested, that the BDC Act and Registered CEF Act were
designed to result in a higher percentage of affected funds qualifying
for WKSI status.\116\ Rather, as discussed above, the Acts directed us
to extend to affected funds the benefits of our securities offering
rules that are available to operating companies. We believe that
designing specific WKSI requirements for affected funds to permit a
particular percentage of those funds to qualify as WKSIs would not
provide parity of treatment. Moreover, the $700 million public float
requirement for operating companies was not designed to result in a
certain percentage of operating companies qualifying as WKSIs, as
suggested by the commenter who recommended that the public float
requirement for affected funds be lowered to $480 million.\117\ In
describing the $700 million public float threshold for operating
companies, the Commission observed that the threshold would make the
WKSI provisions available to approximately 30% of listed issuers, but
this was describing the effect of the provision and not its
intent.\118\
---------------------------------------------------------------------------

\116\ See, e.g., Invesco Comment Letter (stating that the
percentage of listed BDCs and registered CEFs that would meet the
$700 million public float requirement, as set forth in the proposing
release, were lower percentages than the Acts were designed to
permit (citing Proposing Release, supra footnote 10, at section
IV.A.1.); ABA Comment Letter (same); Dechert Comment Letter (stating
that a goal of the BDC Act was to improve the flow of funds to
middle-market companies, which would be furthered by permitting
unlisted funds to qualify as WKSIs based on their aggregate NAVs).
\117\ See TIAA Comment Letter.
\118\ See Securities Offering Reform Adopting Release, supra
footnote 5, at text following n.48.
---------------------------------------------------------------------------

We also do not agree with commenters that the Registered CEF Act,
by referring to interval funds, requires us to permit affected funds to
qualify as WKSIs based on criteria other than the criteria that apply
to operating companies.\119\ The Registered CEF Act directed us to
allow interval funds (in addition to listed CEFs) to use the securities
offering rules that are available to other issuers required to file
reports under section 13 or 15(d) of the Exchange Act.\120\ As
discussed throughout this release and summarized in Tables 1 and 2
above, the rules that we are amending in this release are available to
all affected funds, including interval funds, that satisfy the relevant
conditions of those rules. In addition, many of the rules we are
amending are not conditioned on an issuer's public

[[Page 33303]]

float, such as the amendments to permit affected funds to use the
``access equals delivery'' prospectus delivery framework available to
operating companies.
---------------------------------------------------------------------------

\119\ See, e.g., ICI Comment Letter (stating that the Registered
CEF Act effectively requires the Commission to proceed without a
public float standard to enable interval funds to qualify as
seasoned funds and WKSI funds); Dechert Comment Letter (stating that
adoption of a public float requirement for affected funds
effectively would frustrate the intent of the Registered CEF Act).
\120\ See section 509(a) of the Registered CEF Act.
---------------------------------------------------------------------------

We are adopting certain targeted amendments to permit certain non-
interval affected funds to rely on rule 486 under the Securities Act.
Unlike the WKSI requirements, rule 486 is specifically designed to
apply to funds. These amendments to rule 486 will permit certain
registered CEFs and BDCs that conduct continuous offerings--regardless
of whether they qualify as WKSIs--to file post-effective amendments and
certain registration statements that become either effective
immediately upon filing under rule 486(b) or automatically effective
after 60 days under rule 486(a).\121\ Similar to the benefits the final
rule will provide to affected funds that qualify as WKSIs or that are
eligible to file short-form registration statements, these amendments
will facilitate certain unlisted affected funds' ability to raise
capital without delay by allowing the funds to more efficiently
maintain effective registration statements while they engage in
continuous offerings. The final rule, therefore, will provide certain
listed affected funds with the flexibility to use a short-form
registration statement and to file registration statements and
amendments that become effective automatically. Additionally, unlisted
affected funds generally will have the flexibility to make filings that
become effective either immediately upon filing or automatically after
60 days. Thus the final rule will provide additional flexibilities to
both listed and unlisted affected funds.
---------------------------------------------------------------------------

\121\ See infra section II.D (discussing the Commission's
request for comment on broadening rule 486(b) in the Proposing
Release and comments received in response to this request, as well
as the amendments we are adopting to rule 486).
---------------------------------------------------------------------------

3. Ineligible Issuer Definition
We are adopting, as proposed, amendments to the definition of
ineligible issuer in rule 405. Although all of the provisions in the
ineligible issuer definition would apply to affected funds, our
amendments are designed to tailor certain of these provisions for
affected funds specifically. First, we are amending the definition of
``ineligible issuer'' to provide that a registered CEF would be
ineligible if it has failed to file all reports and materials required
to be filed under section 30 of the Investment Company Act during the
preceding 12 months. This provision is consistent with the proposed
short-form registration instruction and would mirror the current
Exchange Act reporting provision in the ineligible issuer
definition.\122\ We did not receive any comments on this particular
proposed amendment.
---------------------------------------------------------------------------

\122\ See amended paragraph (1)(i) of the ineligible issuer
definition in rule 405.
---------------------------------------------------------------------------

Second, we are adopting, as proposed, an amendment to the
definition of ineligible issuer to give effect to the definition's
anti-fraud prong in the context of affected funds. Specifically, we are
adopting a parallel anti-fraud prong for affected funds, which provides
that an affected fund is an ineligible issuer if within the past three
years its investment adviser, including any sub-adviser, was the
subject of any judicial or administrative decree or order arising out
of a governmental action that determines the investment adviser aided
or abetted or caused the affected fund to have violated the anti-fraud
provisions of the Federal securities laws.\123\ We believe this
amendment is appropriate because investment companies typically are
externally managed by an investment adviser, which is primarily
responsible for the day-to-day management of the fund and the
preparation of the fund's disclosures.\124\
---------------------------------------------------------------------------

\123\ See amended paragraph (1)(ix) of the ineligible issuer
definition in rule 405.
\124\ See Proposing Release, supra footnote 10, at text
following n.84.
---------------------------------------------------------------------------

We received several comments requesting that we clarify or modify
certain aspects of the proposed amendments. Commenters suggested that
we clarify that a violation of section 206(4) of the Advisers Act, or
the rules adopted under section 206(4) (except for 17 CFR 275.206(4)-8
(rule 206(4)-8)), by an affected fund's investment adviser or sub-
adviser would not give rise to WKSI ineligibility for the affected
fund.\125\ These commenters also recommended that we modify the
proposed anti-fraud provision so that an affected fund would not be an
ineligible issuer if the investment adviser (or sub-adviser) that was
the subject of a judicial or administrative decree or order as
described in the proposed rule no longer advises the affected fund at
the time the affected fund seeks WKSI status.\126\
---------------------------------------------------------------------------

\125\ See ACC Comment Letter; CBD Comment Letter.
\126\ Id.
---------------------------------------------------------------------------

Under the anti-fraud prong for affected funds, an affected fund is
ineligible for WKSI status if the affected fund's adviser or sub-
adviser is determined to have aided or abetted or caused a violation by
the fund of the anti-fraud provisions of the Federal securities laws.
As such, only the anti-fraud provisions of the securities laws that
apply to the affected fund itself can give rise to WKSI ineligibility.
There could not be a violation of section 206(4) or the rules adopted
thereunder by an affected fund, because the fund is not itself an
adviser.
We also do not believe it would be appropriate, as commenters
suggested, to modify the proposed amendments to permit an affected fund
whose adviser or sub-adviser was determined to have aided or abetted or
caused a violation by the fund of the anti-fraud provisions of the
securities laws to preserve its WKSI eligibility by terminating the
adviser or sub-adviser.\127\ An operating company currently will be an
ineligible issuer under the anti-fraud prong even if the operating
company terminates all of the employees who aided or abetted the
underlying violation of the Federal securities laws, and our amendments
will provide comparable treatment if an affected fund were to terminate
its adviser. The affected fund also may have the same board of
directors that was in place when the affected fund violated the anti-
fraud provisions. The specific facts and circumstances relating to a
particular issuer's WKSI status under the ineligible issuer definition
may, however, be considered through the Commission's process under rule
405 for granting waivers of ineligible issuer status.\128\
---------------------------------------------------------------------------

\127\ See ACC Comment Letter; CBD Comment Letter;
\128\ See paragraph (2) of the ineligible issuer definition in
rule 405 (providing that the Commission may grant waivers of
ineligible issuer status upon a good-cause showing that it is not
necessary under the circumstances for the issuer to be considered an
ineligible issuer).
---------------------------------------------------------------------------

For these reasons, we are adopting the amendments to the ineligible
issuer definition as proposed.

D. Automatic or Immediate Effectiveness for Filings by Affected Funds
Conducting Certain Continuous Offerings

Based on comments that we received, we are expanding the scope of
rule 486 to permit any registered CEF or BDC that conducts continuous
offerings under rule 415(a)(1)(ix) (e.g., a continuously-offered tender
offer fund) to rely on the rule. Rule 486 under the Securities Act
currently permits interval funds to file post-effective amendments and
certain registration statements that are either immediately effective
upon filing under rule 486(b) or automatically effective 60 days after
filing under rule 486(a).\129\
---------------------------------------------------------------------------

\129\ Filings under rule 486(a) are generally effective on the
sixtieth day after filing, but a registrant may designate a later
date for effectiveness (which must not be later than eighty days
after filing). In addition, the Commission, having due regard to the
public interest and the protection of investors, may declare an
amendment or registration statement effective under rule 486(a) on
an earlier date. See rule 486(a).

---------------------------------------------------------------------------

[[Page 33304]]

As discussed in the Proposing Release, our staff has previously
stated that it would not recommend that the Commission take enforcement
action under certain provisions of the Securities Act if, on a case-by-
case basis, specific listed registered CEFs that conduct offerings
under rule 415(a)(1)(x) use rule 486(b) to file certain post-effective
amendments that are immediately effective upon filing.\130\ The
Proposing Release noted that staff in the Division of Investment
Management were reviewing these no-action letters to determine if they
should be withdrawn in connection with any final rules. The Commission
also requested comment on whether it should make rule 486(b) available
to all or a broader group of registered CEFs and BDCs.\131\ In response
to this request, several commenters asked that we allow certain non-
interval funds that conduct delayed or continuous offerings under rule
415 to rely on rule 486, in whole or in part.\132\ For example, one
commenter suggested that the existing no-action letters be retained or
codified. This commenter stated that withdrawing the no-action letters
would be disruptive to relevant non-WKSI funds and their ability to
update their registration statements and receive automatic
effectiveness.\133\ Additionally, two commenters recommended that we
permit affected funds that are continuously-offered unlisted funds to
rely on rule 486 in its entirety, including rule 486(a) and rule
486(b). The commenters suggested that, like interval funds, these
unlisted funds are continuously offered and would benefit if their
filings could become immediately effective or automatically effective
60 days after filing.\134\ One of these commenters stated that, for
example, allowing continuously-offered unlisted affected funds to rely
on rule 486 would benefit investors in these funds by allowing the
funds to avoid the time and expense of an annual staff review of
registration statements where no changes are made beyond immaterial
updates and updates to audited financial information.\135\
---------------------------------------------------------------------------

\130\ 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).
\131\ See Proposing Release, supra footnote 10, at section II.I.
\132\ See ABA Comment Letter and ICI Comment Letter.
\133\ See ICI Comment Letter.
\134\ See ABA Comment Letter and ICI Comment Letter.
\135\ See ABA Comment Letter.
---------------------------------------------------------------------------

In response to these comments, we are amending rule 486 to allow
any registered CEF or BDC that conducts a continuous offering under
rule 415(a)(1)(ix) to rely on rule 486.\136\ We believe this rule
amendment will allow these continuously-offered affected funds to
maintain effective registration statements in a more efficient, cost-
effective manner. For example, under rule 486(a), these funds will be
able to make material changes to their registration statements on an
automatically effective basis 60 days after filing. In addition, under
rule 486(b), continuously-offered unlisted affected funds will be able,
for example, to update their financial statements under section
10(a)(3) or make non-material changes to their registration statements
on an immediately effective basis. The rule amendment will allow these
funds to more efficiently maintain effective registration statements
while they engage in continuous offerings. This is similar to the
benefits the final rule will provide to affected funds that file short-
form registration statements or qualify as WKSIs, as those funds also
will be able to make certain updates to their registration statements
more efficiently (i.e., through forward incorporation by reference or
automatically effective registration statements and post-effective
amendments).\137\ We believe it is appropriate for any affected fund
that conducts delayed or continuous offerings under rule 415(a)(1)(ix),
(x), or (xi) to have a mechanism for bringing its financial statements
up to date under section 10(a)(3) without delay.\138\ Together, the
amendments we are adopting in this release and current rule 486 will
achieve this objective.
---------------------------------------------------------------------------

\136\ We also are making a technical amendment to rule
486(b)(1)(iv) to provide a more accurate cross reference to Item
9.1.c of Form N-2. Moreover, we are amending Form N-2 to recognize
the broader scope of affected funds that may rely on rule 486. See
General Instruction E.4 of amended Form N-2 and cover page of
amended Form N-2.
\137\ See supra sections II.B.3.b and II.B.3.c. Although
affected funds that file short-form registration statements or
qualify as WKSIs will be able to use forward incorporation by
reference and automatically effective filings to make a broader
range of updates to their registration statements on an immediate
basis than those specified in rule 486(b), the majority of post-
effective amendments that affected funds currently file are solely
for one or more purposes described in rule 486(b). Moreover,
interval funds, and affected funds that make continuous offerings
under rule 415(a)(1)(ix), will be able to make other, material
amendments that are automatically effective 60 days after filing.
\138\ Rule 415(a)(1)(ix), (x), and (xi) are the provisions
affected funds primarily use to conduct delayed or continuous
offerings of their securities. Rule 415(a)(1)(ix) allows nontraded
affected funds to engage in continuous offerings but does not allow
delayed (or ``shelf'') offerings. Rule 415(a)(1)(x) allows affected
funds that are eligible to file short-form registration statements
on Form N-2 to engage in delayed or continuous offerings. Rule
415(a)(1)(xi) allows interval funds to engage in delayed or
continuous offerings.
---------------------------------------------------------------------------

Continuously-offered unlisted affected funds relying on rule 486
will continue to be subject to applicable provisions in rule 415.\139\
Moreover, these funds will need to comply with relevant conditions in
rule 486.\140\ If it appears to the Commission that a post-effective
amendment or registration statement filed under rule 486(a) may be
incomplete or inaccurate in any material respect, the Commission may
suspend the effective date of that filing. Further, if it appears to
the Commission that the fund has not complied with the conditions in
rule 486(b), the Commission may suspend the fund's ability to rely on
rule 486(b).\141\
---------------------------------------------------------------------------

\139\ For example, rule 415 limits the amount of securities that
can be registered in a continuous offering under rule 415(a)(1)(ix)
and generally requires an issuer relying on rule 415(a)(1)(ix) to
file a new registration statement every three years. See rule
415(a)(2), (5), and (6).
\140\ See rule 486(b)(2) (requiring certain written
representations that a post-effective amendment filed under rule
486(b) is filed solely for one or more of the permissible purposes
covered by the provision); rule 486(e) (requiring a fund to have
filed a post-effective amendment or registration statement relating
to its common stock that became effective within two years prior to
the filing made under rule 486(a) or (b)).
\141\ See rule 486(c).
---------------------------------------------------------------------------

In addition to allowing an affected fund to rely on rule 486 if the
fund makes continuous offerings under rule 415(a)(1)(ix), we are also
amending the scope of registration statements that rule 486 covers.
Currently, rule 486 is available for post-effective amendments and for
registration statements filed for purposes of registering additional
shares of common stock for which a Form N-2 registration statement is
effective. This generally reflects the scope of amendments and
registration statement filings interval funds make after their initial
registration statements are effective. However, unlike interval funds,
the affected funds that will newly be eligible to rely on rule 486
generally are required to file new registration statements every three
years under rule 415(a)(5) and (6). We are amending rule 486 to allow
these registration statements to be immediately or automatically
effective under the rule, depending on the substance of the
disclosure.\142\ Specifically, a registration

[[Page 33305]]

statement a fund files to comply with rule 415(a)(5) and (6) could be
immediately effective upon filing if it is filed for no purpose other
than to comply with those provisions of rule 415 or for other purposes
listed in rule 486(b), such as making non-material changes or updating
the fund's financial statements under section 10(a)(3). If the
registration statement does not qualify under rule 486(b) because, for
example, it includes material changes to the fund's disclosure, the
registration statement could be automatically effective 60 days after
filing under rule 486(a). As a result of the amendments, affected funds
that make continuous offerings under rule 415(a)(1)(ix) will be able to
rely on rule 486 for registration statements filed to comply with rule
415(a)(5) and (6), regardless of whether they choose to register
additional shares at the time these provisions requires them to file
new registration statements. This will promote consistent treatment of
these funds' filings under the rule.
---------------------------------------------------------------------------

\142\ See amended rule 486(a), (b)(1)(vi), and (g).
---------------------------------------------------------------------------

Although one commenter suggested that we retain or codify the staff
no-action letters discussed above to allow affected funds that conduct
delayed or continuous offerings under rule 415(a)(1)(x) to file post-
effective amendments that are immediately effective under rule 486(b),
we believe the final rule makes such relief unnecessary.\143\ For
example, while these funds will need to file new registration
statements every three years under rule 415, during the interim period
they will be able to update their registration statements through the
forward incorporation by reference provisions applicable to short-form
registration statement filers.\144\ The forward incorporation by
reference provisions allow these funds to avoid filing the types of
post-effective amendments that rule 486(b) covers, as well as other
types of post-effective amendments (e.g., those making material changes
to the fund's disclosure). Thus, we do not believe that affected funds
that make delayed or continuous offerings under rule 415(a)(1)(x) will
need to file the types of post-effective amendments rule 486(b) covers.
---------------------------------------------------------------------------

\143\ See ICI Comment Letter.
\144\ See rule 415(a)(5) and (6); General Instructions A.2 and
F.3 of amended Form N-2.
---------------------------------------------------------------------------

Moreover, while the commenter only referred to post-effective
amendments, rule 486(b) also covers new registration statements under
certain circumstances. For instance, when an eligible fund has an
effective registration statement and wants to register additional
shares without making material amendments to its existing disclosure,
rule 486(b) allows that new registration statement to be immediately
effective.\145\ If we were to permit a fund that makes delayed or
continuous offerings under rule 415(a)(1)(x) to rely on rule 486(b) in
its entirety, then the new registration statement the fund must file
every three years could effectively become an automatic shelf
registration statement, even though the fund does not qualify as a WKSI
(e.g., it does not have $700 million in public float).\146\ As a result
of these considerations, the no-action letters stating that the staff
would not recommend an enforcement action if specific listed,
registered CEFs conducted offerings under rule 415(a)(1)(x) using rule
486(b) will be withdrawn effective August 1, 2021 (one year from the
effective date of the final rule).\147\ Importantly, as recognized
above, the final amendments provide a mechanism for these funds to
efficiently update their registration statements.
---------------------------------------------------------------------------

\145\ See rule 486(b)(1)(i) and (v).
\146\ Under these circumstances, a non-WKSI fund potentially
could combine its ability to forward incorporate by reference and
its ability to rely on rule 486(b) to achieve a WKSI-like status,
with registration statements that would always be immediately
effective upon filing. This could occur if, for example, a fund made
material changes to its registration statement by forward
incorporating information into its registration statement and then,
to satisfy the requirement to file a new registration statement
every three years, it filed a new registration statement under rule
486(b). In contrast, when an affected fund that may rely on rule 486
makes a material change to its registration statement, the relevant
filing is not effective immediately. See rule 486(a).
\147\ See supra footnote 130.
---------------------------------------------------------------------------

E. Final Prospectus Delivery Reforms

We are adopting, as proposed, rule amendments that will allow an
affected fund to satisfy its final prospectus delivery obligations by
filing its final prospectus with the Commission.
The Securities Act requires registrants to deliver to each investor
in a registered offering a prospectus meeting the requirements of
section 10(a) (known as a ``final prospectus'').\148\ Section 5(b)(2)
makes it unlawful to deliver a security for the purpose of sale or for
delivery after sale unless accompanied or preceded by a final
prospectus. After the effectiveness of a registration statement, a
written communication that offers a security for sale, or confirms the
sale of a security, may be provided to investors if a final prospectus
is sent or given previously or at the same time. Otherwise, such a
communication may not be provided unless it is otherwise permitted
under Commission rules or meets the requirements of section 10(a).\149\
---------------------------------------------------------------------------

\148\ 15 U.S.C. 77j(a).
\149\ 15 U.S.C. 77e(b)(2).
---------------------------------------------------------------------------

Rule 172 allows issuers, brokers, and dealers to satisfy final
prospectus delivery obligations if a final prospectus is or will be on
file with the Commission within the time required by the rules and
other conditions are satisfied.\150\ For example, rule 172 provides
that a final prospectus will be deemed to precede or accompany a
security for sale for purposes of section 5(b)(2) as long as the final
prospectus is filed with the Commission or it will be filed as part of
the registration statement.\151\ Rule 172 applies only to final
prospectuses and not to other documents.\152\ Rule 173 requires the
delivery of a copy of the final prospectus or, in lieu of a final
prospectus, a notice to purchasers stating that a sale of securities
was made pursuant to a registration statement or in a transaction in
which a final prospectus would have been required to have been
delivered in the absence of rule 172.\153\
---------------------------------------------------------------------------

\150\ 17 CFR 230.172 (Securities Act rule 172); see also
Securities Offering Reform Adopting Release, supra footnote 5, at
nn.560-562 and accompanying text.
\151\ See Securities Act rule 172. In the event that the issuer
fails to file such a prospectus in a timely manner, the issuer must
file the prospectus as soon as practicable thereafter. Securities
Act rule 172(c)(3); see also Securities Offering Reform Adopting
Release, supra footnote 5, at n.568 and preceding text (describing
this ``cure'' provision).
\152\ See, e.g., Securities Offering Reform Adopting Release,
supra footnote 5, at text following n.567.
\153\ 17 CFR 230.173 (Securities Act rule 173). See also
Proposing Release, supra footnote 10, at n.109. Rule 173(d) provides
that a purchaser who receives a notification may request a copy of
the final prospectus. We proposed a change to Item 34.6 of Form N-2,
under which funds currently undertake to provide an SAI upon
request, to require an affected fund to also undertake to provide a
prospectus upon request. We received no comments regarding this
aspect of the proposal and are making the change as proposed. See
Item 34.7 of amended Form N-2.
---------------------------------------------------------------------------

Rules 172 and 173 do not apply to offerings of affected funds.\154\
The BDC Act directs us to remove the exclusion for BDC offerings.\155\
To implement the BDC Act, and to provide parity for registered CEFs
consistent with the Registered CEF Act, we proposed to amend rules 172
and 173 to remove the exclusion for offerings of all affected funds.
Commenters supported this approach, stating that the proposed
amendments would reduce prospectus printing and delivery costs and
provide parity for affected funds, consistent with

[[Page 33306]]

the BDC Act and the Registered CEF Act.\156\ We are adopting the
amendments to rules 172 and 173 as proposed.\157\
---------------------------------------------------------------------------

\154\ See Securities Act rule 172(d)(1)-(2); Securities Act rule
173(f)(2)-(3).
\155\ Section 803(b)(2)(L) of the BDC Act; see also section
509(a) of Registered CEF Act (requiring parity of securities
offering rules with operating companies for listed registered CEFs
and interval funds).
\156\ See, e.g., SIFMA Comment Letter; ICI Comment Letter;
Invesco Comment Letter; TIAA Comment Letter.
\157\ See amended Securities Act rule 172(d); amended Securities
Act rule 173(f).
---------------------------------------------------------------------------

F. Communications Reforms

1. Offering Communications
We are adopting amendments to the communications rules, as
proposed, to extend to affected funds the rules that currently provide
operating companies and other parties (such as underwriters) increased
flexibility in their communications.\158\ The amendments permit these
communications notwithstanding the ``gun-jumping provisions'' in the
Securities Act, which restrict the types of offering communications
that issuers or other parties subject to the Act's provisions may use
in connection with a registered public offering.\159\ The gun-jumping
provisions were designed to make the statutorily mandated prospectus
the primary means for investors to obtain information regarding a
registered securities offering.\160\ Accordingly, the statute provides
that unless otherwise permitted:
---------------------------------------------------------------------------

\158\ See, Proposing Release, supra footnote 10 at section
II.E.1; see also Securities Act rule 134; Securities Act rule 168;
Securities Act rule 156; Securities Act rule 163; Securities Act
rule 163A; Securities Act rule 164; Securities Act rule 168;
Securities Act rule 169; and Securities Act rule 433.
\159\ Unless otherwise noted, offering communications generally
refer to written communications. Rule 405 provides that ``[e]xcept
as otherwise specifically provided or the context otherwise
requires, a written communication is any communication that is
written, printed, a radio or television broadcast, or a graphic
communication as defined in [rule 405].''
\160\ See Securities Offering Reform Adopting Release, supra
footnote 5, at 44731. But see section 5(d) of the Securities Act [15
U.S.C. 77e(d)], which permits an emerging growth company, or any
person authorized to act on its behalf, to engage in oral or written
communications with potential investors that are qualified
institutional buyers, as defined in 17 CFR 230.144A (Securities Act
rule 144A), or institutions that are accredited investors, as
defined in 17 CFR 230.501(a) (Securities Act rule 501(a)), either
prior to or after the filing of a registration statement, to
determine their interest in a contemplated registered offering.
These communications are often referred to as ``testing the
waters.'' 17 CFR 230.163B (Securities Act rule 163B), recently
adopted by the Commission, extends this accommodation to all
issuers. Solicitations of Interest Prior to a Registered Public
Offering, Securities Act Release No. 10699 (Sept. 25, 2019) [84 FR
53011 (Oct. 4, 2019)] (``Rule 163B Adopting Release'').
---------------------------------------------------------------------------

Before an issuer files a registration statement, all
offers, in whatever form, are prohibited; \161\
---------------------------------------------------------------------------

\161\ See section 5(c) of the Securities Act [15 U.S.C. 77e(c)].
---------------------------------------------------------------------------

After the issuer files a registration statement but before
it has become effective, the only written offers that are permitted are
those made using a preliminary prospectus that meets the requirements
of section 10 of the Securities Act, which must be filed with the
Commission; \162\ and
---------------------------------------------------------------------------

\162\ This is because after the filing of the registration
statement but before its effectiveness, offers made in writing
(including electronically), by radio, or by television are limited
to a ``statutory prospectus'' that conforms to the information
requirements section 10 of the Securities Act. See sections 5(b)(1)
and 10 of the Securities Act [15 U.S.C. 77e(b)(1) and 77(j)].
---------------------------------------------------------------------------

Even after the registration statement is declared
effective, offering participants still may make written offers only
through a statutory prospectus, except that they may use additional
written offering materials if a final prospectus that meets the
requirements of Securities Act section 10(a) is sent or given prior to
or with those materials.\163\
---------------------------------------------------------------------------

\163\ See section 2(a)(10) and section 5(b)(1) of the Securities
Act [15 U.S.C. 77b(a)(10) and 77e(b)(1)].
---------------------------------------------------------------------------

Since the adoption of the Securities Act, the Commission has
recognized that certain communications before, during, and after the
filing of a registration statement do not raise the investor protection
concerns that the gun jumping provisions aim to address. For this
reason, the Commission has adopted several rules to provide clarity to
issuers on the types of communications that are permissible and how to
communicate with investors without violating the gun jumping
provisions. We proposed to extend those rules to affected funds in the
Proposing Release. Commenters generally supported the proposed
amendments to the communications rules.\164\ Two commenters stated that
the amendments would allow increased flexibility in communications and
provide parity with operating companies.\165\ One commenter added that
the amendments would make it easier to execute offerings by affected
funds and would decrease costs, leading to lower offering costs and
potentially enhance capital formation while not negatively impacting
investor protections.\166\
---------------------------------------------------------------------------

\164\ See, e.g., SIFMA Comment Letter; Comment Letter of Sidley
Austin LLP (June 10, 2019); ICI Comment Letter; ACC Comment Letter;
CBD Comment Letter; MFDF Comment Letter; TIAA Comment Letter.
\165\ See, e.g., SIFMA Comment Letter; ICI Comment Letter.
\166\ See, e.g., SIFMA Comment Letter.
---------------------------------------------------------------------------

The Commission continues to believe that investors and the market
will benefit from access to greater communications under conditions
that preserve investor protections. To implement the BDC Act, and to
provide parity for registered CEFs consistent with the Registered CEF
Act, we are extending, as proposed, the communications rules currently
available to operating companies to affected funds by removing the
exclusions for affected funds and making other conforming changes.\167\
Specifically, the amended rules will:
---------------------------------------------------------------------------

\167\ See amended rules 134(g), 163(b)(3), 163A(b)(4), 164(f),
168(d)(3), and 169(d)(4) (removing references to BDCs and limiting
the rules' exclusion of registered investment companies from the
safe harbor to exclude registered funds other than registered CEFs).
See also amended rule 168 (adding to paragraphs (b)(1) and (2)
references to the Investment Company Act to parallel current
references to the Exchange Act to provide that forward-looking
information and factual business information may be included in
materials filed under the Investment Company Act); amended rule 433
(adding to paragraphs (a)(1)(i) and (iv) references to registration
statements filed on Form N-2 under adopted General Instruction A.2
to parallel current references to Form S-3; adding to paragraph
(c)(1)(ii) a reference to reports filed under section 30 of the
Investment Company Act as reports with which a free-writing
prospectus may not conflict). See also amended rule 156(d); infra
footnote 172.
---------------------------------------------------------------------------

Permit affected funds to use rule 134 to publish factual
information about the issuer or the offering, including ``tombstone
ads.'' \168\
---------------------------------------------------------------------------

\168\ See Proposing Release, supra footnote 10, at n.122
(discussing rule 134).
---------------------------------------------------------------------------

Permit affected funds to rely on rule 163A, which provides
issuers a bright-line time period, ending 30 days prior to filing a
registration statement, during which they may communicate without risk
of violating the gun-jumping provisions.\169\
---------------------------------------------------------------------------

\169\ See id. at n.123 (discussing rule 163A).
---------------------------------------------------------------------------

Permit affected funds that are reporting companies to rely
on rule 168 to publish or disseminate regularly released factual
business information and forward-looking information at any time,
including around the time of a registered offering.\170\ The amendments
to rule 169 will also permit affected funds' continued publication or
dissemination of regularly released factual business information that
is intended for use by persons other than in their capacity as
investors or potential investors.\171\ We also are adopting amendments
to rule 156 to state that nothing in that rule may be construed to
prevent an affected fund from qualifying for an exemption under rule
168 or 169.\172\ The contents of any rule 168 or 169 communication
remain subject to the anti-fraud provisions of the Federal securities
laws.
---------------------------------------------------------------------------

\170\ See id. at n.124 (discussing rule 168).
\171\ Rule 169 is also a safe harbor from the definition of
``prospectus'' in section 2(a)(10) of the Securities Act.
\172\ See amended rule 156(d); section 803(b)(2)(G) of the BDC
Act; section 509(a) of Registered CEF Act.

---------------------------------------------------------------------------

[[Page 33307]]

Permit affected funds to rely on rules 164 and 433 to use
a ``free writing prospectus.'' \173\
---------------------------------------------------------------------------

\173\ See Proposing Release, supra footnote 10, at n.127
(discussing rules 164 and 433).
---------------------------------------------------------------------------

Permit affected funds that are WKSIs to engage at any time
in oral and written communications, including use at any time of a free
writing prospectus (before or after a registration statement is filed),
subject to the same conditions applicable to other WKSIs.\174\
---------------------------------------------------------------------------

\174\ See id. at n.128 (discussing how communications rules
apply to WKSIs).
---------------------------------------------------------------------------

As we discussed in the Proposing Release, investment company
communications currently are subject to rule 482.\175\ Rule 482
communications can only be used by a fund that is selling or is
proposing to sell its securities pursuant to a filed registration
statement, and are prospectuses subject to prospectus liability under
section 12 of the Securities Act.\176\ The amendments to the
communications rules provide affected funds with incremental
flexibility in their communications, including additional flexibility
to communicate before filing a registration statement, and some
additional flexibility in using communications that are not subject to
prospectus liability under section 12 of the Securities Act.\177\
Moreover, as we discussed in the Proposing Release, both the BDC Act
and Registered CEF Act direct the Commission to continue to make
available Securities Act rule 482 communications, or ``ads,''
notwithstanding the amendments to the communications rules.\178\
Affected funds therefore can now take advantage of additional
flexibility under the communications rules as amended or continue to
rely on rule 482 and other rules currently applicable to investment
company communications.
---------------------------------------------------------------------------

\175\ See id. at section II.E.1.
\176\ 17 CFR 230.482 (Securities Act rule 482); see also 17 CFR
230.497(i) (Securities Act rule 497).
\177\ See Proposing Release, supra footnote 10, at section
II.E.1.
\178\ See id. at text following n.128; see also sections
803(e)(2) of the BDC Act (prohibiting the Commission from
interpreting the amendments directed by the BDC Act in a manner that
would prevent BDCs from distributing sales material pursuant to rule
482 under the Securities Act); and 509(c)(1) of the Registered CEF
Act (prohibiting the Commission from interpreting the amendments
directed by the Registered CEF Act to impair or limit in any way a
registered closed-end company from using rule 482 communications,
under the Investment Company Act, to distribute sales material).
---------------------------------------------------------------------------

In addition to comments on the proposed amendments to the
communications rules, two commenters urged us to adopt rules that would
extend the safe harbors for liability in private actions for certain
forward looking statements under section 27A of the Securities Act and
section 21E of the Exchange Act to affected funds.\179\ Those
commenters did not specify what the conditions or requirements of such
a rule might be, and the public has not had the opportunity to comment
on whether or how to extend safe harbors for forward-looking statements
to affected funds. For these reasons, we believe commenters' request
requires more extensive consideration beyond the scope of this
rulemaking.
---------------------------------------------------------------------------

\179\ See Dechert Comment Letter; IPA Comment Letter; see also
sections 27A(b)(2)(B) and 27A(g) of the Securities Act [15 U.S.C.
77z-2(b)(2)(B) and 15 U.S.C. 77z-2(g)] and sections 21E(b)(2)(B) and
21E(g) of the Exchange Act [15 U.S.C. 78u-5(b)(2)(B) and 15 U.S.C.
78u-5(g)].
---------------------------------------------------------------------------

2. Broker-Dealer Research Reports
We are adopting the amendments to Securities Act rule 138 as
proposed. Rule 138 permits a broker-dealer participating in the
registered offering of an eligible issuer's common stock and similar
securities to publish or distribute research reports about that
issuer's fixed income securities, and vice versa, if it publishes or
distributes that research in the regular course of its business.
Although rule 138 does not currently exclude affected funds from
coverage, it does include references to Form S-3 but not Form N-2. We
therefore proposed to amend the rule's references to shelf registration
statements filed on Form S-3 to include a parallel reference to a
registration statement filed on Form N-2 under the proposed short-form
registration instruction. Rule 138 also currently provides that an
issuer covered in a research report published in reliance on the rule
must be required to file reports, and must have filed all periodic
reports required during the preceding 12 months (or such shorter time
that the issuer was required to file such reports), on Forms 10-K and
10-Q.\180\ Because registered CEFs do not file the periodic reports
currently specified in rule 138, we proposed to include parallel
references to the reports that registered CEFs are required to file,
i.e., reports on Forms N-CSR, N-Q, N-CEN, and N-PORT.\181\ We did not
receive any comments on these amendments and are adopting them as
proposed.
---------------------------------------------------------------------------

\180\ See 17 CFR 230.138(a)(2)(i) (Securities Act rule
138(a)(2)(i)).
\181\ See supra section II.B.3.a (Form N-Q will be rescinded on
May 1, 2020).
---------------------------------------------------------------------------

We are not adopting changes to 17 CFR 230.139 (rule 139).\182\ That
rule provides a safe harbor for a broker-dealer's publication or
distribution of research reports where the broker-dealer is
participating in the registered offering of the issuer's securities
and, unlike rule 138, permits the research report to cover any class of
the issuer's securities.
---------------------------------------------------------------------------

\182\ See Proposing Release, supra footnote 10, at section
II.E.2.
---------------------------------------------------------------------------

As we stated in the Proposing Release, in 2018 the Commission
adopted new 17 CFR 230.139b (Securities Act rule 139b) to implement the
Fair Access to Investment Research Act of 2017 (the ``FAIR Act'').\183\
The FAIR Act directed that the Commission extend rule 139 to cover
broker-dealers' publication or distribution of ``covered investment
fund research reports.'' These include research reports about affected
funds.\184\
---------------------------------------------------------------------------

\183\ See Fair Access to Investment Research Act of 2017, Public
Law 115-66, 131 Stat. 1196 (2017); see also Covered Investment Fund
Research Reports Adopting Release, supra footnote 101.
\184\ 17 CFR 230.139b; see also Covered Investment Fund Research
Reports Adopting Release, supra footnote 101, at 64183 (providing
that under rule 139b, the term ``covered investment fund'' includes,
among other things, registered investment companies and BDCs).
---------------------------------------------------------------------------

Rule 139b includes specific provisions mandated by Congress for
covered investment fund research reports. For example, rule 139b
excludes from the rule's safe harbor research reports published or
distributed by the covered investment fund itself, any affiliate of the
covered investment fund, or any broker-dealer that is an investment
adviser (or an affiliated person of an investment adviser) for the
covered investment fund.\185\ The Commission did not propose changes to
rule 139 because it believed that rule 139b satisfies the directives of
the BDC Act and Registered CEF Act by extending rule 139's safe harbor
to research reports on BDCs and registered CEFs and is consistent with
Congress's core objective regarding research reports covering these
funds.\186\ The Commission observed that, if it were to amend rule 139
to cover research reports on BDCs, or on affected funds generally,
exactly the same conduct would be subject to different standards based
on the rule a broker-dealer chose to use.\187\ The Commission believed
that it would be more appropriate to provide a consistent approach for
affected fund research reports under rule 139b.\188\
---------------------------------------------------------------------------

\185\ See Covered Investment Fund Research Reports Adopting
Release, supra footnote 101 at sections II.A.1 and II.E.2; see also
section 2(f)(3) of the FAIR Act.
\186\ See Covered Investment Fund Research Reports Adopting
Release, supra footnote 101, at nn.144-145 and accompanying
paragraph.
\187\ Id.
\188\ Id.
---------------------------------------------------------------------------

One commenter suggested that we amend rule 139 and repeal rule
139b, in order to provide the same requirements for broker-dealer
research reports on

[[Page 33308]]

affected funds and operating companies.\189\ The commenter raised
concerns regarding differences between these two rules' requirements,
such as rule 139b's ``affiliate exclusion.'' That provision makes rule
139b's safe harbor inapplicable to research reports by a broker-dealer
that is an investment adviser (or an affiliated person of an investment
adviser) to the covered investment fund.
---------------------------------------------------------------------------

\189\ See ABA Comment Letter.
---------------------------------------------------------------------------

We acknowledged the differences between rule 139b and rule 139 in
the Proposing Release. Indeed, the different requirements in rule
139b--which were mandated by Congress in the FAIR Act--are why we did
not propose amendments to rule 139. We continue to believe that rule
139b already satisfies the directives of the BDC Act and Registered CEF
Act by extending rule 139's safe harbor to research reports on BDCs and
registered CEFs and is consistent with Congress's core objective
regarding research reports covering these funds. If we were to amend
rule 139 and rescind rule 139b as urged by this commenter, this would
not give effect to Congress's more specific directives in the FAIR Act.
Moreover, rule 139b, as directed by the FAIR Act, provides a consistent
framework for research reports on ``covered investment funds,'' which
are not limited to the affected funds covered in this rulemaking.
Maintaining rule 139b therefore provides a consistent approach for all
``covered investment fund research reports.''

G. Other Rule Amendments

1. Rule 418 Supplemental Information
As proposed, we are adopting amendments to rule 418 to exempt
affected funds that are eligible to file a short-form registration
statement on Form N-2 from the requirement to furnish certain
supplemental information to the Commission or staff on request under
paragraph (a)(3) of the rule. As discussed in the Proposing Release,
operating companies that are eligible to use Form S-3 are already
exempt from having to furnish certain information under rule
418(a)(3).\190\ Commenters did not address the amendments to rule 418,
which we proposed to implement the BDC Act and to provide parity for
registered CEFs consistent with the Registered CEF Act.\191\ Consistent
with the proposal, affected funds that are eligible to file a short-
form registration statement on Form N-2 will not be required to
furnish, on request, recent engineering, management, or similar reports
or memoranda relating to broad aspects of the business, operations, or
products of the registrant under amended rule 418(a)(3).\192\
---------------------------------------------------------------------------

\190\ See Proposing Release, supra footnote 10, at text
accompanying n.147.
\191\ See section 803(b)(2)(M) of the BDC Act.
\192\ See Proposing Release, supra footnote 10, at n.148.
---------------------------------------------------------------------------

2. Amendments to Incorporation by Reference Into Proxy Statements
We are adopting amendments to Schedule 14A under the Exchange Act
as proposed, consistent with the BDC Act and the Registered CEF
Act.\193\ We did not receive comments on the proposed amendments to
Schedule 14A. The amendments will allow affected funds that meet the
requirements of the short-form registration instruction in Form N-2, as
further described in Note E to Schedule 14A, to incorporate certain
information by reference to previously-filed documents for proxy
statements containing specific proposals under Item 13 of Schedule
14A.\194\ The amendments allow eligible funds to incorporate by
reference certain required information for relevant proxy proposals to
the same extent that operating companies meeting the requirements of
Form S-3 (as defined in Note E to Schedule 14A) may use incorporation
by reference under the same circumstances.\195\
---------------------------------------------------------------------------

\193\ Section 803(b)(2)(N) of the BDC Act (directing us to amend
Item 13(b)(1) of Schedule 14A to include as an issuer to which Item
13(b)(1) applies a BDC that would otherwise meet the requirements of
Note E of the Schedule); section 509(a) of the Registered CEF Act
(requiring us to provide certain registered CEFs with the same
flexibility under the proxy rules, subject to appropriate
conditions, as is available to other issuers required to file
reports under section 13 or section 15(d) of the Exchange Act).
\194\ Item 13 applies to proxy statements seeking security
holder approval to authorize, issue, modify, or exchange securities
as described in Items 11 or 12 of Schedule 14A.
\195\ The proposed definition in Note E of Schedule 14A of an
affected fund that ``meets the requirements of General Instruction
A.2 of Form N-2'' included certain conditions relating to the
transaction requirements in General Instruction I.B or I.C of Form
S-3, consistent with the conditions in the definition in Note E of
an operating company that ``meets the requirements of Form S-3.'' We
are adopting the definition in Note E as proposed to provide parity
between affected funds and operating companies although, as
discussed in the Proposing Release, we believe these conditions are
less likely to be relevant to affected funds. See Proposing Release,
supra footnote 10, at n.152.
---------------------------------------------------------------------------

3. Rule 103 of Regulation FD
We are adopting amendments to rule 103(a) of Regulation FD, as
proposed, to provide that an affected fund's failure to make a public
disclosure required solely by rule 100 of Regulation FD will not affect
the fund's eligibility under the short-form registration instruction of
Form N-2.\196\ We did not receive comments on the proposed amendments
to rule 103(a). The final amendments to rule 103(a) will enhance parity
between affected funds and operating companies, consistent with the BDC
Act and the Registered CEF Act, as rule 103(a) already provides that an
operating company's failure to make a public disclosure required solely
by rule 100 of Regulation FD will not affect its eligibility to use
Form S-3.\197\
---------------------------------------------------------------------------

\196\ 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. See 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).
\197\ See section 803(b)(2)(O) of the BDC Act; 17 CFR 243.103(a)
(rule 103(a) of Regulation FD).
---------------------------------------------------------------------------

H. New Registration Fee Payment Method for Interval Funds and Issuers
of Certain Exchange-Traded Products

We are adopting a modernized approach to registration fee payment
that will require interval funds to pay securities registration fees
using the same method that mutual funds and ETFs use today.\198\
Specifically, for interval funds, the final rule will provide that such
funds register an indefinite amount of securities upon their
registration statements' effectiveness.\199\ Like mutual funds and
ETFs, interval funds will be required to

[[Page 33309]]

pay registration fees based on their net issuance of shares, no later
than 90 days after the funds' fiscal year ends.\200\ These issuers will
be required to file information about the computation of this
registration fee and other information on Form 24F-2 under the
Investment Company Act when paying the fee.\201\ In response to
comments that we received, we also are extending similar treatment to
certain ETPs that are not registered under the Investment Company Act.
---------------------------------------------------------------------------

\198\ In general, issuers today--including interval funds--are
required under the Securities Act to pay a registration fee to the
Commission at the time of filing a registration statement. See
sections 6(b)(1) (requiring applicants to pay a fee to the
Commission at the time of filing a registration statement) and (c)
(providing that a registration statement shall not be deemed to have
taken place without payment of a registration fee) of the Securities
Act [15 U.S.C. 77f(b)(1)]. This means that they pay registration
fees at the time they register the offering of securities,
regardless of when (or if) they sell them. WKSIs using automatic
shelf registration statements have additional flexibility to pay
filing fees at or prior to the time of a securities offering. See
supra footnote 78; see also Securities Offering Reform Adopting
Release, supra footnote 5, at 44780. This arrangement is commonly
known as ``pay-as-you-go.'' Id. As a result, these filers may defer
payment until a future takedown of shares off a shelf registration
statement. Affected funds that become WKSIs as a result of our final
rule will also gain that flexibility, but other affected funds will
not. See supra section II.C.
\199\ The final rule applies to interval funds the same
treatment provided by rule 24f-2 to open-end funds and UITs. See
amended rule 23c-3(e) (providing that an interval fund would be
deemed to have registered an indefinite amount of securities under
section 24(f) upon the effective date of its registration
statement); see also amended rule 24f-2 (providing for interval
funds to pay their registration fees on the same annual net basis as
mutual funds, other open-end funds, and UITs). See section 4(e) of
the Exchange Act [15 U.S.C. 78d-4(e)]; section 28 of the Securities
Act [15 U.S.C. 77z-3)].
\200\ See section 24(f)(2) of the Investment Company Act [15
U.S.C. 80a-24(f)(2)]. Specifically, mutual funds and ETFs currently
are required to pay fees on a net basis, based upon the sales price
for securities sold during the fiscal year and reduced based on the
price of shares redeemed or repurchased that year.
\201\ 17 CFR 274.24.
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We proposed to amend rules 23c-3 and 24f-2 so that interval funds
would pay registration fees on this same annual net basis.\202\ The
commenters who addressed this aspect of the proposal supported it.\203\
Two commenters suggested expanding the scope of this aspect of our
proposal to include additional types of issuers.\204\ One commenter
recommended extending the scope of the provision to ``all other funds''
to confer the same benefits to those additional funds, such as
eliminating the need to predict the number of shares the fund expects
to sell.\205\ Another commenter suggested extending the scope to
``tender offer funds''--those that make repurchase offers but that are
not, like interval funds, required to periodically repurchase shares or
to have a fundamental policy regarding its repurchase offers that can
be changed only by a shareholder vote.\206\ We are adopting this
provision as proposed. Of the categories of investment companies
contemplated by commenters, only interval funds routinely repurchase
shares at NAV and are required to periodically offer to repurchase
their shares, making these funds more like mutual funds and ETFs, which
are required to use this method.
---------------------------------------------------------------------------

\202\ Proposing Release, supra footnote 10, at section II.G
(discussing how and why interval funds are currently not permitted
to pay registration fees on an annual net basis).
\203\ ICI Comment Letter; Invesco Comment Letter. No commenter
expressed opposition to the proposed provision.
\204\ ABA Comment Letter; ICI Comment Letter.
\205\ ICI Comment Letter.
\206\ ABA Comment Letter.
---------------------------------------------------------------------------

In response to a request for comment in the Proposing Release, a
number of commenters also recommended that certain ETPs that are not
registered under the Investment Company Act be permitted to register
offerings of an indefinite number of securities and pay registration
fees in a manner equivalent to that under rule 24f-2.\207\ These
commenters stated that these ETPs operate in a manner substantially
similar to that of ETFs and would similarly benefit from paying
registration fees on an annual net basis and from registering offerings
of an indefinite number of securities.\208\ Some of these commenters
also noted that the attributes cited in the Proposing Release for
extending the ability to pay registration fees on an annual net basis
to interval funds (routine repurchases of shares at NAV and avoiding
the possibility that an interval fund would inadvertently sell more
shares than it had registered) would also apply to these ETPs.\209\
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\207\ GraniteShares Comment Letter; Invesco Comment Letter;
ProShares Comment Letter; Comment Letter of State Street Global
Advisors (June 21, 2019) (``SSGA Comment Letter''); USCF Comment
Letter; WGC Comment Letter; Comment Letter of Morgan, Lewis &
Bockius LLP (Jan. 15, 2020).
\208\ Invesco Comment Letter (stating that the provision would
assist ETPs); ProShares Comment Letter (same); SSGA Comment Letter
(same); GraniteShares Comment Letter (stating that the provision
would assist ETPs, and would eliminate a competitive difference
between ETPs and mutual funds); USCF Comment Letter (stating that
the provision would provide ETPs with cost savings and efficiencies
that would benefit investors); WGC Comment Letter (same). One
commenter noted that the securities of these ETPs are issued and
redeemed in large blocks called ``creation units'' through either
in-kind transactions with brokerage firms and institutional
investors or on a cash basis when the ETPs invest in futures
contracts and other investments that cannot be transferred in-kind.
GraniteShares Comment Letter.
\209\ USCF Comment Letter; SSGA Comment Letter; WGC Comment
Letter.
---------------------------------------------------------------------------

After considering these comments, we have determined to adopt
amendments to enable certain ETPs that are not registered under the
Investment Company Act to elect to register an offering of an
indeterminate number of securities and to pay registration fees for
such an offering in a manner equivalent to that for mutual funds and
ETFs (i.e., in arrears on an annual net basis). In view of the concerns
raised by commenters as well as the similarities between these ETPs and
ETFs, we agree that it is appropriate to extend the availability of
this treatment to these ETPs under the Securities Act. Accordingly,
issuers that offer exchange-traded vehicle securities, as the term will
now be defined in amended rule 405,\210\ will be eligible under new
Securities Act rule 456(d) to elect to register an offering of an
indeterminate amount of exchange-traded vehicle securities and pay
registration fees for such an offering on an annual net basis no later
than 90 days after the end of the fiscal year when making this
election. We are also adopting Securities Act rule 457(u), which sets
forth the calculation method for paying registration fees in this
manner and is consistent with the fee calculation provisions of Form
24F-2.\211\ Finally, we are adopting rule 424(i) pursuant to which
issuers that elect to register an offering of an indeterminate amount
of securities pursuant to rule 456(d) will be required to file a
prospectus supplement when paying registration fees on an annual net
basis.\212\
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\210\ We believe that the scope of this definition properly
limits the availability of this treatment to offerings of securities
that share substantially similar attributes with those issued by
ETFs, such as being listed on a national securities exchange and
routine purchases and redemptions of the securities in ``creation
units'' at NAV. The reference to ``ratable share'' in the definition
encompasses repurchases or redemptions of securities that occur at
NAV on an in-kind basis or cash basis.
\211\ We are amending a number of Securities Act registration
statement forms (Forms S-1, S-3, F-1 and F-3) to provide that an
issuer may elect to register an indeterminate amount of exchange-
traded vehicle securities on these registration statement forms.
\212\ Rule 424(i) also includes certain disclosure requirements
modeled after Form 24F-2.
---------------------------------------------------------------------------

I. Disclosure and Reporting Parity Proposals

We are adopting amendments to our rules and forms, substantially as
proposed, intended to tailor the disclosure and regulatory framework
for affected funds in light of our amendments to the offering rules.
Many of these amendments are not required by the BDC Act or the
Registered CEF Act, but we believe are consistent with the respective
Acts' requirements to increase regulatory parity of affected funds with
otherwise similarly-situated issuers.\213\ As discussed in detail
below, these amendments include structured data requirements; new
annual reporting requirements; amendments to provide all affected funds
additional flexibility to incorporate information by reference; and
enhancements to the disclosures that registered CEFs make to investors
when the funds are not updating their registration statements.
---------------------------------------------------------------------------

\213\ For example, regulatory parity could mitigate any
competitive disparities between affected funds and other issuers. It
also could help investors in affected funds by providing them
investor protections that are currently provided to investors in
similarly-situated issuers. See, e.g., infra discussion in
paragraphs accompanying footnotes 284-289.
---------------------------------------------------------------------------

1. Structured Data Requirements
We are adopting, substantially as proposed, certain new structured
data reporting requirements for registered CEFs and BDCs. In
particular, and as discussed in detail below, we are requiring:

[[Page 33310]]

BDCs, like operating companies, to submit financial
statement information using Inline XBRL format;
registered CEFs and BDCs to include structured cover page
information in their registration statements on Form N-2 using Inline
XBRL format;
certain information required in an affected fund's
prospectus to be tagged using Inline XBRL format; and
filings on Form 24F-2 to be submitted in eXtensible Markup
Language (``XML'') format.
a. Inline XBRL Requirements for Financial Statements and Notes to
Financial Statements
We are adopting, as proposed, an amendment to 17 CFR 229.601 (Item
601 of Regulation S-K) to subject BDCs to the Inline XBRL financial
statement tagging requirements that apply to operating companies, by
removing the exclusion for BDCs from the Inline XBRL financial
statement tagging requirements.\214\ We continue to believe that
reporting in a structured data format makes financial information
easier for investors to analyze and helps automate regulatory filings
and business information processing.\215\ We also believe that BDC
investors and other market participants would benefit from the
availability of relevant information in a structured data format.\216\
These requirements will reduce the current disparity between the
accessibility of financial information BDCs provide to the market and
the accessibility of substantially similar financial information that
operating companies provide to the market.\217\
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\214\ Compare 17 CFR 229.601(b)(101)(i) (amended Item
601(b)(101)(i) of Regulation S-K) (excluding registered investment
companies from rule 601's tagging requirements) with current Item
601(b)(101)(i) of Regulation S-K (excluding all registrants that
prepare financial statements in accordance with 17 CFR 210.6-01
through 210.6-10 (Article 6 of Regulation S-X); see also amended
rule 405(b)(3)(i) of Regulation S-T (requiring a BDC to tag its
financial statements). We also are making conforming amendments to
Items 601(b)(101)(ii)(A) and (iii) of Regulation S-K to clarify the
exclusion of registered investment companies from rule 601's tagging
requirements.
\215\ Proposing Release, supra footnote 10, at section II.H.1.a.
\216\ Id. We also observed that having this information in a
structured data format would enhance our staff's ability to review
and analyze BDCs' financial statements.
\217\ Id. (summarizing the structured data reporting
requirements for operating companies and registered investment
companies).
---------------------------------------------------------------------------

The commenters who addressed this proposed requirement supported
it.\218\ Some of these commenters stated that structured financial
statement data would be more useful to investors than information in
only a HyperText Markup Language (``HTML'') or plain text format.\219\
One of these commenters stated that more structured financial statement
reporting would improve the clarity and transparency of reported
information by using consistent, agreed-upon definitions, and would
yield information that is less expensive to process and more timely
than unstructured data.\220\ Another commenter stated that eliminating
the delay for data users to obtain information once it is public makes
capital markets more efficient.\221\
---------------------------------------------------------------------------

\218\ Calcbench Comment Letter; Comment Letter of IRIS Business
Services Ltd. (June 10, 2019) (``IRIS Comment Letter''); Comment
Letter of XBRL US (June 10, 2019) (``XBRL US Comment Letter'').
\219\ Calcbench Comment Letter; XBRL US Comment Letter.
\220\ XBRL US Comment Letter.
\221\ Calcbench Comment Letter.
---------------------------------------------------------------------------

Two commenters supported the use of the Inline XBRL format
specifically.\222\ One of these commenters noted that, because Inline
XBRL is both machine-readable and human-readable, it will help
investors in BDCs quickly access structured data just as investors in
operating companies can.\223\ This commenter also highlighted potential
benefits of the format for issuers, stating that data in Inline XBRL
format is easier to review than, for example, the same data in separate
XBRL and HTML formats.\224\ Some commenters also stated that the
currently available XBRL taxonomies will be sufficient for BDCs.\225\
After considering public comments received, and because we continue to
believe that investors will benefit from the availability of relevant
information in a structured data format, we are adopting this
requirement as proposed.\226\
---------------------------------------------------------------------------

\222\ IRIS Comment Letter; XBRL US Comment Letter.
\223\ IRIS Comment Letter.
\224\ IRIS Comment Letter. The commenter also stated that it is
appropriate to subject BDCs to the same format as operating
companies--compared to requiring BDCs to report on Forms N-PORT and
N-CEN--because the format of their financial statements is similar
to that of operating companies. Id. Another commenter observed that
the same applications used to prepare XBRL for operating companies
could be leveraged for BDCs, increasing economies of scale. XBRL US
Comment Letter.
\225\ IRIS Comment Letter; XBRL US Comment Letter. Based on our
staff's review of BDCs' disclosures and assessment of the XBRL
taxonomies' development since they were first adopted in 2009, the
Commission stated its belief that relevant XBRL taxonomies were
sufficiently well developed for financial statement reporting by
BDCs. Proposing Release, supra footnote 10, at section II.H.1.a. One
commenter observed that BDC financial statement line items were
already captured in the US GAAP Taxonomy and that a new custom
schema would be an unnecessary cost for the Commission and the
marketplace. XBRL US Comment Letter. Another commenter stated,
however, that it would expect a greater use of non-standard
reporting elements than for average operating companies. IRIS
Comment Letter. We continue to believe that the relevant XBRL
taxonomies are sufficiently well developed for use by BDCs, even if
BDCs use non-standard elements more than the average operating
company.
\226\ See supra footnote 214.
---------------------------------------------------------------------------

b. New Check Boxes and Structured Data Format for Form N-2 Cover Page
Information
We are adopting, as proposed, a requirement that all affected funds
tag all of the data points that appear on the cover page of Form N-2,
except the Calculation of Registration Fee table, using Inline XBRL
format.\227\ These cover page data points will include, for example,
the company name, the Act or Acts to which the registration statement
relates, and check boxes relating to the effectiveness of the
registration statement. We currently require operating companies to tag
all of the data points on the cover page of Form 10-K, Form 10-Q, Form
8-K, Form 20-F, and Form 40-F using Inline XBRL format.\228\ The
Commission generally proposed to extend this requirement to mandatory
tagging of the data points on the cover page of Form N-2 because it
believed it would allow investors, other market participants, and other
data users to automate their use of this information.\229\
---------------------------------------------------------------------------

\227\ See new General Instruction I.1 of amended Form N-2; new
rule 405(b)(3)(ii) of amended Regulation S-T.
We also are making certain conforming revisions to proposed
General Instruction H (Interactive Data Files), which we renumbered
as General Instruction I of amended Form N-2. In addition, and as a
result, we renumbered General Instruction I of current Form N-2
(Registration of Additional Securities) as General Instruction J of
amended Form N-2.
\228\ See 17 CFR 232.406 [rule 406 of Regulation S-T]; FAST Act
Modernization Adopting Release, supra footnote 66, at 12674.
\229\ Proposing Release, supra footnote 10, at section II.H.1.b.
The Commission noted that this requirement would enhance investors'
ability to better identify, count, sort, aggregate, compare, and
analyze registrants and disclosures to the extent these data points
otherwise would be formatted only in HTML.
---------------------------------------------------------------------------

The commenters who addressed the proposed requirement supported
it.\230\ As above, two commenters supported the proposed Inline XBRL
format, stating that it would provide benefits for investors,
regulators, and issuers.\231\ One commenter specifically supported
requiring the Inline XBRL format over allowing reporting entities to
choose from more than one data standard or developing a custom schema
for the required information.\232\ After

[[Page 33311]]

considering public comments received, and because we continue to
believe that it would allow investors, other market participants, and
other data users to automate their use of this information, we are
adopting this requirement as proposed.
---------------------------------------------------------------------------

\230\ IRIS Comment Letter; XBRL US Comment Letter.
\231\ IRIS Comment Letter; XBRL US Comment Letter; see also
supra footnotes 222-224 and accompanying text.
\232\ XBRL US Comment Letter (stating that multiple data
standards would cause confusion in the marketplace and unnecessary
costs throughout the reporting supply chain and that a custom schema
would require the development of new tools to create and to extract
and analyze the data).
---------------------------------------------------------------------------

The Commission did not propose to require affected funds to tag the
table on the form's cover page that includes information about
calculation of the fund's registration fee under the Securities
Act.\233\ One commenter recommended that the Commission require tagging
of such registration fee information, stating that these are valuable
data elements and that extending the requirement to fee information
would not increase the burden of tagging on issuers.\234\ The
Commission recently proposed such amendments to Form N-2 as part of a
larger proposal to modernize the filing fee disclosure and payment
methods for most of the Commission's fee-bearing forms, statements, and
related rules.\235\ As a result, we believe that the filing fee
disclosure and payment modernization rulemaking is a more appropriate
vehicle for considering whether the fee calculation information on Form
N-2 should be tagged.
---------------------------------------------------------------------------

\233\ See Proposing Release, supra footnote 10, at section
II.H.1.b.
\234\ See XBRL US Comment Letter.
\235\ See Filing Fee Disclosure and Payment Methods
Modernization, Investment Company Act Release No. 33676 (Oct. 24,
2019) [84 FR 71580 (Dec. 27, 2019)].
---------------------------------------------------------------------------

In addition, we are amending Form N-2 to add new check boxes to its
cover page, as proposed.\236\ We proposed several new check boxes to
allow investors, Commission staff, and others to more readily identify
types of issuers and securities.\237\ We continue to believe that this
check box information will allow investors, Commission staff, and
others to more readily identify types of issuers and securities, and so
are adopting this provision as proposed.\238\ These check boxes will be
among the data points required to be tagged using Inline XBRL
format.\239\
---------------------------------------------------------------------------

\236\ See cover page of amended Form N-2. For purposes of 17 CFR
230.401(g) (Securities Act rule 401(g)), an affected fund that
checks a box on Form N-2 to indicate that it is relying on the
short-form registration instruction or that it is a WKSI filing an
automatic shelf registration statement will be deemed to have filed
the relevant registration statement or post-effective amendment
properly under the applicable provisions of Form N-2 unless the
Commission objects in the manner set forth in rule 401(g). See 17
CFR 230.401(g).
\237\ Proposing Release, supra footnote 10, at section II.G.1.b.
(discussing proposed check box requirements on Form N-2 cover page).
In a conforming change, we are also including a check box that is
substantively identical to a parallel check box on Form S-3 for
emerging growth companies that have elected not to use an extended
transition period for complying with new or revised accounting
standards. See cover page of amended Form N-2.
\238\ Commenters recommended that the Commission clarify that
the check box indicating that the only securities being registered
are being offered pursuant to dividend or interest reinvestment
plans is not intended to affect the ability of affected funds to
rely on ``Guide 5. Dividend Reinvestment Plans'' to Form N-2. See
Dechert Comment Letter; IPA Comment Letter. The new check box will
not affect that ability.
\239\ See supra footnote 227.
---------------------------------------------------------------------------

c. Tagging of Prospectus Disclosure Items
We are adopting, as proposed, a requirement that all affected funds
tag certain information that is required to be included in an affected
fund's prospectus using Inline XBRL format. All affected funds will be
required to submit certain information in registration statements or
post-effective amendments filed on Form N-2 and certain forms of
prospectuses filed pursuant to rule 424 under the Securities Act to the
Commission using Inline XBRL.\240\ A seasoned fund filing a short-form
registration statement on Form N-2 also will be required to tag
information appearing in Exchange Act reports--such as those on Form N-
CSR, 10-K, 10-Q, or 8-K--if that information is required to be tagged
in the fund's prospectus.\241\
---------------------------------------------------------------------------

\240\ See new General Instruction I.2 of amended Form N-2.
\241\ See new General Instruction I.3 of amended Form N-2.
---------------------------------------------------------------------------

We will require affected funds to tag the following prospectus
disclosure items using Inline XBRL format: Fee Table; Senior Securities
Table; Investment Objectives and Policies; Risk Factors; Share Price
Data; and Capital Stock, Long-Term Debt, and Other Securities.\242\ We
continue to believe that these items are of greatest utility for
investors and other data users that seek structured data to analyze and
compare funds, as they provide important information about a fund's key
features, costs, and risks.\243\ We believe tagging the Fee Table,
which provides detailed information about the fund's costs, could
facilitate analysis of fund costs and allow investors and other data
users to compare the costs of a particular affected fund to the costs
of other funds or other investment products, such as mutual funds. The
Senior Securities Table requires registrants to include information
about each class of senior securities, including bank loans. Tagging
this information will facilitate analyses of outstanding senior
securities that may bear on the likelihood, frequency, and size of
distributions from the fund to its investors. Tagging Investment
Objectives and Policies, which provides information about the fund's
principal portfolio emphasis, will help an investor determine the
degree to which a fund's objectives and policies align with the
investor's preferences. Risk Factors describes risks associated with an
investment in the fund. Tagging Risk Factors will facilitate the
aggregation, analysis, and comparison by investors and other data users
of information about a fund's risks alongside the fund's features and
benefits. Tagging Share Price Information is important because the
presence of a premium or discount may bear on the likelihood,
frequency, and size of distributions from the fund to its investors,
which we believe may be of particular importance to many affected fund
investors. Tagging Capital Stock, Long-Term Debt, and Other Securities
better informs common shareholders how their rights, expenses, and
risks are affected when the fund issues other types or classes of
securities. We also continue to believe that these items are best
suited to being tagged in a structured format.
---------------------------------------------------------------------------

\242\ See new General Instructions I.2 and I.3 of amended Form
N-2; see also Items 3.1, 4.3, 8.2.b, 8.2.d, 8.3.a, 8.3.b, 8.5.b,
8.5.c, 8.5.e, 10.1.a-d, 10.2.a-c, 10.2.e, 10.3, and 10.5 of amended
Form N-2. This information largely parallels similar information
contained in the Form N-1A risk/return summary. See Item 2 (Risk/
Return Summary: Investment Objectives/Goals), Item 3 (Risk/Return
Summary: Fee Table), and Item 4 (Risk/Return Summary: Investments,
Risks and Performance) of Form N-1A.
\243\ See generally Proposing Release, supra footnote 10, at
section II.H.1.b.
---------------------------------------------------------------------------

The commenters who addressed the proposed requirement supported
it.\244\ These commenters stated that the tagged data would be useful,
including both numeric and narrative information.\245\ In addition, one
commenter asserted that the Commission should require tagging all
financial data that is required to be reported.\246\ We believe that
this rule is appropriately focused on the key items that are most
suitable for tagging and of greatest utility for investors.
---------------------------------------------------------------------------

\244\ IRIS Comment Letter; XBRL US Comment Letter.
\245\ Id. One commenter also supported the proposed scope of the
new requirement--all affected funds--stating that if some issuers
are excluded, it would result in higher costs for preparer and users
of data. XBRL US Comment Letter. One commenter offered support for
the proposed Inline XBRL format, stating that it would provide
benefits to investors, regulators, and issuers. IRIS Comment Letter;
see also supra footnotes 222-224 and accompanying text.
\246\ XBRL US Comment Letter.
---------------------------------------------------------------------------

Because we continue to believe that structuring these data elements
will allow investors, other market participants, and other data users
to automate their use of this information,

[[Page 33312]]

we are adopting this requirement as proposed.\247\ As with other new
Commission XBRL taxonomies, staff will post for public review and
feedback a draft Inline XBRL taxonomy for affected funds' tagged
prospectus disclosures.\248\ When available, affected funds will be
required to use the most recent version of the Inline XBRL taxonomy for
tagged prospectus disclosures, as specified by the EDGAR Filer
Manual.\249\
---------------------------------------------------------------------------

\247\ See new General Instructions I.2 and I.3 of amended Form
N-2; new rule 405(b)(3)(iii) of amended Regulation S-T. We also are
making conforming amendments to rule 601(b)(101)(i)(C) of Regulation
S-K, rule 11 of Regulation S-T, and adding a new general instruction
to Form N-CSR to implement the specified prospectus disclosure
tagging requirements for affected funds.
\248\ Taxonomies are available at https://www.sec.gov/structureddata/dera_taxonomies.
\249\ See rule 405(c)(1) of Regulation S-T.
---------------------------------------------------------------------------

As the Commission proposed, and as required of mutual funds and
ETFs under the recently adopted Inline XBRL regime,\250\ we will
require affected funds to submit ``Interactive Data Files'' (i.e.,
machine-readable computer code that presents information in XBRL
format) \251\ as follows:
---------------------------------------------------------------------------

\250\ See Inline XBRL Filing of Tagged Data, Investment Company
Act Release No. 33139 (June 28, 2018) (``Inline XBRL Adopting
Release'').
\251\ The term ``Interactive Data File'' is defined to mean
``the machine-readable computer code that presents information in
[XBRL] electronic format pursuant to [rule 405 of Regulation S-T]
and as specified by the EDGAR Filer Manual.'' See rule 11 of
Regulation S-T. The EDGAR Filer Manual sets forth the technical
formatting requirements for the presentation and submission of
electronic filings through the EDGAR system.
---------------------------------------------------------------------------

For any registration statements and post-effective
amendments, Interactive Data Files must be filed either concurrently
with the filing or in a subsequent amendment that is filed on or before
the date that the registration statement or post-effective amendment
that contains the related information becomes effective; \252\
---------------------------------------------------------------------------

\252\ New General Instruction I.2 of amended Form N-2; cf.
General Instruction C.3.(g)(i)(B) of Form N-1A.
---------------------------------------------------------------------------

for any form of prospectus filed pursuant to rule 424,
Interactive Data Files must be submitted concurrently with the filing;
\253\ and
---------------------------------------------------------------------------

\253\ New General Instruction I.2 of amended Form N-2; cf.
General Instruction C.3.(g)(ii) of Form N-1A.
---------------------------------------------------------------------------

for any Exchange Act reports that a seasoned fund filing a
short-form registration statement on Form N-2 will have to tag, as
discussed above, Interactive Data files must be submitted concurrently
with the filing.\254\
---------------------------------------------------------------------------

\254\ New General Instruction I.3 of amended Form N-2.
---------------------------------------------------------------------------

We proposed this approach to facilitate timely availability and
promote the comparability and utility of important information in a
structured data format for investors, other market participants, and
other data users, which we believed would yield substantial
benefits.\255\ We did not receive comments on this aspect of the
proposal. We continue to believe that this approach will yield the
substantial benefits discussed above and therefore are adopting it as
proposed.
---------------------------------------------------------------------------

\255\ Proposing Release, supra footnote 10, at section II.H.1.c.
---------------------------------------------------------------------------

d. Structured Data Format for Form 24F-2
We will require submission of filings on Form 24F-2 in a structured
XML format.\256\ We proposed this use of a structured data format,
believing that it would make it easier for issuers to accurately
prepare and submit the information required by Form 24F-2 and would
make the submitted information more useful to Commission staff.\257\
The commenters who addressed the proposed requirement to structure Form
24F-2 supported it,\258\ with one commenter observing that the
structured registration fee information could be useful in validating
the submission.\259\ Commenters were mixed on the proposed custom XML
format, with one commenter supporting the proposed XML format,\260\ and
another recommending that the Commission use an XBRL format
instead.\261\
---------------------------------------------------------------------------

\256\ See General Instruction A.3 to amended Form 24F-2
(requiring reports on Form 24F-2 to be submitted in electronic
format pursuant to the EDGAR Filer Manual and Appendices). We are
expanding the group of issuers subject to filing on Form 24F-2 to
include interval funds. See supra section II.H. We also are making a
technical correction in Form 24F-2 to refer to the applicable
paragraph of 17 CFR 232.101 (rule 101 of Regulation S-T). See
General Instruction A.3 to amended Form 24F-2 (correcting ``rule
101(a)(1)(i)'' to ``rule 101(a)(1)(iv)''). In addition, we are
amending Form 24F-2 to add a free text response field, and a
requirement to provide the EDGAR series/class (contract) ID for each
separately reported series/class (contract) to facilitate
implementation of the new structured data format. See amended Form
24F-2.
\257\ Proposing Release, supra footnote 10, at section II.H.1.d.
\258\ IRIS Comment Letter; XBRL US Comment Letter.
\259\ IRIS Comment Letter.
\260\ IRIS Comment Letter. Additionally, two commenters
recommended that the Commission require that reports on Forms N-CEN
and N-PORT, which require reporting of information in a structured
data format using a custom XML schema, be in XBRL or Inline XBRL
format. See XBRL US Comment Letter; IRIS Comment Letter. The
Commission considered requiring reporting in XBRL format in
connection with its adoption of Forms N-CEN and N-PORT and
determined that the relatively simple characteristics reported on
those forms is more suited to XML than XBRL. See Investment Company
Reporting Modernization, Investment Company Act Release No. 32314
(Oct. 13, 2016) [81 FR 81870, 81906-07 (Nov. 17, 2016)]
(``Investment Company Reporting Modernization Adopting Release'').
\261\ XBRL US Comment Letter (stating that a custom XML schema
will result in added costs for reporting entities and data consumers
relative to XBRL). This commenter also suggested requiring the use
of validation rules and linking custom extensions to improve data
quality for reported financial information. XBRL US Comment Letter.
While we encourage the use of appropriate tools to improve data
quality, we believe that consideration of a requirement to use
validation rules or use custom extension linking would best be taken
up on a separate, holistic basis, for BDCs and operating companies
alike, rather than in the context of this final rule.
---------------------------------------------------------------------------

Because Form 24F-2 is primarily used by Commission staff to
validate registration fees paid by issuers and not for financial
reporting purposes, we continue to believe that a custom XML schema
will be an appropriate format for the required information. For
example, while XBRL allows issuers to capture the rich complexity of
financial information presented in accordance with GAAP, we believe
that XML is more appropriate for the relatively simple characteristics
of the fund's fee information in reports on Form 24F-2.\262\ In
addition we continue to believe that the XML format will improve the
quality of information disclosed by providing a built-in validation
framework of the data in the reports.\263\ We therefore will require
reports on Form 24F-2 to be filed in a structured XML format, as
proposed.
---------------------------------------------------------------------------

\262\ See Investment Company Reporting Modernization Adopting
Release, supra footnote 260, at nn.449-50 and accompanying text.
\263\ See id.
---------------------------------------------------------------------------

2. Periodic Reporting Requirements
We are also adopting new annual report requirements, as proposed.
As we discussed in the Proposing Release, we expect several of the
reforms we are adopting in this release, such as those relating to
automatically effective shelf registration, forward incorporation by
reference, and final prospectus delivery, will elevate the importance
of periodic reporting relative to prospectus disclosure for affected
funds.
A seasoned fund filing a short-form registration statement on Form
N-2 will be required to forward incorporate all periodic Exchange Act
reports into its registration statement.\264\ This should result in
periodic reports becoming a more salient, convenient, and comprehensive
source of updated information about a particular seasoned fund,
relative to that fund's registration statement. As a result, these
funds' annual reports may take on greater prominence, with investors
looking to the annual reports for key

[[Page 33313]]

information.\265\ Registered CEFs' shareholder reports may also take on
greater prominence for investors because, under the final rule,
affected funds will not be required to deliver final prospectuses but
will still be required to deliver shareholder reports at least semi-
annually.\266\
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\264\ See new General Instruction F.3.b of amended Form N-2.
\265\ In 2005, the Commission observed that recent enhancements
to Exchange Act reporting enabled us to rely on those reports to a
greater degree in adopting our rules to reform the securities
offering process. Securities Offering Reform Adopting Release, supra
footnote 5, at 44726. As the Commission did then, we believe that
enhanced periodic reporting is an important corollary to reform of
the offering process under the Securities Act. See id.
\266\ Compare Securities Act rule 172 with 17 CFR 270.30e-1
(Investment Company Act rule 30e-1); see also supra section II.C.
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Accordingly, as proposed, we are requiring seasoned funds that
register using the proposed short-form registration instruction to
include key information in their annual reports regarding fees and
expenses, premiums and discounts, and outstanding senior securities
that the funds currently disclose in their prospectuses.\267\ Because
the annual report will be incorporated by reference into the fund's
prospectus, requiring disclosure in both the prospectus and annual
report should not require duplicative disclosure. Moreover, specifying
identical disclosure requirements in both places may facilitate forward
incorporation by reference, by making clear that the same required
disclosure will satisfy both requirements. We continue to believe that
investors should have no less current information than they do today
about these items when the fund is offering its shares.\268\ Finally,
we are requiring, as proposed, registered CEFs to provide management's
discussion of fund performance (or ``MDFP'') in their annual reports to
shareholders, BDCs to provide financial highlights in their
registration statements and annual reports, and affected funds filing a
short-form registration statement on Form N-2 to disclose material
unresolved staff comments.\269\ These provisions are intended to
modernize and harmonize our periodic report disclosure requirements for
affected funds with those applicable to operating companies and mutual
funds and ETFs.\270\
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\267\ In general, these requirements are expressed as a cross-
reference to the specified registration statement requirements in
Form N-2. See new Instructions 4.h.(1)-4.h.(3) to Item 24 of amended
Form N-2 (referencing Items 4.3, 3.1, and 8.5 of amended Form N-2,
respectively).
\268\ Proposing Release, supra footnote 10, at section II.H.2.
\269\ See infra sections II.I.2.a-II.I.2.d. See new Instruction
4.g to Item 24 of amended Form N-2 (MDFP); deletion of Instruction 1
to Item 4 of current Form N-2 (BDC financial highlights); and new
Instruction 4.h.(4) to Item 24.4.h(4) of amended Form N-2 (material
unresolved staff comments).
\270\ We are also, as proposed, amending Form N-2 to apply
certain of its requirements for annual reports to BDCs. See new
Instruction 10 to Item 24 of amended Form N-2.
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a. Fee and Expense Table, Share Price Data, and Senior Securities Table
We are adopting a requirement, as proposed, that funds filing a
short-form registration statement on Form N-2 include key information
in their annual reports that they disclose in their prospectuses in
light of the importance of this information and the increased
prominence of shareholder reports under our final rule. Specifically,
we will require that these funds include the following information in
their annual reports: \271\
---------------------------------------------------------------------------

\271\ See new Instructions 4.h.(1) (senior securities table),
4.h.(2) (fee and expense table), and 4.h.(3) (share price data) to
Item 24 of amended Form N-2.
---------------------------------------------------------------------------

Fee and Expense Table: Form N-2 requires registrants to
include information about the costs and expenses that the investor will
bear directly or indirectly, using specified captions and a specified
tabular format.\272\ This table is designed to help investors
understand the costs of investing in an affected fund and to compare
those costs with the costs of other affected funds.\273\ The Commission
has previously noted the importance of costs to an investment decision
and, in the case of registered open-end funds, has specified the
location of the fee table to enhance the prominence of the cost
information.\274\
---------------------------------------------------------------------------

\272\ See Item 3.1 of amended Form N-2; see also new Instruction
4.h.(2) to Item 24 of amended Form N-2.
\273\ See Enhanced Disclosure and New Prospectus Delivery Option
for Registered Open-End Management Investment Companies, Investment
Company Release No. 28064 (Nov. 21, 2007) [72 FR 67790, 67794 (Nov.
30, 2007)].
\274\ See id.; 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, 4553 (Jan. 26, 2009)]; Request for Comment on Fund Retail
Investor Experience and Disclosure, Investment Company Act Release
No. 33113 (June 5, 2018) [83 FR 26891, 26901 (June 11, 2018)]
(``Investor Experience Request for Comment'').
---------------------------------------------------------------------------

Share Price Data: Form N-2 requires registrants to include
information about the share price of the registrant's stock as well as
information about any premium or discount that the share price
reflects, compared to the registrant's NAV.\275\ The presence of a
premium or discount may bear on the likelihood, frequency, and size of
distributions from the fund to its investors, which we believe may be
of particular importance to many affected fund investors.
---------------------------------------------------------------------------

\275\ See Item 8.5 of amended Form N-2; see also new Instruction
4.h.(3) to Item 24 of amended Form N-2 (share price data).
---------------------------------------------------------------------------

Senior Securities Table: Form N-2 requires registrants to
include information about each of its classes of senior securities,
including bank loans.\276\ As with a premium or discount, any
outstanding senior securities may bear on the likelihood, frequency,
and size of distributions from the fund to its investors. A registrant
must disclose information about its senior securities for the most
recent ten years, the last five years of which must be audited.\277\
---------------------------------------------------------------------------

\276\ See Item 4.3 of amended Form N-2; see also new Instruction
4.h.(1) to Item 24 of amended Form N-2.
\277\ See Instruction 1 to Item 4.3 (applying Instruction 8 to
Item 4.1 to Item 4.3) and Instruction 8 to Item 4.1 (requiring the
information to be audited) of amended Form N-2.
---------------------------------------------------------------------------

The commenters that addressed these proposed requirements related
to the Fee and Expense Table, Share Price Data, and Senior Securities
Table supported them.\278\ Because we continue to believe in the
importance of this information and the increased prominence of
shareholder reports under our final rule,\279\ we are adopting this
aspect of the proposal as proposed.\280\
---------------------------------------------------------------------------

\278\ ICI Comment Letter; Invesco Comment Letter. Two other
commenters stated that they did ``not object'' to the proposed
requirements. Dechert Comment Letter; IPA Comment Letter. Several
commenters opposed related potential modifications addressed in the
requests for comment within the Proposing Release that we are not
adopting. Dechert Comment Letter (opposing expansion of proposed
requirement to semi-annual reports; opposing expansion of
requirement to ``portfolio companies'' table); IPA Comment Letter
(same). One commenter recommended that the Commission continue to
consider ways to enhance the fund retail investor experience,
including the content of the annual report. ICI Comment Letter. The
Commission staff is continuing to consider comment letters received
in response to the Investor Experience Request for Comment. See
supra footnote 274.
\279\ Proposing Release, supra footnote 10, at section II.H.2.a.
\280\ One commenter recommended that we add an instruction to
Form N-2 to ``clarify'' that the schedules required by 17 CFR
210.12-12 (rule 12-12 of Regulation S-X) satisfy the Portfolio
Companies table requirement in Item 8.6.a of Form N-2. See Dechert
Comment Letter. We are not making this change because the two
provisions do not require the same information. Disclosure
satisfying the requirements of rule 12-12 of Regulation S-X would
not always satisfy the requirements of Item 8.6.a. For example, Item
8.6.a of Form N-2 requires certain information about each portfolio
company, such as the percentage of each class owned by the issuer,
the issuer's relationship with the portfolio company, and the
address of the portfolio company. Regulation S-X requires no such
disclosures.
---------------------------------------------------------------------------

With respect to the Senior Securities Table, two commenters
requested that we revise the instruction to Form N-2

[[Page 33314]]

as it relates to affected funds to reduce the audit requirement from
the last five-years (in the registration statement) to the same periods
as contained in the audited balance sheet presented in the annual
report.\281\ However, such a change would alter the periods presented
for the Senior Securities Table, which match the periods presented in
the Financial Highlights.\282\ Given the importance of asset coverage
and the comparability of information contained in both the Financial
Highlights and the Senior Securities Table, we do not believe such a
change is appropriate. Additionally, because the annual report will be
incorporated by reference into the fund's prospectus, filing the
audited senior securities table in the annual report will not result in
duplicative disclosure. For this reason, we have determined not to
amend the requirements in the manner suggested by the commenters.
---------------------------------------------------------------------------

\281\ Dechert Comment Letter (``[W]e believe that the SEC should
revise the instructions to Item 4.3 of Form N-2 to state that an
Affected Fund need only audit the information in the senior
securities table for the same periods as contained in the audited
balance sheet included in the fund's annual report.''); IPA Comment
Letter.
\282\ See Instruction 1 to Item 4.3 of Form N-2 (applying
Instruction 3 to Item 4.1 to the Senior Securities Table).
---------------------------------------------------------------------------

b. Management's Discussion of Fund Performance
We are also adopting, as proposed, an amendment to Form N-2 that
will extend the MDFP disclosure requirements to all registered
CEFs.\283\ Currently, mutual funds and ETFs are required to include
MDFP in their annual reports to shareholders.\284\ MDFP disclosure aids
investors in assessing a fund's performance over the prior year and
complements other backward looking information required in the annual
report, such as financial statements.\285\ This required disclosure is
grounded conceptually in the disclosure requirement for operating
companies (as well as BDCs) to include a narrative discussion of the
financial statements of the company--``management discussion and
analysis'' or ``MD&A''--and to provide an opportunity to look at a
company ``through the eyes of management.'' \286\
---------------------------------------------------------------------------

\283\ New Instruction 4.g to Item 24 of amended Form N-2.
\284\ Item 27(b)(7) of Form N-1A. This requirement applies to
registered open-end management investment companies other than money
market funds.
\285\ Shareholder Reports and Quarterly Portfolio Disclosure of
Registered Management Investment Companies, Investment Company Act
Release No. 26372 (Feb. 27, 2004) [69 FR 11243, 11254 (Mar. 9,
2004)] (``Quarterly Portfolio Disclosure Adopting Release''); see
also Proposing Release, supra footnote 10, at section II.H.2.b
(summarizing the history and purpose of the requirement).
\286\ Disclosure and Analysis of Mutual Fund Performance
Information; Portfolio Manager Disclosure, Investment Company Act
Release No. 17294 (Jan. 8, 1990) [55 FR 1460, 1462 (Jan. 16, 1990)].
---------------------------------------------------------------------------

We proposed to amend Form N-2 to extend the MDFP disclosure
requirements to all registered CEFs.\287\ Specifically, we proposed to
require that registered CEFs:
---------------------------------------------------------------------------

\287\ Proposing Release, supra footnote 10, at section II.H.2.b.
---------------------------------------------------------------------------

Discuss the factors that materially affected their
performance during the most recently completed fiscal year, including
the relevant market conditions and the investment strategies and
techniques used by the fund;
Provide a line graph comparing the initial and subsequent
account values at the end of each of the most recently completed ten
fiscal years of the fund and a table of the fund's total returns for
the 1-, 5-, and 10-year periods as of the last day of the fund's most
recent fiscal year; and
Discuss the effect of any policy or practice of
maintaining a specified level of distributions to shareholders on the
fund's investment strategies and per share NAV during the last fiscal
year, as well as the extent to which the registrant's distribution
policy resulted in distributions of capital.
Commenters that addressed this aspect of the proposal supported
it.\288\ Because we continue to believe that investors in these funds--
like investors in mutual funds, ETFs, BDCs, and operating companies--
would benefit from annual report disclosure that aids them in assessing
the fund's performance over the prior year and that complements other
information in the report,\289\ we are adopting this requirement as
proposed.\290\
---------------------------------------------------------------------------

\288\ ABA Comment Letter; ICI Comment Letter; Invesco Comment
Letter; TIAA Comment Letter. One commenter stated that MDFP
information can assist investors with understanding fund performance
and market conditions over the reporting period from the fund
manager's perspective. ICI Comment Letter. In the Proposing Release,
we asked whether, instead of requiring MDFP information for
registered CEFs, we should require such funds to disclose MD&A
information like BDCs and operating companies. Proposing Release,
supra footnote 10, at section II.H.2.b. A few commenters expressly
opposed this change to the proposed requirement compared with the
MDFP requirement in Form N-1A. ABA Comment Letter; ICI Comment
Letter; Invesco Comment Letter; TIAA Comment Letter.
\289\ Proposing Release, supra footnote 10, at section II.H.2.b.
\290\ New Instruction 4.g to Item 24 of amended Form N-2.
---------------------------------------------------------------------------

c. Financial Highlights
We are amending Form N-2, as proposed, to require that a BDC, like
other affected funds, include financial highlights disclosure
summarizing its financial statements in its registration statement and
annual report.\291\ Today, BDCs include their full financial statements
in their prospectus, and we currently permit BDCs to omit financial
highlights disclosure summarizing these financial statements.\292\ We
understand, however, that it is generally market practice for BDCs to
include financial highlights disclosure. This information is arranged
to allow investors to trace the operating performance of a fund on a
per share basis from the fund's beginning NAV to its ending NAV so that
investors may understand the sources of changes.\293\ It summarizes the
financial statements.\294\ Commenters did not address this aspect of
the proposal. Because we continue to believe that investors will
benefit from required disclosure summarizing a BDC's financial
statements,\295\ we are adopting this change as proposed.\296\
---------------------------------------------------------------------------

\291\ To effectuate this change, we are removing and reserving
Instruction 1 to Item 4, and adding new Instruction 10 to Item 24 of
amended Form N-2. Currently, only registered CEFs are required to
include financial highlights in their registration statements, and
annual reports to shareholders. See Instruction 1 to Item 4.1
(limiting the applicability of Item 4.1 in the case of BDCs), and
Instruction 4.b (requiring the financial highlights required by Item
4.1 to be included in the annual report) to Item 24 of current Form
N 2.
\292\ General Instruction 1 to Item 4.1 of current Form N-2.
\293\ Registration Form for Closed-End Management Investment
Companies, Investment Company Act Release No. 19115 (Nov. 20, 1992)
[57 FR 56826, 56829 (Dec. 1, 1992)].
\294\ Registration Form for Closed-End Management Investment
Companies, Investment Company Act Release No. 17091 (July 28, 1989)
[54 FR 32993, 32997 (Aug. 11, 1989)].
\295\ See Proposing Release, supra footnote 10, at section
II.H.2.c.
\296\ See Instruction 1 to Item 4.1 of amended Form N-2 (removed
and reserved); new Instruction 10 to Item 24 of amended Form N-2.
In addition, we are adopting, as proposed, a conforming change
to the financial highlights requirements to eliminate the current
requirement that registered CEFs specify the average commission rate
paid. See Item 4.1 of amended Form N-2 (removing Instructions 18-19
from Item 4.1). Although this information is currently required for
registered CEFs, the Commission previously eliminated a similar
requirement from Item 13(a) of Form N-1A for open-end funds
registered on Form N-1A. Item 4.1.l of Form N-2; Instructions 18-19
to Item 4.1 of Form N-2; Item 13(a) of Form N-1A; See Registration
Form Used by Open-End Management Investment Companies, Investment
Company Act Release No. 23064 (Mar. 13, 1998) [63 FR 13916, 13936
(Mar. 23, 1998)]. The Commission reached this determination after
receiving and considering public comment arguing that these rates
are technical information that typical investors are unable to
understand. Id. We continue to believe that the same considerations
supporting elimination of this requirement from Form N-1A also apply
to registered CEFs.

---------------------------------------------------------------------------

[[Page 33315]]

d. Unresolved Staff Comments
We are also adopting, as proposed, a requirement that affected
funds filing a short-form registration statement disclose outstanding
staff comments that remain unresolved for a substantial period of time
and that the fund believes are material.\297\ As part of the
Commission's 2005 securities offering reforms for operating companies,
the Commission adopted a similar provision for operating companies,
recognizing that the new rules could eliminate some incentives issuers
may have to timely resolve any staff comments on their Exchange Act
reports.\298\ The Commission observed, in connection with this proposed
requirement, that this rulemaking similarly may eliminate some
incentives for certain affected funds to timely resolve staff comments.
---------------------------------------------------------------------------

\297\ See new Instruction 4.h.(4) to Item 24 of amended Form N-
2. Specifically, such funds will be required to disclose the
substance of any unresolved written staff comments that the fund
believes are material and that were received not less than 180 days
before the end of the fiscal period to which the annual report
relates. Id.
\298\ See generally Proposing Release, supra footnote 10, at
section II.H.2.d.
---------------------------------------------------------------------------

Two commenters recommended that the Commission not adopt this
proposed requirement.\299\ One commenter stated that the proposed
requirement would be inconsistent with Commission efforts to simplify
disclosure and focus on key information important to investors.\300\ We
believe, however, that, because the requirement only relates to
comments that the issuer believes are material and because they will
relate to information about which the issuer and the Commission staff
disagree, the disclosure of the comments is likely to be information
that is important to investors. This commenter also stated that the
requirement would be at odds with recent statements about the non-
binding nature of staff guidance. However, the provision will not make
the substance of statements by staff in their comments binding upon the
public or the Commission. Rather, the Commission, by rule, will require
affected funds to inform investors about their disagreements with the
staff in connection with the staff's review of disclosures.
---------------------------------------------------------------------------

\299\ ICI Comment Letter; Invesco Comment Letter. One commenter
opposed extending the proposed requirement to additional categories
of issuers, including mutual funds and ETFs. ICI Comment Letter.
\300\ ICI Comment Letter.
---------------------------------------------------------------------------

Two commenters expressed concern that differing views about whether
a particular comment is ``material'' or ``unresolved'' could result in
inconsistent disclosure among different funds in similar
circumstances.\301\ We recognize that analysis of whether a particular
written comment must be disclosed may involve some subjective judgment
regarding specific facts and circumstances. Many disclosure
requirements inherently involve some subjective judgment and can result
in some variance in the disclosure provided by different funds.
---------------------------------------------------------------------------

\301\ ICI Comment Letter; Invesco Comment Letter.
---------------------------------------------------------------------------

These commenters also suggested some alternatives to the proposed
requirement. For example, one commenter suggested that the Commission,
rather than require disclosure of material unresolved staff comments,
issue a stop order to prevent an offering from going forward if
necessary.\302\ We believe that it is more appropriate to preserve an
intermediate approach for the Commission, in appropriate circumstances,
to allow an offering to proceed while informing investors and others
about material disagreements between the issuer and the Commission's
staff, so that investors can make an informed judgment about the
disagreement. Another commenter recommended, as an alternative, that
the Commission publish its staff's comments and issuer responses.\303\
We believe, however, that investors and other interested persons are
more likely to see and read disclosure of material, unresolved staff
comments if they appear in a fund's annual report than comments and
responses published separately.\304\
---------------------------------------------------------------------------

\302\ ICI Comment Letter.
\303\ Invesco Comment Letter.
\304\ Adopting this requirement does not prevent the Commission
from also publishing staff comments or issuer responses, which may
supplement this required disclosure. For example, publishing staff
comments and issuer responses, which the staff currently
disseminates using the EDGAR system, may also inform investors and
the market about comments that are promptly resolved. See Press
Release No. 2004-89; SEC Staff to Publicly Release Comment Letters
and Responses (June 24, 2004) available at https://www.sec.gov/news/press/2004-89.htm.
---------------------------------------------------------------------------

In addition, this requirement parallels the current requirement for
operating companies that use the offering rules.\305\ These commenters,
however, provide no basis for distinguishing affected funds from those
operating companies that are already subject to the requirement. After
considering comments received, and because we continue to believe that
these disclosure requirements will provide an incentive for affected
funds to timely resolve staff comments and that investors may value
information about areas of disagreement that the issuer believes are
material, we are adopting the requirement as proposed.\306\
---------------------------------------------------------------------------

\305\ Proposing Release, supra footnote 10, at section II.H.2.d.
\306\ New Instruction 4.h.(4) to Item 24 of amended Form N-2.
---------------------------------------------------------------------------

3. Current Reporting Requirements for Affected Funds
As discussed in the Proposing Release, operating companies and BDCs
are required to promptly report certain events on Form 8-K, while
registered CEFs generally are not required to report on Form 8-K. The
Commission proposed to require registered CEFs to report information on
Form 8-K to enhance parity with operating companies and BDCs, to
improve information for investors and the market, and to recognize the
role of Form 8-K reporting in the 2005 offering reform amendments.\307\
It also proposed to amend Form 8-K to: (1) Add two new reporting items
for affected funds on material changes to investment objectives or
policies and material write-downs of significant investments, and (2)
adapt the existing reporting requirements and instructions to affected
funds. As discussed in more detail below, in response to comments, we
are not adopting the proposed Form 8-K amendments.\308\ However, we
will continue to consider current reporting more generally as part of
our ongoing review of the effectiveness of investment company
disclosure.
---------------------------------------------------------------------------

\307\ See Proposing Release, supra footnote 10, at section
II.H.3.a. See also Securities Offering Reform Adopting Release,
supra footnote 5, at 44726 (describing the availability of ongoing
information about a public issuer and its securities, including
current information on Form 8-K, as an important component of the
offering reforms the Commission adopted for operating companies) and
44730 (declining to make the benefits of being a reporting issuer,
seasoned issuer, or WKSI available to voluntary filers and stating
that ``such issuers should be required to register under the
Exchange Act, and thus become subject to all of the results of
registration for all purposes, if they wish to avail themselves of''
these benefits).
\308\ BDCs will continue to be required to report on Form 8-K,
as they do today.
---------------------------------------------------------------------------

a. Form 8-K Reporting for Registered CEFs
The Commission proposed to require registered CEFs that are
reporting companies under section 13(a) or section 15(d) of the
Exchange Act to report current information on Form 8-K. Commenters
generally opposed a Form 8-K reporting requirement for registered
CEFs.\309\ Commenters suggested that registered CEFs should not be
subject to Form 8-K reporting requirements because the commenters
believe that: (1) Existing registered CEF

[[Page 33316]]

disclosure is sufficient; \310\ (2) Form 8-K reporting would be costly
for registered CEFs; \311\ (3) parity with operating companies and BDCs
is unnecessary in the context of Form 8-K reporting; \312\ and (4)
investors, analysts, and regulators have not previously indicated that
registered CEF disclosure is inadequate.\313\
---------------------------------------------------------------------------

\309\ See ABA Comment Letter; ICI Comment Letter; and Invesco
Comment Letter.
\310\ See ABA Comment Letter; ICI Comment Letter; and Invesco
Comment Letter.
\311\ See ABA Comment Letter (stating that the cost and
administrative burden of Form 8-K reporting would outweigh the
benefits discussed in the Proposing Release of establishing a
uniform and centralized current reporting regime for registered
CEFs); ICI Comment Letter (suggesting that registered CEFs already
have a greater regulatory filing burden than operating companies
because they report on Forms N-CEN, N-PORT, and N-PX); and Invesco
Comment Letter.
\312\ See ICI Comment Letter (suggesting there are reasons for
registered CEFs to be subject to a different disclosure regime than
operating companies, including that registered CEFs are highly
regulated under the Investment Company Act).
\313\ See ABA Comment Letter and ICI Comment Letter. But see
White Comment Letter (stating that there should always be a current
document where an investor can see a fund's strategy, risks,
performance, and costs each year and suggesting that investors
should receive notices of any material changes on a more timely
basis); Proposing Release, supra footnote 10, at n.323 (citing a
similar comment letter the Commission received in response to the
Investor Experience Request for Comment).
---------------------------------------------------------------------------

With respect to existing disclosure practices, commenters stated
that registered CEFs already provide material updates through other
required or voluntary mechanisms (e.g., prospectus supplements, press
releases, shareholder reports, voluntary Form 8-K filings, and website
disclosure) that result in adequate and timely disclosure of
information to investors.\314\ One commenter suggested that registered
CEFs would be unlikely to provide meaningful new information under Form
8-K beyond what they already disclose under other regulatory
requirements.\315\ Two commenters expressed concern that Form 8-K
reporting may not timely inform investors about important fund
events.\316\ One of these commenters suggested that fund investors are
more likely to receive timely information through a registered CEF's
typical practice of issuing a press release about an important event,
posting the press release to its website, and including information
about the event in its next shareholder report.\317\
---------------------------------------------------------------------------

\314\ See ABA Comment Letter; ICI Comment Letter; and Invesco
Comment Letter. As discussed in the Proposing Release, listed
registered CEFs may disclose certain information on Form 8-K to
comply with exchange requirements for listed company disclosure,
although there are other mechanisms they may use to disclose the
information (e.g., press releases). See Proposing Release, supra
footnote 10, at section II.H.3.a. Two commenters pointed to these
requirements in support of their argument that existing disclosure
is adequate. ABA Comment Letter and Invesco Comment Letter.
\315\ See ABA Comment Letter (stating that Form 8-K is largely
duplicative of information that listed registered CEFs disclose in
press releases in accordance with exchange rules and that
continuously-offered registered CEFs disclose in prospectus
supplements or post-effective amendments under SEC rules).
\316\ See Invesco Comment Letter and White Comment Letter.
\317\ See Invesco Comment Letter.
---------------------------------------------------------------------------

Although they opposed a new Form 8-K reporting requirement, a few
commenters suggested alternative approaches if we were to require
registered CEFs to report on Form 8-K. One commenter suggested that, if
the Commission requires registered CEFs to report on Form 8-K, we
should require them to report only a subset of Form 8-K items.\318\
Another commenter suggested that, rather than require registered CEFs
to report on Form 8-K, we could require listed registered CEFs to file
press releases containing material information on Form 8-K, similar to
how continuously-offered registered CEFs file prospectus supplements on
EDGAR.\319\ Additionally, one commenter suggested that we require
registered CEFs to more directly notify investors about material fund
changes and stated that Form 8-K filings would not provide appropriate
notice to a fund's investors.\320\
---------------------------------------------------------------------------

\318\ See ICI Comment Letter.
\319\ See ABA Comment Letter.
\320\ See White Comment Letter.
---------------------------------------------------------------------------

As we recognized in the Proposing Release and as noted by
commenters, there are differences between the types of events that are
important to registered CEFs and the types of events that are important
to operating companies.\321\ Moreover, for those Form 8-K events that
would be relevant to registered CEFs, we recognize that these funds
currently may disclose substantially similar information through other
mechanisms, such as prospectus supplements, post-effective amendments,
and press releases. We also are sensitive to commenters' concerns about
the burdens to registered CEFs associated with a new Form 8-K reporting
requirement, particularly for those registered CEFs that will not
qualify as WKSIs or be eligible to file short-form registration
statements under the amendments we are adopting.
---------------------------------------------------------------------------

\321\ See Proposing Release, supra footnote 10, at text
following n.260; ABA Comment Letter (suggesting that, as a general
matter, registered CEFs tend to have a simpler and more transparent
business than operating companies (e.g., many listed registered CEFs
publish their NAVs on a daily or weekly basis)); ICI Comment Letter
(stating that, for example, disclosure about departures of fund
officers on Form 8-K would not be meaningful for registered CEFs
because fund officers generally are not actively involved in the
day-to-day management of a fund's portfolio).
---------------------------------------------------------------------------

As a result of these considerations, we are persuaded that a new
Form 8-K reporting requirement for registered CEFs may not
substantially improve the flow of important current information to
investors and the market and, as a result, would not justify the
additional burdens associated with Form 8-K reporting. Therefore, we
are not adopting the proposed Form 8-K reporting requirements for
registered CEFs.\322\ However, we will continue to consider whether
more current reporting requirements that are tailored to registered
CEFs, or to registered investment companies more generally, may be
appropriate in connection with our continuing review of investment
company disclosure effectiveness.\323\
---------------------------------------------------------------------------

\322\ In addition to the proposed amendments to Form 8-K, we
also are not adopting the associated proposed amendments to 17 CFR
240.13a-11 and 240.15d-11 (Exchange Act rule 13a-11 and rule 15d-11)
because the proposed amendments to those rules were only necessary
to carry out the proposal to require registered CEFs to report on
Form 8-K.
\323\ See Investor Experience Request for Comment, supra
footnote 274. See also supra footnote 313.
---------------------------------------------------------------------------

Although registered CEFs generally will not be required to file
reports on Form 8-K, a registered CEF that is eligible to file a short-
form registration statement may voluntarily file information on Form 8-
K to forward incorporate that information into its registration
statement or for other purposes (e.g., to publicly disseminate
information under exchange rules, as applicable).\324\ These voluntary
Form 8-K filings will not affect a registered CEF's ability to qualify
as a seasoned fund. This is because the requirements to be current and
timely with respect to the fund's Exchange Act and Investment Company
Act reports only apply to materials a fund is required to file.\325\
---------------------------------------------------------------------------

\324\ Although registered CEFs are only required to file Form 8-
K reports under Item 5.04 (Temporary Suspension of Trading Under
Registrant's Employee Benefit Plans), as applicable, other Form 8-K
reports they file on a voluntary basis will be ``filed pursuant to
Section 13(a) or 15(d) of the Exchange Act'' for purposes of the
incorporation by reference instructions in Form N-2 that apply to
funds that are eligible to file short-form registration statements.
See General Instruction F.3 of amended Form N-2; Exchange Act rule
13a-11(b)(1) and rule 15d-11(b)(1). Information a registered CEF
furnishes on a Form 8-K report will not be incorporated by reference
into the fund's registration statement under this instruction. This
is consistent with the incorporation by reference regime for
operating companies on Form S-3, where information voluntarily filed
on Form 8-K (e.g., under Item 8.01 (Other Events)) is incorporated
by reference into the company's registration statement while
furnished Form 8-K reports are not incorporated by reference. See
also supra footnote 314 (discussing exchange rules requiring listed
registered CEFs to timely disclose certain information to the
public).
\325\ See new General Instruction A.2 of amended Form N-2;
General Instruction I.A.3 of Form S-3.

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[[Page 33317]]

b. Other Proposed Amendments to Form 8-K
We are similarly not adopting the other proposed amendments to Form
8-K, including the two proposed reporting items regarding material
changes to investment objectives or policies and material write-
downs.\326\ Although the two proposed reporting items also would have
applied to BDCs, we are not adopting these current reporting
requirements for any affected funds. Commenters generally opposed these
proposed reporting items and argued that existing disclosure is
adequate.\327\ We will continue to consider the adequacy of affected
fund disclosure, including the availability and timeliness of
information about material changes in investment objectives or policies
and material write-downs of significant investments, as part of our
ongoing review of the effectiveness of investment company
disclosure.\328\ Rather than establish new current reporting
requirements for affected funds on a piecemeal basis in this release,
we believe it is more appropriate to consider current reporting in
connection with a broader, systematic review of investment company
disclosure.
---------------------------------------------------------------------------

\326\ See Proposing Release, supra footnote 10, at section
II.H.3.b. Since we are not adopting the proposed items to Form 8-K,
we also are not amending the safe harbor in Exchange Act rules 13a-
11 and 15d-11 to include those items. See Proposing Release, supra
footnote 10, at n.289.
\327\ See ABA Comment Letter (suggesting that neither of the
proposed items would provide additional important information); ACC
Comment Letter (opposing the proposed material write-down item for
BDCs in particular); CBD Comment Letter.
\328\ See Investor Experience Request for Comment, supra
footnote 274.
---------------------------------------------------------------------------

4. Online Availability of Information Incorporated by Reference
We are adopting, as proposed, amendments to Form N-2's General
Instruction for Incorporation by Reference.\329\ All registered CEFs
and BDCs currently can backward incorporate their financial information
from previously-filed Exchange Act reports into the prospectus or SAI.
However, 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.\330\ Under
the amendments, and as proposed, we are removing the requirement that a
fund deliver to new investors information that it has incorporated by
reference into the prospectus or SAI.\331\ These amendments will allow
the fund to make its prospectus, SAI, and the incorporated materials
readily available and accessible on a website identified in the fund's
prospectus and SAI.\332\ Affected funds will also be required to
provide incorporated materials upon request free of charge. We believe
this approach will improve the online accessibility of the prospectus
and SAI and any documents that are incorporated by reference for
investors that wish to review such information online, and will
facilitate the efficient use of incorporation by reference by affected
funds.\333\ The only commenter who addressed this approach supported
it,\334\ and we are adopting it as proposed.
---------------------------------------------------------------------------

\329\ See General Instruction F of amended Form N-2.
\330\ See General Instruction F.3 of amended Form N-2 (requiring
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); see
also Proposing Release, supra footnote 10, at text accompanying
nn.309-311.
\331\ We also are amending Form N-2's current disclosure
requirements for incorporation by reference, by replacing 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 streamlines--but does not substantively
change (other than the website disclosure provision discussed
below)--the disclosure requirements for incorporation by reference
in current Form N-2.
\332\ New General Instruction F.4.a of amended Form N-2; cf.
General Instruction VII.F of Form S-1; General Instruction F.4.b.(5)
of amended Form N-2; cf. Item 12(c)(1)(v) of Form S-1. We are
amending current General Instruction F.3 in its entirety, and moving
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 new General Instruction F.4.b of amended
Form N-2. We also are conforming certain incorporation by reference
provisions in Form N-2 to mirror parallel provisions in Form N-1A.
See new General Instruction F.2.a-c of amended Form N-2; cf. General
Instruction D.1.(a)-(c) of Form N-1A.
\333\ See Proposing Release, supra footnote 10, at nn.313-317
and accompanying text.
\334\ See SIFMA Comment Letter.
---------------------------------------------------------------------------

5. Amendments to Certain Registered CEFs' Annual Report Disclosure
We are adopting, largely as proposed, amendments to rule 8b-16(b)
that are designed to allow investors in registered CEFs that rely on
the rule to more easily identify and understand key information about
their investments.\335\ Although rule 8b-16(a) generally requires
registered investment companies to update their registration statements
annually, rule 8b-16(b) currently allows registered CEFs to forgo an
annual update provided that they disclose in their annual reports
certain key changes that have occurred during the prior year.\336\
Disclosures that describe a specific change to a fund strategy or risk
may not have sufficient context to allow investors to understand the
effect of such change, potentially leaving shareholders to 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
certain key information about the fund, such as its current investment
strategy or principal risk factors.\337\ Accordingly, we proposed to
require funds that rely on rule 8b-16(b) to describe any changes in
enough detail to allow investors to understand each change and how it
may affect the fund.\338\ For example, as stated in the Proposing
Release, to the extent a fund's principal investment objectives,
investment policies or principal risks have changed, the fund should
describe its objectives, policies or risks before and after the
change.\339\
---------------------------------------------------------------------------

\335\ See amended Investment Company Act rule 8b-16.
\336\ Current rule 8b-16(b) (requiring 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.
\337\ See Proposing Release, supra footnote 10, at n.323 and
accompanying text. See also Investor Experience Request for Comment,
supra footnote 274, in which we sought input from individual
investors on how to enhance fund disclosures.
\338\ See Proposing Release, supra footnote 10, at 136.
\339\ Id.
---------------------------------------------------------------------------

The one commenter to address this aspect of the proposal stated
that a closed-end fund's annual report should include a full
description of the fund's current objectives, strategies and risks, as
many closed-end funds do not maintain a current registration statement,
which would otherwise include this information.\340\ One

[[Page 33318]]

commenter described difficulties faced by investors in determining an
affected fund's current investment objectives and policies, with
another requesting a single location where such key information could
be found.\341\
---------------------------------------------------------------------------

\340\ See Peres Comment Letter (noting that ``[i]f there is a
change to an objective, strategy or risk in the past year, they
describe the change in the annual report. However, there is no
complete description of a fund's current objectives, strategies and
risks. To learn this information, an investor would need to look at
the fund's most recent registration statement (which could be from
decades ago) and review each annual report since that time.'').
The Proposing Release requested comment on whether we should
adopt different disclosure requirements for funds that rely on rule
8b-16, including whether we should require such funds to summarize
in their annual reports certain key information that would be
required in a current prospectus. See Proposing Release, supra
footnote 10, at section II.H.5.
\341\ See ABA Comment Letter (``[M]any Affected Funds were
organized many years ago, and since the relevant information may be
spread among the prospectus used for the Affected Fund's most recent
public offering (which may have taken place years or even decades
ago), proxy statements and reports to shareholders spanning many
years, it can be a burdensome undertaking to piece such information
together.''); see also Dale White Comment Letter (``There should
always be a current document where an investor can see a fund's
strategy, risks, performance, and costs each year.'').
---------------------------------------------------------------------------

As proposed, we are requiring funds that rely on rule 8b-16(b) to
describe certain key changes in enough detail to allow investors to
understand each change and how it may affect the fund.\342\ We believe
that in giving context for a change to one or more of the required
disclosures, it is particularly effective for a fund to describe
current information regarding related disclosures, as this approach may
facilitate a more complete understanding of how a change to one aspect
of the fund impacts the fund more broadly. Such disclosures must be
prefaced with a legend clarifying that the disclosures provide only a
summary of certain changes that have occurred in the past year, which
may not reflect all of the changes that have occurred since the
investor purchased the fund.\343\
---------------------------------------------------------------------------

\342\ See paragraph (e) of amended Investment Company Act rule
8b-16.
\343\ Id.
---------------------------------------------------------------------------

In response to comments and in a change from the proposal, we also
are requiring any affected fund that relies on rule 8b-16(b) to
describe the fund's current investment objectives, investment policies,
and principal risks in its annual report.\344\ These key disclosures
must be provided, even if there were no changes in the past year. This
will ensure that investors can access in a single location current
information about key aspects of the fund in which they invest. We
believe that funds could increase the effectiveness of this disclosure
by presenting it concisely, in accordance with ``plain English''
principles for organization, wording, and design. We similarly
encourage funds to tailor their disclosures to how the fund operates
rather than rely on generic, standard disclosures about the fund's
investment policies and risks. Finally, we encourage funds to describe
principal risks in order of importance, with most significant risks
appearing first (i.e., not listing risks in alphabetical order).
---------------------------------------------------------------------------

\344\ See amended rule 8b-16(b)(2), (4).
---------------------------------------------------------------------------

J. Effective and Compliance Dates

Effective Dates. The final rule will become effective on August 1,
2020. While we proposed that the rule would become effective 60 days
from publication in the Federal Register, we are establishing a fixed
date so that the amendments to certain rules and forms adopted pursuant
to the Variable Contract Summary Prospectus Adopting Release will be
effective prior to the amendments to the same rules and forms adopted
herein.\345\ The August 1, 2020 effective date will apply to all
aspects of the final rule, except for the following:
---------------------------------------------------------------------------

\345\ See Updated Disclosure Requirements and Summary Prospectus
for Variable Annuity and Variable Life Insurance Contracts,
Investment Company Act Release No. 33814 (March 11, 2020)
(``Variable Contract Summary Prospectus Adopting Release'').
---------------------------------------------------------------------------

Rules 23c-3, 24f-2, and Form 24F-2. The amendments to
rules 23c-3, 24f-2, and Form 24F-2 \346\ will become effective August
1, 2021 (one year after other aspects of the final rule take effect, as
proposed). One commenter suggested making the amendments to rules 23c-3
and 24f-2 immediately effective for new interval funds so they can pay
registration fees based on the net issuance of shares sold during their
initial fiscal year, and allow existing funds to use the new payment
method as soon as possible thereafter.\347\ While we agree that
interval funds should be able to calculate fees on Form 24F-2 as soon
as possible, as proposed, the amendments to rules 23c-3 and 24f-2 will
become effective one year after the final rule's effective date to
provide sufficient time to modify the Commission's systems to accept
such filings from interval funds.\348\
---------------------------------------------------------------------------

\346\ See supra section II.G.
\347\ See ICI Comment Letter.
\348\ To facilitate the transition to calculating fees on Form
24F-2, an interval fund's fee calculation should exclude excess
shares that were registered under the fund's last registration
statement on Form N-2 that remain unsold prior to the effectiveness
of rule 24f-2 as applied to interval funds.
---------------------------------------------------------------------------

Rules 456 and 457 and Forms S-1, S-3, F-1 and F-3: The
amendments to rules 456 and 457 and Forms S-1, S-3, F-1 and F-3 under
the Securities Act will become effective August 1, 2021.
Compliance Dates. We are adopting compliance dates for certain new
requirements to provide a transition period after the effective date of
the final rule.
MDFP. As proposed, an annual report filed by a registered
CEF one year or more after the effective date of the final rule will be
required to include the MDFP disclosures.\349\ We received no comments
on this proposed compliance period. Affected funds must comply with
this requirement by August 1, 2021.
---------------------------------------------------------------------------

\349\ See supra section II.H.2.b.
---------------------------------------------------------------------------

Structured Data Requirements (Financial Statement, Cover
Page, and Prospectus Information). We proposed that all affected funds
subject to the Inline XBRL structured data reporting requirements for
financial statement, registration statement cover page, and prospectus
information that are eligible to file a short-form registration
statement would be required to comply with those provisions 18 months
after the effective date, and all other affected funds to comply 24
months after the effective date. The one commenter who addressed this
aspect of the release recommended that any new Inline XBRL requirements
have a compliance date later than that required for open-end
funds.\350\ We are extending the compliance period by an additional six
months to align more closely with the Inline XBRL compliance periods
for other fund registrants.\351\ Accordingly, affected funds that are
eligible to file a short-form registration statement will be required
to comply with those provisions 24 months after the effective date, or
August 1, 2022. All other affected funds subject to these requirements
must comply 30 months after the effective date, or February 1, 2023.
Affected funds will be permitted to file in Inline XBRL prior to the
compliance date once EDGAR has been modified to accept submissions in
Inline XBRL for all forms subject to the amendments, which is
anticipated to be March 2021. Notice of EDGAR system readiness to
accept filings in Inline XBRL will be provided in a manner similar to
notices of taxonomy updates and EDGAR Filer Manual updates.
---------------------------------------------------------------------------

\350\ See ICI Comment Letter (citing Inline XBRL Adopting
Release, supra footnote 250, which requires open-end funds to comply
with the Inline XBRL requirements on September 17, 2020 (24 months
post-effective date) for ``large fund groups'' and September 17,
2021 (36 months post-effective date) for ``small fund groups'').
\351\ Id.; see also Variable Contract Summary Prospectus
Adopting Release, supra footnote 345 (requiring variable contracts
to comply with the Inline XBRL requirements on January 1, 2023 (30
months post-effective date)).
---------------------------------------------------------------------------

Structured Data Requirements (Form 24F-2). As proposed,
all filers on Form 24F-2 (including existing Form 24F-2 filers, such as
open-end funds and unit investment trusts, as well as interval funds)
will be required to file reports on the form in an XML structured data
format 18 months after the effective date, or February 1,

[[Page 33319]]

2022.\352\ The one commenter who addressed the proposed 18-month
transition period supported it.\353\
---------------------------------------------------------------------------

\352\ See supra section II.H.1.d.
\353\ See ICI Comment Letter.
---------------------------------------------------------------------------

III. Economic Analysis

We are adopting 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 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 generally 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 final rule will provide incremental
flexibility to funds in their communications, which may increase the
flow of information to investors. As discussed in detail above, the
final rule will affect numerous distinct aspects of how our securities
offering and communications rules apply to affected funds.\354\
---------------------------------------------------------------------------

\354\ See supra section I for summary of final rule.
---------------------------------------------------------------------------

A. Introduction and Baseline

We are sensitive to the economic effects that may result from the
final rule, 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, we must 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 final rule, as well as the potential effects on
efficiency, competition, and capital formation. Many of the potential
economic effects of the final rule would stem from the statutory
mandates, while others would stem from the discretion we are
exercising. We discuss the potential economic effects of the amendments
to implement the statutory mandates in sections III.B and III.C. We
considered certain alternatives to our approach to implementing the
statutory mandates, as discussed in section III.D. We are also adopting
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 section III.E. Where possible, we have attempted
to quantify the costs, benefits, and effects on efficiency,
competition, and capital formation expected to result from the final
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 final
rule is the current set of legal requirements and market practices. The
final rule likely will 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
final rule will depend on many factors, including the number of
affected funds that rely on the final rule. We recognize that some
affected funds would not satisfy the conditions in certain of the
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 final rule. The
discussion below describes our understanding of the markets and issuers
that will be affected by the final rule.
1. Number of Affected Funds
The final rule will affect BDCs and registered CEFs. As of June 30,
2019, there were 791 affected funds, including 105 BDCs and 686
registered CEFs. To estimate the number of BDCs, we use data from Form
10-K and Form 10-Q filings as of June 30, 2019, the latest data
available.\355\ We identify 51 listed BDCs and 54 unlisted BDCs. The
average net assets of the listed BDCs is approximately $820 million,
and the average of their total assets is $1.5 billion. Based on trading
data as of June 30, 2019, 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 15 of those BDCs have public float greater than $700
million (i.e., the WKSI public float threshold).\356\
---------------------------------------------------------------------------

\355\ The estimated number of BDCs includes BDCs that have not
registered a securities offering on Form N-2. Certain of our
amendments, such as the requirement to tag certain Form N-2
prospectus disclosure items in Inline XBRL, will 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 amendments with respect to BDCs may be over-
estimates in certain respects.
\356\ The data (as of June 30, 2019) 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.\357\ We identify 497 registered CEFs that were
listed on an exchange as of June 30, 2019, including 1 interval fund.
There were 189 unlisted registered CEFs as of June 30, 2019, including
60 interval funds. The average net assets of the listed registered CEFs
is approximately $551 million, while the average net assets of the
unlisted registered CEFs is approximately $382 million.\358\ Based on
trading data as of June 30, 2019, 455 of the listed registered CEFs
have public float greater than $75 million, and 85 of those funds have
public float greater than $700 million.\359\ Information about the
types

[[Page 33320]]

of offerings conducted by different categories of affected funds for
the period of July 1, 2014--June 30, 2019 is reflected in the below
table.\360\
---------------------------------------------------------------------------

\357\ The estimated number of registered CEFs includes
registered CEFs that have not registered a securities offering under
the Securities Act. Certain of our amendments, such as the
structured data requirements, will apply somewhat differently to
these registered CEFs and may impose fewer burdens on them. For
example, a registration statement that is filed under only the
Investment Company Act is not required to include financial
highlights information under Item 4 of Form N-2, while registered
CEFs that file a registration statement under the Securities Act
must disclose financial highlights information and tag that
information in Inline XBRL. See General Instructions G and H of
amended Form N-2. Thus, our quantitative estimates of the costs and
paperwork burdens of certain of the amendments with respect to
registered CEFs may be over-estimates in certain respects.
\358\ The average of net assets of registered interval funds is
$520 million.
\359\ This includes the listed interval fund, which had public
float of approximately $73 million as of June 30, 2019. Data on
prices and shares outstanding, which is used to calculate the public
float, is taken from CRSP.
\360\ 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 is
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.

Table 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Listed registered Unlisted registered
Types of offerings Offering statistics Listed BDCs Unlisted BDCs CEFs CEFs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Registered offerings............... Number of offerings... 113................... 24................... 26................... 137
Total amount raised... $12.2 bil............. $1.7 bil............. $5.2 bil............. $20.3 bil
Average (median) $107.9 mil ($60.0 mil) $7.8 mil ($7.2 mil).. $201.3 mil ($103.8 $176.3 mil ($31.0
offering amount. mil). mil)
Regulation D offerings............. Number of offerings... 21.................... 67................... 1.................... 165
Total amount raised... $12.3 bil............. $9.1 bil............. $15.1 mil............ $7.5 bil
Average (median) $584.7 mil ($100 mil). $135.0 mil ($50.0 $15.1 mil ($15.1 mil) $45.6 mil ($6.1 mil)
offering amount. mil).
--------------------------------------------------------------------------------------------------------------------------------------------------------

As of September 2019, there were 7,995 mutual funds, 2,076 ETFs,
and 4,758 UITs. Thus, together with the 791 affected funds, there is a
total of 15,620 funds, affected and non-affected. This means that
affected funds represent about 5.1% of the total number of funds. As of
September 2019, mutual funds had approximately $20,156 billion in
assets, ETFs had approximately $4,024 billion in assets, UITs had
approximately $76 billion in assets, and affected funds had
approximately $459 billion in assets. Thus, affected funds represent
about 1.8% of total investment company assets.
We use data from Morningstar and SEC filings to estimate the number
of affected ETPs. We identify 68 such ETPs as of December 31, 2019.
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 in more detail
above in sections II.B, II.C, and II.F, registered investment companies
and BDCs are excluded from certain offering and communications rules
available to operating companies.
Affected funds currently 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.\361\
---------------------------------------------------------------------------

\361\ See supra section II.C.
---------------------------------------------------------------------------

Affected funds currently can conduct shelf offerings under rule
415(a)(1)(x) if they meet the applicable eligibility criteria for Form
S-3, even though affected funds register their securities offerings on
Form N-2. Affected funds conducting shelf offerings, however, currently
experience certain burdens not faced by operating companies.\362\ For
example, affected funds conducting shelf offerings currently must file
post-effective amendments to make certain updates to their registration
statements, while operating companies conducting shelf offerings may
update their registration statements through forward incorporation by
reference. As a result, affected funds can incur additional expense or
delay for shelf offerings, which can affect the timing of their
capital-raising. Similarly, different rules apply to affected fund
communications as opposed to operating company communications.\363\
These differences can impose additional costs or constraints on
affected funds or others because, for example, underwriters may be more
familiar with the operating company rules. Further, affected funds
currently are required to deliver a final prospectus to investors.\364\
Final prospectuses can be lengthy, particularly for BDCs because they
generally do not take advantage of backward incorporation by reference
currently permitted for certain financial and related information. For
example, the median page length of prospectuses filed by listed BDCs is
approximately 234 pages.\365\
---------------------------------------------------------------------------

\362\ See supra section II.B.1.
\363\ See supra section II.F.
\364\ See supra section II.E.
\365\ This estimate is based on recent Form N-2 filings of the
49 listed BDCs. BDCs generally do not rely on existing Form N-2
backward incorporation by reference provisions because the form
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.
---------------------------------------------------------------------------

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. 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).\366\
---------------------------------------------------------------------------

\366\ See supra footnote 314.
---------------------------------------------------------------------------

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

As discussed, the 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 final rule will 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

[[Page 33321]]

certain communications during a registered offering.\367\ Additionally,
as discussed below, we believe that the final rule will 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 final rule
will provide cost-saving options to affected fund issuers and
underwriters.
---------------------------------------------------------------------------

\367\ See also infra section III.E (discussing benefits
associated with our discretionary rule amendments).
---------------------------------------------------------------------------

1. Improved Access to Capital and Lower Cost of Capital
We anticipate that the final rule will facilitate capital formation
and possibly lower the cost of capital by improving access to the
public capital markets for affected funds. The rule is 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 final rule will depend on the
characteristics of the affected fund, 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
final rule than unlisted BDCs and unlisted registered CEFs, including
unlisted interval funds. The final rule will 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 will benefit, albeit to a lesser degree,
from the other revisions to the offering process and our communications
rules.
a. Benefits From WKSI Status
The largest increase in capital formation and reduction in cost of
capital that the final rule could generate will come from allowing
affected funds to obtain WKSI status. Affected funds that qualify as
WKSIs will enjoy additional flexibility compared to affected funds that
are non-WKSIs.\368\ There are 100 affected funds (15 listed BDCs and 85
listed registered CEFs) that meet the $700 million dollar public float
criterion as of June 30, 2019.\369\ A shelf registration statement and
any subsequent amendments filed by a WKSI are automatically effective
upon filing. This flexibility will allow affected funds that qualify as
WKSIs to promptly tap favorable conditions 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, because affected
funds typically trade at a discount to their NAV,\370\ affected funds
that are WKSIs will be able to act more quickly to raise capital when
their shares are trading at a premium,\371\ thus increasing the amount
of capital raised and enhancing capital formation.
---------------------------------------------------------------------------

\368\ See supra section II.C.
\369\ See supra section III.A.1.
\370\ 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).
\371\ See supra footnote 37 (discussing restrictions on affected
funds' ability to sell their shares at a price below NAV).
---------------------------------------------------------------------------

Additionally, WKSIs are not required to pay any registration fees
at the time of filing a registration statement. They are only required
to pay the registration filing fee at the time securities are taken
down and sold off the shelf registration statement. This will 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 final rule may also lower the cost of capital because it
will provide significant flexibility to affected funds that are WKSIs
and their underwriters in marketing securities. The final
communications rules will allow these funds to communicate at any time
regarding an offering.
Requiring an affected fund to have at least $700 million in public
float to qualify as a WKSI will avoid providing affected funds with an
advantage in the competition for capital over certain operating
companies. For example, a lower public float threshold for affected
funds would provide them with a competitive advantage over operating
companies that may have similar characteristics to affected funds, such
as listed REITs, but have public float below $700 million. In a similar
vein, the use of alternative eligibility criteria for affected funds to
qualify as WKSIs would put them at competitive advantage compared to
similar operating companies without public float, such as unlisted
REITs. Moreover, reducing the $700 million threshold or providing
alternative eligibility criteria for affected funds to qualify as WKSIs
would likely lead to potential higher incidences of disclosure and fund
practices that may not comply with applicable law due to reduced staff
review.\372\
---------------------------------------------------------------------------

\372\ See also infra section III.D (discussing considerations
related to an alternative of modifying the public float standards in
the WKSI definition by changing the required level of public float
or providing alternative eligibility criteria).
---------------------------------------------------------------------------

Given the important benefits that WKSI status provides, 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, the 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.\373\
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 inhibit competition and
negatively affect the number of investment opportunities available to
investors if it leads to a reduction of the number of strategies funds
employ. 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. Smaller funds, however, may have
better access to investment opportunities in smaller companies because
these investments may be too small to be economically viable for larger
funds. At present, we are not able to estimate the effects of these
competitive dynamics.
---------------------------------------------------------------------------

\373\ See, e.g., 17 CFR 270.17a-8 (Investment Company Act rule
17a-8).
---------------------------------------------------------------------------

b. Benefits From Shelf Registration
Other provisions of the final rule 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.\374\ For example,

[[Page 33322]]

the final rule generally allows these funds to more efficiently use the
shelf registration process if, like operating companies, they meet the
eligibility requirements of Form S-3.\375\ As of June 30, 2019, there
were 499 affected funds that met the $75 million dollar public float
criterion for primary offerings under Form S-3 (which criterion is
incorporated into the short-form registration instruction of Form N-
2).\376\ Affected funds that qualify will bear fewer costs associated
with updating the information in their registration statements because
information in the fund's Exchange Act reports will be incorporated by
reference into the fund's registration statement. For example, for PRA
purposes, we estimate that eligible affected funds will file
approximately 128 fewer post-effective amendments annually as a result
of the amendments, resulting in an annual aggregate cost reduction of
approximately $5,726,592 for these funds.\377\ 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 final rule,
eligible BDCs will no longer file these prospectus supplements since
their Exchange Act reports will 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 rule.\378\ We anticipate that eligible registered CEFs also
will be able to make fewer prospectus supplement filings under the
final rule, although they likely will 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. While we believe that affected
funds will likely file fewer prospectus supplements under the final
amendments, we are unable to estimate any reduction in the number of
prospectus supplements that affected funds will file under the final
rule, and any associated cost savings for affected funds, due to
certain counterbalancing factors. For example, if the final rule 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 final amendments, they may file fewer prospectus
supplements.\379\ On average, we believe that affected funds will
likely file fewer prospectus supplements under the final amendments
since they will 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.
---------------------------------------------------------------------------

\374\ See supra section II.B.
\375\ 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.
\376\ See supra section III.A.1.
\377\ See infra section IV.B.1. For purposes of the PRA, we
estimate that the hour burden of preparing and filing a post-
effective amendment is 125 hours. Reducing the number of post-
effective amendments by 128 filings would decrease the aggregate
annual burden of Form N-2 by 16,000 hours (125 hours x 128 post-
effective amendments = 16,000 hours). We estimate that the monetized
internal burden is $33,625 per post-effective amendment and the
external burden is $11,114 per post-effective amendment. See infra
section IV.B.1. The total annual cost is calculated by adding the
monetized internal burden ($33,625 x 128 post-effective amendments =
$4,304,000) to the cost of outside professionals ($11,114 x 128
post-effective amendments = $1,422,592). Although we have increased
the expected reduction in the number of post-effective amendments
discussed in the Proposing Release from 112 to 128 filings, the
estimated annual aggregate cost reduction has decreased from
$7,943,376 to $5,726,592 to better recognize how we have monetized
internal burdens for purposes of the PRA. See Proposing Release,
supra footnote 10, at n.359 and accompanying text; infra section
IV.B.1.
\378\ 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 Proposing Release, supra footnote 10, at n.415 and
accompanying text (discussing the estimated number of Form 8-K
filings per BDC per year).
\379\ See supra sections II.B.3.e and II.I.2.a.
---------------------------------------------------------------------------

In general, we believe affected funds that qualify for the short-
form registration instruction will experience cost savings associated
with making fewer filings and will be able to use a more efficient
process to update their prospectus disclosure. This will decrease the
costs of eligible funds' registered offerings and will 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
shelf offerings also will be able to omit certain information from
their prospectuses and use the same process as operating companies to
provide omitted information by filing a prospectus supplement, which
will generally make the shelf registration process less costly for
these funds as compared to the baseline.
The final 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 final rule will
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.\380\ We do not anticipate that these cost savings will 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 amendment to rule 418 since
they will no longer be required by that rule to furnish certain
information to the Commission or its staff promptly on request.\381\
---------------------------------------------------------------------------

\380\ See supra section II.G.2.
\381\ See supra section II.G.1.
---------------------------------------------------------------------------

c. Other Benefits for Affected Funds
The final rule will generate other benefits for affected funds
generally, regardless of whether they are WKSIs or seasoned funds. For
example, the amendment to require affected funds to follow the same
process that operating companies follow to file prospectuses under rule
424 will require that affected funds file prospectus supplements when
changes from or additions to a previously filed prospectus are
substantive, whereas currently they are required to file every
prospectus that varies from any previously filed prospectus under rule
497.\382\ 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 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 final
rule allows an affected fund to satisfy its obligation to deliver a
final prospectus by filing it with the Commission and complying with
certain other requirements, thus decreasing the cost of the
offering.\383\ For example, the final rule will permit affected funds
to save on printing and mailing costs for delivering the final
prospectus in paper.\384\
---------------------------------------------------------------------------

\382\ See supra section II.B.3.d.
\383\ See supra section II.D.
\384\ 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 rule.

---------------------------------------------------------------------------

[[Page 33323]]

In general, commenters stated that the rule will generate benefits
for affected funds. Several commenters stated that the proposed rule
would lead to a more efficient capital-raising process.\385\ One
commenter suggested that the proposed rule could also help encourage
product development that would expand the universe of registered CEFs,
but did not elaborate on the specific aspects of the rulemaking that
would encourage product development.\386\
---------------------------------------------------------------------------

\385\ See ACC Comment Letter; CBD Comment Letter; SIFMA Comment
Letter.
\386\ See Invesco Comment Letter.
---------------------------------------------------------------------------

d. Benefits for Other Parties
The lower costs of registered offerings resulting from the final
rule should benefit investors in affected funds because funds bear
offering expenses. Lowering offering expenses may, all else equal,
reduce the size of the discount or increase the size of the premium at
which shares of the affected funds trade. Two commenters expressed
similar views, arguing that the proposed rule would provide cost
savings to funds' shareholders.\387\
---------------------------------------------------------------------------

\387\ See ICI Comment Letter; Invesco Comment Letter.
---------------------------------------------------------------------------

In addition, the final rule could reduce the cost to underwriters
of participating in registered offerings of affected funds, and these
potential cost savings could be passed on to the affected funds. Based
on the sheer volume and number of transactions,\388\ underwriters may
have more expertise and established procedures for operating companies'
registered offerings, which are subject to the rules we are extending
to affected funds. In contrast, underwriters probably have less, or
more concentrated, expertise regarding the current requirements for
offerings by affected funds. Standardization in the registered offering
space, by making the offerings of affected funds more similar to those
of operating companies, could make it easier for underwriters to
execute such offerings and may decrease their compliance costs. If
underwriters pass some of the cost savings on to affected funds and
their investors, this could result in cheaper registered offerings for
affected funds, thus encouraging them to raise more capital, which
would lead to enhanced capital formation. Lastly, standardization may
encourage a broader set of underwriters to participate in this market,
potentially decreasing costs for affected funds and investors in these
funds. One commenter agreed that the proposed rule would make it easier
for underwriters to execute offerings by affected funds, which could
lead to decreased costs.\389\
---------------------------------------------------------------------------

\388\ For example, in 2017 non-fund issuers raised approximately
$1.3 trillion in 1,846 registered debt offerings and $184 billion in
976 registered equity offerings. See Capital Raising in the U.S.: An
Analysis of the Market for Unregistered Securities Offerings, 2009-
2017, Division of Economic and Risk Analysis White Paper (Aug. 1,
2018), available at https://www.sec.gov/dera/staff-papers/white-papers/dera_white_paper_regulation_d_082018.
\389\ See SIFMA Comment Letter.
---------------------------------------------------------------------------

The final rule could level the securities offering playing field
between affected funds and operating companies and streamline the
registration process for affected funds, consequently making them
potentially more competitive in the market for capital raising. The
final rule may also make certain affected funds more competitive
compared to affected funds that either cannot or choose not to rely on
these amendments. Thus, the final rule will likely enhance competition
in the public capital markets. The increased competition for capital in
turn could lead to potentially better allocation of capital. The final
rule may also benefit companies in which affected funds invest. Small
and mid-size companies, because of their size, type of assets, risk
profile, and the general lack of information about their activities and
financial condition, typically find it more difficult to raise funds
from traditional sources of capital such as bank loans and registered
offerings.\390\ This difficulty in sourcing more traditional financing
constrains their ability to invest in profitable projects and grow. To
the extent that the final rule improves capital-raising opportunities
for affected funds that invest in these companies, this may result in
investments in a greater number of small to mid-size U.S. companies,
thus alleviating financial constraints of such companies and
contributing to economic growth generally.\391\ Commenters generally
agreed that the proposed rule would facilitate capital formation,
especially for small to mid-size businesses.\392\ One commenter stated
that the proposed rule could potentially stimulate economic
growth.\393\
---------------------------------------------------------------------------

\390\ See, e.g., Alan Berger and Gregory Udell, The Economics of
Small Business Finance: The Roles of Private Equity and Debt Markets
in the Financial Growth Cycle, Journal of Banking and Finance, Vol.
22, 613-673 (1998); Meghana Ayyagari, Asli Demirg[uuml][ccedil]-
Kunt, and Vojislav Maksimovic, How Important are Financing
Constraints? The Role of Finance in the Business Environment, World
Bank Mimeo (2005); Crowdfunding, Securities Act Release No. 9974
(Oct. 30, 2015) [80 FR 71388 (Nov. 16, 2015)].
\391\ See, e.g., Torsten Beck, Asli Demirg[uuml][ccedil]-Kunt,
and Ross Levine, SMEs, Growth, and Poverty: Cross-Country Evidence,
Journal of Economic Growth, Vol. 10, 197-227 (2005); Ryan Decker,
John Haltiwanger, Ron Jarmin, and Javier Miranda, The Role of
Entrepreneurship in U.S. Job Creation and Economic Dynamism, Journal
of Economic Perspectives, July, 3-24 (2014).
\392\ See SIFMA Comment Letter; ACC Comment Letter; CBD Comment
Letter.
\393\ See ICI Comment Letter.
---------------------------------------------------------------------------

2. Facilitated Communication With Investors
The final rule will provide incremental flexibility to funds in
their communications, which may increase the flow of information to
investors.\394\ Currently, affected funds generally 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).\395\
---------------------------------------------------------------------------

\394\ See supra section II.F.
\395\ But see supra footnote 144 (explaining that affected funds
currently are permitted to engage in certain pre-filing test-the-
waters communications under Securities Act rule 163B).
---------------------------------------------------------------------------

This standardization in the communications processes of affected
funds, by making them similar to those of operating companies, will
make it easier for underwriters to execute offerings by affected funds
and thus may decrease their compliance costs, which in turn may lead to
lower offering costs and potentially enhance capital formation.
Additionally, under the final rule, affected funds that qualify as
WKSIs can engage in the widest range of communications, including free
writing prospectus communications about an offering with any party
before a registration statement is filed. More generally, affected
funds will be able to engage in certain other pre-filing
communications, use free writing prospectuses after a registration
statement is filed, and use certain communications that are not subject
to prospectus liability. The changes in the communications rules for
affected funds may increase the amount of valuable information that
could be provided to investors before they make investment decisions,
particularly with respect to WKSIs. We believe that more information
could be provided on a timelier basis because the amendments will
eliminate regulatory barriers to the dissemination of that information,
and the markets may provide incentives for issuers, underwriters, and
broker-dealers to produce additional

[[Page 33324]]

information. We also believe that the increased flexibility of affected
funds in their communications with investors under the free writing
prospectus rules will maintain appropriate investor protection,
consistent with the protections that apply to affected funds'
communications under rule 482. For example, the rules that allow
affected funds to use free writing prospectuses are designed to assure
that written issuer-provided or issuer-used information is publicly
available. Additionally, the free writing prospectus will be a section
10(b) prospectus under the Securities Act and, as such, will be subject
to liability under section 12(a)(2) as well as the anti-fraud
provisions of the Federal securities laws.
Increased information flow can help promote efficient capital
markets because the market may be able to value securities more
accurately. For example, the final rule will permit broker-dealers to
disseminate research about an affected fund if certain conditions are
met. While broker-dealers currently may disseminate such research under
rule 482, the amendments to rule 138 will likely reduce certain costs
to broker-dealers associated with rule 482 (e.g., filing costs and
concerns associated with prospectus liability). This could allow more
valuable information about affected funds to reach potential investors.
Another benefit of increasing the information flow is that investors
may become better informed in making portfolio allocation decisions in
accordance with their particular risk-return profiles. In addition, the
final rule may benefit broker-dealers who provide research reports on
affected funds by reducing their potential liability exposure
associated with such reports, relative to the baseline, which may
encourage them to provide additional research and enhance information
flow. Commenters generally agreed that the proposed rule would provide
more flexibility for affected funds to communicate and would increase
information flow.\396\
---------------------------------------------------------------------------

\396\ See ACC Comment Letter; ICI Comment Letter; Invesco
Comment Letter.
---------------------------------------------------------------------------

C. Potential Costs Resulting From the Proposed Implementation of the
Statutory Mandates

1. Compliance Costs
The amendments we are adopting to implement the statutory mandates
could increase affected funds' compliance costs in certain
respects.\397\ We also are cognizant of the fact that such an increase
could be passed on to funds' investors. A potential cost of the final
rule is that affected funds could incur increased filing or
recordkeeping costs associated with issuer free writing
prospectuses,\398\ although affected funds currently face many of the
same filing and recordkeeping costs under rule 482. For example, the
ability of affected funds that qualify as WKSIs to use free writing
prospectuses may increase the level of these funds' current
communications (including certain communications prior to filing a
registration statement that are presently prohibited), thus increasing
the funds' filing and recordkeeping costs.\399\ We estimate that
affected funds that are WKSIs would have additional annual filing and
recordkeeping costs of $200 per affected fund for free writing
prospectuses used before the fund files a registration statement.\400\
To the extent affected funds use free writing prospectuses for
communications that currently occur under rule 482, the costs
associated with free writing prospectuses could increase, and the costs
associated with rule 482 advertisements could decrease. We are unable
to predict, however, whether affected funds will be more likely to use
free writing prospectuses than rule 482 communications or to engage in
more communications with investors in practice as a result of the
amendments.
---------------------------------------------------------------------------

\397\ See also infra section III.E (discussing compliance and
other costs associated with the proposed discretionary amendments).
\398\ See supra section II.F.1; infra section IV.B.4 (estimating
the annual paperwork burden for free writing prospectuses under
rules 163 and 433 for purposes of the PRA).
\399\ But see infra Table 14 footnote 1 (discussing that only 10
WKSIs relied on rule 163 for the Commission's 2017 fiscal year).
\400\ For purposes of the PRA, we estimate that, on average,
affected funds that are eligible to be WKSIs (estimated as 100
funds) would file two free writing prospectuses under the proposed
amendments to rule 163 each year. We estimate the total incremental
burden would be approximately 0.125 hours and $150 for the service
of outside professionals. See infra section IV.B.4. We monetize the
internal burden of preparing and filing a free writing prospectus by
multiplying the burden hours by an estimated wage rate of $400 per
hour (0.125 x $400 = $50). The estimated wage figure is based on
analysis in previous rulemakings. The total annual cost is
calculated by adding the monetized internal burden ($50) to the cost
of outside professionals ($150).
---------------------------------------------------------------------------

Affected funds could also incur costs associated with adjusting
their internal procedures for filing prospectus supplements.\401\ Such
costs could stem from the need to augment funds' information technology
systems or train funds' employees, although, as recognized above,
affected funds likely will be able to file fewer prospectus supplements
under the final rule.
---------------------------------------------------------------------------

\401\ See supra section II.B.3.d.
---------------------------------------------------------------------------

Parties that will be required to provide notices under rule
173,\402\ including underwriters and dealers in certain circumstances,
may incur additional costs due to the requirement to notify affected
fund investors that they have purchased shares in a registered
offering. In addition, these same parties may incur costs to establish
procedures for receiving and complying with requests for final
prospectuses. We believe that providing the notice to investors will
not impose a significant incremental cost because the notice can
consist of a pre-printed message that is automatically delivered with
or as part of the confirmation required by 17 CFR 240.10b-10 (Exchange
Act rule 10b-10). Accordingly, we estimate that the cost of complying
with rule 173 will be approximately $0.05 per notice.\403\ We estimate
the annual cost of providing the notification will be approximately
$831,729.\404\ For the parties that are required to provide such
notices, these additional costs of complying with rule 173 will be
mitigated to a certain degree by the elimination of the requirement to
supply a final prospectus to each investor.
---------------------------------------------------------------------------

\402\ See supra section II.D.
\403\ The Commission has estimated the cost per rule 173 notice
to be $0.05 for operating companies. See Securities Offering Reform
Adopting Release, supra footnote 5, at 44795. We assume the same
cost will apply to rule 173 notices provided to affected fund
investors.
\404\ For the purpose of the PRA, we estimate that there will be
43,546 notices per year per affected fund with an effective
Securities Act registration statement (estimated as 382 affected
funds). The annual cost of providing rule 173 notification is
calculated as the number of affected funds (382) x the number of
notices per year (43,546) x the cost per notice ($0.05). See infra
section IV.B.5.
---------------------------------------------------------------------------

2. Other Costs
Under the final rule, affected funds that qualify as WKSIs will be
able to file shelf registration statements and post-effective
amendments that become automatically effective. To the extent that
investors previously benefited from the Commission staff's review of
these filings before they become effective, allowing these filings of
affected funds that are WKSIs to become automatically effective may
eliminate such reviews and, as a result, possibly increase the costs to
investors. Allowing affected funds that file short-form registration
statements on Form N-2 to forward incorporate by reference could have a
similar potential impact on investors. However, issuers will still face
liability under the Federal securities laws for registration statement
disclosures (e.g., sections 12 and 17 of the Securities Act and section
10(b) of the Exchange Act

[[Page 33325]]

and 17 CFR 240.10b-10 (rule 10b-5 under the Exchange Act)), which may
ameliorate the potential costs associated with reduced staff
review.\405\
---------------------------------------------------------------------------

\405\ Certain of our discretionary amendments may also
ameliorate these costs. See infra section III.E.3 (discussing the
benefits and costs of the requirement to disclose material
unresolved staff comments) and section III.E.2 (discussing the
benefits and costs of the structured data requirements).
---------------------------------------------------------------------------

More generally, allowing forward incorporation by reference under
the short-form registration instruction could increase the analytical
burden and search costs for potential investors. Currently, affected
funds provide required information in the prospectus that is delivered
to investors, and forward incorporation by reference is not allowed.
Under the amendments, instead of having all the information available
in one location, investors may need to separately access on a website
or request the incorporated materials. As a result, costs to investors
for assembling and assimilating necessary information could increase,
with a potentially stronger effect for retail investors (e.g., because
they generally may not have the technical capabilities or monetary
resources to efficiently search through several information sources).
We do not have data to assess if, and to what extent, this revision
will burden investors.
However, an affected fund making a shelf offering under rule
415(a)(1)(x) is required to file a new registration statement every
three years, which provides investors with a periodic update of
consolidated information.\406\ The final rule will require that
affected funds provide in their annual reports certain information
currently disclosed in their prospectuses to make the information more
readily available in one document for investors.\407\ Further,
Securities Act Forms S-3 and F-3 have long permitted incorporation by
reference from the issuer's Exchange Act reports, and investors have
not indicated they are unduly burdened when investing in offerings
registered on these Forms.\408\ Studies have shown, however, that the
majority of investors in operating companies are institutional
investors, whereas the majority of investors in the securities of
affected funds are retail investors, who may face relatively higher
costs associated with searching for information distributed across
multiple documents.\409\ In addition, the requirement to backward and
forward incorporate by reference certain information into a short-form
registration statement could increase an affected fund's liability with
respect to information that has not previously been incorporated into
its registration statement because this information will now be part of
the registration statement. This could increase costs for relevant
funds, including potential legal costs (e.g., those associated with
additional review of materials that would be incorporated by reference
into the fund's registration statement, or counsel and other costs in
connection with potential legal actions). These potential cost
increases could be passed on to investors of affected funds.
---------------------------------------------------------------------------

\406\ See supra footnote 29.
\407\ See supra section II.I.2.a.
\408\ See Securities Offering Reform Adopting Release, supra
footnote 5, at 44796.
\409\ The average institutional holding is estimated to be
approximately 30% for BDCs and 21% for registered CEFs. See Covered
Investment Fund Research Reports Adopting Release, supra footnote
101, at 64199. The institutional ownership of U.S. public equities
was approximately 67% as of 2010. See Marshall E. Blume and Donald
B. Keim, Institutional Investors and Stock Market Liquidity: Trends
and Relationships, Working Paper, The Wharton School, University of
Pennsylvania (Aug. 21, 2012).
---------------------------------------------------------------------------

The final rule will allow an affected fund to not deliver final
prospectuses directly to investors if the fund files the final
prospectus with the Commission and certain other conditions are
satisfied. We acknowledge, however, that while this procedure has
become commonplace in many aspects of our capital markets, there may be
some investors who would prefer to receive the prospectus directly.
While an investor could request a copy of the final prospectus under
rule 173, there will be burdens on an investor to make such a request
(e.g., loss of time while making the request and a delay in receiving
the prospectus). Thus, investors without home internet access,
depending on their ability and preference to access fund information
electronically, might experience a reduction in their ability to access
a fund's final prospectus. To the extent that a reduction in this
information by such investors decreases how informed they are about
affected funds, it could potentially decrease their ability to
efficiently allocate capital across affected funds and other
investments. However, an investor's purchase commitment and the
resulting contract of sale of securities to the investor in the
offering generally occur before the final prospectus is required to be
delivered under the Securities Act, and this is commonplace in other
parts of our capital markets. Moreover, for sales occurring in the
secondary market, as a result of our existing rules, investors in
securities of reporting issuers generally are not delivered a final
prospectus.\410\
---------------------------------------------------------------------------

\410\ See Securities Offering Reform Adopting Release, supra
footnote 5, at 44782.
---------------------------------------------------------------------------

D. Alternatives to Adopted Approach To Implementing Statutory Mandates

We considered certain alternative approaches to implementing the
directives in the BDC Act and Registered CEF Act to allow affected
funds to use the securities offering rules that are available to
operating companies. Although the BDC Act identifies certain required
amendments to our rules and forms, we could have, for example, made
additional modifications to the relevant provisions for affected funds
or further revised the current registration and offering framework
affected funds use.
For example, as discussed above, we considered modifying the public
float standards in the WKSI definition or the short-form registration
instruction by changing the required level of public float or providing
alternative eligibility criteria, such as the aggregate NAV of a
certain size for funds whose shares are not traded on an exchange.\411\
Several commenters supported changing the public float standards in the
WKSI definition for affected funds.\412\ These alternatives could have
allowed more affected funds to qualify as WKSIs or to file short-form
registration statements, with the associated benefits (e.g., lower
costs of registered offerings) and costs (e.g., potential higher
incidence of disclosure and fund practices that may not comply with
applicable law due to reduced staff review) discussed above. For
example, most interval funds do not list their securities on an
exchange and do not have ``public float,'' and these alternatives
therefore could have permitted these interval funds, as well as other
unlisted affected funds, to qualify as WKSIs or file short-form
registration statements. However, modifying the eligibility criteria in
the WKSI definition or the short-form registration instruction could
give affected funds that do not have the requisite public float under
the current WKSI definition or Form S-3 eligibility requirements an
advantage over certain operating companies that do not have public
float or do not meet the $700 million public float requirement.
In addition, certain of the benefits that flow from WKSI status or the
ability to use a short-form registration statement may be less relevant
to unlisted affected funds that engage in continuous

[[Page 33326]]

offerings.\413\ Further, interval funds already have a tailored
registration process that provides similar efficiencies. For example,
certain of an interval fund's post-effective amendments are immediately
effective upon filing (e.g., filings solely to update the fund's
financial statements or to make non-material changes), while other
post-effective amendments (e.g., filings to make material changes) are
automatically effective 60 days after filing unless the fund designates
a later date for effectiveness. In addition, we are extending this
process to allow other continuously-offered unlisted affected funds to
file immediately-effective post-effective amendments under the same
circumstances as interval funds. Specifically, we are amending rule 486
to allow certain unlisted continuously-offered affected funds to
maintain effective registration statements in a more efficient and
cost-effective manner. We believe that amended rule 486 will provide
these funds with benefits that are similar to the benefits we are
providing to affected funds that qualify to file short-form
registration statements or as WKSIs. Interval funds and other
continuously-offered unlisted affected funds, however, will not
experience the same efficiencies as affected funds that qualify to file
short-form registration statements or as WKSIs when they make material
changes to their registration statements. This is because these filings
by interval funds and other continuously-offered unlisted affected will
be subject to staff review and will not be immediately effective upon
filing.
---------------------------------------------------------------------------

\411\ See supra section II.C.
\412\ See, e.g., ICI Comment Letter; ABA Comment Letter; Dechert
Comment Letter; CBD Comment Letter; TIAA Comment Letter.
\413\ See supra paragraph accompanying footnotes 50-51.
---------------------------------------------------------------------------

Under the BDC Act and the Registered CEF Act, we could have
extended the final rule only to BDCs, listed registered CEFs, and
interval funds. Under this approach, unlisted registered CEFs would not
have been able to take advantage of certain benefits of the amendments
that would otherwise be available to unlisted BDCs, such as the cost
savings associated with the final prospectus delivery reforms.\414\
This alternative also could have saved unlisted registered CEFs certain
compliance costs stemming from the proposed rulemaking, such as the
requirement to tag certain prospectus information using Inline XBRL.
However, excluding unlisted registered CEFs from the final rule could
create unnecessary competitive disparities between unlisted registered
CEFs and unlisted BDCs and would not provide investors in unlisted
registered CEFs with the benefits of the new investor protections we
are adopting.
---------------------------------------------------------------------------

\414\ As previously recognized, unlisted registered CEFs would
not be eligible for certain of the amendments. See supra section
II.A.
---------------------------------------------------------------------------

E. Discussion of Discretionary Choices

We discuss below the discretionary amendments that we are adopting,
in light of the changes to implement the BDC Act and Registered CEF Act
and the associated benefits and costs of those choices. We have tried
to quantify the impact of each of the amendments, but in many cases,
reliable, empirical evidence about the effects is not readily available
to the Commission.
With respect to the proposed discretionary amendments, one
commenter stated that the proposal would impose regulatory and
compliance costs on unlisted affected funds, while at the same time
providing unlisted interval funds with only small benefits and
providing no benefits to other unlisted affected funds (e.g., tender
offer funds).\415\ We believe interval funds and other continuously-
offered unlisted affected funds will directly benefit from two of our
discretionary amendments.\416\ While the final rule also imposes
certain costs on these funds, we believe those costs are warranted, as
discussed in detail below. Moreover, we are not at this time adopting
the proposed new reporting requirements on Form 8-K that would have
imposed costs on unlisted affected funds.\417\
---------------------------------------------------------------------------

\415\ See ABA Comment Letter.
\416\ See infra sections III.E.1 and III.E.5.
\417\ See supra section II.I.3.
---------------------------------------------------------------------------

1. New Registration Fee Payment Method for Interval Funds and Issuers
of Certain Exchange-Traded Products
We are adopting a modernized approach to registration fee payment
for interval funds that will require them to pay securities
registration fees using the same method that mutual funds and ETFs use
today. In response to comments, we also are allowing certain ETPs that
are not registered under the Investment Company Act to use a similar
method to pay registration fees.
With respect to interval funds, the final rule requires these funds
to pay their registration fees on a net basis once a year, rather than
having to pay registration fees when the fund files its registration
statement.\418\ We believe this approach will make the registration fee
payment process for interval funds more efficient. For example, it will
avoid the possibility that an interval fund will inadvertently sell
more shares than it has registered and will not require the issuer to
periodically register new shares.
---------------------------------------------------------------------------

\418\ See supra section II.G.3.
\419\ The estimates are based on data collected for interval
funds that were active as of June 30, 2018. We used their Form N-2
filings and Form N-CSR filings to identify current registration
fees, proceeds from shares issued, and cost of shares repurchased.
---------------------------------------------------------------------------

We believe the final rule could also benefit interval funds by
reducing their initial registration fees. In the table below, we have
attempted to quantify the potential initial cost-savings for interval
funds under the modernized approach to registration fee payment over a
3-year period.\419\

Table 4
------------------------------------------------------------------------
Estimated average
Current average registration fee
registration fee that will be paid
(paid upon filing) under the amendments
\1\ (paid at the end of
the fiscal year) \2\
------------------------------------------------------------------------
Year 1...................... $31,501 $8,376
Year 2...................... .................... 7,015
Year 3...................... .................... 22,445
------------------------------------------------------------------------
Notes:
\1.\ The current average registration fee paid in year 1 is the average
of the actual fees reported by the interval funds in the Calculation
of Registration Fee table in Form N-2 in the year of registration with
the Commission. For purposes of this analysis, we assume that interval
funds did not register additional securities in years 2 or 3. If they
did, the average registration fees under the current framework would
be higher than $31,501.

[[Page 33327]]

\2.\ For each of the interval funds, the fees in years 1, 2, and 3 are
estimated as [(dollar proceeds from shares issued + dollar cost of
shares repurchased) / $1,000,000] x $129.80. The $129.80 is the fee
rate (per million dollars) that funds pay to register shares for
fiscal year 2020. Then we calculate the average fees per year.

Under the current regime, an interval fund would pay on average
$31,501 at the time of filing, and then issue and repurchase securities
over time. Under the regime we are adopting, the interval fund will pay
its registration fees on a net basis once a year. Since the final rule
allows interval funds to shift more of the fee payments to the future,
it will decrease their cost of offering securities. An interval fund
will, however, be required to annually file Form 24F-2.\420\ We
estimate the annual burden of filing Form 24F-2 for interval funds will
be $140 per fund.\421\
---------------------------------------------------------------------------

\420\ As discussed below, interval funds and other funds that
file on Form 24F-2 will be required to file the form in a structured
XML format under the amendments.
\421\ For PRA purposes, we estimate an annual burden per
respondent of filing Form 24F-2 of two hours. See infra section
IV.B.6. At an estimated wage rate of $70 per hour, the annual dollar
cost for filing Form 24F-2 is $140 (2 hours x $70 per hour). This
estimate does not account for burdens associated with filing Form
24F-2 in a structured XML format, which are discussed infra in
section III.E.2.
---------------------------------------------------------------------------

We believe the final rule will provide similar benefits to certain
ETPs that are not registered under the Investment Company Act by
allowing these ETPs to elect to register an indeterminate number of
securities and to pay registration fees in arrears on an annual net
basis. Since now ETPs pay registration fees in advance whether or not
they sell any securities and may not factor in redemptions in reducing
the amount of the registration fees owed, this change will allow them
to reduce their registration fees and shift their payment obligations
into future periods. The amendments will also avoid the possibility
that such an ETP will inadvertently sell more shares than it has
registered and will not require the issuer to periodically register new
shares. Moreover, the amendments will allow ETPs that are not
registered under the Investment Company Act to use a similar
registration fee payment method as ETFs that are registered under the
Investment Company Act.
As an alternative, we considered allowing a wider range of affected
funds, such as registered CEFs that are tender offer funds, to rely on
rule 24f-2. This approach would have extended the benefits of rule 24f-
2 to additional affected funds. However, as discussed above, interval
funds have structural similarities to mutual funds and ETFs that other
affected funds do not. In particular, interval funds routinely
repurchase shares at NAV and are required to periodically offer to
repurchase their shares, and therefore are more likely to realize the
operational benefits of computing registration fees on a net annual
basis than are funds that are not required to periodically offer to
repurchase their shares at NAV.
2. Structured Data Requirements
The final rule includes new structured data reporting requirements
for affected funds. Specifically, all affected funds will be required
to tag in Inline XBRL format certain Form N-2 prospectus disclosure
items. All affected funds also will be required to tag the information
on the cover page of Form N-2 using Inline XBRL. Finally, BDCs will be
required to tag financial statement information using Inline XBRL.
Under the final rule, affected funds will be required to tag the
following Form N-2 prospectus disclosure items using Inline XBRL: Fee
Table; Senior Securities Table; Investment Objectives and Policies;
Risk Factors; Share Price Data; and Capital Stock, Long-Term Debt, and
Other Securities.\422\ These items provide important information about
an affected fund's key features, costs, and risks and may be
particularly useful to investors to inform their investment decisions.
With respect to the requirement that BDCs tag financial statement
information, unlike operating companies and registered investment
companies, BDCs currently are not required to report any structured
data.\423\ This requirement will extend to BDCs a requirement that
currently applies to operating companies.
---------------------------------------------------------------------------

\422\ See supra section II.I.1.c.
\423\ See supra section II.I.1.a.
---------------------------------------------------------------------------

Requiring BDCs to tag financial statement information using Inline
XBRL, and all affected funds to tag in Inline XBRL format certain
important prospectus disclosure items, will provide important benefits
to investors seeking to access information about affected funds, both
directly and through information intermediaries such as data
aggregators and financial analysts. Providing a standardized,
interactive, computer-based framework for reporting could further
facilitate more efficient investor comparisons of important information
across affected funds by making it easier to aggregate and analyze
information through automated means, which could increase competition
for investor capital. The Inline XBRL tagging requirements may also
potentially increase the efficiency of capital formation to the extent
that making disclosures available in a structured format reduces some
of the information barriers facing prospective investors and makes it
easier for affected funds to attract investors. One commenter expressed
similar views.\424\
---------------------------------------------------------------------------

\424\ See Calcbench Comment Letter.
---------------------------------------------------------------------------

Smaller affected funds in particular may benefit more from enhanced
exposure to investors. To the extent that reporting the disclosures in
a structured format increases the availability, or reduces the cost of
collecting and analyzing, key information about affected funds, smaller
affected funds may benefit from improved coverage by information
intermediaries. Further, requiring affected funds to tag certain
prospectus disclosures using Inline XBRL would facilitate monitoring of
these disclosures by investors and information intermediaries,
potentially increasing transparency and mitigating the potential
informational costs stemming from other aspects of the proposal such as
automatic shelf registration statements for WKSIs and short-form
registration statements for eligible funds, which may result in
required disclosures being distributed across multiple regulatory
filings and could thereby affect investor protection.\425\
---------------------------------------------------------------------------

\425\ See supra section III.C.2 (discussing these costs).
---------------------------------------------------------------------------

The cover page tagging requirement includes new check boxes that
will help identify whether a registration statement is, for example, an
automatic shelf registration statement or a short-form registration
statement.\426\ We already require registrants to tag all of the
information on the cover page of Form 10-K, Form 10-Q, Form 8-K, Form
20-F, and Form 40-F using Inline XBRL.\427\ The requirement to tag the
Form N-2 cover page in Inline XBRL is expected to benefit investors by
enabling investors and information intermediaries to automate their use
of the cover page information, including company name, the Act or Acts
to which the registration statement relates, and check boxes relating
to the effectiveness of the registration statement. This will enhance
the ability of investors and information intermediaries to identify,
count, sort, and analyze registrants and disclosures

[[Page 33328]]

to the extent these data points otherwise would be formatted, for
example, in HTML. The check boxes, which are required to be tagged in
Inline XBRL format, will allow investors and information intermediaries
to distinguish between different categories of registration statements
in much the same way they are currently able to do for operating
companies. The availability of information in Inline XBRL could enable
investors and information intermediaries to capture and analyze cover
page information more quickly and at a lower cost, as well as to search
and analyze the information dynamically. It could also facilitate
comparison of information across filers and reporting periods.
---------------------------------------------------------------------------

\426\ See supra section II.I.1.b.
\427\ See FAST Act Modernization Adopting Release, supra
footnote 66.
---------------------------------------------------------------------------

Affected funds will incur some costs to tag and review the required
information in Inline XBRL. Some filers may perform the tagging in-
house while others may retain outside service providers. We expect
filers will incur costs for the fees of the outside service providers.
Various XBRL preparation solutions have been developed and used by
operating companies and open-end fund filers, and some evidence
suggests that, for operating companies, XBRL tagging costs have
decreased over time.\428\ While this evidence is specific to XBRL
tagging costs rather than Inline XBRL tagging costs, because Inline
XBRL allows filers to embed XBRL data directly into an HTML document,
we expect Inline XBRL costs to be even lower than XBRL costs since
Inline XBRL eliminates the need to tag a copy of the information in a
separate XBRL exhibit. Costs of Inline XBRL preparation may depend on
the familiarity of the filer and/or its service provider with Inline
XBRL. Filers that currently report information in Inline XBRL for other
investment products they offer, such as open-end funds, filing affected
fund information in Inline XBRL under the amendments will likely incur
lower costs of compliance than filers adopting Inline XBRL for the
first time. Those registrants affected by the requirement that have not
had experience structuring disclosures in other contexts will likely
incur initial costs to acquire the necessary expertise and/or software
as well as ongoing costs of tagging required information in Inline
XBRL, and any fixed costs of complying with the Inline XBRL requirement
may have a relatively greater impact on smaller filers. On an ongoing
basis, registrants are expected to expend time to tag and review the
tagged information in Inline XBRL using their in-house staff. Some
registrants may also incur an initial cost to license filing
preparation software with Inline XBRL capabilities from a software
vendor, and some may also incur an ongoing licensing cost. Other
registrants may incur an initial cost to modify their existing filing
preparation software to accommodate Inline XBRL preparation. Some
registrants will incur the costs of filing agent services to rely on a
filing agent to prepare their Inline XBRL filings. Initial costs
involving investments in expertise and modifications to disclosure
preparation solutions, or switching to a different software vendor or
outside service provider, may result in a higher compliance cost during
the first year of using Inline XBRL than in subsequent years.
---------------------------------------------------------------------------

\428\ See, e.g., Michael Cohn, AICPA sees 45% drop in XBRL costs
for small companies, Accounting Today (Aug. 15, 2018), available at
https://www.accountingtoday.com/news/aicpa-sees-45-drop-in-xbrl-costs-for-small-reporting-companies (stating that, according to an
updated survey by AICPA and XBRL US, the cost of formatting
financial statements in XBRL for smaller reporting companies has
declined 45% since 2014 and that 68.6% of the companies paid $5,500
or less on an annual basis (as compared to 29.9% of companies in the
2014 survey) for fully outsourced creation and filing solutions for
their XBRL filings, while 11.8% of the companies surveyed paid
annual costs between $5,500 to as much as $8,000 for their full-
service outsourced solutions).
---------------------------------------------------------------------------

The costs of compliance with the Inline XBRL requirements are
likely to vary across registrants. On average we estimate that the
compliance cost to BDCs of tagging financial statement information,
certain prospectus disclosure items, and Form N-2 cover page
information using Inline XBRL will be approximately $161,179 per BDC
per year in the 3 years following the adoption of the rule.\429\ We
estimate that the compliance cost to registered CEFs of tagging in
Inline XBRL format certain prospectus disclosure items and tagging Form
N-2 cover page information will be approximately $8,855 per registered
CEF per year in the 3 years following the adoption of the rule.\430\ We
note that some recent surveys based on operating companies suggest that
these current PRA-based burden estimates may be overstated with respect
to affected funds, and particularly smaller affected funds.\431\
---------------------------------------------------------------------------

\429\ For BDCs, for the purposes of the PRA, we estimated the
average annual compliance costs in the 3 years following the
adoption of the rule to be 33,028 burden hours of in-house Inline
XBRL preparation (31,095 burden hours for tagging financial
statement information, 1,828 burden hours for certain prospectus
disclosure items, and 105 burden hours for Form N-2 cover page
information using Inline XBRL) and $3,712,565 in outside services
($3,555,931 for tagging financial statement information, $156,634
for certain prospectus disclosure items, and $0 for Form N-2 cover
page information using Inline XBRL). See infra section IV.B.2. We
monetize the burden of in-house Inline XBRL preparation by
multiplying the burden hours by an estimated wage rate of $400 per
hour (33,028 x $400 = $13,211,200). The estimated wage figure is
based on analysis in previous rulemakings. The average cost per BDC
is calculated by adding the monetized internal burden ($13,211,200)
to the cost of outside services ($3,712,565) and dividing by the
number of BDCs (105). See also supra footnote 355.
\430\ For registered CEFs, for the purposes of the PRA, we
estimated the average annual compliance costs in the 3 years
following the adoption of the rule to be 12,628 burden hours of in-
house Inline XBRL preparation (686 burden hours for Form N-2 cover
page information using Inline XBRL and 11,942 burden hours for
certain prospectus disclosure items) and $1,023,345 in outside
services ($0 for Form N-2 cover page information using Inline XBRL
and $1,023,345 for certain prospectus disclosure items). See infra
section IV.B.2. We monetize the burden of in-house Inline XBRL
preparation by multiplying the burden hours by an estimated wage
rate of $400 per hour (12,628 x $400 = $5,051,200). The estimated
wage figure is based on analysis in previous rulemakings. The
average cost per registered CEF is calculated by adding the
monetized internal burden ($5,051,200) to the cost of outside
services ($1,023,345) and dividing by the number of registered CEFs
(686).
\431\ See American Institute of CPAs, XBRL Costs for Small
Companies Have Declined 45%, According to AICPA Study (Aug. 18,
2018), available at https://www.aicpa.org/press/pressreleases/2018/xbrl-costs-have-declined-according-to-aicpa-study.html; CFA
Institute, The Cost of Structured Data: Myth vs. Reality (2017),
available at https://www.cfainstitute.org/-/media/documents/survey/the-cost-of-structured-data-myth-vs-reality-august-2017.ashx.
---------------------------------------------------------------------------

One commenter cited a study by the European Securities and Markets
Authority estimating the cost of preparing Inline XBRL in-house to be
on average around 8,200 euros for the first filing and 2,400 euros for
each subsequent filing.\432\ In case of outsourcing, the study
estimates the costs to be on average around 13,000 euros for the first
filing and 4,600 euros for each subsequent filing. However, we do not
believe that these figures the commenter cited are salient to the
structured data requirements we are adopting. For example, although not
cited by the commenter, the same study mentions that in the United
States, because of the detailed tagging and extended taxonomy, the
average costs for outsourcing the preparation of the financial
statements in XBRL is higher, between 9,000 euros and 19,000
euros.\433\
---------------------------------------------------------------------------

\432\ See XBRL US Comment Letter.
\433\ See European Securities and Markets Authority, Feedback
Statement on the Consultation Paper on the Regulatory Technical
Standard on the European Single Electronic Format (ESEF) (Dec. 21,
2016), available at https://www.esma.europa.eu/sites/default/files/library/2016-1668_esma_feedback_statement_on_the_rts_on_esef_0.pdf.
---------------------------------------------------------------------------

As an alternative, we could have allowed but not required affected
funds to present cover page, financial statement, and certain
prospectus disclosure information in Inline XBRL. Compared to the final
rule, a fully voluntary Inline XBRL program would

[[Page 33329]]

lower costs for those filers that do not find Inline XBRL to be cost
efficient. We also could have required Inline XBRL tagging only for a
subset of affected funds--for example, affected funds that file short-
form registration statements on Form N-2 or WKSIs. We also could have
permitted more than one structured data format or left the precise
format unspecified. However, a voluntary program or the use of multiple
structured data formats would also reduce potential data quality
benefits compared to mandatory Inline XBRL, as would a program that
captures only a subset of affected funds. If the information were not
submitted by all affected funds in a standardized, structured, machine-
readable format, investors who seek to instantly analyze, aggregate,
and compare the data would have to incur the costs of paying a third-
party service provider to manually rekey the data, review the data for
data quality problems during the duplication process, and disseminate
the data to the investors.\434\ Alternatively, investors unwilling to
pay a third-party service provider would have to incur the time to do
that process themselves. In either scenario, the data would not be
usable in as timely a manner as if it were made machine-readable in a
standardized format. In addition, under a voluntary program, data that
is not submitted in Inline XBRL would not be validated, thus decreasing
the overall data quality of the data submitted. Unlike the machine-
readable Inline XBRL format, data submitted in unstructured formats
(e.g., HTML, ASCII) is not machine-readable at the element level and
thereby cannot be validated by EDGAR in any way. Thus, data submitted
in the HTML format by affected funds that opted not to use Inline XBRL
and XBRL data submitted by other affected funds could be different due
to the level of pre-submission validation activities. Poor data quality
reduces any data user's ability to meaningfully analyze, aggregate, and
compare data. One commenter supported the use of Inline XBRL compared
to unstructured formats, arguing that Inline XBRL data is significantly
less expensive to process and more timely than unstructured data.\435\
---------------------------------------------------------------------------

\434\ Some studies have shown that investors use XBRL files
often, even preferring them to non-XBRL files when both are
available. See Yu Cong, Hui Du, and Miklos A. Vasarhelyi, Are XBRL
Files Being Accessed? Evidence from the SEC EDGAR Log File Dataset,
Journal of Information Systems, Vol. 32-3, 23-29 (2018).
\435\ See XBRL US Comment Letter.
---------------------------------------------------------------------------

As another alternative, we could have required the disclosures to
be filed in a different structured format, such as the XBRL or XML
format. Compared to the Inline XBRL requirement that we are adopting,
using the XBRL format would entail duplicative entry, which can
adversely affect the quality and usability of the structured data as
well as the efficiency and cost of preparation and review of the
structured data. Compared to the requirement to use Inline XBRL, the
alternative of requiring affected funds to use XML could result in
lower costs. However, compared to the amendments, XML would provide
less flexibility in tagging complex information as well as less
extensive data quality validation capabilities. Given the complexity of
the information required to be tagged and its importance to investors,
we believe the benefits of using Inline XBRL outweigh the higher costs
compared to XML.\436\ One commenter supported using Inline XBRL
compared to XML, arguing that financial information is more efficiently
reported in Inline XBRL.\437\
---------------------------------------------------------------------------

\436\ In contrast, the information provided in Form 24F-2 is
less complex and is generally only used by fund issuers and
Commission staff for purposes of calculating certain registered
investment companies' registration fees, so we have proposed to
require Form 24F-2 information in a structured XML format rather
than Inline XBRL.
\437\ See XBRL US Comment Letter.
---------------------------------------------------------------------------

As another alternative, we could have expanded the scope of
prospectus disclosure information required to be tagged in Inline XBRL
under the final rule. Compared to the final rule, this alternative
would improve the timeliness and usability of the required disclosure
information, but would potentially impose additional costs on affected
funds. To the extent that the other required prospectus disclosures of
affected funds contain information that is more specific to individual
funds without sufficient comparability or aggregation utility, the
benefits of having those additional required disclosures in a
structured format may be lower than the more limited subset of
disclosures that we are requiring affected funds to file in Inline
XBRL. As another alternative, we could have narrowed the scope of
prospectus disclosure information required to be tagged in Inline XBRL
under the rule. Compared to the final rule, this alternative could
decrease the timeliness and usability of the information required to be
disclosed, but could also potentially reduce costs for registrants.
Overall, the prospectus disclosures that affected funds will be
required to tag in Inline XBRL largely parallel the information that
mutual funds and ETFs are required to disclose. We also believe these
disclosures represent the information that will be most useful for
investors that seek to use structured data to assist with investment
decisions regarding affected funds.
We also are requiring issuers that file Form 24F-2 (including
mutual funds and ETFs, as well as interval funds) to submit the form in
a structured XML format.\438\ We believe using a structured data format
will make it easier for issuers to accurately prepare and submit the
information Form 24F-2 requires and will make the submitted information
more useful to Commission staff. Automated validation processes could
help issuers compute registration fees accurately before submitting the
filing, which could reduce administrative burdens associated with
correcting inaccurate filings. A structured filing format could also
facilitate pre-population of previously-filed information. We estimate
the cost of tagging Form 24F-2 in a structured XML format to be $542
per fund.\439\
---------------------------------------------------------------------------

\438\ See supra section II.I.1.d.
\439\ We assume that the burden of tagging Form 24F-2 in a
structured XML format would be 2 hours for each filing. See infra
section IV.B.6. At an estimated wage rate of $271 per hour, the
dollar cost for filing Form 24F-2 in a structured XML format is $542
(2 hours x $271 per hour) per fund.
---------------------------------------------------------------------------

3. Periodic Reporting Requirements
We are adopting certain new annual report requirements for affected
funds that file a short-form registration statement on Form N-2. These
funds must include in their annual reports certain information that
they currently disclose in their prospectus--a table of fees and
expenses, share price information, and a table of senior securities--
and a discussion of material unresolved staff comments.\440\ In
addition, all BDCs will be required to include financial highlights in
their registration statements and annual reports.\441\ We also are
requiring all registered CEFs to provide management's discussion of
fund performance in their annual reports.\442\ Finally, registered CEFs
that rely on rule 8b-16(b) under the Investment Company Act to avoid
annually updating their registration statements will be required to
describe in their annual reports the fund's current investment
objectives and policies, and principal risks, and to provide more
expansive disclosure about certain key changes that occurred during the
relevant year in enough detail to allow investors to understand each
change and how it may affect the fund.\443\ We believe these
requirements will promote

[[Page 33330]]

investor protection by making important information more readily
accessible to investors.
---------------------------------------------------------------------------

\440\ See supra section II.I.2.a and section II.I.2.d.
\441\ See supra section II.I.2.c.
\442\ See supra section II.I.2.b.
\443\ See supra section II.I.5.
---------------------------------------------------------------------------

With respect to affected funds filing short-form registration
statements on Form N-2, the annual report requirements will compile
certain information that is already available in a fund's registration
statement. This could be beneficial to some investors in these funds
since information will be readily available in one document instead of
investors needing to compile it from several sources. As previously
discussed, given the ability of affected funds to use forward
incorporation by reference under the short-form registration
instruction, these funds' annual reports may become a more convenient
and comprehensive source of information about a particular seasoned
fund, relative to that fund's registration statement. At the same time,
the annual report requirements may increase the compliance costs for
seasoned funds because new information items will have to be added to
the annual report. However, because the annual report will be
incorporated by reference into the fund's prospectus, requiring
disclosure in both the prospectus and annual report should not require
duplicative disclosure. Moreover, specifying identical disclosure
requirements in both places may facilitate forward incorporation by
reference, by making clear that the same required disclosure will
satisfy both requirements. Alternatively, we could have required
affected funds to include in their annual reports more or less
information from their registration statements. While requiring less
information would reduce costs to affected funds by reducing the amount
of required annual report disclosure, it could also make it more
difficult for investors to find important fund information. Requiring
affected funds to include more prospectus information in their annual
reports could increase the length and complexity of annual reports and
make them less useful to investors overall. This alternative would also
increase affected funds' compliance costs.
The requirement to disclose material unresolved staff comments in
the annual report is designed to mitigate the concern that other
aspects of the amendments may reduce certain affected funds' incentives
to resolve staff comments in a timely manner. We believe disclosure of
material unresolved staff comments will likely provide important
information to investors. This requirement may, however, impose certain
compliance costs to the extent a seasoned fund does not timely resolve
staff comments and hence will be required to provide such disclosure.
We do not believe these disclosure costs will be significant because
the information will be readily available to the affected fund. We
recognize, however, there could be some costs to affected funds
associated with compliance and legal review to the extent an affected
fund wants to provide additional information in its annual report
disclosure beyond that provided in the fund's written response to the
staff's comment (which would typically already be publicly available on
EDGAR). We also recognize, as some commenters suggested, that
determining whether a particular comment is ``material'' or
``unresolved'' involves some subjective judgment, which may contribute
to compliance and legal costs.\444\
---------------------------------------------------------------------------

\444\ See ICI Comment Letter; Invesco Comment Letter.
---------------------------------------------------------------------------

With respect to the requirement that BDCs provide financial
highlights information, we believe investors will benefit from
disclosure summarizing a BDC's financial statements. We believe the
costs associated with this requirement should be minimal since we
understand that it is general market practice for BDCs to include this
information in their registration statements.
We believe the requirement for registered CEFs to include MDFP
disclosure in their annual shareholder reports will be beneficial to
investors by helping them assess a fund's performance over the prior
year and complementing other information in the report, which may make
the annual report disclosure more understandable as a whole. This
requirement will also promote parity between different types of funds,
as open-end funds and BDCs are already required to provide similar
disclosure in their annual reports. This requirement will likely
increase compliance burdens for registered CEFs, to the extent they do
not voluntarily provide MDFP disclosure already. We believe that a
majority of registered CEFs already provide MDFP-like disclosure in
their annual shareholder reports. We estimate the annual cost of
providing MDFP disclosure to be $6,400 per registered CEF,\445\
although this cost will likely be lower for affected funds that already
provide MDFP-like disclosure.
---------------------------------------------------------------------------

\445\ For the purpose of the PRA, we estimate that the proposed
amendments to require registered CEFs to provide MDFP in their
annual reports will result in an additional 16 burden hours for
registered CEFs. See infra section IV.B.3. We monetize the internal
burden by multiplying the burden hours by an estimated wage rate of
$400 per hour (16 x $400 = $6,400).
---------------------------------------------------------------------------

We considered adopting additional MDFP requirements, such as
requirements to: (1) Disclose the impact of particular investments
(including large positions and/or significant investments) or
investment types that contributed to or detracted from performance; (2)
explain a fund's performance in relation to its index; (3) explain how
the use of leverage affected fund performance; (4) explain the reason
for and effect of any large cash or temporary defensive positions on
fund performance; (5) explain the effect of any tax strategies, or the
effects of taxes, on fund performance; (6) explain the effect of non-
recurring or non-cash income on fund performance; (7) include general
discussion of purchases and sales of fund shares and the effects of any
share repurchases or tender offers on fund performance; and/or (8)
disclose whether the fund has high portfolio turnover and the effect of
portfolio turnover on fund performance. We also considered changing the
average annual total return table to provide additional or more useful
information to investors, such as requiring total return based on per-
share NAV, in addition to total return based on current market price.
Although one or more of these changes could result in additional,
potentially helpful information for investors, we also considered the
administrative costs that additional disclosure requirements would
impose and have determined not to adopt them at this time.
Under the amendments to rule 8b-16, registered CEFs relying on
paragraph (b) of the rule must describe in their annual reports the
fund's current investment objectives and policies, and principal risks,
and certain key changes that occurred during the relevant year in
enough detail to allow investors to understand each change and how it
may affect the fund. We estimate that approximately 521 registered CEFs
relied on rule 8b-16 as of December 31, 2019 and will therefore provide
the new disclosure.\446\ These registered CEFs also will be required to
preface disclosure of these key changes with a legend clarifying that
the disclosures provide only a summary of certain changes that have
occurred in the past year, and that the summary may not reflect all of
the changes that have occurred. We believe these new disclosure
requirements will allow investors in funds relying on rule 8b-16(b) to
more easily identify and understand key information about their

[[Page 33331]]

investments by providing such information in one place. Because these
funds are already required to disclose in their annual reports the
enumerated changes to specified Form N-2 disclosure items--and
therefore already must have and maintain, among other things, updated
information about the investment objectives, policies and principal
risks that we are requiring them to disclose in full--the new
requirement will likely add only a small incremental compliance burden.
---------------------------------------------------------------------------

\446\ See infra footnote 561.
---------------------------------------------------------------------------

4. Discretionary Amendments to Incorporation by Reference Requirements
The final rule will modernize Form N-2's requirements for backward
incorporation by reference for all affected funds.\447\ Specifically,
we are requiring that an affected fund make information that is
incorporated by reference into its prospectus or SAI, as well as the
corresponding prospectus and SAI, readily available and accessible on a
website maintained by or for the fund and identified in the fund's
prospectus or SAI.
---------------------------------------------------------------------------

\447\ See supra section II.I.4.
---------------------------------------------------------------------------

We believe this new requirement will improve the information's
online accessibility for investors. In particular, this new requirement
will make the incorporated information, prospectus, and SAI more
accessible to retail investors online because we believe they may be
more inclined to look at a fund's website for information than to
search the EDGAR system.\448\ We recognize that investors without home
internet access, depending on their ability and preference to access
fund information electronically, might experience a reduction in their
ability to access information that is incorporated by reference into
its prospectus or SAI. However, affected funds will also be required to
provide incorporated materials upon request free of charge, in
recognition that some investors may prefer to review these materials in
paper.\449\
---------------------------------------------------------------------------

\448\ For example, results from 2011 investor testing sponsored
by the Commission suggest that an investor looking for a fund's
annual report is most likely to seek it out on the fund's website.
See Investor Testing of Selected Mutual Fund Annual Reports (Feb. 9,
2012), available at https://www.sec.gov/comments/s7-08-15/s70815-3.pdf. Additionally, a 2018 report by the Investment Company
Institute suggests that over 90% of U.S. households owning mutual
funds used the internet extensively. See ICI Research Perspective,
Ownership of Mutual Funds, Shareholder Sentiment, and Use of the
internet, 2019 (Oct. 2019), available at https://www.ici.org/pdf/per25-08.pdf.
\449\ See supra paragraph accompanying footnote 410 (recognizing
the effects of allowing affected funds to not deliver final
prospectuses directly to investors if they meet certain
requirements).
---------------------------------------------------------------------------

This amendment also will facilitate the efficient use of
incorporation by reference by affected funds. For example, if an
investor requested a copy of the affected fund's prospectus in
accordance with rule 173, the fund would in some cases need to deliver
a much longer document if we did not amend Form N-2's backward
incorporation by reference provisions.\450\ We do not, however, expect
that the backward incorporation by reference amendment will
substantially reduce the amount of information affected funds deliver
to investors by mail or electronically. This is because we expect that
most affected funds will rely on rules 172 and 173 to satisfy their
prospectus delivery obligations. An issuer that uses these rules will
satisfy its final prospectus delivery obligations by filing the
prospectus with the Commission rather than delivering the prospectus
and any incorporated material to investors.\451\
---------------------------------------------------------------------------

\450\ See, e.g., supra footnote 365 and accompanying text.
\451\ See supra section II.D.
---------------------------------------------------------------------------

We do not believe the requirement to make a fund's prospectus, SAI,
and incorporated materials available on a website will generate
significant compliance costs for affected funds because many funds
currently post their annual and semi-annual reports and other fund
information on their websites. We estimate the annual cost to comply
with the website posting requirements to be $496 per fund.\452\
---------------------------------------------------------------------------

\452\ For the purpose of the PRA, we estimate an average burden
to comply with the website posting requirements of 2 hours per fund.
See infra section IV.B.1. The expected compliance cost associated
with the proposed website posting requirements is calculated by
multiplying the 2-hour burden by the estimated hourly wage based on
published rates for webmasters ($248).
---------------------------------------------------------------------------

Affected funds may also incur printing and mailing costs under the
final rule if some investors request paper copies of the prospectus
\453\ or of the information that has been incorporated by reference
into the prospectus or SAI but not delivered with the prospectus or
SAI.\454\ In another release, the Commission estimated that the annual
printing and mailing cost associated with providing copies of
prospectuses and other documents upon request would be approximately
$500 per registrant.\455\ We are similarly adopting a requirement to
send prospectuses and related information in this release, and we have
no reason to assume significant differences in the average lengths of
the associated materials or the frequency of investor requests under
the amendments we are adopting. We estimate that the printing and
mailing costs associated with the new requirements will be
approximately $750 per fund in recognition that the requirement to
deliver information that has been incorporated by reference may result
in greater overall costs since affected funds that are eligible to file
short-form registration statements under the final rule will be able to
use incorporation by reference more frequently.\456\ We anticipate,
however, that investors may be less likely to request copies of
materials that have been incorporated by reference into an affected
fund's prospectus or SAI, so we believe this requirement will only
incrementally increase costs.
---------------------------------------------------------------------------

\453\ See supra footnote 153.
\454\ See supra section II.I.4.
\455\ See Variable Contract Summary Prospectus Adopting Release,
supra footnote 345, at n.1233 and accompanying text.
\456\ We requested data regarding how often investors may
request copies of prospectuses or incorporated materials, how many
materials affected funds would incorporate by reference into their
prospectuses or SAIs, and how lengthy those materials would be.
Commenters did not provide any data in response.
---------------------------------------------------------------------------

Alternatively, we could have retained Form N-2's current backward
incorporation by reference requirements and continued to require funds
to deliver incorporated materials to new investors. Because current
General Instruction F of Form N-2 does not require affected funds to
make incorporated materials available online, funds would not have to
incur costs associated with website posting. However, because affected
funds that choose to rely on rules 172 and 173 will be deemed to have
delivered their disclosures upon filing with the Commission instead of
giving them to investors, the current backward incorporation delivery
requirement will not result in delivery of incorporated materials to a
fund's investors, thus making less accessible the disclosure materials
that might affect their investment decision.
We are also modifying Form N-14 to decrease the disclosure burden
of the form and reduce the length of Form N-14 prospectuses in certain
circumstances.\457\ The amendments will allow BDCs to incorporate by
reference to the same extent as registered CEFs. This will provide for
more consistent treatment between registered CEFs and BDCs. We also are
eliminating the requirement that registrants file with the Form N-14
registration statement the documents containing the information that is
incorporated by reference into the prospectus or SAI, thus decreasing

[[Page 33332]]

compliance costs. Commenters generally supported these changes.\458\
---------------------------------------------------------------------------

\457\ See supra section II.B.3.b.
\458\ See Dechert Comment Letter; IPA Comment Letter.
---------------------------------------------------------------------------

5. Automatic or Immediate Effectiveness of Filings by Affected Funds
Conducting Certain Continuous Offerings
In response to comments, the final rule will allow any registered
CEF or BDC that conducts continuous offerings under rule 415(a)(1)(ix)
to file post-effective amendments and certain registration statements
that become effective immediately upon filing or automatically 60 days
after filing.\459\ We believe this rule amendment will allow these
unlisted continuously-offered affected funds to maintain effective
registration statements in a more efficient, cost-effective manner,
similar to the benefits the final rule provides to affected funds that
file short-form registration statements or qualify as WKSIs. Under the
amendments, continuously-offered unlisted affected funds, which
generally will not qualify as WKSIs or be eligible to file short-form
registration statements because they do not have public float, will be
able to more efficiently update their financial statements under
section 10(a)(3) of the Securities Act to maintain effective
registration statements while they engage in continuous offerings. One
commenter stated that allowing continuously-offered unlisted affected
funds to rely on rule 486 would benefit investors in these funds by
allowing the funds to avoid the time and expense of an annual staff
review of registration statements where no changes are made beyond
immaterial updates and updates to audited financial information.\460\
---------------------------------------------------------------------------

\459\ See supra section II.D.
\460\ See ABA Comment Letter.
---------------------------------------------------------------------------

As an alternative, we could have continued to limit rule 486 to
interval funds. Such an alternative would have made it less efficient
for certain continuously-offered unlisted affected funds to update
their financial statements or make other changes to their registration
statements relative to the processes available to all other funds that
conduct continuous or delayed offerings under the Commission's rules.

IV. Paperwork Reduction Act Analysis

A. Background
Certain provisions of the final amendments contain ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (PRA).\461\ We are submitting the final
amendments to the Office of Management and Budget (OMB) for review in
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The hours and
costs associated with preparing disclosure, filing forms, and retaining
records constitute reporting and cost burdens imposed by the
collections of information. An agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless it displays a currently valid control number. The titles for the
collection of information are summarized in Table 5 below.
---------------------------------------------------------------------------

\461\ 44 U.S.C. 3501 et seq.

Table 5--Collections of Information
------------------------------------------------------------------------
OMB control
Title No.
------------------------------------------------------------------------
Form N-2................................................ 3235-0026
Investment Company Interactive Data \1\................. 3235-0642
Rule 30e-1.............................................. 3235-0025
Form 10-K............................................... 3235-0063
Family of rules under section 8(b) of the Investment 3235-0176
Company Act of 1940 \2\................................
Rule 163................................................ 3235-0619
Rule 433................................................ 3235-0617
Rule 173................................................ 3235-0618
Form 24F-2.............................................. 3235-0456
Form S-1................................................ 3235-0065
Form S-3................................................ 3235- 0073
Form N[dash]14.......................................... 3235-0336
Form F-1................................................ 3235-0258
Form F-3................................................ 3235-0256
------------------------------------------------------------------------
Notes:
\1.\ Recently, we issued a release that, among other things, retitled
this collection of information (previously, ``Mutual Fund Interactive
Data'') ``Investment Company Interactive Data.'' See Variable Contract
Summary Prospectus Adopting Release, supra footnote 345.
\2.\ The paperwork burdens for the rules under section 8(b) of the
Investment Company Act are imposed through the forms and reports that
are subject to the requirements in these rules and are reflected in
the PRA burdens of those documents. To avoid a PRA inventory
reflecting duplicative burdens and for administrative convenience, we
assign a one-hour burden to these rules.

The rules, forms, and regulations listed above were adopted under
the Securities Act, the Exchange Act, or the Investment Company Act.
They set forth the disclosure requirements for registration statements,
prospectuses, periodic reports, and certified shareholder reports that
are prepared by registrants to help investors make informed investment
and voting decisions. They also permit additional communications by
registrants during a registered offering. The final amendments will
allow affected funds to use the securities offering rules that are
already available to operating companies. In addition, the final rule
includes amendments to our rules and forms intended to tailor the
disclosure and regulatory framework to affected funds.
The Investment Company Interactive Data collection of information
references current requirements for certain registered investment
companies to submit to the Commission information included in their
registration statements, or information included in or amended by any
post-effective amendments to such registration statements, in response
to certain form items in interactive data format. It also references
the requirement for funds to submit an Interactive Data File to the
Commission for any form of prospectus filed pursuant to rule 497(c) or
(e) that includes information in response to certain form items. The
final amendment will include several new structured data requirements,
including requirements for: (1) BDCs to submit financial statement
information using Inline XBRL format; (2) affected funds to include
structured cover page information in their registration statements on
Form N-2 using Inline XBRL format; and (3) affected funds to tag
certain prospectus information using Inline XBRL format.\462\ Although
the interactive data filing requirements are included in the Form N-2
instructions, we are separately reflecting the hour and cost burdens
for these requirements in the burden estimate for Investment Company
Interactive Data and not in the estimate for Form N-2.
---------------------------------------------------------------------------

\462\ We are also adopting new requirements for funds that file
on Form 24F-2 to submit the form in XML format. We account for the
burdens associated with this requirement in infra section IV.B.6.
---------------------------------------------------------------------------

The information collection requirements related to registration
statements and Exchange Act reports are mandatory. In addition, there
is no mandatory retention period for the information disclosed, and the
information gathered will be made publicly available. The information
collection requirements related to the communications and prospectus
delivery rules we are adopting apply only to affected funds and other
offering participants choosing to rely on them. There will be a
mandatory record retention period with respect to the communications
and prospectus delivery information collections. Under rule 433,
issuers and offering participants must retain all free writing
prospectuses that have been used, for three years following the date of
the initial bona fide offering of the securities in question that were
not filed with the Commission. Moreover, free writing prospectuses that
are made by or on behalf of an affected fund, and free

[[Page 33333]]

writing prospectuses that are broadly disseminated by another offering
participant, will have to be filed and will be publicly available on
EDGAR, whereas free writing prospectuses prepared by or on behalf of,
or used or referred to, by offering participants other than the issuer
will not have to be filed.

B. Summary of the Amendments and Impact on Information Collections

We are amending several rules and forms to modify the registration,
communications, and offering processes for affected funds under the
Securities Act and Investment Company Act. The amendments are designed
to carry out the requirements of section 803 of the BDC Act and section
509 of the Registered CEF Act. The amendments generally will allow
affected funds to use the securities offering rules that are already
available to operating companies.
The amendments principally affect five aspects of the application
of our securities offering rules to affected funds. First, the
amendments will streamline the registration process under the
Securities Act for affected funds to allow them to sell securities more
quickly and efficiently under a shelf registration process tailored to
affected funds. Second, the amendments will allow affected funds to
qualify as WKSIs under rule 405 under the Securities Act. Third, the
amendments will allow affected funds to satisfy final prospectus
delivery requirements using the same method as operating companies.
Fourth, the amendments will allow affected funds to use communications
rules currently available to operating companies, such as the use of
the safe harbors for disseminating certain factual business
information, forward-looking information, a ``free writing
prospectus,'' and broker-dealer research reports. Finally, the
amendments will tailor affected funds' disclosure and regulatory
framework in light of the amendments to the offering rules applicable
to them. These amendments include new structured data requirements, new
disclosure requirements for annual reports, and a requirement for
interval funds to pay securities registration fees using the same
method that mutual funds and ETFs use today.
We anticipate that several provisions of the amendments will
increase the burdens and costs for affected funds that will be subject
to the amendments. We have estimated the average number of hours an
affected fund will spend to prepare and file the information
collections and the average hourly rate for the services of outside
professionals. In deriving our estimates, we recognize that the burdens
will likely vary among individual affected funds based on a number of
factors, including their size and the nature of their investment
activities.\463\ In addition, some affected funds may experience costs
in excess of our estimates, and some may experience less than the
estimated average costs.
---------------------------------------------------------------------------

\463\ See supra footnotes 355 and 357.
---------------------------------------------------------------------------

In addition to these amendments relating to affected funds, we are
amending several rules and forms to enable certain ETPs that are not
registered under the Investment Company Act to elect to register
offerings of an indeterminate amount of exchange-traded vehicle
securities and pay registration fees for these offerings on an annual
net basis. We have estimated the average number of additional hours
that such ETPs will spend when filing registration statements for these
offerings to prepare and file the information collections and the
average hourly rate for the services of outside professionals. We
anticipate that the amendments will result in a decrease in the number
of registration statements filed by these issuers and that, overall,
these amendments will reduce the burdens and costs for these issuers.
1. Amendments to Form N-2 Registration Statement
Form N-2 is the form used by an affected fund to register offerings
under the Securities Act and, as applicable, to register as an
investment company under the Investment Company Act.
The amendments to Form N-2 will increase the existing disclosure
burdens of the form by requiring:
Affected funds to use new check boxes on the cover page to
provide information about the fund, the purpose of the filing, and the
type of offering, including whether the form is being used for
automatic shelf registration; \464\
---------------------------------------------------------------------------

\464\ See supra section II.I.1.b; see also amended cover page of
Form N-2.
---------------------------------------------------------------------------

BDCs to include financial highlights disclosure in their
registration statements, as registered CEFs are currently required to
do; \465\
---------------------------------------------------------------------------

\465\ See supra section II.I.2.c; see also Instruction 1 to Item
4 of amended Form N-2.
---------------------------------------------------------------------------

Affected funds to provide new undertakings to be furnished
in registration statements being filed pursuant to rule 415; \466\ and
---------------------------------------------------------------------------

\466\ See supra footnote 63 and accompanying paragraph; see also
Items 34.3-7 of amended Form N-2.
---------------------------------------------------------------------------

Affected funds to make certain documents available online
if they incorporate them by reference, including the prospectus, SAI,
and any Exchange Act reports filed under section 13 or section 15(d) of
the Exchange Act that are incorporated by reference into the fund's
prospectus or SAI.\467\
---------------------------------------------------------------------------

\467\ See supra section II.I.4; see also General Instruction
F.4.a of amended Form N-2.
---------------------------------------------------------------------------

At the same time, the amendments to Form N-2 will decrease existing
burdens for the form by:
Permitting eligible affected funds to forward incorporate
by reference Exchange Act reports, which will reduce the need for such
funds to file a post-effective amendment or a prospectus supplement to
update information in the registration statement.\468\
---------------------------------------------------------------------------

\468\ See supra section II.B.3.e; see also General Instruction
F.3.b of amended Form N-2.

Table 6--Currently Approved Form N-2 PRA Estimates \1\
----------------------------------------------------------------------------------------------------------------
Internal Cost of internal Annual external
burden Wage rate \2\ burden cost burden
----------------------------------------------------------------------------------------------------------------
Burden per Initial Registration Statement
----------------------------------------------------------------------------------------------------------------
Total burden per registration 517.6 hours x $269 (blended $139,234............. $32,241
statement. rate of $365 for
compliance
attorney and
$172 for
intermediate
accountant).
Number of annual initial x 136 ................. x 136................ x 136
registration statements.
---------------------------------------------------------------------------------

[[Page 33334]]

Total annual burden....... 70,394 hours ................. $18,935,824.......... $4,384,776
----------------------------------------------------------------------------------------------------------------
Burden per Post-Effective Amendment
----------------------------------------------------------------------------------------------------------------
Total burden per post- 125 hours x $269 (blended $33,625.............. $11,114
effective amendment. rate of $365 for
compliance
attorney and
$172 for
intermediate
accountant).
Number of annual post- x 30 ... ................. x 30................. x 30
effective amendments.
---------------------------------------------------------------------------------
Total annual burden....... 3,751 hours ................. $1,008,750........... $333,420
---------------------------------------------------------------------------------
Total Burden
----------------------------------------------------------------------------------------------------------------
Total initial registration 70,394 hours ................. $18,935,824.......... $4,384,776
statement burden.
Total post-effective amendment 3,751 hours ................. $1,008,750........... $333,420
burden.
---------------------------------------------------------------------------------
Total annual burden....... 74,145 hours ................. 19,944,574........... 4,718,196
----------------------------------------------------------------------------------------------------------------
Notes:
\1.\ These estimates were previously submitted to OMB in connection with a revision of the then-currently-
approved collection in 2020.
\2.\ Derived from SIFMA's Management & Professional Earnings in the Securities Industry 2013 (modified to
account for an 1,800[dash]hour work year; multiplied by 5.35 to account for bonuses, firm size, employee
benefits and overheard, and adjusted for inflation).

Table 7--Proposed Form N-2 PRA Estimates \1\
----------------------------------------------------------------------------------------------------------------
Internal Cost of internal Annual external
burden Wage rate \2\ burden cost burden
----------------------------------------------------------------------------------------------------------------
Burden for Initial Registration Statement
----------------------------------------------------------------------------------------------------------------
Preparing and filing initial 171.67 hours x $401 (attorney).. $68,838.33........... $31,941
registration statement.
171.67 hours x $210 (paralegal). $36,050.............. .................
171.67 hours x $449 (assistant $77,078.33........... .................
general counsel).
Total burden per registration 515 hours ................. $181,966.67.......... $31,941
statement.
Number of annual initial x 138 ................. x 138................ x 138
registration statements.
---------------------------------------------------------------------------------
Total annual burden....... 71,070 hours ................. $25,111,399.08....... $4,407,858
----------------------------------------------------------------------------------------------------------------
Burden for Post-Effective Amendment
----------------------------------------------------------------------------------------------------------------
Preparing and filing post- 35.67 hours x $401 (attorney).. $14,302.33........... $10,814
effective amendments.
35.67 hours x $210 (paralegal). $7,490............... .................
35.67 hours x $449 (assistant $16,014.33........... .................
general counsel).
Total burden per post- 107 hours ................. $37,806.67........... $10,814
effective amendment.
Number of annual post- x 190 ................. x 190................ x 190
effective amendments.
---------------------------------------------------------------------------------
Total annual burden....... 20,330 hours ................. $7,183,266.70........ $2,054,660
----------------------------------------------------------------------------------------------------------------
Additional Burden for Affected Funds
----------------------------------------------------------------------------------------------------------------
Proposed new check box 0.1667 x $352 (compliance $58.67............... $0
requirements. attorney).
0.1667 x $319 (senior $53.17............... .................
programmer).
0.1667 x $239 (webmaster). $39.83............... .................
Proposed online availability 0.67 hours x $352 (compliance $234.67..............
requirement. attorney).
0.67 hours x $319 (senior $212.67.............. $0
programmer).
0.67 hours x $239 (webmaster). $159.33.............. .................
Total additional burden per 2.5 hours ................. $758.33.............. $0
affected fund.
Number of affected funds...... x 807 ................. x 807................ x 807
---------------------------------------------------------------------------------
Total annual burden....... 2,018 hours ................. $611,975............. $0
----------------------------------------------------------------------------------------------------------------
Additional Burden for BDCS
----------------------------------------------------------------------------------------------------------------
Financial highlights 0.5 hours x $352 (compliance $176................. $0
requirement. attorney).
0.5 hours x $319 (senior $159.50.............. .................
programmer).

[[Page 33335]]

0.5 hours x $239 (webmaster). $119.50.............. .................
Total additional burden per 1.5 hours ................. $455................. $0
BDC.
Number of BDCs................ x 103 ................. x 103................ x 103
---------------------------------------------------------------------------------
Total annual burden....... 155 hours ................. $46,865.............. $0
----------------------------------------------------------------------------------------------------------------
Total Burden
----------------------------------------------------------------------------------------------------------------
Total initial registration 71,070 hours ................. $25,111,399.08....... $4,407,858
statement burden.
Total post-effective amendment 20,330 hours ................. $7,183,266.70........ $2,054,660
burden.
Total additional burden for 2,018 hours ................. $611,975............. $0
affected funds.
Total additional burden for 155 hours ................. $46,865.............. $0
BDCs.
---------------------------------------------------------------------------------
Total annual burden....... 93,573 hours ................. $32,953,505.78....... $6,462,518
----------------------------------------------------------------------------------------------------------------
Notes:
\1.\ See Proposing Release, supra footnote 10, at section IV.B.1.
\2.\ See supra Table 6, at footnote 2.

Table 8--Final Form N-2 PRA Estimates
----------------------------------------------------------------------------------------------------------------
Internal Cost of internal Annual external
burden Wage rate \1\ burden cost burden
----------------------------------------------------------------------------------------------------------------
Burden for Initial Registration Statement
----------------------------------------------------------------------------------------------------------------
Total burden per registration 517.6 hours x $269 (blended $139,234............. $32,241
statement. rate of $365 for
compliance
attorney and
$172 for
intermediate
accountant).
Number of annual initial x 140\2\ \3\ x 140 \2\ \3\........ x 140 \2\ \3\
registration statements.
---------------------------------------------------------------------------------
Total annual burden....... 72,464 hours $19,492,760.......... $4,513,740
----------------------------------------------------------------------------------------------------------------
Burden for Post-Effective Amendment
----------------------------------------------------------------------------------------------------------------
Total burden per post- 125 hours x $269 (blended $33,625.............. $11,114
effective amendment. rate of $365 for
compliance
attorney and
$172 for
intermediate
accountant).
Number of annual post- x 158\2, 4\ x 158 \2\ \4\........ x 158 \2\ \4\
effective amendments.
---------------------------------------------------------------------------------
Total annual burden....... 19,750 hours $5,312,750........... $1,756,012
----------------------------------------------------------------------------------------------------------------
Additional Burden for Affected Funds
----------------------------------------------------------------------------------------------------------------
New check box requirements.... 0.1667 hours x $365 (compliance $60.85............... $0
attorney) \2\.
0.1667 hours x $331 (senior $55.18............... .................
programmer) \2\.
0.1667 hours x $248 (webmaster) $41.34............... .................
\2\.
Online availability 2 hours x $248 (webmaster) $496................. $0
requirement. \2\ \4\.
Total additional burden per 2.5 hours $653.37.............. $0
affected fund.
Number of affected funds...... x 791 x 791................ x 791
---------------------------------------------------------------------------------
Total annual burden....... 1,978 hours $516,815.67.......... $0
----------------------------------------------------------------------------------------------------------------
Additional Burden for BDCS
----------------------------------------------------------------------------------------------------------------
Financial highlights 0.5 hours x $365 (compliance $182.50.............. $0
requirement. attorney) \2\.
0.5 hours x $331 (senior $165.50..............
programmer) \2\.
0.5 hours x $248 (webmaster) $124.................
\2\.
Total additional burden per 1.5 hours $472................. $0
BDC.
---------------------------------------------------------------------------------
Number of BDCs................ x 105 x 105................ x 105
---------------------------------------------------------------------------------
Total annual burden....... 158 hours 49,560............... $0
----------------------------------------------------------------------------------------------------------------
Total Burden
----------------------------------------------------------------------------------------------------------------
Total initial registration 72,464 hours $19,492,760.......... $4,513,740
statement burden.
Total post-effective amendment 19,750 hours ... ................. 5,312,750............ 1,756,012
burden.
Total additional burden for 1,978 hours ... ................. 516,815.67........... 0
affected funds.

[[Page 33336]]

Total additional burden for 158 hours ... ................. 49,560............... 0
BDCs.
Total annual burden....... 94,350 hours $25,371,885.70....... $6,269,752
----------------------------------------------------------------------------------------------------------------
Notes:
\1.\ See supra Table 6, at footnote 2. In a change from the Proposing Release, we have revised the wage rate
categories for existing Form N-2 burdens, consistent with the currently-approved Form N-2 PRA burden
estimates.
\2.\ Estimate revised to reflect updated industry data.
\3.\ We considered whether deeming interval funds to have registered an indefinite number of shares under the
amendments to rules 23c-3 and 24f-2 will result in fewer registration statement filings since these funds will
no longer need to file registration statements to register additional shares. Based on staff analysis of
interval fund filings between January 1, 2017 and December 31, 2019, interval funds very rarely filed
registrations statements on Form N-2 solely to register additional shares (i.e., the filing typically also
updated the fund's financial statements or included other changes). On average, interval funds filed seven
Form N-2 registration statements each year during this period that, among other things, registered additional
shares. As a result, for purposes of this PRA estimate, we are not reducing the estimated number of Form N-2
filings to account for the change in how interval funds register additional shares.
\4.\ Estimate revised to reflect the average number of post-effective amendments filed between January 1, 2017
and December 31, 2019 (286 post-effective amendments), minus an estimated reduction of 128 post-effective
amendments resulting from the ability of affected funds that are eligible to file short-form registration
statements to forward incorporate by reference information into their registration statements. The estimated
reduction in the number of post-effective amendment filings has been increased from 112 to 128 filings to
account for an increase in the percentage of affected funds that will be eligible to file short-form
registration statements (based on updated industry data) and to account for post-effective amendments under
rule 486(b) filed by funds that have received relevant staff no-action letters (an average of approximately 29
filings per year over the three-year period). See supra Section II.D (discussing relevant staff no-action
letters); Proposing Release, supra footnote 10, at n.447 (discussing the initial estimated reduction in the
number of post-effective amendments of 112).

Table 6 above summarizes the current PRA estimates associated with
the requirements of Form N-2. Table 7 summarized the proposed PRA
estimates included in the Proposing Release.\469\ Table 8 summarizes
the final PRA estimates associated with Form N-2 as amended. We did not
receive public comment on our proposed PRA estimates, but we are
revising our estimates as a result of updated industry data.
Specifically, we are revising the estimated wage rates, the estimated
number of affected funds, and the estimated number of annual initial
registration statement and post-effective amendment filings to reflect
updated industry data.
---------------------------------------------------------------------------

\469\ See Proposing Release, supra footnote 10, at section
IV.B.1.
---------------------------------------------------------------------------

As summarized in Table 8 above, we estimate that the total hour
burdens and time costs associated with Form N-2 will be an aggregate
annual burden of 94,350 hours at an aggregate annual cost of internal
burden of $25,371,886. We estimate an aggregate annual external time
cost of $6,269,752.
2. Structured Data Reporting Requirements
We are amending Form N-2, as well as Regulation S-K and Regulation
S-T,\470\ to require certain new structured data reporting requirements
for registered CEFs and BDCs.\471\ Specifically, the amendments will
require:
---------------------------------------------------------------------------

\470\ See 17 CFR part 229 [OMB Control No. 3235-0071]
(Regulation S-K specifies the requirements for exhibits to
registration statements and reports); 17 CFR part 232 [OMB Control
No. 3235-0424] (Regulation S-T specifies the requirements that
govern the electronic submission of documents). Specifically, we are
amending rule 601 of Regulation S-K, and rules 11 and 405 of
Regulation S-T. The additional collection of information burden that
will result from the amendments to rule 601 of Regulation S-K, rules
11 and 405 of Regulation S-T, and Forms N-2 and N-CSR to require
structured data reporting for affected funds are included in our
burden estimates for the ``Investment Company Interactive Data''
collection of information, and do not impose any separate burden
aside from that described in our discussion of the burden estimates
for this collection of information.
\471\ We also are amending Form 24F-2 to require submission of
this filing in a structured XML format. We discuss the PRA burdens
of this and other amendments to the form below. See infra section
IV.B.6.
---------------------------------------------------------------------------

BDCs to submit financial statement information using
Inline XBRL format, as is currently required of operating
companies.\472\ The respondents for this collection of information are
an estimated 105 BDCs.
---------------------------------------------------------------------------

\472\ See supra section II.I.1.a; see also amended rule
601(b)(101) of Regulation S-K; amended rule 405(b)(3)(i) of
Regulation of S-T.
---------------------------------------------------------------------------

Affected funds to include structured cover page
information in their registration statements on Form N-2 using Inline
XBRL, including the tagging of the new check boxes to the cover page of
Form N-2.\473\ The respondents for this collection of information are
an estimated 791 affected funds. As demonstrated in Table 9 below, we
do not believe the cover page tagging requirement will result in
significant additional burdens for affected funds.
---------------------------------------------------------------------------

\473\ See supra section II.I.1.b; see also General Instruction
I.1 of amended Form N-2; amended rule 405(b)(3)(ii) of Regulation S-
T.
---------------------------------------------------------------------------

Affected funds to tag certain Form N-2 disclosure items
using Inline XBRL.\474\ The respondents for this collection of
information are an estimated 791 affected funds.
---------------------------------------------------------------------------

\474\ See supra section II.I.1.c; see also General Instruction
I.2-3 of amended Form N-2; amended rule 405(b)(3)(iii) of Regulation
S-T. The amendments will require the following prospectus disclosure
items be tagged using Inline XBRL: Fee Table; Senior Securities
Table; Investment Objectives and Policies; Risk Factors; Share Price
Data; and Capital Stock, Long-Term Debt, and Other Securities.
A seasoned fund filing a short-form registration statement on
Form N-2 also will be required to tag any information that is
incorporated by reference from an Exchange Act report, such as those
on Form N-CSR, 10-K, 10-Q, or 8-K, in response to a disclosure item
of the registration statement that is required to be tagged. See
supra footnote 241 and accompanying text.
---------------------------------------------------------------------------

The purposes of these information collections are to make financial
information easier for investors to analyze and to help automate
regulatory filings and business information processing, and to reduce
the current disparity between operating companies and BDCs with respect
to the accessibility of information they provide to the market. These
collections of information are mandatory for the relevant respondents,
discussed for each collection below. Confidential information will not
be disclosed pursuant to these new reporting requirements.

[[Page 33337]]

Table 9--Proposed and Final Structured Data Reporting PRA Analysis
----------------------------------------------------------------------------------------------------------------
Initial cost
Initial hours Annual hours \1\ burden Annual cost burden
----------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES \2\
----------------------------------------------------------------------------------------------------------------
BDC Financial Statement 81 65.81 hours............... $9,262.50 $7,525.78
Information--Per BDC Response
(I).
Number of BDC Responses Per .............. x 463.5 \2\............... .............. x 463.5 \2\
Year.
Total Annual Burden....... .............. 30,503 hours.............. .............. $3,488,199.03
Affected Funds Cover Page 0 1 hour.................... $0 $0
Information on Form N 2--Per
Affected Fund Response (II).
Number of Affected Fund .............. x 807..................... .............. x 807
Responses Per Year.
Total Annual Burden....... .............. 807 hours................. .............. $0
Affected Funds Form N-2 15.25 12.8 hours................ $1,350.00 $1,096.88
Disclosure Items--Per
Affected Fund Response (III).
Number of Affected Fund .............. x 1097.5.................. .............. x 1097.5
Responses Per Year.
Total Annual Burden....... .............. 14,048.26 hours........... .............. $1,203,825.80
Combined Total Annual .............. 45,358.26 hours........... .............. $4,692,024.83
Burden.
----------------------------------------------------------------------------------------------------------------
FINAL ESTIMATES
----------------------------------------------------------------------------------------------------------------
BDC Financial Statement 81 hours 65.81..................... $9,262.50 $7,525.78
Information--Per BDC Response
(I).
Number of BDC Responses Per .............. x 472.5................... .............. x 472.5
Year.
Total Annual Burden....... .............. 31,095 hours.............. .............. $3,555,931
Affected Funds Cover Page .............. 1 hour.................... .............. $0
Information on Form N-2--Per
Affected Fund Response (II).
Number of Affected Fund .............. x 791..................... .............. x 791
Responses Per Year.
Total Annual Burden....... .............. 791 hours................. .............. $0
Affected Funds Form N-2 15.25 12.8 hours................ $1,350.00 $1,097
Disclosure Items (III).
Number of Affected Fund .............. x 1,076................... .............. x 1,076
Responses Per Year.
Total Annual Burden....... .............. 13,773 hours.............. .............. $1,180,372
Combined Total Annual .............. 45,659 hours.............. .............. $4,736,303
Burden.
----------------------------------------------------------------------------------------------------------------
Notes:
\1.\ Includes initial and ongoing burden estimates annualized over a three-year period. Here, as discussed in
the Proposing Release, supra footnote 10, at section V.B.2, we assumed that the one-time cost would result in
a 50% incremental increase in the internal burdens and external costs of the BDC financial information and
Form N-2 disclosure requirements (items I and III in the chart above) during the first year, and would
subsequently decline in the second and third years by 75% from the immediately-preceding year.
\2.\ The proposed estimates are discussed in additional detail in the Proposing Release, supra footnote 10, at
section V.B.2.

Table 9 summarizes the proposed PRA estimates included in the
Proposing Release and the final PRA estimates for the structured data
reporting requirements. We did not receive public comment on our
proposed PRA estimates, but we are revising our estimates as a result
of updated industry data. Specifically, we are revising the estimated
number of BDCs and affected funds to reflect updated industry data.
As summarized in Table 9, we estimate that the total hour burdens
and time costs associated with the structured data reporting
requirements will be an aggregate annual burden of 45,659 hours. We
estimate an aggregate annual external time cost of $4,736,303.
3. New Annual Reporting Requirements Under Rule 30e-1 and Exchange Act
Periodic Reporting Requirements for BDCs
Several of the amendments, such as the amendments that would allow
certain affected funds to use an automatic shelf registration statement
or to forward incorporate by reference Exchange Act reports, may raise
the importance of an affected fund's Exchange Act reports to
investors.\475\ In light of this, we are adopting new disclosure
requirements for affected funds' annual reports. Specifically, we are
amending:
---------------------------------------------------------------------------

\475\ See supra section II.I.2.
---------------------------------------------------------------------------

Form N-2 to require affected funds using the short-form
registration statement to disclose in their annual reports a fee and
expense table, share price data, a senior securities table, and
unresolved staff comments regarding the fund's periodic or current
reports or registration statement; \476\
---------------------------------------------------------------------------

\476\ See supra section II.I.2.a; see also new Instructions
4.h.(1) (senior securities table), 4.h.(2) (fee and expense table),
4.h.(3) (share price data), and 4.h.(4) (unresolved staff comments)
to Item 24 of amended Form N-2.
---------------------------------------------------------------------------

Form N-2 to require registered CEFs to provide MDFP in
their annual reports; \477\
---------------------------------------------------------------------------

\477\ See supra section II.I.2.b; see also new Instruction 4.g
to Item 24 of amended Form N-2.
---------------------------------------------------------------------------

Form N-2 to require BDCs to include financial highlights
in their annual reports on Form 10-K; \478\ and
---------------------------------------------------------------------------

\478\ See supra section II.I.2.c; see also Instruction 1 to Item
4 of amended Form N-2; new Instruction 10 to Item 24 of amended Form
N-2. As discussed above, BDCs also will be required to include
financial highlights in their registration statements on Form N-2.
See supra section IV.B.1.
---------------------------------------------------------------------------

Rule 8b-16 to require a registered CEF that relies on
paragraph (b) of that rule to describe in its annual reports its
current investment objectives and policies, and principal risks, and
certain key changes that occurred during the relevant year in enough
detail to allow investors to understand each change and how it may
affect the fund.\479\
---------------------------------------------------------------------------

\479\ See supra section II.I.5; see also amended rule 8b-16.
---------------------------------------------------------------------------

The collection of information burdens under these amendments
correspond to information collections under rule 30e-1 for registered
CEFs and Form 10-K for BDCs. Rule 30e-1 generally requires registered
investment companies to transmit to their shareholders, at least semi-
annually, reports containing the information that is required to be
included in such reports by the fund's registration statement form
under the Investment Company Act. BDCs, like operating companies, are
required to file annual reports on Form 10-K pursuant to section 13 or
15(d) of the Exchange Act.
The burden estimates were calculated by multiplying the estimated
number of responses by the estimated average amount of time it would
take an affected

[[Page 33338]]

fund to prepare and review disclosure required under the amendments.
For purposes of the PRA, the burden is allocated between internal
burden hours and outside professional costs. For these purposes, we
estimate that 75% of the burden of preparing annual reports under rule
30e-1 and on Form 10-K is undertaken by the fund internally, while 25%
of this burden is undertaken by outside professionals, such as outside
counsel and independent auditors, retained by the fund at an average
cost of $400 per hour.\480\
---------------------------------------------------------------------------

\480\ We recognize that the costs of retaining outside
professionals may vary depending on the nature of the professional
services but, for purposes of this PRA analysis for rule 30e-1 and
Form 10-K, we estimate that such costs would be an average of $400
per hour. This estimate is based on consultations with several
registrants, law firms, and persons who regularly assist registrants
in preparing and filing reports with the Commission.

Table 10--Rule 30e-1 Incremental Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in Increase in
Number of Burden hour Increase in Increase in professional professional
estimated increase per burden hours company hours hours for costs for
affected current for current for current current current
responses affected affected affected affected affected
response responses responses responses responses
(A) (B) (C) = (A) x (D) = (C) x (E) = (C) x (F) = (E) x
(B) 0.75 0.25 $400
--------------------------------------------------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
MDFP requirement........................................ 704 16 11,264 8,448 2,816 $1,126,400
Requirements to disclose fee and expense table, share 457 3 1,371 1,028 343 137,200
price data, a senior securities table, and unresolved
staff comments.........................................
Amendments to rule 8b-16(b)............................. 704 4 2,816 2,112 704 281,600
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total estimated burdens............................. 11,588 hours .............. \2\ $1,545,200
--------------------------------------------------------------------------------------------------------------------------------------------------------
FINAL ESTIMATES
--------------------------------------------------------------------------------------------------------------------------------------------------------
MDFP requirement........................................ \3\ 686 16 10,976 8,232 2,744 1,097,600
Requirements to disclose fee and expense table, share \3\ 455 3 1,365 1,024 341 136,400
price data, a senior securities table, and unresolved
staff comments.........................................
Amendments to rule 8b-16(b)............................. \3\ \4\ 521 \5\ 5 2,605 1,954 651 260,400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total estimated burdens............................. 11,210 hours 1,494,400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1.\ See Proposing Release, supra footnote 10, at section V.B.3.
\2.\ The Proposing Release reflected an estimate of $1,545,100. Since we are rounding internal burden and external cost estimates to the nearest whole
number in this section, this table reflects an estimated annual cost burden of $1,545,200.
\3.\ Revised to reflect updated industry data.
\4.\ Revised to recognize that not all registered CEFs rely on rule 8b-16(b).
\5.\ Revised to reflect a change from the proposed requirements.

Table 10 summarizes the proposed incremental PRA burden estimates
and the final incremental PRA burden estimates associated with the new
annual report requirements for registered CEFs. We did not receive
comments on our proposed estimates, but we have revised them as a
result of updated industry data and changes to the proposed amendments.
Specifically, we are revising the estimated number of registered CEFs
that will be subject to the new annual report requirements to reflect
updated industry data and the estimated burden hours associated with
the amendments to rule 8b-16(b). As summarized in Table 10 above, the
revised additional burdens associated with the new annual report
requirements for registered CEFs for purposes of the rule 30e-1
collection of information is 11,210 hours for internal time and
external costs of $1,494,400.

[[Page 33339]]

Table 11--Form 10-K Incremental Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in Increase in
Number of Burden hour Increase in Increase in professional professional
estimated increase per burden hours company hours hours for costs for
affected current for current for current current current
responses affected affected affected affected affected
response responses responses responses responses
(A) (B) (C) = (A) x (D) = (C) x (E) = (C) x (F) = (E) x
(B) 0.75 0.25 $400
--------------------------------------------------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Requirements to disclose fee and expense table, share 43 3 129 97 32 $12,800
price data, a senior securities table, and unresolved
staff comments.........................................
Financial highlights requirement........................ 103 1.5 155 116 39 15,600
-----------------------------------------------------------------------------------------------
Total estimated burdens............................. 213 hours 28,400
--------------------------------------------------------------------------------------------------------------------------------------------------------
FINAL ESTIMATES
--------------------------------------------------------------------------------------------------------------------------------------------------------
Requirements to disclose fee and expense table, share \2\ 44 3 132 99 33 13,200
price data, a senior securities table, and unresolved
staff comments.........................................
Financial highlights requirement........................ \2\ 105 1.5 158 119 40 16,000
-----------------------------------------------------------------------------------------------
Total estimated burdens............................. 218 hours 29,200
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1.\ See Proposing Release, supra footnote 10, at section V.B.3.
\2.\ Revised to reflect updated industry data.

Table 11 summarizes the proposed incremental PRA burden estimates
and the final incremental PRA burden estimates associated with the new
annual report requirements for BDCs. We did not receive comments on our
proposed estimates, but we have revised them as a result of updated
industry data. Specifically, we are revising the estimated number of
BDCs that will be subject to the new annual report requirements to
reflect updated industry data. As summarized in Table 11 above, the
revised additional burdens associated with the new annual report
requirements for BDCs for purposes of the Form 10-K collection of
information is 218 hours for internal time and external costs of
$29,200.

Table 12--Requested Paperwork Burden Under the Amendments to Annual Report Disclosure
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in
Rule or form Current annual Current Current cost Number of affected Increase in professional Annual Burden hours Cost burden
responses burden hours burden responses company hours costs responses
(A) (B) (C) (D).................... (E) (F) (G) = (A) (H) = (B) + (I) = (C) +
(E) (F)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current Burden \1\
Program Change
Requested Change in Burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
30e-1................................ 23,784 1,028,658 $147,750,391 Varies (see Table 10) 11,210 $1,494,400 23,784 1,039,868 $149,244,791
\2\.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
10-K................................. 8,137 14,198,780 $1,895,224,719 Varies (see Table 11) 218 $29,200 8,137 14,198,998 1,895,253,919
\2\.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1.\ The rule 30e-1 estimates are based on the last time the rule's information collections were approved, pursuant to a submission for a PRA extension in 2019. The Form 10-K estimates are
based on the last time the form's information collections were approved, pursuant to a submission for a PRA extension in 2019.
\2.\ As reflected in Table 10 and Table 11, the number of registered CEFs and the number of BDCs that will need to comply with the new annual report disclosure requirements will vary depending
on the type of new disclosure, although all registered CEFs (686) and all BDCs (105) will be required to provide some additional annual report disclosure.

As summarized above in Table 12, the revised aggregate estimates,
including the new amendments, for rule 30e-1 are 1,039,868 hours and
$149,244,791 in external costs. The revised aggregate estimates for
Form 10-K, including the new amendments, are 14,198,998 hours and
$1,895,253,919 in external costs.
4. Securities Offering Communications
Rule 163 permits WKSIs to make unrestricted oral and written offers
before filing a registration statement, but any written offer will be
considered a free writing prospectus and will generally have to be
filed upon filing a registration statement or amendment covering the
securities. Rule 433 governs the use of free writing prospectuses by
WKSIs and non-WKSI issuers after the filing of a registration
statement. A free writing prospectus used by or on behalf of an
affected fund, or free writing prospectuses that are broadly
disseminated by another offering participant, are required to be filed
with the Commission. We have adopted amendments to rules 163 and 433
that will permit affected funds to

[[Page 33340]]

rely on these rules to use a free writing prospectus.
We did not receive public comment on our proposed estimates, but we
have revised them as a result of updated industry data. Specifically,
we are revising the estimated number of firms that will be subject to
the rule to reflect updated industry data.
The burden estimates were calculated by multiplying the estimated
number of responses by the estimated average amount of time it would
take a registrant to prepare and review disclosure required under the
proposed amendments. For purposes of the PRA, the burden is to be
allocated between internal burden hours and outside professional costs.
Table 13 below sets forth the percentage estimates we typically use for
the burden allocation for each rule.\481\ We also estimate that the
average cost of retaining outside professional to be $400 per
hour.\482\
---------------------------------------------------------------------------

\481\ We estimate that 25% of the burden of preparing and filing
a free writing prospectus pursuant to rule 163 or rule 433 is
undertaken by the issuer internally and that 75% of the burden is
undertaken by outside professionals retained by the issuer.
\482\ We recognize the costs of retaining outside professionals
may vary depending on the nature of the professional services, but
for purposes of this PRA analysis, we estimate that such costs would
be an average of $400 per hour. This estimate is based on
consultations with several registrants, law firms, and other persons
who regularly assist registrants in preparing and filing reports
with the Commission.

Table 13--Standard Estimated Burden Allocation for Securities Act Rules
163 and 433
------------------------------------------------------------------------
Outside
Internal professionals
------------------------------------------------------------------------
ESTIMATED BURDEN ALLOCATION
------------------------------------------------------------------------
Rule 163................................ 25% 75%
Rule 433................................ 25% 75%
------------------------------------------------------------------------

The table below illustrates the incremental change to the total
annual compliance burden of affected rules, in hours and costs, as a
result of the proposed amendments.

Table 14--Calculation of the Incremental Change in Burden Estimates of Current Responses Resulting from the Amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden hour Increase in Increase in
Number of increase per burden hours Increase in company Increase in professional
estimated current for current hours for current professional hours costs for
affected affected affected affected responses for current current affect
responses response responses affected responses responses
(A) 1 2 (B) \3\ (C) = (A) x (B) (D) = (C) x 0.25 (E) = (C) x 0.75 (F) = (E) x
or 0.75 or 0.25 $400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Incremental Change in Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
163....................................... 2 0.25 0.50 0.125 0.375 $150
433....................................... 4,271 1.28 5,467 1,367 4,100 $1,640,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1.\ For a number of reasons, many issuers that are currently eligible to be WKSIs do not make use of free writing prospectuses in reliance on rule 163.
At the time the Commission adopted rule 163, it estimated that 53 free writing prospectuses would be filed under rule 163 per year. However, during
the Commission's 2017 fiscal year, only 10 free writing prospectuses in reliance on rule 163 were filed with the Commission. We estimate that 100
affected funds would be eligible to be WKSIs. See supra section III.A.1. If current practices regarding the use of free writing prospectuses under
rule 163 continue with respect to affected funds, we do not believe that these affected funds would significantly increase the number of free writing
prospectuses under rule 163. Accordingly, we estimate that, on average, affected funds that are eligible to be WKSIs would file 2 free writing
prospectuses under the amendments to rule 163 each year.
\2.\ The most recent data that we have available shows that each operating company files an average of approximately 5.4 free writing prospectuses per
year in reliance on rule 433. We estimate that there will be 791 affected funds filing approximately 4,271 free writing prospectuses. See supra
section III.A.1.
\3.\ The burden hour estimates for rules 163 and 433 are based on the last time the rules' information collections were approved, pursuant to a
submission for a PRA extension in 2017. The conditions under rule 433 to use a free writing prospectus, require a free writing prospectus to contain
more information and contribute to the greater burden hour than for a rule 163 free writing prospectus.

The following table summarizes the requested paperwork burden,
including the estimated total reporting burdens and costs, under the
proposed amendments.

[[Page 33341]]

Table 15--Requested Paperwork Burden Under the Amendments to Securities Act Rules 163 and 433
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current Current Number of Increase in Increase in
annual burden Current affected company professional Annual Burden hours Cost burden
responses hours cost burden responses hours costs responses
(A) (B) (C) (D) (E) (F) (G) = (A) (H) = (B) + (E) (I) = (C) + (F)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current Burden
Program Change
Requested Change in Burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
163............................................................... 10 1 $720 2 0.125 $150 12 1.125 $870
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
433............................................................... 15,700 5,024 $6,028,800 4,271 1,367 $1,640,000 19,971 6,391 $7,668,800
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As summarized above in Table 15, the revised aggregate estimates,
including the new amendments, for rule 163 are 1.125 hours, and $870 in
external costs. The revised aggregate estimates for rule 433, including
the new amendments, are 6,391 hours and $7,669,017 in external costs.
5. Prospectus Delivery Requirements
Rule 173 requires the delivery of a copy of a final prospectus, or
in lieu of a final prospectus, a notice to purchasers stating that a
sale of securities was made based on a registration statement or in a
transaction in which a final prospectus would have been required to
have been delivered in the absence of rule 172.\483\ We have adopted
amendments to rule 173 to remove the exclusion for offerings of
affected funds.\484\
---------------------------------------------------------------------------

\483\ See supra footnote 153.
\484\ See supra section II.D.
---------------------------------------------------------------------------

We did not receive public comment on our proposed PRA estimates for
rule 173. We have revised our estimates regarding the number of funds
likely to rely on rule 173, and to reflect updated industry data.\485\
Specifically, based on a review of Form N-2 filings made with the
Commission, we are revising downward the proposed estimate of the
number of affected funds expected to rely on rule 173 as a result of
the amendments, and thus incur burdens associated with the rule.
---------------------------------------------------------------------------

\485\ This estimate is based on the last time rule 173's
information collections were approved, in 2017.
---------------------------------------------------------------------------

The burden estimates were calculated by multiplying the estimated
number of registrants likely to rely on rule 173 by the number of
responses per registrant by the estimated time it would take compile
the necessary information and data, prepare and review disclosure, file
documents and retain records for issuers that choose to rely on rule
173. We assume, similar to operating companies that rely on rule 173,
that each affected fund will incur 100% of the burden. The table below
illustrates the incremental change to the total annual burden for
affected funds as a result of the amendments.

Table 16--Rule 173 (Calculation of the Incremental Change in Burden Estimates of Current Responses Resulting from the Amendments)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in Increase in
Number of Burden hour per Burden hours for professional professional
estimated current affected current affected hours for costs for
affected response responses current affected current affect
responses responses responses
(A) \1\ (B) \2\ (C) = (A) x (B)
--------------------------------------------------------------------------------------------------------------------------------------------------------
173........................................................... 16,634,572 0.0167 277,797 0 $0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1.\ In the Proposing Release we estimated that all 807 affected funds would rely on rule 173. See supra footnote 10 at section V.B.5. However, because
only a fund with an effective Securities Act registration statement may rely on rule 173, we are revising our estimates. Based on our staff's review
of Form N-2 Securities Act registration statements filed annually between 2017 and 2019, we estimate 382 annual filings, each by a different affected
fund. We estimate that each such fund will provide 43,546 responses annually, for a total of 16,634,572 annual responses per year (382 funds x 43,546
responses annually = 16,634,572).
\2.\ The estimated burden hour per response of 0.0167 hours derives from the most recently-approved rule 173 PRA submission (2017).

The following table summarizes the total PRA burden, including the
estimated total reporting burdens and costs, for rule 173 as a result
of the amendments. As reflected below, the revised aggregate hourly
burden associated with rule 173 as a result of the amendments is
4,159,688 internal burden hours, with no external costs.

Table 17--Rule 173 (Requested Paperwork Burden Under the Amendments)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current Current Number of Increase in Increase in
annual burden Current affected company professional Annual Burden Cost burden
responses hours cost burden responses hours costs responses hours
(A) (B) (C) (D) (E) (F) (A) + (D) (B) + (E) (C) + (F)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current Burden
Program Change
Requested Change in Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
173.............................. 232,448,548 3,881,891 $0 + 16,634,572 + 277,797 $0 249,083,120 4,159,688 $0
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 33342]]

6. Form 24F-2
Rule 24f-2 requires any open-end management company, unit
investment trust, or face-amount certificate company deemed to have
registered an indefinite amount of securities to file a Form 24F-2 not
later than 90 days after the end of any fiscal year in which it has
publicly offered such securities. Form 24F-2 is the annual notice of
securities sold by these funds that accompanies the payment of
registration fees with respect to the securities sold during the fiscal
year, net of securities redeemed or repurchased during the year. We are
amending rules 23c-3 and 24f-2 so that interval funds will pay
registration fees on the same annual basis using Form 24F-2. We are
also adopting a requirement that funds submit reports on Form 24F-2 in
an XML structured data format.

Table 18--Form 24F-2 PRA Estimates
----------------------------------------------------------------------------------------------------------------
Cost of Annual
Internal burden Wage rate \1\ internal external
burden cost burden
----------------------------------------------------------------------------------------------------------------
Currently Approved Estimates \2\
----------------------------------------------------------------------------------------------------------------
Clerical work to file Form 24F[dash]2.. 2 hours x $66 (compliance clerk)... $132 $0
Number of annual responses............. x 7,284 ......................... x 7,284 x 7,284
------------------------------------------------------------------------
Total annual burden................ 14,568 hours ......................... *$961,488 $0
----------------------------------------------------------------------------------------------------------------
Proposed Estimates \3\
----------------------------------------------------------------------------------------------------------------
Clerical work to file Form 24F-2....... 2 hours x $67 (compliance clerk)... $134 $0
Submission in a structured data format. 2 hours x $261 (programmer)........ $522 $0
Total annual burden per response....... 4 hours ......................... $656 $0
Number of annual responses............. x 6,177 ......................... x 6,177 x 6,177
------------------------------------------------------------------------
Total annual burden................ 24,708 hours ......................... $4,052,112 $0
----------------------------------------------------------------------------------------------------------------
Final Estimates
----------------------------------------------------------------------------------------------------------------
Clerical work to file Form 24F-2....... 2 hours x $70 (compliance clerk) $140 $0
\4\.
Submission in a structured data format. 2 hours x $271 (programmer) \4\.... $542 $0
Total annual burden per response....... 4 hours ......................... $682 $0
Number of annual responses............. x 6,794\4\ ......................... \4\ x 6,794 \4\ x 6,794
------------------------------------------------------------------------
Total annual burden................ 27,176 hours ......................... $4,633,508 $0
----------------------------------------------------------------------------------------------------------------
Notes:
\1.\ See supra Table 6, at footnote 2.
\2.\ This estimate was previously submitted to OMB in connection with the renewal of approval for the collection
of information required by Form 24F[dash]2 in 2018.
\3.\ Proposing Release, supra footnote 10, at section IV.B.7.
\4.\ Estimate revised to reflect updated data. Based on a review of Form 24F-2 filings for the period 2017-2019,
the staff estimates that 6,741 filings will be made annually, and that 53 interval funds (representing the 3-
year average of interval funds registered with the Commission) will file Form 24F-2 as a result of the final
amendments (6,741 + 53 = 6,794).

Table 18 above summarizes the current PRA estimates, the proposed
PRA estimates, and the final PRA estimates associated with the
requirement to file reports on Form 24F-2.\486\ We did not receive
public comment on our proposed estimates, but we have revised them as a
result of updated industry data. Specifically, we are revising the
estimated wage rates and estimated number of funds that will be subject
to the requirements of Form 24F-2 to reflect updated industry data. As
summarized in Table 18 above, the revised aggregate estimates for Form
24F-2, including the new amendments, are 27,176 hours, with no external
costs.
---------------------------------------------------------------------------

\486\ See Proposing Release, supra footnote 10, at section
IV.B.7.
---------------------------------------------------------------------------

7. Amendments Permitting the Registration of Offerings of an
Indeterminate Number of Exchange-Traded Vehicle Securities and the
Payment of Registration Fees for Such Offerings on an Annual Net Basis
The amendments to certain Securities Act rules and to Forms S-1, S-
3, F-1 and F-3 will allow issuers of exchange-traded vehicle securities
to elect to register offerings of an indeterminate number of such
securities and pay registration fees for these offerings on an annual
net basis. We estimate that the amendments will increase the paperwork
burden for registration statements on Form S-1 and Form S-3 for such
offerings due to the requirement to calculate and pay registration fees
on an annual net basis within 90 days after the end of the fiscal
year.\487\ However, because these issuers will have the ability to
elect to register offerings of an indeterminate number of such
securities, we also estimate that the amendments will result in a
decrease in the number of registration statements on these forms filed
by these issuers and that, overall, the amendments will reduce the
paperwork burdens associated with Form S-1 and Form S-3. The amendments
to Forms F-1 and F-3 are not expected to affect the burdens associated
with those forms, in that we do not anticipate that any issuers at this
time will use Form F-1 or Form F-3 to register offerings of an
indeterminate number of exchange-

[[Page 33343]]

traded vehicle securities and pay registration fees for these offerings
on an annual net basis.
---------------------------------------------------------------------------

\487\ The paperwork burdens for 17 CFR 230.400 through 230.498A
(Regulation C) are imposed through the forms, schedules and reports
that are subject to the requirements in these regulations and are
reflected in the analysis of those documents. To avoid a PRA
inventory reflecting duplicative burdens and for administrative
convenience, we assign a one-hour burden to Regulation C.
---------------------------------------------------------------------------

Based on a review of registration statements filed by ETPs for the
period 2017-2019, the staff estimates that, after the effectiveness of
these amendments, an average of five registration statements on each of
Form S-1 and Form S-3 will be filed each year for offerings of an
indeterminate number of exchange-traded vehicle securities with the
payment of registration fees on an annual net basis.\488\ We estimate
that the incremental increase in burden for these registration
statements will be two hours, consistent with the estimated burden for
Form 24F-2. We would expect there to be only a minimal initial burden
of establishing a system for calculating fee payments in this manner,
in that these issuers already track the issuances and redemptions of
their securities on an ongoing basis. When paying registration fees,
these issuers will file prospectus supplements under rule 424 and
provide disclosures modeled after Form 24F-2. We estimate that, in
filing these prospectus supplements in connection with registration
statements on Form S-1 or Form S-3, 25% of the burden of preparation is
carried by the issuer internally and that 75% of the burden of
preparation is carried by outside professionals retained by the issuer
at an average cost of $400 per hour.
---------------------------------------------------------------------------

\488\ While we believe that the number of such registration
statements to register an indeterminate number of exchange-traded
vehicle securities will be higher immediately following the
effectiveness of these amendments, we estimate that the number of
registration statements for such offerings after this initial period
will average a total of approximately 10 registration statements
each year.

Table 19--Incremental Paperwork Burden Under the Amendments for Registration Statements
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current burden Estimated increase in burden for affected responses
-------------------------------------------------------------------------------------------------------------------------------
Change in
Estimated Burden hour Change in Change in professional Change in
Annual Burden Costs number of change per burden hours company hours hours for professional
reponses hours affected affected for affected for affected affected costs
responses response responses responses responses
........... ........... ............ (A) (B) (C) = (A) x (D) = (C) x (E) = (C) x
(B) 0.25 0.75
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
S-1............................................................. 901 147,208 $180,319,975 5 2 10 2.5 7.5 $3,000
S-3............................................................. 1,657 193,626 236,198,036 5 2 10 2.5 7.5 3,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, we estimate that seven fewer Forms S-1 and ten fewer
Forms S-3 will be filed by these issuers each year as a result of the
ability to register offerings of an indeterminate number of exchange-
traded vehicle securities, which could result in lower costs for these
issuers through a reduction in the number of registration statements
filed by these issuers.

Table 20--Estimated Decrease in Burden as a Result of the Decrease in the Number of Annual Responses
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current burden Estimated decrease in burden as a result of the
--------------------------------------------------- decrease in the number of annual responses
--------------------------------------------------
Estimated
Annual decrease in Estimated
reponses Burden hours Costs the number of decrease in Estimated
annual burden hours decrease in costs
responses
--------------------------------------------------------------------------------------------------------------------------------------------------------
S-1............................................... 901 147,208 $180,319,975 7 1,144 $1,400,932
S-3............................................... 1,657 193,626 236,198,036 10 1,169 1,425,456
--------------------------------------------------------------------------------------------------------------------------------------------------------

The following table illustrates the total annual compliance burden,
in hours and in costs, of the affected collections of information
resulting from the amendments to these forms.

Table 21--Current and Revised Burdens Under the Amendments to Securities Act Registration Statements
----------------------------------------------------------------------------------------------------------------
Current burden Revised burden
---------------------------------------------------------------------
Burden hours Costs Burden hours Costs
(A) (B) (C) (D)
----------------------------------------------------------------------------------------------------------------
S-1....................................... 147,208 $180,319,975 146,067 $178,922,043
S-3....................................... 193,626 236,198,036 192,460 234,775,580
F-1....................................... 26,692 32,275,375 26,692 32,275,375
F-3....................................... 4,441 5,703,600 4,441 5,703,600
----------------------------------------------------------------------------------------------------------------

[[Page 33344]]

8. Amendments to Form N-14
Form N-14 is the form used by an affected fund for the registration
of securities issued in business combination transactions. The
amendments to Form N-14 will decrease the existing disclosure burden of
the form by allowing BDCs to incorporate by reference to the same
extent as is currently permitted for registered CEFs and eliminating
the requirement for affected funds to file with the Form N-14
registration statement the documents that contain the information that
is incorporated by reference into the prospectus or SAI.\489\
---------------------------------------------------------------------------

\489\ See supra section II.B.3.b.

Table 22--Currently Approved Form N-14 PRA Estimates \1\
----------------------------------------------------------------------------------------------------------------
Cost of Annual
Internal burden Wage rate \2\ internal external
burden cost burden
----------------------------------------------------------------------------------------------------------------
Burden per Initial Filing
----------------------------------------------------------------------------------------------------------------
310 hours x $401 (attorney).......... $124,310 $27,500
Preparing and filing initial filing.... 248 hours x $209 (senior accountant). $51,832
62 hours x $210 (paralegal)......... $13,020
Total burden per initial filing........ 620 hours ......................... $189,162 $27,500
Number of annual initial filings....... x 156 ......................... x 156 x 156
------------------------------------------------------------------------
Total annual burden................ 96,720 hours ......................... $29,509,272 $4,290,000
----------------------------------------------------------------------------------------------------------------
Burden per Amendment
----------------------------------------------------------------------------------------------------------------
150 hours x $401 (attorney).......... $60,150 ...........
Preparing and filing amendments........ 120 hours x $209 (senior accountant). $25,080 $16,000
30 hours x $210 (paralegal)......... $6,300 ...........
Total burden per amendment............. 300 hours ......................... $91,530 $16,000
Number of annual amendments............ x 97 ......................... x 97 x 97
------------------------------------------------------------------------
Total annual burden................ 29,100 hours ......................... $8,878,410 $1,552,000
----------------------------------------------------------------------------------------------------------------
Total Burden
----------------------------------------------------------------------------------------------------------------
Total initial filing burden............ 96,720 hours ......................... $29,509,272 $4,290,000
Total amendment burden................. 29,100 hours ......................... $8,878,410 $1,552,000
------------------------------------------------------------------------
Total annual burden................ 125,820 hours ......................... $38,387,682 $5,842,000
----------------------------------------------------------------------------------------------------------------
Notes:
\1.\ These estimates were previously submitted to OMB in connection with the renewal of approval for the
collection of information required by Form N[dash]2 in 2019.
\2.\ See supra Table 6, at footnote 2.

Table 23--Final Form N-14 PRA Estimates
----------------------------------------------------------------------------------------------------------------
Cost of Annual
Internal burden Wage rate \2\ internal external
burden cost burden
----------------------------------------------------------------------------------------------------------------
Burden per Initial Filing
----------------------------------------------------------------------------------------------------------------
Current burden for preparing and filing 310 hours x \2\ $415 (attorney)...... $128,650 $27,500
initial filing. 248 hours x \2\ $216 (senior $53,568
62 hours x accountant). $13,516
\2\ $218 (paralegal).....
Burden reduction from incorporation by \3\ (10 hours) x \2\ $218 (paralegal)..... $(2,180) $(0)
reference amendments.
Total burden per initial filing........ 610 hours . ......................... $193,554 $27,500
Number of annual initial filings....... x \2\ 156 . ......................... x \2\ 156 x \2\ 156
------------------------------------------------------------------------
Total annual burden................ 96,160 hours . ......................... $29,181,672 $4,290,000
----------------------------------------------------------------------------------------------------------------
Burden per Amendment
----------------------------------------------------------------------------------------------------------------
Current burden for preparing and filing 150 hours x \2\ $415 (attorney)...... $62,250 $16,000
amendments. 120 hours x \2\ $216 (senior $25,920
30 hours x accountant). $6,540
\2\ $218 (paralegal).....
Burden reduction from incorporation by \3\ (10 hours) x \2\ $218 (paralegal)..... $(2,180) $(0)
reference amendments.
Total burden per amendment............. 290 hours . ......................... $92,530 $16,000
Number of annual amendments............ \2\ x 97 . ......................... \2\ x 97 \2\ x 97
------------------------------------------------------------------------
Total annual burden................ 29,100 hours . ......................... $8,674,710 $1,552,000
----------------------------------------------------------------------------------------------------------------

[[Page 33345]]

Total Burden
----------------------------------------------------------------------------------------------------------------
Total initial filing burden............ 96,160 hours . ......................... $29,181,672 $4,290,000
Total amendment burden................. 29,100 hours . ......................... 8,674,710 $1,552,000
------------------------------------------------------------------------
Total annual burden................ 125,260 hours . ......................... $37,856,382 $5,842,000
----------------------------------------------------------------------------------------------------------------
Notes:
\1.\ See supra Table 6, at footnote 2.
\2.\ Estimate revised to reflect updated industry data.
\3.\ Estimate revised to reflect modifications from the proposal.

Table 22 above summarizes the current PRA estimates associated with
the requirements of Form N-14. Table 23 summarizes the final PRA
amendments associated with Form N-14 as amended. We are revising our
estimates as a result of updated industry data and modifications from
the proposal. Specifically, we are deducting 10 hours of internal
burden per filing to reflect the burden reduction associated with the
incorporation by reference amendments affecting filings on Form N-14.
In addition, we are revising the estimated wage rates to reflect
updated industry data. As summarized in Table 23 above, we estimate
that the total hour burdens and time costs associated with Form N-14
will be an aggregate burden of 125,260 hours at an aggregate annual
cost of internal burden of $37,856,382. We estimate an aggregate annual
external time cost of $5,842,000.

V. Final Regulatory Flexibility Analysis

The Commission has prepared the following Final Regulatory
Flexibility Analysis (``FRFA'') in accordance with section 4(a) of the
Regulatory Flexibility Act (``RFA''),\490\ regarding the final rule
modifications to the registration, communications, and offering
processes for affected funds under the Securities Act and the rules and
forms under the Exchange Act and Investment Company Act, that will
allow affected funds to use the securities offering rules that are
already available to operating companies. An Initial Regulatory
Flexibility Analysis (``IRFA'') was prepared in accordance with the RFA
and is included in the Proposing Release.\491\
---------------------------------------------------------------------------

\490\ See 5 U.S.C. 603.
\491\ See Proposing Release, supra footnote 10, at section VI.
---------------------------------------------------------------------------

A. Need and Objectives of the Final Rule

The BDC Act directs us to allow a BDC to use the securities
offering rules that are available to other issuers required to file
reports under section 13(a) or section 15(d) of the Exchange Act and
specifically enumerates the required revisions. Similarly, the
Registered CEF Act directs us to allow any listed registered CEF or
interval fund to use the securities offering rules that are available
to other issuers that are required to file reports under section 13(a)
or section 15(d) of the Exchange Act, subject to appropriate
conditions.\492\ Pursuant to both Acts, the final rule will modify the
registration, communications, and offering processes for affected funds
to allow them to use the securities offering rules that are available
to other issuers required to file reports under section 13(a) or
section 15(d) of the Exchange Act. We are also adopting amendments to
our rules and forms, to tailor the disclosure and regulatory framework
for affected funds, in light of the amendments to the offering rules
applicable to them. The reasons for, and objectives of, the final rule
are further discussed in more detail in Section II above. The costs and
burdens of these requirements on smaller affected funds are discussed
below as well as above in our Economic Analysis and Paperwork Reduction
Act Analysis, which discusses the costs and burdens of the final rule
on all affected funds.
---------------------------------------------------------------------------

\492\ As discussed above, we apply the final rule to all
registered CEFs (and BDCs), with certain conditions and exceptions.
---------------------------------------------------------------------------

B. Significant Issues Raised by Public Comments

In the Proposing Release, we requested comment on every aspect of
the IRFA, including the number of small entities that would be affected
by the proposed rule and form amendments, the existence or nature of
the potential impact of the proposals on small entities discussed in
the analysis, and how to quantify the impact of the proposed
amendments. We also requested comment on the proposed compliance
burdens and the effect these burdens would have on smaller entities.
Although we did not receive comments specifically addressing the IRFA,
several commenters stated in their comment letters the impact they
believed certain aspects of the proposed amendments would have on small
affected funds.\493\ Specifically, one commenter stated that the
proposed rules would disadvantage smaller affected funds relative to
larger affected funds that have obtained WKSI status, because smaller
funds that would benefit from the ability to use automatic effective
registration statements to quickly come to market during periods when
their shares trade at a premium, may miss the opportunity to raise
capital that the proposed rules were designed to facilitate. The
commenter stated that this disparity was unnecessary because
shareholders of smaller funds would not likely be disadvantaged by a
lower level of market commentary about those funds as compared to
larger funds given the investor protections afforded to those
shareholders by the Investment Company Act.\494\ Similarly, another
commenter stated that the Commission should reconsider the public float
requirement in order to encourage new CEF issuances and give smaller
CEFs the opportunity to grow through the issuance of additional shares,
because the offering size of most of the recent offerings by public
CEFs have been relatively small, making them ineligible for treatment
as a ``seasoned fund'' or WKSI.\495\ The second commenter stated that
forward incorporation by reference, which is allowed when an affected
fund has met the requirements to use a short-form registration
statement, should be made available to smaller affected funds.\496\
However, as discussed below, commenters defined smaller funds as those
funds that did not meet the WKSI

[[Page 33346]]

public float threshold of $700 million or more for purposes of using an
automatic registration statement, or did not meet the seasoned public
float threshold of $75 million or more for purposes of forward
incorporation by reference.
---------------------------------------------------------------------------

\493\ See e.g., ABA Comment Letter; Invesco Comment Letter;
White Comment Letter; XBRL US Comment Letter.
\494\ See e.g., ABA Comment Letter.
\495\ See e.g., Invesco Comment Letter.
\496\ See e.g., White Comment Letter.
---------------------------------------------------------------------------

Another commenter voiced support for the XBRL format proposed for
certain filings by affected funds and recommended expanded use of the
format for other disclosures.\497\ The commenter noted that a study it
conducted along with the AICPA in 2014 and again in 2017 evaluating the
annual cost of XBRL preparation for small reporting companies had
decreased from $10,000 in 2014 to $5,500 in 2017.\498\ In citing to the
Council of Institutional Investors (CII) July 19, 2018 comment letter
in response to the SEC Draft Strategic Plan 2018-2022, the commenter
stated that inline XBRL is an improvement to EDGAR functionality and
makes disclosure documents more valuable and cost-effective for a broad
range of users including market analysts and data vendors that conduct
research on smaller companies.\499\ In response to the Commission's
request for comment regarding whether the current burdens of preparing
financial statements and notes in XBRL format have changed over time
for small reporting companies, the commenter reiterated that the cost
of XBRL preparation has declined 45% for small reporting
companies.\500\
---------------------------------------------------------------------------

\497\ See e.g., XBRL US Comment Letter.
\498\ Id. at 13.
\499\ Id. at 10.
\500\ Id. at 13.
---------------------------------------------------------------------------

After considering the comments we received on the proposed rule and
form amendments, we are adopting the amendments, substantially as
proposed, with two modifications intended to reduce the operational
challenges commenters identified. Specifically, we are expanding the
scope of rule 486 to any registered CEF or BDC conducting continuous
offerings under rule 415(a)(1)(ix), and we are not adopting our
proposed amendments to Form 8-K.\501\ However, we do not believe there
would be any meaningful reporting, recordkeeping, or other compliance
costs associated with these modifications that would impact small
entities.
---------------------------------------------------------------------------

\501\ See supra sections II.D and II.I.3.
---------------------------------------------------------------------------

C. Small Entities Subject to the Rule

An investment company is a small entity if, together with other
investment companies in the same group of related investment companies,
it has net assets of $50 million or less as of the end of its most
recent fiscal year.\502\ Commission staff estimates that, as of June
2019, 16 BDCs and 33 registered CEFs are small entities.\503\
---------------------------------------------------------------------------

\502\ 17 CFR 270.0-10(a) (Investment Company Act rule 0-10(a)).
\503\ These estimates, reflecting the net assets of registered
CEFs and of BDCs, are based on staff review of Forms N-CEN and N-Q
filed with the Commission as of June 2019 and are based on the
definition of small entity under Investment Company Act rule 0-10.
Such funds will not necessarily be able to meet the transaction
requirement to qualify to file a short-form registration statement
on Form N-2 (i.e., generally those affected funds with a public
float of $75 million) or to be a WKSI (i.e., generally those
affected funds with a public float of $700 million). See supra
section II.B.3 and II.C.
Based on data as of June 2019 from Morningstar Direct, Forms 10-
K and 10-Q that are filed with the Commission by BDCs, and closed-
end fund data reported on Forms N-CSR, N-Q, and N-PORT filed with
the Commission, we estimate, of the 16 BDCs that are small entities,
3 were traded on an exchange with market capitalization below the
$75 million public float threshold for qualifying to file a short-
form registration statement on Form N-2, and 5 small BDCs traded on
the over-the-counter (OTC) market with market capitalization below
this same $75 million threshold. Likewise, of the 33 registered CEFs
that qualified as small entities, 4 traded on an exchange with
market capitalizations below this same $75 million threshold; while
3 were traded on the OTC market with market capitalizations below
$75 million.
---------------------------------------------------------------------------

A broker-dealer is a small entity if it has total capital (net
worth plus subordinated liabilities) of less than $500,000 on the date
in the prior fiscal year as of which its audited financial statements
were prepared pursuant to 17 CFR 240.17a-5(d) (Exchange Act rule 17a-
5),\504\ and it is not affiliated with any person (other than a natural
person) that is not a small business or small organization.\505\
Commission staff estimates that, as of June 30, 2019, there are
approximately 942 broker-dealers that may be considered small
entities.\506\ To the extent a small broker-dealer participates in a
securities offering or prepares research reports, it may be affected by
the final rule. Generally, we believe larger broker-dealers engage in
these activities, and we did not receive comments on whether or how the
proposed amendments to rule 138 affect small broker-dealers.\507\
---------------------------------------------------------------------------

\504\ See 17 CFR 240.0-10(c)(1) (Exchange Act rule 0-10(c)(1)).
Alternatively, if a broker-dealer is ``not required to file such
statements, a broker or dealer that had total capital (net worth
plus subordinated liabilities) of less than $500,000 on the last
business day of the preceding fiscal year (or in the time that it
has been in business, if shorter).'' See id.
\505\ See Exchange Act rule 0-10(c)(2).
\506\ This estimate is derived from an analysis of data for the
period ending June 30, 2019 obtained from Financial and Operational
Combined Uniform Single (FOCUS) Reports that broker-dealers
generally are required to file with the Commission and/or SROs
pursuant to Exchange Act rule 17a-5.
\507\ See supra section II.F.2.
---------------------------------------------------------------------------

The final rule will also affect ETPs, permitting them to register
offerings of an indeterminate number of exchange-traded vehicle
securities and pay registration fees for such offerings on an annual
net basis. For purposes of the RFA, 17 CFR 230.157 (Securities Act rule
157) defines an issuer, other than an investment company, to be a
``small business'' or ``small organization'' if it had total assets of
$5 million or less on the last day of its most recent fiscal year and
is engaged or proposing to engage in an offering of securities not
exceeding $5 million.\508\ Exchange Act rule 0-10(a) defines an issuer,
other than an investment company, to be a ``small business'' or ``small
organization'' if it had total assets of $5 million or less on the last
day of its most recent fiscal year. Commission staff estimates that, as
of February 2020, there are approximately 7 ETPs that are issuers,
other than an investment company, that may be considered small
entities.\509\
---------------------------------------------------------------------------

\508\ See 17 CFR 230.157.
\509\ Based on data as of February 2020 from Morningstar Direct
and Form S-1 and Form S-3 registration statements filed with the
Commission within the past three years. As discussed above, we do
not anticipate that any issuers at this time will use Form F-1 to
register offerings of an indeterminate number of exchange-traded
vehicle securities and pay registration fees for these offerings on
an annual net basis. See supra section IV.B.7. Consequently, our
figures do not reflect F-1 filers as a ``small business'' or ``small
organization.''
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements

The final rule will create, amend, or eliminate current
requirements for affected funds and broker-dealers, including those
that are small entities discussed in section V.C above.\510\
---------------------------------------------------------------------------

\510\ See also supra section IV (discussing the skills necessary
to perform the recordkeeping, reporting, and compliance requirements
of the final rule, including those to be performed internally by a
fund, and those to be performed externally by professionals). The
PRA provides for the hours, costs, and skill level associated with
preparing disclosures, filing forms, and retaining records in
compliance with our adopted rules. These skills would apply for
compliance with the adopted rules by all funds, large and small, and
Commission staff further estimates that small funds will incur
approximately the same initial and ongoing costs as large funds.
---------------------------------------------------------------------------

1. Registration Process and Final Prospectus Delivery
The amendments to the registration process for affected funds will
create a short-form registration statement on Form N-2 that will
function like a registration statement filed on Form S-3.\511\ An
affected fund eligible to file the short-form registration statement
can use it to register shelf offerings, including shelf registration
statements (filed by a WKSI) that become effective

[[Page 33347]]

automatically.\512\ Such a fund also can satisfy Form N-2's disclosure
requirement by incorporating by reference information from the fund's
Exchange Act reports. \513\
---------------------------------------------------------------------------

\511\ See supra section II.B.3.
\512\ Id.
\513\ Id.
---------------------------------------------------------------------------

In addition, the final rule will allow certain affected funds
eligible to register a primary offering under the adopted short-form
registration instruction to rely on rule 430B to omit information from
their base prospectuses, and to permit affected funds to use the
process operating companies follow to file prospectus supplements.\514\
Affected funds that choose to forward incorporate information by
reference into their registration statements will also be able to
include additional information in their periodic reports that is not
required to be included in these reports in order to update their
registration statements.\515\
---------------------------------------------------------------------------

\514\ See supra section II.B.3.d.
\515\ See supra section II.B.3.e.
---------------------------------------------------------------------------

The amendments to the WKSI definition in rule 405 will also permit
affected funds to qualify for enhanced offering and communication
benefits under our rules.\516\ In order for an issuer to qualify as a
WKSI, the issuer must meet the registrant requirements of Form S-3,
i.e., it must be ``seasoned,'' and generally must have at least $700
million in public float.\517\ Qualifying as a WKSI will allow such
funds to file a registration statement or amendment that becomes
effective automatically in a broader variety of contexts than non-
WKSIs, and to communicate at any time, including through a free writing
prospectus, without violating the ``gun-jumping'' provisions of the
Securities Act.\518\
---------------------------------------------------------------------------

\516\ See supra section II.C.
\517\ Id.
\518\ Id.
---------------------------------------------------------------------------

Smaller affected funds will not be able to avail themselves of the
aspects of the adopted rule amendments streamlining the registration
process for affected funds or that make available the WKSI designation
to affected funds. The adopted short-form registration instruction is
designed to provide affected funds parity with operating companies by
permitting them to use the instruction to register the same
transactions that an operating company can register on Form S-3.\519\
In order to qualify to use the short-form registration statement under
Form N-2, General Instruction A.2 of Form N-2 generally requires an
affected fund to meet the public float requirement of $75 million under
the transaction requirements for Form S-3.\520\ Likewise, the WKSI
provision of rule 405 contains a public float requirement of $700
million, as discussed above. Smaller funds will not generally meet the
public float thresholds to file a short-form registration statement or
qualify as a WKSI and therefore will not generally be subject to either
of these amendments.\521\ However, smaller affected funds may be
affected by these amendments in other ways. For example, smaller
affected funds may be more likely to merge to obtain WKSI status, and
could experience competitive disadvantages compared to larger funds
that qualify as WKSIs or that file short-form registration statements
on Form N-2.\522\
---------------------------------------------------------------------------

\519\ See supra section II.B.3.a; see also supra footnote 51 and
accompanying and preceding text.
\520\ See supra sections II.B.3.a and III.B.1.
\521\ See supra sections II.B.3 and III.B.1.
\522\ See supra section III.B.1.
---------------------------------------------------------------------------

The final rule will also apply the delivery method for operating
company final prospectuses to offerings of affected funds. As a result,
an affected fund, broker, or dealer will be allowed to satisfy the
final prospectus delivery obligations if a final prospectus is or will
be on file with the Commission within the time required by the rules
and other conditions are satisfied.\523\ These requirements will apply
to all affected funds, as well as all brokers or dealers.\524\
---------------------------------------------------------------------------

\523\ See supra sections IV.B.5 and II.E.
\524\ Affected funds using the new approach to prospectus
delivery will be required to provide a notice to purchasers stating
that a sale of securities was made pursuant to a registration
statement or in a transaction in which a final prospectus would have
been required to have been delivered in the absence of Securities
Act rule 172. See supra footnote 153 and accompanying text.
---------------------------------------------------------------------------

2. Communications Rules
For offerings of smaller affected funds, we are not adopting any
new restrictions on communications. As discussed above, the amendments
to Securities Act rules 134, 138, 156, 163, 163A, 164, 168, 169, and
433 will make available the use of certain types of communications that
were previously not available to affected funds.\525\ Except as
otherwise discussed below, we believe that there are no significant
reporting, recordkeeping, or other compliance requirements associated
with these amendments. As such, except as otherwise discussed below, we
believe that there are no attendant costs and administrative burdens
for small affected funds associated with these amendments.
---------------------------------------------------------------------------

\525\ See supra sections II.F, III.B.2, III.C.1, and IV.B.4. The
amendments to Securities Act rules 163 and 433, regarding the use of
a free writing prospectus, create new recordkeeping, filing, and
compliance requirements that are addressed further below.
---------------------------------------------------------------------------

In addition, the communications rules themselves do not create any
new restrictions for smaller affected funds. Instead, smaller affected
funds now may be able to take advantage of new communications options
not previously afforded to them.\526\ We also note that rule 163, and
the new amendments, apply only to WKSIs. Consequently, these amendments
to rule 163 will not produce any benefit, or create any burden, for
small affected funds because they would not qualify as WKSIs, as
discussed above.\527\
---------------------------------------------------------------------------

\526\ See supra sections II.F, III.B.2, III.C.1, and IV.B.4.
These include, for example, amendments to rule 163A of the
Securities Act, which provides a bright-line rule permitting
communications more than 30 days before filing a registration
statement, and amendments to rule 169 of the Securities Act, which
provides affected funds the ability to engage in regular factual
business communications.
\527\ See supra section V.D.1.
---------------------------------------------------------------------------

To the extent that an affected fund uses a free writing prospectus
under the adopted rules, any affected fund--large or small--will incur
the burden of the requirement to file a free writing prospectus, or
retain a record of the free writing prospectus for three years if it
was not filed with the Commission.\528\ However, we believe that the
burden here will be negligible. Affected funds currently use rule 482
of the Securities Act to engage in communications similar to those that
will be permitted under the amendments to rule 433, and these funds are
required to file their rule 482 communication with either the
Commission or, alternatively, with the Financial Industry Regulatory
Authority (``FINRA'').\529\ The burden associated with the filing
requirements that the amendments to rule 433 will entail will therefore
not be meaningfully different than the burden associated with the
filing requirement for rule 482 communications. Rule 433 also creates a
recordkeeping requirement. We do not believe that this requirement will
create any significant burden given that records of rule 482
communications must also be retained for a period that

[[Page 33348]]

will generally exceed that required under rule 433.\530\ In addition,
the recordkeeping requirement will apply only to affected funds (both
large and small) that elect to use rule 433, as adopted.
---------------------------------------------------------------------------

\528\ See amended rule 433(d) and (g). Paragraph (d) of the rule
provides for the various conditions and exclusions applicable to the
general requirement of 433(d)(1) that an issuer or offering
participant file its free writing prospectus. Paragraph (g) requires
that if a free writing prospectus is not filed pursuant to paragraph
(d) or (f) of rule 433, issuers and offering participants must
retain all free writing prospectuses that have been used, for three
years following the initial bona fide offering of the securities in
question.
\529\ See note to paragraph (h) of Securities Act rule 482. Rule
482 requires that advertisements used in reliance on rule 482 are
required to be filed in accordance with the requirements of rule
497, unless they are filed with FINRA. See supra footnote 528 and
sections III.C and IV.B.4.; see also Securities Act rule 497(a) and
(i).
\530\ See 17 CFR 270.31a-2(a)(3) (Investment Company Act rule
31a-2(a)(3)) (requiring every registered investment company to
preserve for no less than six years from the end of the fiscal year
last used, any advertisement, pamphlet, circular form letter, or
other sales literature addressed to or intended for distribution to
prospective investors). Securities Act rule 433(g) requires an
issuer and offering participants to retain all free writing
prospectuses that have been used, and that have not been filed
pursuant to paragraphs (d) or (f) of the rule, for three years
following the initial bona fide offering of the securities in
question. However, for a broker or dealer utilizing a free writing
prospectus, rule 433 defers to the recordkeeping requirements under
17 CFR 240.17a-4 (Exchange Act rule 17a-4) (requiring sales
literature to be retained for not less than three years).
---------------------------------------------------------------------------

The final rule also will affect broker-dealers participating in a
registered offering. Specifically, the amended rules will affect: (1)
Broker-dealers' publication and distribution of research reports on
affected funds; and (2) broker-dealers' use of free writing
prospectuses on affected funds.
The amendments to rule 138 will affect both large and small broker-
dealers. These amendments will now permit broker-dealers to publish or
distribute research reports with respect to a broader class of issuers
and securities without this publication or distribution being an offer
that otherwise could be a non-conforming prospectus in violation of
section 5 of the Securities Act.\531\ Broker-dealers that once used
rule 482 ads styled as research reports, and instead rely on rule 138,
as adopted, to publish or distribute similar communications, will no
longer be subject to any filing requirement for these communications.
Consequently, we expect that the amendments to rule 138 will result in
fewer rule 482 communications being filed with FINRA.\532\ This in turn
will reduce filing-related administrative costs for broker-dealers
publishing or distributing research reports on affected funds under the
amendments to rule 138. However, large and smaller broker-dealers will
not be affected differently by the amendments to rule 138.
---------------------------------------------------------------------------

\531\ See amended Securities Act rule 138.
\532\ See supra footnote 529 and FINRA rule 2210(c)(7)(F)
(requiring a broker-dealer to file with FINRA an investment company
prospectus published pursuant to Securities Act rule 482).
---------------------------------------------------------------------------

In addition, the free writing prospectus rule amendments will
permit broker-dealers to engage in these communications on behalf of
the affected fund issuer.\533\ This will require broker-dealers, both
large and small, to file the free writing prospectuses that they use
with the Commission, or maintain records of any free writing
prospectuses used if it was not filed with the Commission.\534\
However, certain of these broker-dealers are already required to file
communications made under rule 482.\535\ Broker-dealers that once used
rule 482 ads and instead now choose to rely on adopted amended rule 433
to publish or distribute similar communications, will no longer be
required to file these communications with FINRA. Consequently, the
amendments to rule 433 could result in fewer rule 482 communications
being filed with FINRA and a potential increase in filings of free
writing prospectuses by affected funds with the Commission.\536\
However, those broker-dealers that have not previously used rule 482 to
publish or distribute the types of communications that the amendments
to rule 433 permit, will newly be subject to both the filing and
recordkeeping requirements of rule 433.
---------------------------------------------------------------------------

\533\ See amended rule 433(b). Paragraph (b)(1) states that for
WKSIs and seasoned issuers, both an issuer or offering participant
may use a free writing prospectus, while paragraph (b)(2) states
that for non-reporting and unseasoned issuers, any person
participating in the offer or sale of the issuer's securities may
use a free writing prospectus. Although the term ``offering
participant'' is not defined, paragraph (h)(3) of rule 433 gives
some context to this term.
\534\ See supra footnote 528.
\535\ See supra footnote 529.
\536\ See supra section III.C.1 and IV.B.4 (noting that we are
unable to predict whether affected funds will engage in more
communications with investors as a result of the final rule). To the
extent affected funds or broker-dealers will use a free writing
prospectus for communications that currently occur under rule 482,
we would expect an increase in such filings of free writing
prospectuses as well as an increase in the number of rule 138
research reports, and a decrease in the number of rule 482 ads filed
with FINRA. See supra footnote 532 and accompanying text.
---------------------------------------------------------------------------

3. New Registration Fee Payment Method for Interval Funds
Interval funds, like other affected funds, are not currently
permitted to pay registration fees on this same annual ``net'' basis as
mutual funds and ETFs, and pay the registration fee at the time of
filing the registration statement.\537\ As discussed above, we believe
that interval funds will benefit from the ability to pay their
registration fees in the same manner as mutual funds and ETFs, and that
this approach is appropriate in light of interval funds'
operations.\538\ In addition, in response to comments to the Proposing
Release, we also are adopting amendments to enable ETPs to register an
indeterminate number of securities and to pay registration fees in
arrears on an annual net basis.\539\ As we discussed above, ETPs
operate in a manner substantially similar to that of ETFs, and as
commenters noted, share similar attributes with interval funds, which
we highlighted in extending to interval funds the ability to pay
registration fees on an annual net basis, including routine repurchases
of shares at NAV and avoiding the possibility of inadvertently selling
more shares than it had registered.\540\ As a result, the final rule
will require interval funds and allow ETPs to pay securities
registration fees using the same method that mutual funds and ETFs
use.\541\ We believe this will benefit small interval funds and ETPs as
well as larger interval funds and ETPs equally, and will make the
registration fee payment process for all interval funds and ETPs more
efficient as discussed above.\542\
---------------------------------------------------------------------------

\537\ See supra section II.H and III.E.1.
\538\ See supra section II.H.
\539\ Id.
\540\ Id.
\541\ Id.
\542\ Id.; see also section III.E.1.
---------------------------------------------------------------------------

4. Disclosure and Reporting Requirements
We also are adopting amendments, substantially as proposed, to our
rules and forms that are intended to tailor the disclosure and
regulatory framework for affected funds in light of our amendments to
the offering rules applicable to them.\543\ These amendments include:
Structured data requirements; new periodic requirements; amendments to
provide affected funds additional flexibility to incorporate
information by reference; and enhancements to the disclosures that
registered CEFs make to investors when the funds are not updating their
registration statements.\544\
---------------------------------------------------------------------------

\543\ See supra section II.I. Some of the amendments reflect our
consideration of the availability of information to investors, as
required by the Registered CEF Act. See section 509(a) of the
Registered CEF Act.
\544\ See supra sections II.I.1-II.I.5.
---------------------------------------------------------------------------

Structured Data Requirements
The amendments will require BDCs, like operating companies, to
submit financial statement information using Inline XBRL format; to
require that affected funds include structured cover page information
in their registration statements on Form N-2 using Inline XBRL format;
to require that certain information required in an affected fund's
prospectus be tagged using Inline XBRL format; \545\ and to require
that

[[Page 33349]]

filings on Form 24F-2 be submitted in XML format.\546\ Large and small
affected funds will both incur on a proportional basis, the costs
associated with these adopted structured data requirements.
Furthermore, as noted above, based on our experience implementing the
XBRL format, we recognize that some registrants affected by the adopted
requirement, particularly filers with no Inline XBRL experience, likely
will incur initial costs to acquire the necessary expertise and/or
software as well as ongoing costs of tagging required information in
Inline XBRL, and the incremental effect of any fixed costs, including
ongoing fixed costs, of complying with the Inline XBRL requirement may
be greater for smaller filers.\547\ However, we believe that smaller
affected funds in particular may benefit more from enhanced exposure to
investors that could result from these adopted requirements.\548\ If
reporting the disclosures in a structured format increases the
availability of, or reduces the cost of collecting and analyzing, key
information about affected funds, smaller affected funds may benefit
from improved coverage by third-party information providers and data
aggregators.
---------------------------------------------------------------------------

\545\ See supra footnote 241 and accompanying text noting that a
seasoned fund filing a short-form registration statement on Form N-2
also will be required to tag information appearing in Exchange Act
reports, such as those on Forms N-CSR, 10-K, or 8-K, if that
information is required to be tagged in the fund's prospectus.
\546\ See supra sections II.I.1 and III.E.1.
\547\ See supra section III.E.2. But see supra footnote 428
(noting that since 2014, costs incurred utilizing XBRL have
significantly reduced for smaller companies).
\548\ Id.
---------------------------------------------------------------------------

Periodic Reporting Requirements
The final rule also will require registered CEFs to provide the
MDFP in their annual reports to shareholders, BDCs to provide financial
highlights in their registration statements and annual reports, and
affected funds filing a short-form registration statement on Form N-2
to disclose material unresolved staff comments.\549\ These requirements
are intended to modernize and harmonize our periodic reporting
disclosure requirements for affected funds with those applicable to
operating companies and mutual funds and ETFs.
---------------------------------------------------------------------------

\549\ See supra sections II.I.2.b, II.I.2.c, and II.I.2.d.
---------------------------------------------------------------------------

The final rule requirement for registered CEFs to include an MDFP
section in the annual report and for BDCs to provide financial
highlights in their registration statement and annual reports will
apply to all applicable affected funds, large and small. We do not
believe it would be appropriate to treat large and small entities
differently for purposes of the MDFP requirement because such
disclosures helps investors assess fund performance over the prior year
and complements other information in the report, which may make the
annual report disclosure more understandable as a whole.\550\ Such
investor protection benefits are equally significant to investors in
smaller affected funds as well as larger affected funds.\551\
---------------------------------------------------------------------------

\550\ See supra section III.E.3.
\551\ See supra section II.I.2.b and II.I.2.c; see also supra
section IV.B.3 (discussing the burden hours associated with
complying with the adopted disclosure requirements for both small
and large affected funds).
---------------------------------------------------------------------------

For similar reasons, we believe that the informational benefit of
BDCs' inclusion of the financial highlights in their registration
statements should apply equally to investors in large and small BDCs.
We also believe the costs associated with this adopted requirement
should be minimal for both large and small BDCs, since we understand
that it is general market practice for BDCs to include this information
in their registration statements.\552\
---------------------------------------------------------------------------

\552\ Id.; see also supra sections IV.B.1 and IV.B.3.
---------------------------------------------------------------------------

Finally, the final rule will require affected funds that file a
short-form registration statement on Form N-2 to disclose material
unresolved staff comments. Such a requirement will apply only to those
entities that qualify for the short-form registration statement, which
generally would not include smaller affected funds.\553\
---------------------------------------------------------------------------

\553\ See supra footnote 503.
---------------------------------------------------------------------------

Online Availability of Information Incorporated by Reference
The final rule will modernize Form N-2's requirements for backward
incorporation by reference by all affected funds. Affected funds will
no longer be required to deliver to new investors information that they
have incorporated by reference.\554\ Instead, we are adopting new
requirements that these funds make the incorporated materials and
corresponding prospectus and SAI readily available and accessible on a
website maintained by or for the fund and identified in the fund's
prospectus or SAI.\555\ We do not believe this requirement will
generate significant compliance costs for affected funds because many
funds currently post their annual and semi-annual reports and other
fund information on their websites.\556\ Nor do we think it would be
appropriate to treat large and small entities differently for these
purposes. The adopted requirement will make the incorporated
information, prospectus, and SAI more accessible to retail investors,
who we believe may be more inclined to look at a fund's website for
information than to search the EDGAR system.\557\ The final rule also
will increase the likelihood that fund investors view the information
in their preferred format, and thereby increase their use of the
information to make investment decisions.\558\ We believe that these
investor protection benefits should be available equally for investors
in smaller and larger affected funds.
---------------------------------------------------------------------------

\554\ See supra sections II.I.4 and IV.E.5.
\555\ Id.
\556\ See supra section III.E.4.
\557\ Id.
\558\ Id.
---------------------------------------------------------------------------

Enhancements to Certain Registered CEFs' Annual Report Disclosure
Finally, the amendments to rule 8b-16(b) under the Investment
Company Act will require a fund relying on that rule to describe in its
annual report the fund's current investment objectives, policies, and
principal risks.\559\ The amendments also will require a fund to
describe in its annual report certain key changes that occurred during
the relevant year in enough detail to allow investors to understand
each change and how it may affect the fund, and to preface such
disclosures with a legend.\560\ The amendments to rule 8b-16(b) will
only affect that portion of registered CEFs that rely on the rule.\561\
We do not think it would be appropriate to treat large and small
entities differently for purposes of the amendments to rule 8b-16(b),
as this new requirement will allow investors in funds relying on the
rule to more easily identify and understand key information about their
investments.\562\ We believe that this investor protection benefit
should be available equally for investors in smaller and larger
affected funds. In addition, the adopted new requirement will likely
add only a small incremental compliance burden because funds relying on
rule 8b-16(b) are already required to disclose the enumerated
changes.\563\ The amendments described in section II.I above will apply
to affected funds that are small entities as well as other affected
funds unless noted otherwise.\564\
---------------------------------------------------------------------------

\559\ See supra sections II.I.5 and III.E.3.
\560\ Id.
\561\ See supra section III.E.3. Based on staff review of data
derived from Morningstar Direct and Commission filings for the
period ending June 30, 2019, approximately 521 registered CEFs
currently rely on rule 8b-16(b). Of these, we estimate that 22 will
be small issuers based on net assets of $50 million or less.
\562\ See supra section III.E.3.
\563\ Id.
\564\ See also supra sections III.E.3 and IV.B.3 (discussing the
economic impact, and the estimated compliance costs and burdens, of
the final rule described in section II.I).

---------------------------------------------------------------------------

[[Page 33350]]

5. Automatic or Immediate Effectiveness for Filings by Affected Funds
Conducting Certain Continuous Offerings
As we discussed above, the amendments we are adopting to rule 486
will permit any registered CEF or BDC that conducts continuous
offerings under rule 415(a)(1)(ix), including unlisted continuously-
offered affected funds such as tender offer funds, to rely on rule
486.\565\ Our amendment to rule 486 will allow such funds to file post-
effective amendments and registration statements that become effective
immediately upon filing or automatically effective 60 days after
filing, depending on the substance of the disclosure changes.\566\ In
doing so, we believe that such funds will be able to more efficiently
update their financial statements under section 10(a)(3) of the
Securities Act to maintain effective registration statements while they
engage in continuous offerings.\567\
---------------------------------------------------------------------------

\565\ See supra section II.D.
\566\ Id.
\567\ Id.; see also supra section III.E.5.
---------------------------------------------------------------------------

These amendments will benefit both large and small continuously-
offered unlisted affected funds, and we believe that they provide
benefits similar to the benefits the adopted rule offers affected funds
that will file short-form registration statements or qualify as
WKSIs.\568\ Because the amended rule applies only to those affected
funds that conduct continuous offerings under rule 415(a)(1)(ix), we
expect this subset of affected funds to be limited.\569\ In addition,
although reliance on rule 486 is voluntary for continuously-offered
affected funds who are newly permitted to rely on the rule, we expect
many will rely on it due to the cost efficiencies sustained from a
regime providing immediate or automatic effectiveness for post-
effective amendments and certain registration statements.
Notwithstanding this increased use, and because it will provide greater
efficiencies, we do not believe the final rule will create any new
meaningful reporting, recordkeeping, or other compliance costs in
relation to how affected funds currently file post-effective amendments
or registration statements. In addition, immediate or automatic
effectiveness would permit smaller funds the ability to engage in
offerings that meet investor demand, on a timely basis, for such
offerings.
---------------------------------------------------------------------------

\568\ See supra section III.E.5.
\569\ Based on staff review of fund filings, as of August 2019,
we estimate that approximately 65 continuously-offered unlisted
affected funds (that are not interval funds) conduct continuous
offerings under rule 415(a)(1)(ix), of which 14 are BDCs, and 51 are
registered CEFs.
---------------------------------------------------------------------------

E. Agency Action To Minimize Effect on Small Entities

The RFA directs the Commission to consider significant alternatives
that would accomplish our stated objective, while minimizing any
significant economic impact on small entities. Although the BDC Act and
Registered CEF Act required certain amendments to our rules and forms,
we could have, for example, made additional modifications to the
relevant provisions with respect to affected funds that are small
entities. Alternatively, we also could have limited the scope to BDCs
(as the BDC Act specified) and to interval funds and listed registered
CEFs (as the Registered CEF Act specified), which would have excluded
from the scope of the adopted rules certain small entities that are
registered CEFs but that are not interval funds or listed registered
CEFs.\570\ Where our final rules reflect an exercise of discretion, we
considered the following alternatives for small entities in relation to
our amendments:
---------------------------------------------------------------------------

\570\ See supra section II.A.
---------------------------------------------------------------------------

Exempting affected funds that are small entities from the
adopted disclosure, reporting, or recordkeeping requirements, to
account for resources available to small entities;
Establishing different compliance or reporting
requirements or frequency to account for resources available to small
entities;
Clarifying, consolidating, or simplifying the compliance
requirements under the amendments for small entities; and
Using performance rather than design standards.
1. Alternatives to the Adopted Approach to Implementing Statutory
Mandates
In accordance with the BDC Act and Registered CEF Act, to the final
rule modifies the restrictions regarding offerings and communications
permitted around the time of a Securities Act registered offering. The
flexibility provided by our amendments will be greatest for larger and
seasoned affected funds, but will also provide greater flexibility to
all affected funds and broker-dealers, including small entities.
We considered modifying the public float standards in the WKSI
definition or the short-form registration instruction by reducing the
required level of public float or providing alternative eligibility
criteria, such as an aggregate NAV of a certain size for funds whose
shares are not traded on an exchange or through the use of
``performance'' rather than ``design'' standards.\571\ These
alternatives would have allowed more affected funds, potentially
including small entities, to qualify as WKSIs or file short-form
registration statements. However, we believe that modifying the
eligibility criteria in the WKSI definition or the short-form
registration instruction could weaken the investor protection benefits
provided by those criteria.
---------------------------------------------------------------------------

\571\ See supra section II.C.
---------------------------------------------------------------------------

We also considered extending the adopted rule amendments only to
BDCs, listed registered CEFs, and interval funds.\572\ However,
excluding unlisted registered CEFs from the adopted rule amendments
will create unnecessary competitive disparities between unlisted
registered CEFs (which will potentially include smaller funds) and
unlisted BDCs and will not provide investors in unlisted registered
CEFs with the benefits of the new investor protections we are
adopting.\573\
---------------------------------------------------------------------------

\572\ See supra section III.D.
\573\ Id.
---------------------------------------------------------------------------

2. Alternative Approaches to Discretionary Choices
New Registration Fee Payment Method for Interval Funds
We considered, but are not adopting, provisions allowing a wider
range of affected funds, such as registered CEFs that are tender offer
funds, to rely on rule 24f-2.\574\ To the extent that this alternative
would have brought in additional small affected funds, it could have
extended the benefits of this fee payment method to additional small
entities. However, we did not adopt this alternative approach because
interval funds and ETPs have structural similarities to mutual funds
and ETFs that other affected funds do not.\575\
---------------------------------------------------------------------------

\574\ See supra section III.E.1.
\575\ See id.
---------------------------------------------------------------------------

Structured Data Requirements
As an alternative, we could have adopted amendments requiring the
Inline XBRL requirements only for a subset of affected funds--for
example, affected funds that file short-form registration statements on
Form N-2 or WKSIs.\576\ This would have lessened the burden associated
with the structured data requirements on smaller affected funds.
However, a structured data program that captures only a subset of
affected funds would reduce potential data quality benefits compared to
mandatory Inline XBRL requirements

[[Page 33351]]

for all affected funds.\577\ This in turn would reduce data users'
ability to meaningfully analyze, aggregate, and compare data.
---------------------------------------------------------------------------

\576\ See supra section IV.B.2.
\577\ See id.
---------------------------------------------------------------------------

However, we are adopting an extended compliance period for the new
XBRL reporting requirements we adopted for affected funds that are not
eligible to file a short-form registration statement. This extended
compliance period--which will apply to affected funds that do not meet
the transaction requirement to qualify to file a short-form
registration statement on Form N-2 (i.e., generally those affected
funds with a public float of $75 million), and which encompasses the
small entities subject to the adopted rule amendments discussed above--
should enable small entities to defer the burden of additional cost
associated with the adopted XBRL requirements and learn from affected
funds that comply earlier.
Periodic Reporting Requirements and Online Availability of Information
Incorporated by Reference
We also considered a partial or complete exemption from the adopted
periodic reporting requirements, and for the adopted requirements to
make information incorporated by reference available on a website, for
small entities.\578\ With respect to the periodic reporting
requirements, small entities that are not affected funds currently
follow the same requirements that large entities do when filing
periodic reports, and we believe that establishing different reporting
requirements or frequency for small entities that are affected funds
would not be consistent with the Commission's goal of investor
protection and industry oversight. For example, we could have adopted
amendments to require smaller affected funds to include in their annual
reports less information from their registration statements. While
requiring less information would reduce costs to smaller affected funds
by reducing the amount of required annual report disclosure, it could
also make it more difficult for investors in these funds to find
important fund information. Similarly, we believe that the investor
protection benefits associated with the other adopted periodic
reporting requirements that apply to large and small affected funds--
for example, the MDFP requirement for registered CEFs and the inclusion
of BDCs' financial highlights in their registration statement--should
apply equally to investors in large and small affected funds.\579\ We
also believe that the investor protection benefits stemming from the
adopted requirement to make materials incorporated by reference
available on a website should be available equally for investors in
smaller and larger affected funds, and therefore this adopted rule
applies equally to large and small affected funds.\580\
---------------------------------------------------------------------------

\578\ See supra section III.E.3.
\579\ See supra section V.D.4.
\580\ See id.
---------------------------------------------------------------------------

VI. Other Matters

Pursuant to the Congressional Review Act,\581\ the Office of
Information and Regulatory Affairs has designated this rule a ``major
rule,'' as defined by 5 U.S.C. 804(2). If any of the provisions of
these rules, or the application thereof to any person or circumstance,
is held to be invalid, such invalidity shall not affect other
provisions or application of such provisions to other persons or
circumstances that can be given effect without the invalid provision or
application.
---------------------------------------------------------------------------

\581\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

VII. Statutory Authority

The amendments contained in this release are being adopted under
the authority set forth in the Securities Act, particularly sections 6,
7, 8, 10, 19, and 28 thereof [15 U.S.C. 77a et seq.]; the Exchange Act,
particularly sections 3, 4, 10, 12, 13, 14, 15, 17, 23, 35A, and 36
thereof [15 U.S.C. 78a et seq.]; the Investment Company Act,
particularly sections 6, 8, 20, 23, 24, 30, 31, and 38 thereof [15
U.S.C. 80a et seq.]; the BDC Act, particularly section 803(b) thereof
[Pub. L. 115-141, div. S, title VIII, 132 Stat. 348 (2018)]; and the
Registered CEF Act, particularly section 509(a) thereof [Pub. L. 115-
174, title V, 132 Stat. 1296 (2018)].

List of Subjects

17 CFR Part 229

Reporting and recordkeeping requirements, Securities.

17 CFR Part 230

Advertising, Confidential business information, Investment
Companies, Reporting and recordkeeping requirements, Securities.

17 CFR Part 232

Administrative practice and procedure, Confidential business
information, Reporting and recordkeeping requirements, Securities.

17 CFR Part 239

Reporting and recordkeeping requirements, Securities.

17 CFR Part 240

Brokers, Confidential business information, Fraud, Reporting and
recordkeeping requirements, Securities.

17 CFR Part 243

Reporting and recordkeeping requirements, Securities.

17 CFR Part 249

Brokers, Reporting and recordkeeping requirements, Securities

17 CFR Part 270

Confidential business information, Fraud, Investment companies,
Reporting and recordkeeping requirements, Securities.

17 CFR Part 274

Investment companies, Reporting and recordkeeping requirements,
Securities.

Text of Rule and Form Amendments

For reasons set forth in the preamble, we are amending title 17,
chapter II of the Code of Federal Regulations as follows:

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K

0
1. The authority citation for part 229 continues to read as follows:

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj,
77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 78o, 78u-
5, 78w, 78ll, 78 mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-11 and 7201 et seq.; 18 U.S.C.
1350; sec. 953(b), Pub. L. 111-203, 124 Stat. 1904 (2010); and sec.
102(c), Pub. L. 112-106, 126 Stat. 310 (2012).

0
2. Amend Sec. 229.601 by revising paragraphs (b)(101)(i) introductory
text, (b)(101)(i)(C), (b)(101)(ii)(A), and (b)(101)(iii) to read as
follows:

Sec. 229.601 (Item 601) Exhibits.

* * * * *
(b) * * *
(101) * * *
(i) Required to be submitted. Required to be submitted to the
Commission in the manner provided by Sec. 232.405 of this chapter if
the registrant is not registered under the Investment Company Act of
1940 (15 U.S.C. 80a-1 et seq.), except that an Interactive Data File:
* * * * *
(C) Is required for a Form 8-K (Sec. 249.308 of this chapter):

[[Page 33352]]

(1) Only when the Form 8-K contains audited annual financial
statements that are a revised version of financial statements that
previously were filed with the Commission and that have been revised
pursuant to applicable accounting standards to reflect the effects of
certain subsequent events, including a discontinued operation, a change
in reportable segments or a change in accounting principle. In such
case, the Interactive Data File will be required only as to such
revised financial statements regardless of whether the Form 8-K
contains other financial statements; and
(2) Except that a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)(48)) also is required to submit an Interactive Data File to the
extent required by Sec. 232.405(b)(3)(iii) of this chapter.
(ii) * * *
(A) Registrant is not registered under the Investment Company Act
of 1940 (15 U.S.C. 80a-1 et seq.); and
* * * * *
(iii) Not permitted to be submitted. Not permitted to be submitted
to the Commission if the registrant is registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.).
* * * * *

PART 230--GENERAL RULES and REGULATIONS, SECURITIES ACT OF 1933

0
3. The authority citation for part 230 continues to read, in part, as
follows:

Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h,
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-
7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-
30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126
Stat. 313 (2012), unless otherwise noted.
* * * * *
Sections 230.400 to 230.499 issued under secs. 6, 8, 10, 19, 48
Stat. 78, 79, 81, and 85, as amended (15 U.S.C. 77f, 77h, 77j, 77s).
Sec. 230.457 also issued under secs. 6 and 7, 15 U.S.C. 77f and
77g.
* * * * *

0
4. Amend Sec. 230.134 by revising paragraph (g) to read as follows:

Sec. 230.134 Communications not deemed a prospectus.

* * * * *
(g) This section does not apply to a communication relating to an
investment company registered under the Investment Company Act of 1940
(15 U.S.C. 80a-1 et seq.), other than a registered closed-end
investment company.

0
5. Amend Sec. 230.138 by:
0
a. Removing Instruction to paragraph (a)(1);
0
b. Adding paragraph (a)(1)(iii); and
0
c. Revising paragraph (a)(2)(i).
The addition and revision read as follows:

Sec. 230.138 Publications or distributions of research reports by
brokers or dealers about securities other than those they are
distributing.

(a) * * *
(1) * * *
(iii) Note: If the issuer has filed a shelf registration statement
under Sec. 230.415(a)(1)(x) (Rule 415(a)(1)(x)) or pursuant to General
Instruction I.D. of Form S-3, General Instruction I.C. of Form F-3
(Sec. 239.13 or Sec. 239.33 of this chapter), or pursuant to General
Instructions A.2 and B of Form N-2 (Sec. Sec. 239.14 and 274.11a-1 of
this chapter) with respect to multiple classes of securities, the
conditions of paragraph (a)(1) of this section must be satisfied for
the offering in which the broker or dealer is participating or will
participate.
(2) * * *
(i)(A) Is required to file reports, and has filed all periodic
reports required during the preceding 12 months (or such shorter time
that the issuer was required to file such reports) on Forms 10-K (Sec.
249.310 of this chapter), 10-Q (Sec. 249.308a of this chapter), and
20-F (Sec. 249.220f of this chapter) pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));
or
(B)(1) Is a registered closed-end investment company; and
(2) Is required to file reports, and has filed all periodic reports
required during the preceding 12 months (or such shorter time that the
issuer was required to file such reports) on Forms N-CSR (Sec. Sec.
249.331 and 274.128 of this chapter), N-PORT (Sec. 274.150 of this
chapter), and N-CEN (Sec. Sec. 249.330 and 274.101 of this chapter)
pursuant to Section 30 of the Investment Company Act; or
* * * * *

0
6. Amend Sec. 230.156 by adding paragraph (d) to read as follows:

Sec. 230.156 Investment company sales literature.

* * * * *
(d) Nothing in this section may be construed to prevent a business
development company or a registered closed-end investment company from
qualifying for an exemption under Sec. 230.168 or Sec. 230.169.

0
7. Amend Sec. 230.163 by:
0
a. In paragraph (b)(3)(i):
0
i. Removing ``Rule 165 (Sec. 230.165) or Rule 166 (Sec. 230.166)''
and adding ``Sec. 230.165 (Rule 165) or Sec. 230.166 (Rule 166)'' in
its place; and
0
ii. Adding ``or'' after the semicolon at the end of the paragraph;
0
b. Revising paragraph (b)(3)(ii); and
0
c. Removing paragraph (b)(3)(iii).
The revision reads as follows:

Sec. 230.163 Exemption from section 5(c) of the Act for certain
communications by or on behalf of well-known seasoned issuers.

* * * * *
(b) * * *
(3) * * *
(ii) Communications by an issuer that is an investment company
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.), other than a registered closed-end investment company.
* * * * *

0
8. Amend Sec. 230.163A by revising paragraph (b)(4) to read as
follows:

Sec. 230.163A Exemption from section 5(c) of the Act for certain
communications made by or on behalf of issuers more than 30 days before
a registration statement is filed.

* * * * *
(b) * * *
(4) Communications made by an issuer that is an investment company
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.), other than a registered closed-end investment company.
* * * * *

0
9. Amend Sec. 230.164 by revising paragraph (f) to read as follows:

Sec. 230.164 Post-filing free writing prospectuses in connection with
certain registered offerings.

* * * * *
(f) Excluded issuers. This section and Rule 433 are not available
if the issuer is an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.), other than a registered
closed-end investment company.
* * * * *

0
10. Amend Sec. 230.168 by revising paragraphs (b)(1) introductory
text, (b)(2) introductory text, and (d)(3) to read as follows:

Sec. 230.168 Exemption from sections 2(a)(10) and 5(c) of the Act for
certain communications of regularly released factual business
information and forward-looking information.

* * * * *
(b) * * *
(1) Factual business information means some or all of the following

[[Page 33353]]

information that is released or disseminated under the conditions in
paragraph (d) of this section, including, without limitation, such
factual business information contained in reports or other materials
filed with, furnished to, or submitted to the Commission pursuant to
the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.):
* * * * *
(2) Forward-looking information means some or all of the following
information that is released or disseminated under the conditions in
paragraph (d) of this section, including, without limitation, such
forward-looking information contained in reports or other materials
filed with, furnished to, or submitted to the Commission pursuant to
the Securities Exchange Act of 1934 or pursuant to the Investment
Company Act of 1940:
* * * * *
(d) * * *
(3) The issuer is not an investment company registered under the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), other than a
registered closed-end investment company.

0
11. Amend Sec. 230.169 by revising paragraph (d)(4) to read as
follows:

Sec. 230.169 Exemption from sections 2(a)(10) and 5(c) of the Act for
certain communications of regularly released factual business
information.

* * * * *
(d) * * *
(4) The issuer is not an investment company registered under the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), other than a
registered closed-end investment company.

0
12. Amend Sec. 230.172 by:
0
a. Revising paragraph (d)(1);
0
b. Removing paragraph (d)(2);
0
c. Redesignating paragraphs (d)(3) and (4) as paragraphs (d)(2) and
(3); and
0
d. In newly redesignated paragraph (d)(2), removing ``Rule 165(f)(1)
(Sec. 230.165(f)(1)'' and adding ``Sec. 230.165(f)(1) (Rule
165(f)(1))'' in its place.
The revision reads as follows:

Sec. 230.172 Delivery of prospectuses.

* * * * *
(d) * * *
(1) Offering of any investment company registered under the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), other than a
registered closed-end investment company;
* * * * *

0
13. Amend Sec. 230.173 by:
0
a. Revising paragraph (f)(2);
0
b. Removing paragraph (f)(3);
0
c. Redesignating paragraphs (f)(4) and (5) as paragraphs (f)(3) and
(4); and
0
d. In newly redesignated paragraph (f)(3), removing ``Rule 165(f)(1)
(Sec. 230.165(f)(1))'' and adding ``Sec. 230.165(f)(1) (Rule
165(f)(1))'' in its place.
The revision reads as follows:

Sec. 230.173 Notice of registration.

* * * * *
(f) * * *
(2) Offering of an investment company registered under the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), other than a
registered closed-end investment company;
* * * * *

0
14. Amend Sec. 230.405 by:
0
a. Revising the definition of ``Automatic shelf registration
statement'';
0
b. Adding the definition for ``Exchange-traded vehicle security'' in
alphabetical order;
0
c. In the definition of ``Ineligible issuer'':
0
i. Revising paragraph (1)(i);
0
ii. In paragraph (1)(vii), removing the word ``or'' at the end of the
paragraph;
0
iii. In paragraph (1)(viii), removing the period and adding in its
place ``; or''; and
0
iv. Adding paragraph (1)(ix);
0
d. Adding the definition for ``Registered closed-end investment
company'' in alphabetical order; and
0
e. In the definition ``Well-known seasoned issuer'', revising
paragraphs (1)(i) introductory text, (1)(i)(B)(2), (1)(v), and
(2)(iii).
The additions and revisions read as follows:

Sec. 230.405 Definitions of terms.

* * * * *
Automatic shelf registration statement. The term automatic shelf
registration statement means a registration statement filed on Form S-
3, Form F-3, or Form N-2 (Sec. 239.13, Sec. 239.33, or Sec. Sec.
239.14 and 274.11a-1 of this chapter) by a well-known seasoned issuer
pursuant to General Instruction I.D. of Form S-3, General Instruction
I.C. of Form F-3, or General Instruction B of Form N-2.
* * * * *
Exchange-traded vehicle security. The term exchange-traded vehicle
security means a security:
(1) Of an issuer:
(i) That is not a registered investment company under the
Investment Company Act of 1940; and
(ii) The assets of which consist primarily of commodities,
currencies, or derivative instruments that reference commodities or
currencies, or interests in the foregoing;
(2) Offered or sold in a registered offering on a continuous basis
pursuant to Sec. 230.415 (Rule 415) by or on behalf of the issuer;
(3) Of a class of securities that is listed for trading on a
national securities exchange at or immediately after the time of
effectiveness of the registration statement; and
(4) Which is able to be purchased or redeemed, subject to
conditions or limitations as described in the registration statement
for the offering of such security, by the issuer for a ratable share of
the issuer's assets (or the cash equivalent thereof) at their net asset
value each business day.
* * * * *
Ineligible issuer. (1) * * *
(i) Any issuer that is required to file reports pursuant to section
13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)) or section 30 of the Investment Company Act of 1940 (15 U.S.C.
80a-29) that has not filed all reports and other materials required to
be filed during the preceding 12 months (or for such shorter period
that the issuer was required to file such reports pursuant to sections
13 or 15(d) of the Securities Exchange Act of 1934 or section 30 of the
Investment Company Act of 1940), other than reports on Form 8-K (Sec.
249.308 of this chapter) required solely pursuant to an item specified
in General Instruction I.A.3(b) of Form S-3 (Sec. 239.13 of this
chapter) or General Instruction A.2.a of Form N-2 (Sec. Sec. 239.14
and 274.11a-1 of this chapter) (or in the case of an asset-backed
issuer, to the extent the depositor or any issuing entity previously
established, directly or indirectly, by the depositor (as such terms
are defined in Sec. 229.1101 of this chapter (Item 1101 of Regulation
AB) are or were at any time during the preceding 12 calendar months
required to file reports pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 with respect to a class of asset-backed
securities involving the same asset class, such depositor and each such
issuing entity must have filed all reports and other material required
to be filed for such period (or such shorter period that each such
entity was required to file such reports), other than reports on Form
8-K required solely pursuant to an item specified in General
Instruction I.A.2 of Form SF-3);
* * * * *
(ix) In the case of an issuer that is a registered closed-end
investment

[[Page 33354]]

company or a business development company, within the past three years
any person or entity that at the time was an investment adviser to the
issuer, including any sub-adviser, was made the subject of any judicial
or administrative decree or order arising out of a governmental action
that determines that the investment adviser aided, abetted or caused
the issuer to have violated the anti-fraud provisions of the Federal
securities laws.
* * * * *
Registered closed-end investment company. The term registered
closed-end investment company means a closed-end company, as defined in
section 5(a)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a-
5(a)(2)), that is registered under the Investment Company Act.
* * * * *
Well-known seasoned issuer. * * *
(1)(i) Meets all the registrant requirements of General Instruction
I.A. of Form S-3 or Form F-3 (Sec. 239.13 or Sec. 239.33 of this
chapter), or General Instructions A.2.a and A.2.b of Form N-2
(Sec. Sec. 239.14 and 274.11a-1 of this chapter) and either:
* * * * *
(B) * * *
(2) Will register only non-convertible securities, other than
common equity, and full and unconditional guarantees permitted pursuant
to paragraph (1)(ii) of this definition unless, at the determination
date, the issuer also is eligible to register a primary offering of its
securities relying on General Instruction I.B.1. of Form S-3 or Form F-
3 or is eligible to register a primary offering described in General
Instruction I.B.1. of Form S-3 relying on General Instruction A.2 of
Form N-2.
* * * * *
(v) Is not an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.), other than a registered
closed-end investment company.
(2) * * *
(iii) In the event that the issuer has not filed a shelf
registration statement or amended a shelf registration statement for
purposes of complying with section 10(a)(3) of the Act for sixteen
months, the time of filing of the issuer's most recent annual report on
Form 10-K (Sec. 249.310 of this chapter), Form 20-F (Sec. 249.220f of
this chapter), or Form N-CSR (Sec. Sec. 249.331 and 274.128 of this
chapter) (or if such report has not been filed by its due date, such
due date).
* * * * *

0
15. Amend Sec. 230.415 by revising paragraphs (a)(1)(x) and (xi),
adding paragraph (a)(1)(xiii), and revising paragraph (a)(2) to read as
follows:

Sec. 230.415 Delayed or continuous offering and sale of securities.

(a) * * *
(1) * * *
(x) Securities registered (or qualified to be registered) on Form
S-3 or Form F-3 (Sec. 239.13 or Sec. 239.33 of this chapter), or on
Form N-2 (Sec. Sec. 239.14 and 274.11a-1 of this chapter) pursuant to
General Instruction A.2 of that form, which are to be offered and sold
on an immediate, continuous or delayed basis by or on behalf of the
registrant, a majority-owned subsidiary of the registrant or a person
of which the registrant is a majority-owned subsidiary; or
(xi) Shares of common stock which are to be offered and sold on a
delayed or continuous basis by or on behalf of a registered closed-end
investment company or business development company that makes periodic
repurchase offers pursuant to Sec. 270.23c-3 of this chapter.
* * * * *
(xiii) Exchange-traded vehicle securities which are to be offered
and sold on a continuous basis by or on behalf of the registrant in
accordance with Sec. 230.456(d) (Rule 456(d)).
(2) Securities in paragraphs (a)(1)(viii) and (ix) of this section
that are not registered on Form S-3 or Form F-3 (Sec. 239.13 or Sec.
239.33 of this chapter), or on Form N-2 (Sec. Sec. 239.14 and 274.11a-
1 of this chapter) pursuant to General Instruction A.2 of that form,
may only be registered in an amount which, at the time the registration
statement becomes effective, is reasonably expected to be offered and
sold within two years from the initial effective date of the
registration.
* * * * *

0
16. Amend Sec. 230.418 by revising paragraph (a)(3) introductory text
to read as follows:

Sec. 230.418 Supplemental information.

(a) * * *
(3) Except in the case of a registrant eligible to use Form S-3
(Sec. 239.13 of this chapter), or Form N-2 (Sec. Sec. 239.14 and
274.11a-1 of this chapter) under General Instruction A.2 of that form,
any engineering, management or similar reports or memoranda relating to
broad aspects of the business, operations or products of the
registrant, which have been prepared within the past twelve months for
or by the registrant and any affiliate of the registrant or any
principal underwriter, as defined in Sec. 230.405 (Rule 405), of the
securities being registered except for:
* * * * *

0
17. Amend Sec. 230.424 by revising paragraph (f) and adding paragraph
(i) to read as follows:

Sec. 230.424 Filing of prospectuses, number of copies.

* * * * *
(f) This section shall not apply with respect to prospectuses of an
investment company registered under the Investment Company Act of 1940,
other than a registered closed-end investment company. References to
``form of prospectus'' in paragraphs (a), (b), and (c) of this section
shall be deemed also to refer to the form of Statement of Additional
Information.
* * * * *
(i)(1) A form of prospectus filed pursuant to this section that
operates to reflect the payment of filing fees for an offering of an
indeterminate amount of exchange-traded vehicle securities pursuant to
Sec. Sec. 230.456(d) and 230.457(u) (Rule 456(d) and Rule 457(u))
shall be filed with the Commission within the time period set forth in
Rule 456(d). The form of prospectus must be accompanied by the
appropriate registration fee.
(2) The form of prospectus must include the following information:
(i) The name and address of issuer;
(ii) The name of the securities for which the prospectus is filed;
(iii) The Securities Act file number(s) of the registration
statement(s) associated with the offering;
(iv) The last day of the fiscal year for the issuer for which the
prospectus is filed;
(v) The calculation of registration fee information calculated
pursuant to Rule 457(u); and
(vi) The total interest due pursuant to Rule 456(d)(5) and the
total amount of registration fee due including any such interest, if
the prospectus is being filed more than 90 days after the end of the
issuer's fiscal year.

0
18. Amend Sec. 230.430A by revising paragraph (a)(2) to read as
follows:

Sec. 230.430A Prospectus in a registration statement at the time of
effectiveness.

(a) * * *
(2) The registrant furnishes the undertakings required by Sec.
229.512(i) of this chapter (Item 512(i) of Regulation S-K), or the
undertakings required by Item 34.4 of Form N-2 (Sec. Sec. 239.14 and
274.11a-1 of this chapter); and
* * * * *

0
19. Amend Sec. 230.430B by revising paragraphs (b) introductory text,
(f)(4)

[[Page 33355]]

introductory text, (f)(4)(ii), and (i) to read as follows:

Sec. 230.430B Prospectus in a registration statement after effective
date.

* * * * *
(b) A form of prospectus filed as part of a registration statement
for offerings pursuant to Rule 415(a)(1)(i) by an issuer eligible to
use Form S-3 or Form F-3 (Sec. 239.13 or Sec. 239.33 of this chapter)
for primary offerings pursuant to General Instruction I.B.1 of such
forms, or an issuer eligible to register such a primary offering under
General Instruction A.2 of Form N-2 (Sec. Sec. 239.14 and 274.11a-1 of
this chapter), may omit the information specified in paragraph (a) of
this section, and may also omit the identities of selling security
holders and amounts of securities to be registered on their behalf if:
* * * * *
(f) * * *
(4) Except for an effective date resulting from the filing of a
form of prospectus filed for purposes of including information required
by section 10(a)(3) of the Act or pursuant to Sec. 229.512(a)(1)(ii)
of this chapter (Item 512(a)(1)(ii) of Regulation S-K) or Item
34.3.a(2) of Form N-2 (Sec. Sec. 239.14 and 274.11a-1 of this
chapter), the date a form of prospectus is deemed part of and included
in the registration statement pursuant to this paragraph (f)(4) shall
not be an effective date established pursuant to paragraph (f)(2) of
this section as to:
* * * * *
(ii) Any person signing any report or document incorporated by
reference into the registration statement, except for such a report or
document incorporated by reference for purposes of including
information required by section 10(a)(3) of the Act or pursuant to Item
512(a)(1)(ii) of Regulation S-K or Item 34.3.a(2) of Form N-2
(Sec. Sec. 239.14 and 274.11a-1 of this chapter) (such person except
for such reports being deemed not to be a person who signed the
registration statement within the meaning of section 11(a) of the Act).
* * * * *
(i) Issuers relying on this section shall furnish the undertakings
required by Item 512(a) of Regulation S-K or Item 34.3 of Form N-2
(Sec. Sec. 239.14 and 274.11a-1 of this chapter) as applicable.

0
20. Amend Sec. 230.433 by revising paragraphs (b)(1)(i) and (iv) and
(c)(1)(ii) to read as follows:

Sec. 230.433 Conditions to permissible post-filing free writing
prospectuses.

* * * * *
(b) * * *
(1) * * *
(i) Offerings of securities registered on Form S-3 (Sec. 239.33 of
this chapter) pursuant to General Instruction I.B.1, I.B.2, I.C., or
I.D. thereof or on Form SF-3 (Sec. 239.45 of this chapter) or on Form
N-2 (Sec. Sec. 239.14 and 274.11a-1 of this chapter) pursuant to
General Instruction A.2 with respect to the same transactions;
* * * * *
(iv) Any other offering not excluded from reliance on this section
and Rule 164 of securities of an issuer eligible to use Form S-3 or
Form F-3 for primary offerings pursuant to General Instruction I.B.1 of
such Forms or an issuer eligible to use General Instruction A.2 of Form
N-2 to register a primary offering described in General Instruction
I.B.1 of Form S-3.
* * * * *
(c) * * *
(1) * * *
(ii) Information contained in the issuer's periodic and current
reports filed or furnished to the Commission pursuant to section 13 or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d))
that are incorporated by reference into the registration statement and
not superseded or modified, or pursuant to section 30 of the Investment
Company Act of 1940 (15 U.S.C. 80a-29).
* * * * *

0
21. Effective August 1, 2021, amend Sec. 230.456 by adding paragraph
(d) to read as follows:

Sec. 230.456 Date of filing; timing of fee payment.

* * * * *
(d)(1) Notwithstanding paragraph (a) of this section, where a
registration statement relates to an offering of exchange-traded
vehicle securities, an issuer may elect to register an offering of an
indeterminate amount of such securities if it meets the following
conditions:
(i) The issuer must state in the ``Calculation of Registration
Fee'' table that it is offering an indeterminate amount of such
securities; and
(ii) The issuer must, not later than 90 days after the end of any
fiscal year during which it has publicly offered such securities, pay a
registration fee to the Commission calculated in accordance with Sec.
230.457(u) (Rule 457(u)) and file a prospectus in accordance with Sec.
230.424(i) (Rule 424(i)).
Instruction 1 to paragraph (d)(1)(ii): To determine the date on
which the registration fee must be paid, the first day of the 90-day
period is the first calendar day of the fiscal year following the
fiscal year for which the registration fee is to be paid. If the last
day of the 90-day period falls on a Saturday, Sunday, or Federal
holiday, the registration fee is due on the first business day
thereafter.
(2) If a registrant elects to register an offering of an
indeterminate amount of exchange-traded vehicle securities pursuant to
paragraph (d)(1) of this section, the securities sold will be
considered registered, for purposes of section 6(a) of the Act, if the
registration fee has been paid and a prospectus is filed pursuant to
paragraph (d)(1) not later than the end of the 90-day period.
(3) A registration statement filed relying on the registration fee
payment provisions of paragraph (d)(1) of this section will be
considered filed as to the securities identified in the registration
statement for purposes of this section and section 5 of the Act when it
is received by the Commission, if it complies with all other
requirements under the Act, including this part.
(4) For purposes of this section, if an issuer ceases operations,
the date the issuer ceases operations will be deemed to be the end of
its fiscal year. In the case of a liquidation, merger, or sale of all
or substantially all of the assets (``merger'') of the issuer, the
issuer will be deemed to have ceased operations for the purposes of
this section on the date the merger is consummated; provided, however,
that in the case of a merger of an issuer or a series of an issuer
(``Predecessor Issuer'') with another issuer or a series of an issuer
(``Successor Issuer''), the Predecessor Issuer will not be deemed to
have ceased operations and the Successor Issuer will assume the
obligations, fees, and redemption credits of the Predecessor Issuer
incurred pursuant to this section if the Successor Issuer:
(i) Had no assets or liabilities, other than nominal assets or
liabilities, and no operating history immediately prior to the merger;
(ii) Acquired substantially all of the assets and assumed
substantially all of the liabilities and obligations of the Predecessor
Issuer; and
(iii) The merger is not designed to result in the Predecessor
Issuer merging with, or substantially all of its assets being acquired
by, an issuer (or a series of an issuer) that would not meet the
conditions of paragraph (d)(4)(i) of this section.
(5) An issuer paying the fee required by paragraph (d)(1) of this
section or any portion thereof more than 90 days after the end of the
fiscal year of the issuer shall pay to the Commission interest on

[[Page 33356]]

unpaid amounts, calculated based on the interest rate in effect at the
time of the interest payment by reference to the ``current value of
funds rate'' on the Treasury Department's Financial Management Service
internet site at https://www.fms.treas.gov, or by calling (202) 874-
6995, and using the following formula: I = (X) (Y) (Z/365), where: I =
Amount of interest due; X = Amount of registration fee due; Y =
Applicable interest rate, expressed as a fraction; Z = Number of days
by which the registration fee payment is late. The payment of interest
pursuant to this paragraph (d)(5) shall not preclude the Commission
from bringing an action to enforce the requirements of this paragraph
(d).
(6) An immaterial or unintentional failure to comply with a
requirement of this paragraph (d) will not result in a violation of
section 6(a) of the Act (15 U.S.C. 77f(a)), so long as:
(i) A good faith and reasonable effort was made to comply with the
requirement; and
(ii) In the case of a late payment of a registration fee, the
issuer pays the registration fee and any interest due thereon as soon
as practicable after discovery of the failure to pay the registration
fee.

0
22. Effective August 1, 2021, amend Sec. 230.457 by adding paragraph
(u) to read as follows:

Sec. 230.457 Computation of fee.

* * * * *
(u) Where an issuer elects to register an offering of an
indeterminate amount of exchange-traded vehicle securities in
accordance with Sec. 230.456(d) (Rule 456(d)), the registration fee is
to be calculated in the following manner:
(1) Determine the aggregate sale price of securities sold during
the fiscal year.
(2) Determine the sum of:
(i) The aggregate redemption or repurchase price of securities
redeemed or repurchased during the fiscal year; and
(ii) The aggregate redemption or repurchase price of securities
redeemed or repurchased during any prior fiscal year ending no earlier
than August 1, 2021, that were not used previously to reduce
registration fees payable to the Commission.
(3) Subtract the amount in paragraph (u)(2) of this section from
the amount in paragraph (u)(1) of this section. If the resulting amount
is positive, the amount is the net sales amount. If the resulting
amount is negative, it is the amount of redemption credits available
for use in future years to offset sales.
(4) The registration fee is calculated by multiplying the net sales
amount by the fee payment rate in effect on the date of the fee
payment. If the issuer determines that it had net redemptions or
repurchases for the fiscal year, no registration fee is due.

0
23. Amend Sec. 230.462 by revising paragraph (f) to read as follows:

Sec. 230.462 Immediate effectiveness of certain registration
statements and post-effective amendments.

* * * * *
(f) A post-effective amendment filed pursuant to paragraph (e) of
this section for purposes of adding a new issuer and its securities as
permitted by Sec. 230.413(b) (Rule 413(b)) that satisfies the
requirements of Form S-3, Form F-3, or General Instruction A.2 of Form
N-2 (Sec. 239.13, Sec. 239.33, or Sec. Sec. 239.14 and 274.11a-1 of
this chapter), as applicable, including the signatures required by
Sec. 230.402(e) (Rule 402(e)), and contains a prospectus satisfying
the requirements of Sec. 230.430B (Rule 430B), shall become effective
upon filing with the Commission.

0
24. Amend Sec. 230.486 by:
0
a. Revising paragraphs (a), (b) introductory text, and (b)(1)(iv);
0
b. Removing ``and'' at the end of paragraph (b)(1)(v);
0
c. Redesignating paragraph (b)(1)(vi) as paragraph (b)(1)(vii);
0
d. Adding new paragraph (b)(1)(vi);
0
e. Revising the introductory text to paragraph (b)(2); and
0
f. Adding paragraph (g).
The revisions and additions read as follows:

Sec. 230.486 Effective date of post-effective amendments and
registration statements filed by certain closed-end management
investment companies.

(a) Automatic effectiveness. Except as otherwise provided in this
section, a post-effective amendment to a registration statement, or a
registration statement described in paragraph (g) of this section,
filed by a registered closed-end management investment company or
business development company which makes periodic repurchase offers
under Sec. 270.23c-3 of this chapter or which offers securities under
Sec. 230.415(a)(1)(ix), shall become effective on the sixtieth day
after the filing thereof, or a later date designated by the registrant
on the facing sheet of the amendment or registration statement, which
date shall not be later than eighty days after the date on which the
amendment or registration statement is filed, Provided, that the
Commission, having due regard to the public interest and the protection
of investors, may declare an amendment or registration statement filed
under this paragraph (a) effective on an earlier date.
(b) Immediate effectiveness. Except as otherwise provided in this
section, a post-effective amendment to a registration statement, or a
registration statement, filed by a registered closed-end management
investment company or business development company which makes periodic
repurchase offers under Sec. 270.23c-3 of this chapter or which offers
securities under Sec. 230.415(a)(1)(ix), shall become effective on the
date on which it is filed with the Commission, or a later date
designated by the registrant on the facing sheet of the amendment or
registration statement, which date shall be not later than thirty days
after the date on which the amendment or registration statement is
filed, except that a post-effective amendment including a designation
of a new effective date under paragraph (b)(1)(iii) of this section
shall become effective on the new effective date designated therein,
Provided, that the following conditions are met:
(1) * * *
(iv) Disclosing or updating the information required by Item 9.1.c
of Form N-2 [17 CFR 239.14 and 274.11a-1];
* * * * *
(vi) Complying with Sec. 230.415(a)(5) and (6); and
* * * * *
(2) The registrant represents that the amendment is filed solely
for one or more of the purposes specified in paragraph (b)(1) of this
section and that no material event requiring disclosure in the
prospectus, other than one listed in paragraph (b)(1) or one for which
the Commission has approved a filing under paragraph (b)(1)(vii) of
this section, has occurred since the latest of the following three
dates:
* * * * *
(g) Registration statements. A registration statement can become
effective under paragraph (a) of this section if it is filed for the
purpose of:
(1) Registering additional shares of common stock for which a
registration statement filed on Form N-2 (Sec. Sec. 239.14 and
274.11a-1 of this chapter) is effective; or
(2) Complying with Sec. 230.415(a)(5) and (6).

0
25. Amend Sec. 230.497 by:
0
a. Remove from paragraphs (c) and (e) the text ``Form N-2 (Sec. Sec.
239.14 and 274.11a-1 of this chapter),'';
0
b. Removing the heading from paragraph (k);
0
c. Adding paragraph (l); and
0
d. Removing the parenthetical authority citation at the end of the
section.

[[Page 33357]]

The addition reads as follows:

Sec. 230.497 Filing of investment company prospectuses--number of
copies.

* * * * *
(l) Except for an investment company advertisement deemed to be a
section 10(b) prospectus pursuant to Sec. 230.482, this section shall
not apply with respect to prospectuses of a registered closed-end
investment company, or a business development company.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS

0
26. The general authority citation for part 232 continues to read as
follows:

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3,
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c),
80a-8, 80a-29, 80a-30, 80a-37, 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
* * * * *

0
27. Amend Sec. 232.11 by revising the section heading and the
definition of ``Related Official Filing'' to read as follows:

Sec. 232.11 Definition of terms used in this part.

* * * * *
Related Official Filing. The term Related Official Filing means the
ASCII or HTML format part of the official filing with which all or part
of an Interactive Data File appears as an exhibit or, in the case of a
filing on Form N-1A (Sec. Sec. 239.15A and 274.11A of this chapter),
Form N-2 (Sec. Sec. 239.14 and 274.11a-1 of this chapter), Form N-3
(Sec. Sec. 239.17a and 274.11b of this chapter), Form N-4 (Sec. Sec.
239.17b and 274.11c of this chapter), Form N-6 (Sec. Sec. 239.17c and
274.11d of this chapter), and Form N-CSR (Sec. 274.128 of this
chapter), and, to the extent required by Sec. 232.405 [Rule 405 of
Regulation S-T] for a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)(48)), Form 10-K (Sec. 249.310 of this chapter), Form 10-Q (Sec.
249.308a of this chapter), and Form 8-K (Sec. 249.308 of this
chapter), the ASCII or HTML format part of an official filing that
contains the information to which an Interactive Data File corresponds.
* * * * *

0
28. Amend Sec. 232.405 by:
0
a. Revising the introductory text and paragraphs (a)(2), (a)(3)(i)
introductory text, (a)(3)(ii), and (a)(4);
0
b. Adding a heading for paragraph (b);
0
c. Removing the heading and revising the introductory text of paragraph
(b)(1);
0
d. Adding paragraph (b)(3); and
0
e. Redesignating the note to Sec. 232.405 as note 2 to Sec. 232.405
and revising the last sentence of newly redesignated note 2 to Sec.
232.405.
The revisions and addition read as follows:

Sec. 232.405 Interactive Data File submissions.

This section applies to electronic filers that submit Interactive
Data Files. Section 229.601(b)(101) of this chapter (Item 601(b)(101)
of Regulation S-K), paragraph (101) of Part II--Information Not
Required to be Delivered to Offerees or Purchasers of Form F-10 (Sec.
239.40 of this chapter), paragraph 101 of the Instructions as to
Exhibits of Form 20-F (Sec. 249.220f of this chapter), paragraph
B.(15) of the General Instructions to Form 40-F (Sec. 249.240f of this
chapter), paragraph C.(6) of the General Instructions to Form 6-K
(Sec. 249.306 of this chapter), General Instruction C.3.(g) of Form N-
1A (Sec. Sec. 239.15A and 274.11A of this chapter), General
Instruction I of Form N-2 (Sec. Sec. 239.14 and 274.11a-1 of this
chapter), General Instruction C.3.(h) of Form N-3 (Sec. Sec. 239.17a
and 274.11b of this chapter), General Instruction C.3.(h) of Form N-4
(Sec. Sec. 239.17b and 274.11c of this chapter), General Instruction
C.3.(h) of Form N-6 (Sec. Sec. 239.17c and 274.11d of this chapter),
and General Instruction C.4 of Form N-CSR (Sec. 274.128 of this
chapter) specify when electronic filers are required or permitted to
submit an Interactive Data File (Sec. 232.11), as further described in
note 2 to this section. This section imposes content, format, and
submission requirements for an Interactive Data File, but does not
change the substantive content requirements for the financial and other
disclosures in the Related Official Filing (Sec. 232.11).
(a) * * *
(2) Be submitted only by an electronic filer either required or
permitted to submit an Interactive Data File as specified by Sec.
229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S-K),
paragraph (101) of Part II--Information Not Required to be Delivered to
Offerees or Purchasers of Form F-10 (Sec. 239.40 of this chapter),
paragraph 101 of the Instructions as to Exhibits of Form 20-F (Sec.
249.220f of this chapter), paragraph B.(15) of the General Instructions
to Form 40-F (Sec. 249.240f of this chapter), paragraph C.(6) of the
General Instructions to Form 6-K (Sec. 249.306 of this chapter),
General Instruction C.3.(g) of Form N-1A (Sec. Sec. 239.15A and
274.11A of this chapter), General Instruction I of Form N-2 (Sec. Sec.
239.14 and 274.11a-1 of this chapter), General Instruction C.3.(h) of
Form N-3 (Sec. Sec. 239.17a and 274.11b of this chapter), General
Instruction C.3.(h) of Form N-4 (Sec. Sec. 239.17b and 274.11c of this
chapter), General Instruction C.3.(h) of Form N-6 (Sec. Sec. 239.17c
and 274.11d of this chapter), or General Instruction C.4 of Form N-CSR
(Sec. 274.128 of this chapter), as applicable;
(3) * * *
(i) If the electronic filer is neither a management investment
company registered under the Investment Company Act of 1940 (15 U.S.C.
80a et seq.), nor a separate account as defined in Section 2(a)(14) of
the Securities Act (15 U.S.C. 77b(a)(14)) registered under the
Investment Company Act of 1940, nor a business development company as
defined in Section 2(a)(48) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(48)), and is not within one of the categories specified
in paragraph (f)(1)(i) of this section, as partly embedded into a
filing with the remainder simultaneously submitted as an exhibit to:
* * * * *
(ii) If the electronic filer is either a management investment
company registered under the Investment Company Act of 1940 (15 U.S.C.
80a et seq.), or a separate account (as defined in Section 2(a)(14) of
the Securities Act (15 U.S.C. 77b(a)(14)) registered under the
Investment Company Act of 1940, or a business development company as
defined in Section 2(a)(48) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(48)), and is not within one of the categories specified
in paragraph (f)(1)(ii) of this section, as partly embedded into a
filing with the remainder simultaneously submitted as an exhibit to a
filing that contains the disclosure this section requires to be tagged;
and
(4) Be submitted in accordance with the EDGAR Filer Manual and, as
applicable, either Item 601(b)(101) of Regulation S-K (Sec.
229.601(b)(101) of this chapter), paragraph (101) of Part II--
Information Not Required to be Delivered to Offerees or Purchasers of
Form F-10 (Sec. 239.40 of this chapter), paragraph 101 of the
Instructions as to Exhibits of Form 20-F (Sec. 249.220f of this
chapter), paragraph B.(15) of the General Instructions to Form 40-F
(Sec. 249.240f of this chapter), paragraph C.(6) of the General
Instructions to Form 6-K (Sec. 249.306 of this chapter), General
Instruction C.3.(g) of Form N-1A (Sec. Sec. 239.15A and 274.11A of
this chapter), General Instruction I of Form N-2 (Sec. Sec. 239.14 and
274.11a-1 of this chapter), General Instruction C.3.(h) of Form N-3
(Sec. Sec. 239.17a and 274.11b of this chapter), General Instruction
C.3.(h) of Form N-4 (Sec. Sec. 239.17b and 274.11c of

[[Page 33358]]

this chapter), General Instruction C.3.(h) of Form N-6 (Sec. Sec.
239.17c and 274.11d of this chapter); or General Instruction C.4 of
Form N-CSR (Sec. 274.128 of this chapter).
(b) Content--categories of information presented. (1) If the
electronic filer is neither a management investment company registered
under the Investment Company Act of 1940 (15 U.S.C. 80a et seq.), nor a
separate account (as defined in Section 2(a)(14) of the Securities Act
(15 U.S.C. 77b(a)(14)) registered under the Investment Company Act of
1940, nor a business development company as defined in Section 2(a)(48)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)) an
Interactive Data File must consist of only a complete set of
information for all periods required to be presented in the
corresponding data in the Related Official Filing, no more and no less,
from all of the following categories:
* * * * *
(3) If the electronic filer is either a closed-end management
investment company registered under the Investment Company Act of 1940
(15 U.S.C. 80a et seq.) or a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)(48)), an Interactive Data File must consist only of a complete set
of information for all corresponding data in the Related Official
Filing, no more and no less, as follows:
(i) For a business development company, for all periods required to
be presented:
(A) The complete set of the electronic filer's financial statements
(which includes the face of the financial statements and all
footnotes); and
(B) All schedules set forth in Sec. Sec. 210.12-01 through 210.12-
29 of this chapter (Article 12 of Regulation S-X) related to the
electronic filer's financial statements;
(ii) All of the information required on the cover page of Form N-2
(Sec. Sec. 239.14 and 274.11a-1 of this chapter) except the
Calculation of Registration Fee table; and
(iii) As applicable, all of the information provided in response to
Items 3.1, 4.3, 8.2.b, 8.2.d, 8.3.a, 8.3.b, 8.5.b, 8.5.c, 8.5.e,
10.1.a-d, 10.2.a-c, 10.2.e, 10.3, and 10.5 of Form N-2 in any
registration statement or post-effective amendment thereto filed on
Form N-2; or any form of prospectus filed pursuant to Sec. 230.424 of
this chapter (Rule 424 under the Securities Act); or, if a Registrant
is filing a registration statement pursuant to General Instruction A.2
of Form N-2, any filing on Form N-CSR, Form 10-K, Form 10-Q, or Form 8-
K to the extent such information appears therein.
* * * * *
Note 2 to Sec. 232.405: * * * For an issuer that is a management
investment company or separate account registered under the Investment
Company Act of 1940 (15 U.S.C. 80a et seq.) or a business development
company as defined in Section 2(a)(48) of the Investment Company Act of
1940 (15 U.S.C. 80a-2(a)(48)), General Instruction C.3.(g) of Form N-1A
(Sec. Sec. 239.15A and 274.11A of this chapter), General Instruction I
of Form N-2 (Sec. Sec. 239.14 and 274.11a-1 of this chapter), General
Instruction C.3.(h) of Form N-3 (Sec. Sec. 239.17a and 274.11b of this
chapter), General Instruction C.3.(h) of Form N-4 (Sec. Sec. 239.17b
and 274.11c of this chapter), General Instruction C.3.(h) of Form N-6
(Sec. Sec. 239.17c and 274.11d of this chapter), and General
Instruction C.4 of Form N-CSR (Sec. 274.128 of this chapter), as
applicable, specifies the circumstances under which an Interactive Data
File must be submitted.

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
29. The authority citation for part 239 continues to read, in part, as
follows:

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77sss, 78c, 78l,78m,78n, 78o(d), 78o-7 note, 78u-5, 78w(a),
78ll,78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24,
80a-26, 80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106,
126 Stat. 312, unless otherwise noted.
Sections 239.31, 239.32 and 239.33 are also issued under 15 U.S.C.
78l, 78m, 78o, 78w, 80a-8, 80a-29, 80a-30, 80a-37 and 12 U.S.C. 241.
* * * * *

0
30. Effective August 1, 2021, amend Form S-1 (referenced in Sec.
239.11) by revising the note that immediately follows the ``Calculation
of Registration Fee'' table to read as follows:

Note: The text of Form S-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

CALCULATION OF REGISTRATION FEE

* * * * *
Note: Specific details relating to the fee calculation shall be
furnished in notes to the table, including references to provisions of
Rule 457 (Sec. 230.457 of this chapter) relied upon, if the basis of
the calculation is not otherwise evident from the information presented
in the table. If the filing fee is calculated pursuant to Rule 457(o)
under the Securities Act, only the title of the class of securities to
be registered, the proposed maximum aggregate offering price for that
class of securities and the amount of registration fee need to appear
in the Calculation of Registration Fee table. If an offering of an
indeterminate amount of exchange-traded vehicle securities is being
registered, state that the registration statement covers an
indeterminate amount of securities to be offered or sold and that the
filing fee will be calculated and paid in accordance with Rule 456(d)
and Rule 457(u) (Sec. 230.456(d) and Sec. 230.457(u) of this
chapter), respectively. Any difference between the dollar amount of
securities registered for such offerings and the dollar amount of
securities sold may be carried forward on a future registration
statement pursuant to Rule 429 under the Securities Act.
* * * * *

0
31. Effective August 1, 2021, amend Form S-3 (referenced in Sec.
239.13) by adding Instruction 5 to the notes that immediately follow
the ``Calculation of Registration Fee'' table to read as follows:

Note: The text of Form S-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

CALCULATION OF REGISTRATION FEE

* * * * *
5. If an offering of an indeterminate amount of exchange-traded
vehicle securities is being registered, the Fee Table must state that
the registration statement covers an indeterminate amount of securities
to be offered or sold and the filing fee will be calculated and paid in
accordance with Rule

[[Page 33359]]

456(d) and Rule 457(u) (Sec. 230.456(d) and Sec. 230.457(u) of this
chapter), respectively.
* * * * *

0
32. Amend Form N-14 (referenced in Sec. 239.23) by revising the first
and second undesignated paragraphs of General Instruction G to read as
follows:

Note: The text of Form N-14 does not, and these amendments will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

G. Incorporation by Reference and Delivery of Prospectuses or Reports
Filed With the Commission

If any party to a transaction registered on Form N-14 is registered
under the 1940 Act or is a business development company as defined by
Section 2(a)(48) of the 1940 Act and has a current prospectus which
meets the requirements of Section 10(a)(3) of the 1933 Act or is
current in its reports filed pursuant to Section 13(a) or 15(d) of the
1934 Act and Section 30 of the 1940 Act, the registrant may, if it so
elects, incorporate by reference the prospectus, the corresponding
Statement of Additional Information, or reports, or any information in
the prospectus, the corresponding Statement of Additional Information,
or reports, which satisfies the disclosure required by Items 5, 6, and
11 through 14 of this Form. If the registrant elects to incorporate
information by reference into the prospectus, a copy of each document
from which information is incorporated by reference must accompany the
prospectus, except that a prospectus from which information has been
incorporated by reference need not be sent to an investor if the
obligation to deliver a prospectus under Section 5(b)(2) of the
Securities Act [15 U.S.C. 77e] has already been satisfied with respect
to that investor pursuant to Rule 498A(j) for the offering described in
the prospectus being incorporated by reference. Notwithstanding the
foregoing the registrant may, at its discretion, incorporate any or all
of the Statement of Additional Information into the prospectus
delivered to investors, without delivering the Statement with the
prospectus, so long as the Statement of Additional Information is
available to investors as provided in General Instruction F. The
registrant also may incorporate by reference into the prospectus
information about the company being acquired without delivering the
information with the prospectus under certain conditions pursuant to
Item 6 of Form N-14, and in accordance with the requirements of
Instruction F.
If the registrant elects to incorporate information by reference
into the Statement of Additional Information, a copy of each document
from which information is incorporated by reference must accompany the
Statement of Additional Information sent to shareholders.
* * * * *

0
33. Effective August 1, 2021, amend Form F-1 (referenced in Sec.
239.31) by revising the note that immediately follows the ``Calculation
of Registration Fee'' table to read as follows:

Note: The text of Form F-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

CALCULATION OF REGISTRATION FEE

0
34. Effective August 1, 2021, amend Form F-3 (referenced in Sec.
239.33) by adding Instruction 5 to the notes that immediately follow
the ``Calculation of Registration Fee'' table to read as follows:

Note: The text of Form F-3 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *
5. If an offering of an indeterminate amount of exchange-traded
vehicle securities is being registered, the Fee Table must state that
the registration statement covers an indeterminate amount of securities
to be offered or sold and that the filing fee will be calculated and
paid in accordance with Rule 456(d) and Rule 457(u) (Sec. 230.456(d)
and Sec. 230.457(u) of this chapter), respectively.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
35. The general authority citation for part 240 continues to read as
follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm,
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et
seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C.
1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-
106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *

0
36. Amend Sec. 240.14a-101 by:
0
a. Revising paragraph E of the ``Notes'' section; and

[[Page 33360]]

0
b. Revising paragraph (b)(1) of ``Item 13. Financial and other
information. (See Notes D and E at the beginning of this Schedule.)''.
The revisions read as follows:

Sec. 240.14a-101 Schedule 14A. Information required in proxy
statement.

Schedule 14A Information

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934

* * * * *
Notes
Notes: * * *
E. In Item 13 of this Schedule, the reference to ``meets the
requirement of Form S-3'' or ``meets the requirements of General
Instruction A.2 of Form N-2'' shall refer to a registrant who meets the
following requirements:
(a) A registrant meets the requirements of Form S-3 if:
(1) The registrant meets the requirements of General Instruction
I.A. of Form S-3 (Sec. 239.13 of this chapter); and
(2) One of the following is met:
(i) The registrant meets the aggregate market value requirement of
General Instruction I.B.1 of Form S-3; or
(ii) Action is to be taken as described in Items 11, 12, and 14 of
this schedule which concerns non-convertible debt or preferred
securities issued by a registrant meeting the requirements of General
Instruction I.B.2. of Form S-3 (referenced in 17 CFR 239.13); or
(iii) The registrant is a majority-owned subsidiary and one of the
conditions of General Instruction I.C. of Form S-3 is met.
(b) A registrant meets the requirements of General Instruction A.2
of Form N-2 (Sec. Sec. 239.14 and 274.11a-1 of this chapter) if the
registrant meets the conditions included in such General Instruction,
provided that General Instruction A.2.c of Form N-2 is subject to the
same limitations described in paragraph (a)(2) of this Note E.
* * * * *
Item 13. Financial and other information. (See Notes D and E at the
beginning of this Schedule.)
* * * * *
(b) * * *
(1) S-3 registrants and certain N-2 registrants. If the registrant
meets the requirements of Form S-3 or General Instruction A.2 of Form
N-2 (see Note E to this Schedule), it may incorporate by reference to
previously-filed documents any of the information required by paragraph
(a) of this Item, provided that the requirements of paragraph (c) are
met. Where the registrant meets the requirements of Form S-3 or General
Instruction A.2 of Form N-2 and has elected to furnish the required
information by incorporation by reference, the registrant may elect to
update the information so incorporated by reference to information in
subsequently-filed documents.
* * * * *

PART 243--REGULATION FD

0
37. The authority citation for part 243 continues to read as follows:

Authority: 15 U.S.C. 78c, 78i, 78j, 78m, 78o, 78w, 78mm, and
80a-29, unless otherwise noted.

0
38. Amend Sec. 243.103 by revising paragraph (a) to read as follows:

Sec. 243.103 No effect on Exchange Act reporting status.

* * * * *
(a) For purposes of Forms S-3 (17 CFR 239.13), S-8 (17 CFR 239.16b)
and SF-3 (17 CFR 239.45) under the Securities Act of 1933 (15 U.S.C.
77a et seq.), or Form N-2 (17 CFR 239.14 and 274.11a-1) under the
Securities Act of 1933 (15 U.S.C. 77a et seq.) and the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.), an issuer is deemed to
have filed all the material required to be filed pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)) or where applicable, has made those filings in a timely manner;
or
* * * * *

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

0
39. The authority citation for part 270 continues to read, in part, as
follows:

Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless
otherwise noted.
* * * * *
Section 270.23c-3 also issued under 15 U.S.C. 80a-23(c).
Section 270.24f-2 also issued under 15 U.S.C. 80a-24(f)(4).
* * * * *

0
40. Amend Sec. 270.8b-16 by revising paragraphs (b)(2) and (4) and
adding paragraph (e) to read as follows:

Sec. 270.8b-16 Amendments to registration statement.

* * * * *
(b) * * *
(2) The company's investment objectives and policies (described in
Item 8.2 of Form N-2), and any material changes to same that have not
been approved by shareholders;
* * * * *
(4) The principal risk factors associated with investment in the
company (described in Item 8.3 of Form N-2), and any material changes
to same; and
* * * * *
(e) The changes required to be disclosed by paragraphs (b)(2)
through (5) of this section must be described in enough detail to allow
investors to understand each change and how it may affect the fund.
Such disclosures must be prefaced with the following legend: ``The
following information [in this annual report] is a summary of certain
changes since [date]. This information may not reflect all of the
changes that have occurred since you purchased [this fund].''

0
41. Effective August 1, 2021, amend Sec. 270.23c-3 by adding paragraph
(e) to read as follows:

Sec. 270.23c-3 Repurchase offers by closed-end companies.

* * * * *
(e) Registration of an indefinite amount of securities. A company
that makes repurchase offers pursuant to paragraph (b) of this section
shall be deemed to have registered an indefinite amount of securities
pursuant to Section 24(f) of the Act (15 U.S.C. 80a-24(f)) upon the
effective date of its registration statement.

0
42. Effective August 1, 2021, amend Sec. 270.24f-2 by revising the
first sentence of paragraph (a) to read as follows:

Sec. 270.24f-2 Registration under the Securities Act of 1933 of
certain investment company securities.

(a) General. Any face-amount certificate company, open-end
management company, closed-end management company that makes periodic
repurchase offers pursuant to Sec. 270.23c-3(b), or unit investment
trust (``issuer'') that is deemed to have registered an indefinite
amount of securities pursuant to Section 24(f) of the Act (15 U.S.C.
80a-24(f)) must not later than 90 days after the end of any fiscal year
during which it has publicly offered such securities, file Form 24F-2
(17 CFR 274.24) with the Commission. * * *
* * * * *

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT of 1940

0
43. The authority citation for part 274 continues to read as follows:

[[Page 33361]]

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,
78n, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and Pub. L. 111-203,
sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted.
Section 274.128 is also issued under 15 U.S.C. 78j-1, 7202, 7233,
7241, 7264, and 7265; and 18 U.S.C. 1350.

0
44. Revise Form N-2 (referenced in Sec. Sec. 239.14 and 274.11a-1) to
read as follows:

Note: The text of Form N-2 does not, and this amendment will
not, appear in the Code of Federal Regulations.

BILLING CODE 8011-01-P
[GRAPHIC] [TIFF OMITTED] TR01JN20.000

[[Page 33362]]

[GRAPHIC] [TIFF OMITTED] TR01JN20.001

[[Page 33363]]

[GRAPHIC] [TIFF OMITTED] TR01JN20.002

BILLING CODE 8011-01-C

Calculation of Registration Fee Under the Securities Act of 1933
----------------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum
Title of securities being registered Amount being offering price aggregate Amount of
registered per unit offering price registration fee
----------------------------------------------------------------------------------------------------------------
................. ................. ................. .................
----------------------------------------------------------------------------------------------------------------

Instructions.
Complete the Registration Fee table and provide the following
(unless payment will be provided using Form 24F-2 [17 CFR 274.24]).
If the registration statement or amendment is filed under only one
of the Acts, omit reference to the other Act from the facing sheet.
Include the ``Approximate Date of Commencement of Proposed Public
Offering'' and the table showing the calculation of the registration
fee only where shares are being registered under the Securities Act.
If the filing fee is calculated pursuant to Rule 457(o) under the
Securities Act [17 CFR 230.457], only the title of the class of
securities to be registered, the proposed maximum aggregate offering
price for that class of securities, and the amount of registration fee
need to appear in the Calculation of Registration Fee table.
If the filing fee is calculated pursuant to Rule 457(r) under the
Securities Act, the Calculation of Registration Fee table must state
that it registers an unspecified amount of securities of each
identified class of securities and must provide that the Registrant is
relying on Rule 456(b) [17 CFR 230.456] and Rule 457(r). If the
Calculation of Registration Fee table is amended in a post-effective
amendment to the registration statement or in a prospectus filed in
accordance with Rule 456(b)(1)(ii), the table must specify the
aggregate offering price for all classes of securities in the
referenced offering or offerings and the applicable registration fee.
Any difference between the dollar amount of securities registered
for such offerings and the dollar amount of securities sold may be
carried forward on a future registration statement pursuant to Rule 457
under the Securities Act.
Fill in the 811-___, 814-___ and 33-___ blanks only if these filing
numbers (for the Investment Company Act registration and/or the
Securities Act registration, respectively) have already been assigned
by the Securities and Exchange Commission.
Form N-2 is to be used by closed-end management investment
companies, except small business investment companies licensed as such
by the United States Small Business Administration, to register under
the Investment Company Act and to offer their shares under the
Securities Act. The Commission has designed Form N-2 to provide
investors with information that will assist them in making a decision
about investing in an investment company eligible to use the Form. The
Commission also may use the information provided on Form N-2 in its
regulatory, disclosure review, inspection, and policy making roles.

[[Page 33364]]

A Registrant is required to disclose the information specified by
Form N-2, and the Commission will make this information public. A
Registrant is not required to respond to the collection of information
contained in Form N-2 unless the Form displays a currently valid Office
of Management and Budget (``OMB'') control number. Please direct
comments concerning the accuracy of the information collection burden
estimate and any suggestions for reducing the burden to Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549. The OMB has reviewed this collection of information under the
clearance requirements of 44 U.S.C. 3507.
Persons who respond to the collection of information contained in
this form are not required to respond unless the form displays a
currently valid OMB control number.

Contents of Form N-2

General Instructions

A. Use of Form N-2
B. Automatic Shelf Offerings by Well-Known Seasoned Issuers
C. Registration Fees
D. Application of General Rules and Regulations
E. Amendments
F. Incorporation by Reference
G. Documents Composing the Registration Statement or Amendment
H. Preparation of the Registration Statement or Amendment
I. Interactive Data Files
J. Registration of Additional Securities
Part A: The Prospectus
Part B: Statement of Additional Information
General Instructions for Parts A and B
Part A--Information Required in a Prospectus
Item 1. Outside Front Cover
Item 2. Cover Pages; Other Offering Information
Item 3. Fee Table and Synopsis
Item 4. Financial Highlights
Item 5. Plan of Distribution
Item 6. Selling Shareholders
Item 7. Use of Proceeds
Item 8. General Description of the Registrant
Item 9. Management
Item 10. Capital Stock, Long-Term Debt, and Other Securities
Item 11. Defaults and Arrears on Senior Securities
Item 12. Legal Proceedings
Item 13. [Removed and reserved.]
Part B--Information Required in a Statement of Additional Information
Item 14. Cover Page
Item 15. Table of Contents
Item 16. General Information and History
Item 17. Investment Objective and Policies
Item 18. Management Instructions
Item 19. Control Persons and Principal Holders of Securities
Item 20. Investment Advisory and Other Services
Item 21. Portfolio Managers
Item 22. Brokerage Allocation and Other Practices
Item 23. Tax Status
Item 24. Financial Statements
Part C--Other Information
Item 25. Financial Statements and Exhibits
Item 26. Marketing Arrangements
Item 27. Other Expenses of Issuance and Distributions
Item 28. Persons Controlled by or Under Common Control
Item 29. Number of Holders of Securities
Item 30. Indemnification
Item 31. Business and Other Connections of Investment Adviser
Item 32. Location of Accounts and Records
Item 33. Management Services
Item 34. Undertakings

Signatures

General Instructions

A. Use of Form N-2

1. General. Form N-2 is used by all closed-end management
investment companies (``Registrant'' or ``Fund''), except small
business investment companies licensed as such by the United States
Small Business Administration, to file: (1) An initial registration
statement under Section 8(b) of the Investment Company Act and any
amendments to the registration statement, including amendments required
by Rule 8b-16 under the Investment Company Act [17 CFR 270.8b-16]; (2)
a registration statement under the Securities Act and any amendment to
it; or (3) any combination of these filings.
2. Optional Use of Form for Certain Registrants. A Registrant may
elect to file a registration statement pursuant to this General
Instruction A.2, including a registration statement used in connection
with an offering pursuant to Rule 415(a)(1)(x) under the Securities Act
[17 CFR 230.415], if it meets all of the following requirements:
a. The Registrant meets the requirements of General Instruction
I.A. of Form S-3 [17 CFR 239.13];
b. if the Registrant is registered under the Investment Company
Act, it has been registered for a period of at least twelve calendar
months immediately preceding the filing of the registration statement
on this Form, and has timely filed all reports required to be filed
pursuant to Section 30 of the Investment Company Act during the twelve
calendar months and any portion of a month immediately preceding the
filing of the registration statement; and
c. the registration statement to be filed pursuant to this General
Instruction A.2 relates to a transaction specified in General
Instruction I.B. or I.C of Form S-3, as applicable, and meets all of
the conditions to the transaction specified in the applicable
instruction.
A registration statement filed pursuant to this instruction shall
specifically incorporate by reference into the prospectus and statement
of additional information (``SAI'') all of the materials specified in
General Instruction F.3, pursuant to the requirements set forth in that
instruction.
A Registrant must indicate that the registration statement is being
filed pursuant to this instruction by checking the appropriate box on
the facing sheet.
Note to General Instruction A.2. Attention is directed to the
General Instructions of Form S-3, including General Instructions II.D,
F, and G, which contain general information regarding the preparation
and filing of automatic and non-automatic shelf registration
statements.

B. Automatic Shelf Offerings by Well-Known Seasoned Issuers

Any Registrant that is a Well-Known Seasoned Issuer as defined in
Rule 405 of the Securities Act [17 CFR 230.405] at the most recent
eligibility determination date specified in paragraph (2) of that
definition may use a registration statement filed under General
Instruction A.2 of this Form as an automatic shelf registration
statement for registration under the Securities Act of securities
offerings, other than pursuant to Rule 415(a)(1)(vii) or (viii) of the
Securities Act, only for the transactions that are described in, and
consistent with the requirements of, General Instruction I.D. of Form
S-3.
Note to General Instruction B. Attention is directed to the General
Instructions of Form S-3, including General Instructions II.E, F, G,
and IV.B, which contain general information regarding the preparation
and filing of automatic shelf registration statements.

C. Registration Fees

Section 6(b) of the Securities Act and Rule 457 thereunder set
forth the fee requirements under the Securities Act. Registrants that
are required to pay registration fees on an annual net basis

[[Page 33365]]

pursuant to Rule 24f-2 under the Investment Company Act must provide
payment using Form 24F-2.

D. Application of General Rules and Regulations

If the registration statement is being filed under both the
Securities and Investment Company Acts or under only the Securities
Act, the General Rules and Regulations under the Securities Act,
particularly Regulation C, shall apply. If the registration statement
is being filed under only the Investment Company Act, the General Rules
and Regulations under the Investment Company Act, particularly those
under Section 8(b), shall apply.

E. Amendments

1. Paragraph (a) of Rule 8b-16 under the Investment Company Act
requires closed-end management investment companies to annually amend
the Investment Company Act registration statement. Paragraph (b) of
Rule 8b-16 exempts a closed-end management investment company from this
requirement if it provides certain information specified by that rule
to shareholders in its annual report.
2. If Form N-2 is used to file a registration statement under both
the Securities and Investment Company Acts, any amendment of that
registration statement shall be deemed to be filed under both Acts
unless otherwise indicated on the facing sheet.
3. Registrants offering securities on a delayed or continuous basis
in reliance upon Rule 415 under the Securities Act must provide the
undertakings with respect to post-effective amendments required by Item
34 of Form N-2.
4. A post-effective amendment to a registration statement on this
Form, or a registration statement filed for the purpose of registering
additional shares of common stock for which a registration statement
filed on this Form is effective or for the purpose of complying with
Rule 415(a)(5) and (a)(6), filed on behalf of a Registrant which makes
periodic repurchase offers pursuant to Rule 23c-3 under the Investment
Company Act [17 CFR 270.23c-3] or which makes a continuous offering of
securities pursuant to Rule 415(a)(1)(ix) under the Securities Act may
become effective automatically in accordance with Rule 486 under the
Securities Act [17 CFR 230.486], as applicable. In accordance with Rule
429 under the Securities Act [17 CFR 230.429], a Registrant filing a
new registration statement for the purpose of registering additional
shares of common stock may use a prospectus with respect to the
additional shares also in connection with the shares covered by earlier
registration statements if such prospectus includes all of the
information which would currently be required in a prospectus relating
to the securities covered by the earlier statements. The filing fee
required by the Securities Act and Rule 457 under the Securities Act
shall be paid with respect to the additional shares only.

F. Incorporation by Reference

1. General Requirements. All incorporation by reference must comply
with the requirements of this Form and the following rules on
incorporation by reference: Rule 411 under the Securities Act [17 CFR
230.411] (general rules on incorporation by reference in a prospectus);
Rule 303 of Regulation S-T [17 CFR 232.303] (specific requirements for
electronically filed documents); and Rule 0-4 [17 CFR 270.0-4],
(additional rules on incorporation by reference for investment
companies).
2. Specific Requirements for Incorporation by Reference for
Registrants Not Relying on General Instruction A.2.
a. A Registrant may not incorporate by reference into a prospectus
information that Part A of this Form requires to be included in a
prospectus, except as specifically permitted by Part A of this Form or
paragraph F.2.d below.
b. A Registrant may incorporate by reference any or all of the SAI
into the prospectus (but not to provide any information required by
Part A to be included in the prospectus) without delivering the SAI
with the prospectus.
c. A Registrant may incorporate by reference into the SAI or its
response to Part C, information that Parts B and C require to be
included in the Registrant's registration statement.
d. A Registrant may incorporate by reference into the prospectus or
the SAI in response to Items 4.1 or 24 of this Form the information
contained in Form N-CSR [17 CFR 249.331 and 274.128] or any report to
shareholders meeting the requirements of Section 30(e) of the
Investment Company Act and Rule 30e-1 [17 CFR 270.30e-1] thereunder
(and a Registrant that has elected to be regulated as a business
development company may so incorporate into Items 4.1, 4.2, 8.6.c, or
24 of this Form the information contained in its annual report under
the Exchange Act), provided:
(1) The material incorporated by reference is prepared in
accordance with, and covers the periods specified by, this Form; and
(2) the Registrant states in the prospectus or the SAI, at the
place where the information required by Items 4.1, 4.2, 8.6.c., or 24
of this Form would normally appear, that the information is
incorporated by reference from a report to shareholders or a report on
Form N-CSR or an annual report on Form 10-K [17 CFR 249.310]. (The
Registrant also may describe briefly, in either the prospectus, the
SAI, or Part C of the registration statement (in response to Item 25.1)
those portions of the report to shareholders or report on Form N-CSR or
Form 10-K that are not incorporated by reference and are not a part of
the registration statement.)
3. Specific Requirements for Incorporation by Reference for Certain
Registrants. If a Registrant is filing a registration statement
pursuant to General Instruction A.2, the following requirements apply:
a. Backward Incorporation by Reference. The documents listed in (1)
and (2) below shall be specifically incorporated by reference into the
prospectus and SAI by means of a statement to that effect in the
prospectus and SAI listing all such documents:
(1) The Registrant's latest annual report filed pursuant to Section
13(a) or Section 15(d) of the Exchange Act that contains financial
statements for the Registrant's latest fiscal year for which a Form N-
CSR or Form 10-K was required to be filed;
(2) all other reports filed pursuant to Section 13(a) or Section
15(d) of the Exchange Act since the end of the fiscal year covered by
the annual report referred to in (1) above; and
(3) if capital stock is to be registered and securities of the same
class are registered under Section 12 of the Exchange Act, the
description of such class of securities which is contained in a
registration statement filed under the Exchange Act, including any
amendment or reports filed for the purpose of updating such
description.
b. Forward Incorporation by Reference. The prospectus and SAI shall
also state that all documents subsequently filed by the Registrant
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act,
prior to the termination of the offering shall be deemed to be
incorporated by reference into the prospectus and SAI.
c. Use of Information to be Incorporated. Any information required
in the prospectus and SAI in response to Items 3-12 and Items 16-24 of
this Form may be included in the prospectus and SAI through documents
filed pursuant to Sections 13(a), 14, or 15(d) of the Exchange Act that
are incorporated or deemed incorporated by

[[Page 33366]]

reference into the prospectus and SAI that are part of the registration
statement.
Instruction. Attention is directed to Rule 439 under the Securities
Act [17 CFR 230.439] regarding consent to use of material incorporated
by reference.
4. Disclosure.
a. The Registrant must make its prospectus, SAI, and any periodic
and current reports filed pursuant to Section 13 or Section 15(d) of
the Exchange Act that are incorporated by reference readily available
and accessible on a website maintained by or for the Registrant and
containing information about the Registrant.
b. The Registrant must state in its prospectus and SAI:
(1) That it will provide to each person, including any beneficial
owner, to whom a prospectus or SAI is delivered, a copy of any or all
information that has been incorporated by reference into the prospectus
or SAI but not delivered with the prospectus or SAI;
(2) that it will provide this information upon written or oral
request;
(3) that it will provide this information at no charge;
(4) the name, address, telephone number, and email address, if any,
to which the request for this information must be made; and
(5) the Registrant's website address where the prospectus, SAI, and
any incorporated information may be accessed.
Instruction. If the Registrant sends any of the information that is
incorporated by reference into the prospectus or SAI to security
holders, it also must send any exhibits that are specifically
incorporated by reference into that information.
c. The Registrant also must:
(1) Identify the reports and other information that it files with
the SEC; and
(2) state that the SEC maintains an internet site that contains
reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC and state the
address of that site (https://www.sec.gov).

G. Documents Composing the Registration Statement or Amendment

1. A registration statement or an amendment to it filed under both
the Securities and Investment Company Acts consists of the facing sheet
of the Form, Part A, Part B, Part C, required signatures, all other
documents filed as a part of the registration statement, and documents
or information permitted to be incorporated by reference.
2. A registration statement or amendment to it that is filed under
only the Securities Act shall contain all the information and documents
specified in paragraph 1 of this Instruction G.
3. A registration statement or an amendment to it that is filed
under only the Investment Company Act shall consist of the facing sheet
of the Form, responses to all items of Parts A and B except Items 1, 2,
3.2, 4, 5, 6, and 7 of Part A, responses to all items of Part C except
Items 25.2.h, 25.2.l, 25.2.n, and 25.2.o, required signatures, and all
other documents that are required or which the Registrant may file as
part of the registration statement.

H. Preparation of the Registration Statement or Amendment

The following instructions for completing Form N-2 are divided into
three parts. Part A relates to the prospectus required by Section 10(a)
of the Securities Act. Part B relates to the SAI that must be provided
upon request to recipients of the prospectus. Part C relates to other
information that is required to be in the registration statement.

I. Interactive Data Files

1. An Interactive Data File as defined in Rule 11 of Regulation S-T
[17 CFR 232.11] is required to be submitted to the Commission in the
manner provided by Rule 405 of Regulation S-T [17 CFR 232.405] for any
registration statement or post-effective amendment thereto filed on
Form N-2 that contains the cover page information specified in Rule 405
of Regulation S-T. The Interactive Data File must be submitted either
with the filing, or as an amendment to the registration statement to
which it relates that is submitted on or before the date the
registration statement or post-effective amendment that contains the
related information becomes effective.
2. An Interactive Data File is required to be submitted to the
Commission in the manner provided by Rule 405 of Regulation S-T for any
registration statement or post-effective amendment thereto filed on
Form N-2 or for any form of prospectus filed pursuant to Rule 424 under
the Securities Act [17 CFR 230.424] that includes or amends information
provided in response to Items 3.1, 4.3, 8.2.b, 8.2.d, 8.3.a, 8.3.b,
8.5.b, 8.5.c, 8.5.e, 10.1.a-d, 10.2.a-c, 10.2.e, 10.3, or 10.5. The
Interactive Data File must be submitted either with the filing, or as
an amendment to the registration statement to which it relates, on or
before the date the registration statement or post-effective amendment
that contains the related information becomes effective. Interactive
Data Files must be submitted with the filing made pursuant to Rule 424.
3. If a Registrant is filing a registration statement pursuant to
General Instruction A.2, an Interactive Data File is required to be
submitted to the Commission in the manner provided by Rule 405 of
Regulation S-T for any of the documents listed in General Instruction
F.3.(a) or General Instruction F.3.(b) that include or amend
information provided in response to Items 3.1, 4.3, 8.2.b, 8.2.d,
8.3.a, 8.3.b, 8.5.b, 8.5.c, 8.5.e, 10.1.a-d, 10.2.a-c, 10.2.e, 10.3, or
10.5. The Interactive Data File must be submitted with the filing of
the document(s) listed in General Instruction F.3.(a) or General
Instruction F.3.(b).
4. The Interactive Data Files must be submitted in accordance with
the specifications in the EDGAR Filer Manual, and must be submitted in
such a manner that--for any information that does not relate to all of
the classes of a Registrant--will permit each class of the Registrant
to be separately identified.

J. Registration of Additional Securities

With respect to the registration of additional securities for an
offering pursuant to Rule 462(b) under the Securities Act [17 CFR
230.462], the Registrant may file a registration statement consisting
only of the following: the facing page; a statement that the contents
of the earlier registration statement, identified by file number, are
incorporated by reference; required opinions and consents; the
signature page; and any price-related information omitted from the
earlier registration statement in reliance on Rule 430A [17 CFR
230.430A] that the Registrant chooses to include in the new
registration statement. The information contained in such a Rule 462(b)
registration statement shall be deemed to be part of the earlier
registration statement as of the date of effectiveness of the Rule
462(b) registration statement. Any opinion or consent required in such
a registration statement may be incorporated by reference from the
earlier registration statement with respect to the offering, if: (i)
Such opinion or consent expressly provides for such incorporation; and
(ii) such opinion relates to the securities registered pursuant to Rule
462(b). See Rules 411(c), 439(b), and 483(c) under the Securities Act
[17 CFR 230.483].
Part A: The Prospectus
The purpose of the prospectus is to provide essential information
about the Registrant in a way that will help investors make informed
decisions

[[Page 33367]]

about whether to purchase the securities being offered. THE INFORMATION
IN THE PROSPECTUS SHOULD BE CLEAR, CONCISE, AND UNDERSTANDABLE. AVOID
THE USE OF TECHNICAL OR LEGAL TERMS, COMPLEX LANGUAGE, OR EXCESSIVE
DETAIL.
Responses to the items of Part A should be as simple and direct as
possible and should include only information needed to understand the
fundamental characteristics of the Registrant. Descriptions of
practices that are required by law generally should not include
detailed discussions of the law itself. No response is required for
inapplicable items.
Part B: Statement of Additional Information
The items in Part B call for additional information about the
Registrant that may be of interest to some investors. Part B also
allows the Registrant to augment discussions of matters described in
the prospectus with additional information the Registrant believes may
be of interest to some investors. If information is included in the
prospectus, it need not be repeated in the SAI, and a Registrant need
not prepare a SAI or refer to it in the prospectus (or provide the
undertaking required by Item 34.7 as to the SAI) if all of the
information required to be in the SAI is included in the prospectus. A
Registrant placing information in Part B should not repeat information
that is in the prospectus, except where necessary to make Part B
understandable.
Information in the SAI need not be included in the prospectus or be
sent to investors with the prospectus provided that the cover page of
the prospectus states that the SAI is available upon oral or written
request and without charge, and includes a toll-free telephone number
and email address, if any, for use by prospective investors to request
the SAI. If the request is made prior to delivery of a confirmation
with respect to a security offered by the prospectus, the SAI must be
sent in a manner reasonably calculated for it to arrive prior to the
confirmation. The SAI may be sent to the address to which the
prospectus was delivered, unless the requester provides an alternate
address for delivery of the SAI.
General Instructions for Parts A and B
1. The information in the prospectus and the SAI should be
organized to make it easy to understand the organization and operation
of the Registrant. The information need not be in any particular order,
with the exception that Items 1, 2, 3, and 4 must appear in order in
the prospectus and may not be preceded or separated by any other
information.
2. The prospectus or the SAI may contain more information than
called for by this Form, provided the information is not incomplete,
inaccurate, or misleading and does not, because of its nature,
quantity, or manner of presentation, obscure or impede understanding of
required information.
3. The requirements for dating the prospectus apply equally to
dating the SAI for purposes of Rule 423 under the Securities Act [17
CFR 230.423]. The SAI should be made available at the same time that
the prospectus becomes available for purposes of Rules 430 and 460
under the Securities Act [17 CFR 230.430 and 230.460].
4. The prospectus should not be presented in fold-out or road-map
type fashion.
5. Instructions for charts, graphs, and sales literature:
(a) A registration statement may include any chart, graph, or table
that is not misleading; however, only the fee table and the table of
contents (required by Rule 481(c) under the Securities Act [17 CFR
230.481]) may precede the financial highlights specified in Item 4.
(b) If ``sales literature'' is included in the prospectus, (1) it
should not significantly lengthen the prospectus nor obscure essential
disclosure, and (2) members of the Financial Industry Regulatory
Authority (``FINRA'') are not relieved of the filing and other FINRA
requirements for investment company sales literature. (See Securities
Act Release No. 5359, Jan. 26, 1973 [38 FR 7220 (Mar. 19, 1973)].)

Part A--Information Required in a Prospectus

Item 1. Outside Front Cover

1. The outside front cover must contain the following information:
a. the Registrant's name;
b. identification of the type of Registrant (e.g., bond fund,
balanced fund, business development company, etc.) or a brief statement
of the Registrant's investment objective(s);
c. the title and amount of securities offered and a brief
description of such securities (unless not necessary to indicate the
material terms of the securities, as in the case of an issue of common
stock with full voting rights and the dividend and liquidation rights
usually associated with common stock);
d. a statement that (A) the prospectus sets forth concisely the
information about the Registrant that a prospective investor ought to
know before investing; (B) the prospectus should be retained for future
reference; and (C) additional information about the Registrant has been
filed with the Commission and is available upon written or oral request
and without charge (this statement should explain how to obtain the
SAI, and whether any of it has been incorporated by reference into the
prospectus). This statement should also explain how to obtain the
Registrant's annual and semi-annual reports to shareholders. Provide a
toll-free (or collect) telephone number for investors to call, and
email address, if any, to request the Registrant's SAI; annual report;
semi-annual report; or other information about the Registrant; and to
make shareholder inquiries. Also state whether the Registrant makes
available its SAI and annual and semi-annual reports, free of charge,
on or through the Registrant's website at a specified internet address.
If the Registrant does not make its SAI and shareholder reports
available in this manner, disclose the reasons why it does not do so
(including, where applicable, that the Registrant does not have an
internet website). Also include the information that the Commission
maintains a website (https://www.sec.gov) that contains the SAI,
material incorporated by reference, and other information regarding
Registrants;
e. the date of the prospectus and the date of the Statement of
Additional Information;
f. if any of the securities being registered are to be offered for
the account of shareholders, a statement to that effect;
g. information in substantially the tabular form indicated as to
all securities being registered that are to be offered for cash
(estimate, if necessary):

------------------------------------------------------------------------
Proceeds to
Price to public Sales load registrant or other
persons
------------------------------------------------------------------------
Per Share...................
Total.......................
------------------------------------------------------------------------

[[Page 33368]]

Instructions.
1. If it is impracticable to state the price to the public, briefly
explain how the price will be determined (e.g., by reference to net
asset value). If the securities will be offered at the market, indicate
the market involved and the market price as of the latest practicable
date.
2. The term ``sales load'' is defined in Section 2(a)(35) of the
Investment Company Act. Subject to Instruction 3, only include the
portion of the sales load that consists of underwriting discounts and
commissions, and include any commissions paid by selling shareholders
(the term ``commissions'' is defined in paragraph 17 of Schedule A of
the Securities Act [15 U.S.C. 77aa(17)]). Commissions paid by other
persons and other consideration to underwriters shall be noted in the
second column and briefly described in a footnote.
3. Include in the table as sales load amounts borrowed to pay
underwriting discounts and commissions or any other offering costs that
are required to be repaid in less than one year. Exclude from the
table, but include in a note thereto, the amount of funds borrowed to
pay such costs that are required to be repaid in more than one year,
and provide a cross-reference to the prospectus discussion of the
borrowed amounts and the effect of repayment on fund assets available
for investment.
4. Where an underwriter has received an over-allotment option,
present maximum-minimum information in the price table or in a note
thereto, based on the purchase of all or none of the shares subject to
the option. The terms of the option may be described briefly in
response to Item 5 rather than on the prospectus cover page.
5. If the securities are to be offered on a best efforts basis, set
forth the termination date of the offering, any minimum required
purchase, and any arrangements to place the funds received in an
escrow, trust, or similar arrangement. If no arrangements have been
made, so state. Set forth the following table in lieu of the ``Total''
information called for by the required table.

------------------------------------------------------------------------
Proceeds to
Price to public Sales load registrant or other
persons
------------------------------------------------------------------------
Total Minimum...............
Total Maximum...............
------------------------------------------------------------------------

6. Set forth in a note to the proceeds column the total of other
expenses of issuance and distribution called for by Item 27, stated
separately for the Registrant and for the selling shareholders, if any.
h. the statements required by paragraphs (1) and (2) of Rule 481(b)
under the Securities Act;
i. if the Registrant's securities have no history of public
trading, a prominent statement to that effect and a statement
describing the tendency of closed-end fund shares to trade frequently
at a discount from net asset value and the risk of loss this creates
for investors purchasing shares in the initial public offering;
Instruction. A Registrant may omit the discount statement if it
believes that, as a result of its investment or other policies, its
capital structure, or the markets in which its shares trade, its shares
are unlikely to trade at a discount from net asset value.
j. a cross-reference to the prospectus discussion of any factors
that make the offering speculative or one of high risk, printed in bold
face common type at least as large as ten point modern type and at
least two points leaded; and
Instruction. No cross-reference is required where the risks
associated with securities in which the Registrant is authorized to
invest are only the basic risks of investing in securities (e.g., the
risk that the value of portfolio securities may fluctuate depending
upon market conditions, or the risks that debt securities may be
prepaid and the proceeds from the prepayments invested in debt
instruments with lower interest rates). Include the cross-reference if
the nature of the Registrant's investment objectives, investment
policies, capital structure, or the trading markets for the
Registrant's securities increase the likelihood that an investor could
lose a significant portion of his or her investment.
k. any other information required by Commission rules or by any
other governmental authority having jurisdiction over the Registrant or
the issuance of its securities.
l. A statement to the following effect, if applicable:
Beginning on [date], as permitted by regulations adopted by the
Securities and Exchange Commission, paper copies of the Registrant's
shareholder reports will no longer be sent by mail, unless you
specifically request paper copies of the reports from the Registrant
[or from your financial intermediary, such as a broker-dealer or bank].
Instead, the reports will be made available on a website, and you will
be notified by mail each time a report is posted and provided with a
website link to access the report.
If you already elected to receive shareholder reports
electronically, you will not be affected by this change and you need
not take any action. You may elect to receive shareholder reports and
other communications from the Registrant [or your financial
intermediary] electronically by [insert instructions].
You may elect to receive all future reports in paper free of
charge. You can inform the Registrant [or your financial intermediary]
that you wish to continue receiving paper copies of your shareholder
reports by [insert instructions]. Your election to receive reports in
paper will apply to all funds held with [the fund complex/your
financial intermediary].
2. The cover page may include other information if it does not, by
its nature, quantity, or manner of presentation impede understanding of
the required information.

Item 2. Cover Pages; Other Offering Information

1. Disclose whether any national securities exchange or the Nasdaq
Stock Market lists the securities offered, naming the particular
market(s), and identify the trading symbol(s) for those securities on
the inside front or outside back cover page of the prospectus, unless
the information appears on the front cover page.
2. Provide the information required by paragraph (d) of Rule 481
under the Securities Act in an appropriate place in the prospectus.
3. Provide the information required by paragraph (e) of Rule 481
under the Securities Act on the outside back cover page of the
prospectus.

Item 3. Fee Table and Synopsis

1. If the prospectus offers common stock of the Registrant, include
information about the costs and expenses that the investor will bear
directly or indirectly, using the captions and tabular format
illustrated below:

[[Page 33369]]

[GRAPHIC] [TIFF OMITTED] TR01JN20.003

Instructions.

General Instructions

1. Immediately after the table, provide a brief narrative
explaining that the purpose of the table is to assist the investor in
understanding the various costs and expenses that an investor in the
fund will bear directly or indirectly. Include, where appropriate,
cross-references to the relevant sections of the prospectus for more
complete descriptions of the various costs and expenses.
2. Any caption not applicable to the Registrant may be omitted from
the table.
3. Round all dollar figures to the nearest dollar and all
percentages to the nearest hundredth of one percent.
Shareholder Transaction Expenses
4. ``Dividend Reinvestment and Cash Purchase Plan Fees'' include
all fees (except brokerage commissions) that are charged to
participating shareholder accounts. The basis on which such fees are
imposed should be described briefly in a note to the table.
5. If the Registrant (or any other party under an agreement with
the Registrant) charges any other transaction fee, add another caption
describing it, and list the maximum amount of the fee or basis on which
the fee is deducted. Underwriters' compensation that is paid with the
proceeds of debt that is not to be repaid within one year need not be
identified as sales load, but should be set forth as a shareholder
transaction expense with a brief narrative following the table
explaining the nature of such payments.
Annual Expenses
6. State the basis on which payments will be made. ``Other
Expenses'' should be estimated and stated (after any expense
reimbursement or waiver) as a percentage of net asset value
attributable to common shares. State in the narrative following the
table that ``Other Expenses'' are based on estimated amounts for the
current fiscal year.
7.a. ``Management Fees'' include investment advisory fees
(including any component thereof based on the performance of the
Registrant), any other management fees payable to the investment
adviser or its affiliates, and administrative fees payable to the
investment adviser or its affiliates not included as ``Other
Expenses,'' and any expenses incurred within the Registrant's own
organization in connection with the research, selection, and
supervision of investments. Where management fees are ``tiered'' or
based on a ``sliding scale,'' they should be calculated based on the
fund's asset size after giving effect to the anticipated net proceeds
of the present offering. In the case of a performance fee arrangement,
assume the base fee. With respect to a best-efforts offering with
breakpoints, assume the maximum fee will be payable.
b. In lieu of the information about management fees required by
Item 3.1, a business development company with a fee structure that is
not based solely on the aggregate amount of assets under management
should provide disclosure concerning the fee arrangement to allow
investors to assess its impact on the Registrant's expenses; a business
development company may use any appropriate expense categories and may
include items that may not, for accounting purposes, be treated as
expenses. A business development company with special fee arrangements
should provide a cross-reference, where applicable, to the discussion
in Item 9.1.a of special management compensation plans.
8. ``Interest Payments on Borrowed Funds'' include all interest
paid in connection with outstanding loans

[[Page 33370]]

(including interest paid on funds borrowed to pay underwriting
expenses), bonds, or other forms of debt. Show interest expenses as a
percentage of net assets attributable to common shares and not the face
amount of debt.
9. ``Other Expenses'' include all expenses (except fees and
expenses reported in other items in the table) that are deducted from
the Registrant's assets and will be reflected as expenses in the
Registrant's statement of operations (including increases resulting
from complying with paragraph 2(g) of Rule 6-07 [17 CFR 210.6-07] of
Regulation S-X).
10. a. If the Registrant invests, or intends to invest based upon
the anticipated net proceeds of the present offering, in shares of one
or more ``Acquired Funds,'' add a subcaption to the ``Annual Expenses''
portion of the table directly above the subcaption titled ``Total
Annual Expenses.'' Title the additional subcaption: ``Acquired Fund
Fees and Expenses.'' Disclose in the subcaption fees and expenses
incurred indirectly by the Registrant as a result of investment in
shares of one or more Acquired Funds. For purposes of this Item, an
``Acquired Fund'' means any company in which the Registrant invests or
intends to invest (A) that is an investment company or (B) that would
be an investment company under Section 3(a) of the Investment Company
Act but for the exceptions to that definition provided for in Sections
3(c)(1) and 3(c)(7) of the Investment Company Act. If a Registrant uses
another term in response to other requirements of this Form to refer to
Acquired Funds, it may include that term in parentheses following the
subcaption title. In the event the fees and expenses incurred
indirectly by the Registrant as a result of investment in shares of one
or more Acquired Funds do not exceed 0.01 percent (one basis point) of
average net assets of the Registrant, the Registrant may include these
fees and expenses under the subcaption ``Other Expenses'' in lieu of
this disclosure requirement.
b. Determine the ``Acquired Fund Fees and Expenses'' according to
the following formula:

AFFE = [(F1/FY)*AI1* D1]+[(F2/FY)*AI2* D2]+[(F3/FY)*AI3* D3] +
Transaction Fees + Incentive Allocations
------------------------------------------------------------------------
Average Net Assets of the
Registrant
------------------------------------------------------------------------
Where:
AFFE............................. Acquired Fund fees and expenses;
F1, F2, F3, . . ................. Total annual operating expense
ratio for each Acquired Fund;
FY............................... Number of days in the relevant
fiscal year;
AI1, AI2, AI3, . . .............. Average invested balance in each
Acquired Fund;
D1, D2, D3, . . ................. Number of days invested in each
Acquired Fund;
``Transaction Fees''............. The total amount of sales loads,
redemption fees, or other
transaction fees paid by the
Registrant in connection with
acquiring or disposing of shares
in any Acquired Funds during the
most recent fiscal year; and
``Incentive Allocations''........ Any allocation of capital from
the Acquiring Fund to the
adviser of the Acquired Fund (or
its affiliate) based on a
percentage of the Acquiring
Fund's income, capital gains and/
or appreciation in the Acquired
Fund.
------------------------------------------------------------------------

c. Calculate the average net assets of the Registrant for the most
recent fiscal year, as provided in Item 4.1 (see Instruction 15 to Item
4.1), and include the anticipated net proceeds of the present offering.
d. The total annual operating expense ratio used for purposes of
this calculation (F1) is the annualized ratio of operating expenses to
average net assets for the Acquired Fund's most recent fiscal period as
disclosed in the Acquired Fund's most recent shareholder report. If the
ratio of expenses to average net assets is not included in the most
recent shareholder report or the Acquired Fund is a newly formed fund
that has not provided a shareholder report, then the ratio of expenses
to average net assets of the Acquired Fund is the ratio of total annual
operating expenses to average annual net assets of the Acquired Fund
for its most recent fiscal period as disclosed in the most recent
communication from the Acquired Fund to the Registrant. If the
Registrant has a written fee agreement with the Acquired Fund that
would affect the ratio of expenses to average net assets as disclosed
in the Acquired Fund's most recent shareholder report, the Registrant
should determine the ratio of expenses to average net assets for the
Acquired Fund's most recent fiscal period using the written fee
agreement. For purposes of this instruction: (i) Acquired Fund expenses
include increases resulting from brokerage service and expense offset
arrangements and reductions resulting from fee waivers or
reimbursements by the Acquired Funds' investment advisers or sponsors;
and (ii) Acquired Fund expenses do not include any expenses (i.e.,
performance fees) that are calculated solely upon the realization and/
or distribution of gains, or the sum of the realization and/or
distribution of gains and unrealized appreciation of assets distributed
in-kind. If an Acquired Fund has no operating history, include in the
Acquired Funds' expenses any fees payable to the Acquired Fund's
investment adviser or its affiliates stated in the Acquired Fund's
registration statement, offering memorandum or other similar
communication without giving effect to any performance.
e. If a Registrant has made investments in the most recent fiscal
year, to determine the average invested balance (AI1), the numerator is
the sum of the amount initially invested in an Acquired Fund during the
most recent fiscal year (if the investment was held at the end of the
previous fiscal year, use the amount invested as of the end of the
previous fiscal year) and the amounts invested in the Acquired Fund no
less frequently than monthly during the period the investment is held
by the Registrant (if the investment was held through the end of the
fiscal year, use each month-end through and including the fiscal year-
end). Divide the numerator by the number of measurement points included
in the calculation of the numerator (i.e., if an investment is made
during the fiscal year and held for 3 succeeding months, the
denominator would be 4).
f. For investments based upon the anticipated net proceeds from the
present offering, base the ``Acquired Fund Fees and Expenses'' on: (i)
Assumptions about specific funds in which the Registrant expects to
invest, (ii) estimates of the amount of assets the Registrant expects
to invest in each of those Acquired Funds, and (iii) an assumption that
the investment was held for all of the Registrant's most

[[Page 33371]]

recent fiscal year and was subject to the Acquired Funds' fees and
expenses for that year. Disclose in a footnote to the table that
Acquired Fund fees and expenses are based on estimated amounts for the
current fiscal year.
g. If an Acquired Fund charges an Incentive Allocation or any other
fee based on income, capital gains and/or appreciation (i.e.,
performance fee), the Registrant must include a footnote to the
``Acquired Fund Fees and Expenses'' subcaption that:
(1) discloses the typical Incentive Allocation or such other fee
(expressed as a percentage) to be paid to the investment advisers of
the Acquired Funds (or an affiliate);
(2) discloses that Acquired Funds' fees and expenses are based on
historic fees and expenses; and
(3) states that future Acquired Funds' fees and expenses may be
substantially higher or lower because certain fees are based on the
performance of the Acquired Funds, which may fluctuate over time.
h. If the Registrant is a Feeder Fund, reflect the aggregate
expenses of the Feeder Fund and the Master Fund in the ``Acquired Fund
Fees and Expenses.'' The aggregate expenses of the Master-Feeder Fund
must include the fees and expenses incurred indirectly by the Feeder
Fund as a result of the Master Fund's investment in shares of one or
more companies (A) that are investment companies or (B) that would be
investment companies under Section 3(a) of the Investment Company Act
but for the exceptions to that definition provided for in Sections
3(c)(1) and 3(c)(7) of the Investment Company Act. For purposes of this
instruction, a ``Master-Feeder Fund'' means a two-tiered arrangement in
which one or more investment companies registered under the Investment
Company Act (each a ``Feeder Fund'') holds shares of a single
management investment company registered under the Investment Company
Act (the ``Master Fund'') in accordance with Section 12(d)(1)(E) of the
Investment Company Act.
i. The Registrant may clarify in a footnote to the fee table that
the total annual expenses item under Item 3.1 is different from the
ratio of expenses to average net assets given in response to Item 4.1,
which reflects the operating expenses of the Registrant and does not
include Acquired Fund fees and expenses.
Example
11. For purposes of the Example in the table:
a. assume that the rates listed under ``Annual Expenses'' remain
the same each year, except to reduce annual expenses to reflect the
scheduled maturity of outstanding debt or the completion of
organization expense amortization;
b. assume reinvestment of all dividends and distributions at net
asset value;
c. reflect all recurring and nonrecurring fees including
underwriting discounts and commissions; and
d. prominently disclose that the Example should not be considered a
representation of future expenses and that actual expenses may be
greater or lesser than those shown.
2. Include a synopsis of information contained in the prospectus
when the prospectus is long or complex. Normally, a synopsis should not
be provided where the prospectus is twelve or fewer printed pages.
Instruction. The synopsis should provide a clear and concise
description of the key features of the offering and the Registrant,
with cross-references to relevant disclosures elsewhere in the
prospectus or Statement of Additional Information.
3. In the case of a business development company, include the
information required by Item 101(e) of Regulation S-K [17 CFR 229.101]
(concerning reports and other information filed with the Commission).

Item 4. Financial Highlights

1. General. Furnish the following information for the Registrant,
or for the Registrant and its subsidiaries, consolidated as prescribed
in Rule 6-03 of Regulation S-X [17 CFR 210.6-03]:

Financial Highlights

Per Share Operating Performance

a. Net Asset Value, Beginning of Period
(1) Net Investment Income
(2) Net Gains or Losses on Securities (both realized and
unrealized)
b. Total From Investment Operations
c. Less Distributions
(1) Dividends (from net investment income)
(A) To Preferred Shareholders
(B) To Common Shareholders
(2) Distributions (from capital gains)
(A) To Preferred Shareholders
(B) To Common Shareholders
(3) Returns of Capital
(A) To Preferred Shareholders
(B) To Common Shareholders
d. Total Distributions
e. Net Asset Value, End of Period
f. Per Share Market Value, End of Period
g. Total Investment Return

Ratios/Supplemental Data

h. Net Assets, End of Period
i. Ratio of Expenses to Average Net Assets
j. Ratio of Net Income to Average Net Assets
k. Portfolio Turnover Rate
Instructions.

General Instructions

1. [Removed and reserved.]
2. Briefly explain the nature of the information contained in the
table and its source. The auditor's report as to the financial
highlights need not be included in the prospectus. Note that the
auditor's report is contained elsewhere in the registration statement,
specify its location, and state that it can be obtained by
shareholders.
3. Present the information in comparative columns for each of the
last ten fiscal years of the Registrant (or for the life of the
Registrant and its immediate predecessors, if less), but only for
periods subsequent to the effective date of the Registrant's first
Securities Act registration statement. In addition, present the
information for the period between the end of the latest fiscal year
and the date of the latest balance sheet or statement of assets and
liabilities. Where the period for which the Registrant provides
financial highlights is less than a full fiscal year, the ratios set
forth in the table may be annualized but the fact of this annualization
must be disclosed in a note to the table.
4. List per share amounts at least to the nearest cent. If the
offering price is computed in tenths of a cent or more, state the
amounts on the table in tenths of a cent. Present all information using
a consistent number of decimal places.
5. Provide all information in the table, including distributions to
preferred shareholders, on a common share equivalent basis.
6. Make, and indicate in a note, appropriate adjustments to reflect
any stock split or stock dividend during the period.
7. If the investment adviser has been changed during the period
covered by this Item, indicate the date(s) of the change(s) in a note.
8. The financial highlights for at least the latest five fiscal
years must be audited and must so state.

Per Share Operating Performance

9. Derive the amount for caption a(1) by adding (deducting) the
increase (decrease) per share in undistributed net investment income
for the period to

[[Page 33372]]

(from) dividends from net investment income per share for the period.
The increase (decrease) may be derived by comparing the per share
figures obtained by dividing undistributed net investment income at the
beginning and end of the period by the number of shares outstanding on
those dates. Other methods may be acceptable but should be explained
briefly in a note to the table.
10. The amount shown at caption a(2) is the balancing figure
derived from the other figures in the statement. The amount shown at
this caption for a share outstanding throughout the year may not agree
with the change in the aggregate gains and losses in the portfolio
securities for the year because of the timing of sales and repurchases
of the Registrant's shares in relation to fluctuating market values for
the portfolio.
11. For any distributions made from sources other than net
investment income and capital gains, state the per share amounts
thereof separately at caption c(3) and note the nature of the
distributions.
12. In caption e, use the net asset value for the end of each
period for which information is being provided. If the Registrant has
not been in operation for a full fiscal year, state its net asset value
immediately after the closing of its first public offering in a note to
the caption.

Total Investment Return

13. When calculating ``total investment return'' for caption g:
a. Assume a purchase of common stock at the current market price on
the first day and a sale at the current market price on the last day of
each period reported on the table;
b. note that the total investment return does not reflect sales
load; and
c. assume reinvestment of dividends and distributions at prices
obtained by the Registrant's dividend reinvestment plan or, if there is
no plan, at the lower of the per share net asset value or the closing
market price of the Registrant's shares on the dividend/distribution
date.
14. A Registrant also may include, as a separate caption, total
return based on per share net asset value, provided the Registrant
briefly explains in a note the differences between this calculation and
the calculation required by caption g.

Ratios and Supplemental Data

15. Compute ``average net assets'' for captions i and j based on
the value of net assets determined no less frequently than the end of
each month. Indicate in a note that the expense ratio and net
investment income ratio do not reflect the effect of dividend payments
to preferred shareholders.
16. Compute the ``ratio of expenses to average net assets'' using
the amount of expenses shown in the Registrant's statement of
operations for the relevant fiscal year, including increases resulting
from complying with paragraph 2(g) of Rule 6-07 of Regulation S-X, and
including reductions resulting from complying with paragraphs 2(a) and
(f) of Rule 6-07 regarding fee waivers and reimbursements. If a change
in the methodology for determining the ratio of expenses to average net
assets results from applying paragraph 2(g) of Rule 6-07, explain in a
note that the ratio reflects fees paid with brokerage commissions and
fees reduced in connection with specific agreements only for fiscal
years ending after September 1, 1995.
17. Compute portfolio turnover rate as follows:
a. Divide (A) the lesser of purchases or sales of portfolio
securities for the fiscal year by (B) the monthly average of the value
of portfolio securities owned by the Registrant during the fiscal year.
Calculate the monthly average by totaling the values of portfolio
securities as of the beginning and end of the first month of the fiscal
year and as of the end of each of the succeeding eleven months and
dividing the sum by 13.
b. Exclude from both the numerator and denominator all securities,
including options, whose maturity or expiration date at the time of
acquisition was one year or less. Include all long-term securities,
including U.S. Government securities. Purchases include cash paid upon
conversion of one portfolio security into another and the cost of
rights or warrants. Sales include net proceeds of the sale of rights or
warrants and net proceeds of portfolio securities that have been called
or for which payment has been made through redemption or maturity.
c. If during the fiscal year the Registrant acquired the assets of
another investment company or of a personal holding company in exchange
for its own shares, exclude from purchases the value of securities so
acquired, and, from sales, all sales of the securities made following a
purchase-of-assets transaction to realign the Registrant's portfolio.
Appropriately adjust the denominator of the portfolio turnover
computation, and disclose the exclusions and adjustments.
d. Include in purchases and sales short sales that the Registrant
intends to maintain for more than one year and put and call options
with expiration dates more than one year from the date of acquisition.
Include proceeds from a short sale in the value of portfolio securities
sold during the period; include the cost of covering a short sale in
the value of portfolio securities purchased during the period. Include
premiums paid to purchase options in the value of portfolio securities
purchased during the reporting period; include premiums received from
the sale of options in the value of portfolio securities sold during
the period.
2. Business Development Companies. If the Registrant is regulated
as a business development company under the Investment Company Act,
furnish in a separate section the information required by Items 301,
302, and 303 of Regulation S-K.
3. Senior Securities. Furnish the following information as of the
end of the last ten fiscal years for each class of senior securities
(including bank loans) of the Registrant. If consolidated statements
were prepared as of any of the dates specified, furnish the information
on a consolidated basis:

----------------------------------------------------------------------------------------------------------------
Total amount
outstanding exclusive Asset coverage per Involuntary Average market value
Year of treasury unit liquidating per unit (exclude
securities preference per unit bank loans)
----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
----------------------------------------------------------------------------------------------------------------

Instructions.
1. Instructions 2, 3, and 8 to Item 4.1 also apply to this sub-
item.
2. Use the method described in Section 18(h) of the Investment
Company Act to calculate the asset coverage to be set forth in column
(3). However, in lieu of expressing asset coverage in terms of a ratio,
as described in Section 18(h), express it for each class of senior
securities in terms of dollar amounts per share (in the case of
preferred stock) or per $1,000 of indebtedness (in the case of senior
indebtedness).

[[Page 33373]]

3. Column (4) need be included only with respect to senior stock.
4. Set forth in a note to the table the method used to determine
the averages called for by column (5) (e.g., weighted, monthly, daily,
etc.).
5. Briefly explain the terms used in the headings of the columns.

Item 5. Plan of Distribution

Briefly describe how the securities being registered will be
distributed. Include the following information:
1. For each principal underwriter distributing the securities being
offered set forth:
a. Its name and principal business address;
b. a brief discussion of the nature of any material relationship
with the Registrant (other than that of principal underwriter),
including any arrangement under which a principal underwriter or its
affiliates will perform administrative or custodial services for the
Registrant;
Instruction. Any material relationship between the underwriter (or
its affiliates) and the investment adviser (or its affiliates) of the
Registrant relating to the business or operation of the Registrant
constitutes a material relationship of the underwriter with the
Registrant.
c. the amount of securities underwritten; and
d. the nature of the obligation to distribute the Registrant's
securities.
Instruction. All that is required to be disclosed as to the nature
of the underwriter's obligation is whether the underwriter will be
committed to take and pay for all the securities if any are taken, or
whether it is merely an agency or ``best-efforts'' arrangement under
which the underwriter is required to take and pay for only such
securities as it may sell to the public. Conditions precedent to the
underwriter's taking the securities, including ``market outs,'' need
not be described, except in the case of an agency or ``best-efforts''
arrangement.
2. The price to the public.
Instructions.
1. If it is impracticable to state the price to the public,
concisely explain the manner in which the price will be determined,
including a description of the valuation procedure used by the
Registrant in determining the price. If the securities are to be
offered at the market price, or if the offering price is to be
determined by a formula related to market price, indicate the market
involved and the market price as of the latest practicable date.
2. For restrictions on distributions and repurchases of closed-end
company securities, see Section 23 of the Investment Company Act, and
Investment Company Act Rel. No. 3187 (Feb. 6, 1961) [26 FR 1275 (Feb.
15, 1961)].
3. Briefly explain the basis for any differences in the price at
which securities are offered to the public, as individuals and/or as
groups, and to officers, directors and employees of the Registrant, its
adviser or underwriter.
3. To the extent not set forth on the cover page of the prospectus,
state the amount of the sales load, if any, as a percentage of the
public offering price, and concisely describe the commissions to be
allowed or paid to (i) underwriters, including all other items that
would be deemed by FINRA to constitute underwriting compensation for
purposes of FINRA's rules regarding securities offerings, underwriting
and compensation, and (ii) dealers, including all cash, securities,
contracts, and/or other considerations to be realized by any dealer in
connection with the sale of securities.
Instruction. If any dealers are to act in the capacity of sub-
underwriters and are allowed or paid any additional discounts or
commission for acting in such capacity, a general statement to that
effect will suffice without giving the additional amounts to be sold.
4. If the underwriting agreement provides for indemnification by
the Registrant of the underwriters or their controlling persons against
any liability arising under the Securities Act or Investment Company
Act, briefly describe such indemnification provisions.
5. Provide the identity of any finder and, if applicable, concisely
describe the nature of any material relationship between such finder
and the Registrant, its officers, directors, principal shareholders,
finders or promoters or the principal underwriter(s), or the managing
underwriter(s), if any, and, in each case, the affiliates or associates
thereof.
6. Indicate the date by which investors must pay for the
securities.
7. If the securities are being offered in conjunction with any
retirement plan, provide a statement regarding the manner in which
further information about the plan can be obtained.
8. If investors' funds will be forwarded to an escrow account,
identify the escrow agent, and briefly describe the conditions for
release of the funds, whether such funds will accrue interest while in
escrow, and the manner in which the monies in such account will be
distributed if such conditions are not satisfied, including how accrued
interest, if any, will be distributed to investors.
9. If the securities offered by the Registrant are not being listed
on a national securities exchange, disclose whether any of the
underwriters intends to act as a market maker with respect to such
unlisted securities.
10. Briefly outline the plan of distribution of any securities that
are to be offered other than through underwriters.
a. If the securities are to be offered through the selling efforts
of brokers or dealers, concisely describe the plan of distribution and
the terms of any agreement, arrangement, or understanding entered into
with broker(s) or dealer(s) prior to the effective date of the
registration statement, including volume limitations on sales, parties
to the agreement, and the conditions under which the agreement may be
terminated. If known, identify the broker(s) or dealer(s) that will
participate in the offering, and state the amount to be offered through
each.
b. If any of the securities being registered are to be offered
other than for cash, describe briefly the general purposes of the
distribution, the basis upon which the securities are to be offered,
the amount of compensation and other expenses of distribution, and the
person(s) responsible for such expenses.
c. If the distribution is to be made under a plan of acquisition,
reorganization, readjustment, or succession, provide a statement
regarding the general effect of the plan and when it becomes operative.
As to any material amount of assets to be acquired under the plan,
furnish the information required by Instruction 4 to Item 7.1 below.

Item 6. Selling Shareholders

If any securities being registered are to be offered for the
account of shareholders, furnish the information required by Item 507
of Regulation S-K [17 CFR 229.507].

Item 7. Use of Proceeds

1. State the principal purposes for which the net proceeds of the
offering are intended to be used and the approximate amount intended to
be used for each purpose.
Instructions.
1. If any substantial portion of the proceeds will not be allocated
in accordance with the investment objectives and policies of the
Registrant, a statement to that effect should be made together with a
statement of the amount involved and an indication of how that amount
will be invested.

[[Page 33374]]

2. If a material part of the proceeds will be used to discharge
indebtedness, state the interest rate and maturity of the indebtedness.
3. If the Registrant intends to incur loans to pay underwriting
commissions or any other organizational or offering expenses, disclose
this fact and state the name of the lender, the amount of the first
installment, the rate of interest, the date on which payments will
begin, the dates and amounts of subsequent installments, and the final
maturity date. Explain that the interest paid on such borrowing will
not be available for investment purposes and will increase the expenses
of the fund.
4. If any material part of the proceeds will be used to acquire
assets other than in the ordinary course of business, briefly describe
the assets, the names of the persons from whom they are to be acquired,
the cost of the assets to the Registrant, and how the costs were
determined.
2. Disclose how long it is expected to take to fully invest net
proceeds in accordance with the Registrant's investment objectives and
policies, the reasons for any anticipated lengthy delay in investing
the net proceeds, and the consequences of any delay.

Item 8. General Description of the Registrant

Concisely discuss the organization and operation, or proposed
operation, of the Registrant. Include the information specified below.
1. General. Briefly describe the Registrant, including:
a. The date and form of organization and the name of the state or
other jurisdiction under whose laws it is organized; and
b. the classification and subclassification under Sections 4 and 5
of the Investment Company Act.
2. Investment Objectives and Policies. Concisely describe the
investment objectives and policies of the Registrant that will
constitute its principal portfolio emphasis, including the following:
a. If these objectives may be changed without a vote of the holders
of a majority of voting securities, a brief statement to that effect;
b. how the Registrant proposes to achieve its objectives,
including:
(1) The types of securities in which the Registrant invests or will
invest principally;
(2) the identity of any particular industry or group of industries
in which the Registrant proposes to concentrate.
Instruction. Concentration, for purposes of this Item, is deemed 25
percent or more of the value of the Registrant's total assets invested
or proposed to be invested in a particular industry or group of
industries. The policy on concentration should not be inconsistent with
the Registrant's name.
c. identify other policies of the Registrant that may not be
changed without the vote of a majority of the outstanding voting
securities, including those policies that the Registrant deems to be
fundamental within the meaning of Section 8(b) of the Investment
Company Act; and
d. briefly describe the significant investment practices or
techniques that the Registrant employs or intends to employ (such as
risk arbitrage, reverse repurchase agreements, forward delivery
contracts, when-issued securities, stand-by commitments, options and
futures contracts, options on futures contracts, currency transactions,
foreign securities, investing for control of management, and/or lending
of portfolio securities) that are not described pursuant to
subparagraph 2.c above or subparagraph 3 below.
3. Risk Factors. Concisely describe the risks associated with an
investment in the Registrant, including the following:
a. General. Discuss the principal risk factors associated with
investment in the Registrant specifically as well as those factors
generally associated with investment in a company with investment
objectives, investment policies, capital structure, or trading markets
similar to the Registrant's.
b. Effects of Leverage. If the prospectus offers common stock of
the Registrant and the Registrant has outstanding or is offering a
class of senior securities as defined in Section 18 of the Investment
Company Act, then:
(1) Set forth the annual rate of interest or dividend payments on
the senior securities;
Instruction. If payments will vary because the interest or dividend
rate is variable, provide the initial rate or, if the security is
currently outstanding, the current rate.
(2) Set forth the annual return that the Registrant's portfolio
must experience in order to cover annual interest or dividend payments
on senior securities; and
(3) provide a table illustrating the effect on return to a common
stockholder of leverage (using senior securities) in the format
illustrated below, using the captions provided, and assuming annual
returns on the Registrant's portfolio (net of expenses) of minus ten,
minus five, zero, five, and ten percent.
(4) The table should be accompanied by a brief narrative explaining
that the purpose of the table is to assist the investor in
understanding the effects of leverage. Indicate that the figures
appearing in the table are hypothetical and that actual returns may be
greater or less than those appearing in the table.

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Assumed Return on Portfolio (Net -10% -5% 0% 5% 10%
of Expenses)...................
Corresponding Return to Common % % % % %
Stockholder....................
----------------------------------------------------------------------------------------------------------------

Instructions.
1. Round all percentages to the nearest hundredth of one percent.
2. A Registrant may assume additional rates of return on its
portfolio; however, to the extent a Registrant shows an additional
positive rate of return, it must also show an additional negative rate
of return of the same magnitude. A Registrant may show the positive
rate of return at which the corresponding rate of return to the common
stockholder is zero without showing the corresponding negative rate of
return.
3. Compute the ``corresponding return to common stockholder'' as
follows: Multiply the total amount of fund assets at the beginning of
the period by the assumed rate of return; subtract from the resulting
product all interest accrued or dividends declared on senior securities
that would be made during the year following the offering; and divide
the resulting difference by the total amount of fund assets
attributable to common stock. If payments will vary because the
interest or dividend rate is variable, use the initial rate or, if the
security is currently outstanding, the current rate.
4. Other Policies. Briefly discuss the types of investments that
will be made by the Registrant, other than those that will constitute
its principal portfolio emphasis (as discussed in Item 8.2 above), and
any policies or practices relating to those investments.
Instructions.
1. This discussion should receive less emphasis in the prospectus
than that required by Item 8.2 and, if appropriate in light of
Instructions 2 and 3 below, may be omitted or limited to the

[[Page 33375]]

information necessary to identify the type of investment, policy, or
practice.
2. Do not discuss a policy that prohibits a particular practice or
permits a practice that the Registrant has not used within the past
twelve months (or since its initial public offering, if that period is
shorter) and does not intend to use in the future.
3. If a policy limits a particular practice so that no more than
five percent of the Registrant's net assets are at risk, or if the
Registrant has not followed that practice within the last year (or
since its initial public offering, if such period is shorter) in such a
manner that more than five percent of net assets were at risk and does
not intend to follow such practice so as to put more than five percent
of net assets at risk, limit the prospectus disclosure about such
practice to that necessary to identify the practice. Disclose whether
or not the Registrant will provide prior notice to security holders of
its intention to commence or expand the use of such practice.
The amount of the Registrant's net assets that are at risk for
purposes of determining whether ``more than five percent of net assets
are at risk'' is not limited to the initial amount of the Registrant's
assets that are invested in a particular practice, e.g., the purchase
price of an option. The amount of net assets at risk is determined by
reference to the potential liability or loss that may be incurred by
the Registrant in connection with a particular practice.
5. Share Price Data. If the prospectus offers common stock or other
type of common equity security (collectively ``common stock'') and if
the Registrant's common stock is publicly held, provide the following
information:
a. Identify the principal United States market or markets in which
the common stock is being traded. Where there is no established public
trading market, furnish a statement to that effect.
Instruction. The existence of limited or sporadic quotations should
not itself be deemed to constitute an ``established public trading
market.''
b. If the principal United States market for the common stock is an
exchange, state the high and low sales prices for the stock for each
full quarterly period within the two most recent fiscal years and each
full fiscal quarter since the beginning of the current fiscal year, as
reported in the consolidated transaction reporting system or, if not so
reported, as reported on the principal exchange market for the stock.
If the principal United States market for the common stock is not an
exchange, state the range of high and low bid information for the
common stock for the periods described in the preceding sentence, as
regularly quoted in the automated quotation system of a registered
securities association or, if not so quoted, the range of reported high
and low bid quotations, indicating the source of the quotations.
Instructions.
1. This information should be set forth in tabular form.
2. Indicate, as applicable, that such over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up, mark-
down, or commission and may not necessarily represent actual
transactions.
3. Where there is an absence of an established public trading
market, qualify reference to quotations by an appropriate explanation.
4. With respect to each quotation, disclose the net asset value and
the discount or premium to net asset value (expressed as a percentage)
represented by the quotation.
5. Where the shares of the Registrant trade at their high or low
share price for more than one day during the period, the Registrant
should provide the discount or premium information for the day on which
the premium or discount was greatest.
c. Include share price and corresponding net asset value and
premium/discount information as of the latest practicable date.
d. Disclose whether the Registrant's common stock has historically
traded for an amount less than, equal to, or exceeding net asset value.
Disclose any methods undertaken or to be undertaken by the Registrant
that are intended to reduce any discount (such as the repurchase of
fund shares, providing for the ability to convert to an open-end
investment company, guaranteed distribution plans, etc.), and briefly
discuss the effects that these measures have or may have on the
Registrant.
e. If the shares of the Registrant have no history of public
trading, discuss the tendency of closed-end fund shares to trade
frequently at a discount from net asset value and the risk of loss this
creates for investors purchasing shares in the initial public offering.
If the Registrant has omitted the statement required by Item 1.i,
describe the basis for the Registrant's belief that its shares will not
trade at a discount from net asset value.
6. Business Development Companies. A Registrant that is a business
development company should, in addition, provide the following
information:
a. Portfolio Companies. For each portfolio company in which the
Registrant is investing, disclose: (1) The name and address; (2) nature
of business; (3) title, class, percentage of class, and value of
portfolio company securities held by the Registrant; (4) amount and
general terms of all loans to portfolio companies; and (5) the
relationship of the portfolio companies to the Registrant.
Instructions.
1. The description of the nature of the business of a portfolio
company in which the Registrant is investing may vary according to the
extent of the Registrant's investment in the particular portfolio
company. The Registrant need only briefly identify the nature of the
business of a portfolio company in which the Registrant's investment
constitutes less than five percent of the Registrant's assets.
2. In describing the nature of the business of a portfolio company,
include matters such as the competitive conditions of the business of
the company; its market share; dependence on a single or small number
of customers; importance to it of any patents, trademarks, licenses,
franchises, or concessions held; key operating personnel; and
particular vulnerability to changes in government regulation, interest
rates, or technology.
3. In describing the relationship of portfolio companies to the
Registrant, include a discussion of the extent to which the Registrant
makes available significant managerial assistance to its portfolio
companies. Disclose any other material business, professional, or
family relationship between the officers and directors of the
Registrant and any portfolio company, its officers, directors, and
affiliates (as defined in Rule 12b-2 under the Exchange Act [17 CFR
240.12b-2]).
b. Certain Subsidiaries. If the Registrant has a wholly-owned small
business investment company subsidiary, disclose: (1) Whether the
subsidiary is regulated as a business development company or investment
company under the Investment Company Act; (2) the percentage of the
Registrant's assets invested in the subsidiary; and (3) material
information about the small business investment company's operations,
including the special risks of investing in a portfolio heavily
invested in securities of small and developing or financially troubled
businesses.
c. Financial Statements. Unless the business development company
has had less than one fiscal year of operations, provide the financial
statements of the Registrant.
Instructions.
1. a. Furnish, in a separate section following the responses to the
above

[[Page 33376]]

items in Part A of the registration statement, the financial statements
and schedules required by Regulation S-X [17 CFR 210]. A business
development company should comply with the provisions of Regulation S-X
generally applicable to registered management investment companies.
(See Section 210.3-18 and Sections 210.6-01 through 210.6-10 of
Regulation S-X.)
b. A business development company should provide an indication in
its Schedule of Investments of those investments that are not
qualifying investments under Section 55(a) of the Investment Company
Act and, in a footnote, briefly explain the significance of non-
qualification.
2. Notwithstanding the requirements of Instruction 1 above, the
following statements and schedules required by Regulation S-X may be
omitted from Part A and included in Part C of the Registration
statement:
a. The statement of any subsidiary that is not a majority-owned
subsidiary; and
b. columns C and D of Schedule IV [17 CFR 210.12-03] in support of
the most recent balance sheet.
3. A business development company with less than one fiscal year of
operations should provide its financial statements in the Statement of
Additional Information in response to Item 24.
d. Prior Operations. If the Registrant has had an operating history
prior to electing to be regulated as a business development company,
disclose any anticipated changes in its operations as a result of
coming into compliance with Section 55(a) of the Investment Company
Act. This information may be omitted in a prospectus used a sufficient
time after election to be regulated as a business development company
so that it is no longer material.
e. Special Risk Factors. To the extent not disclosed in response to
this Item or Item 8.3, concisely describe the special risks of
investing in a business development company, including the risks
associated with investing in a portfolio of small and developing or
financially troubled businesses. (See Section 64(b)(1) of the
Investment Company Act.)

Item 9. Management

1. General. Describe concisely how the business of the Registrant
is managed, including:
a. Board of Directors. A description of the responsibilities of the
board of directors with respect to the management of the Registrant;
Instructions.
1. In responding to this Item, it is sufficient to include a
general statement as to the responsibilities of the board of directors
under the applicable laws of the Registrant's jurisdiction of
organization.
2. A Registrant that has elected to be regulated as a business
development company should briefly describe the terms of any special
compensation plans available to management.
b. Investment Advisers. For each investment adviser of the
Registrant:
(1) Its name and principal business address, a description of its
experience as an investment adviser, and, if the investment adviser is
controlled by another person, the name of that person and the general
nature of its business;
Instruction. If the investment adviser is subject to more than one
level of control, it is sufficient to provide the name of the ultimate
control person.
(2) A description of the services provided by the investment
adviser;
Instructions.
1. If, in addition to providing investment advice, the investment
adviser or persons employed by or associated with the investment
adviser are subject to the authority of the board of directors,
responsible for overall management of the Registrant's business
affairs, it is sufficient to state that fact instead of listing all
services provided.
2. A Registrant that has elected to be regulated as a business
development company should describe briefly the type of managerial
assistance that is or will be provided to the businesses in which it is
investing and the qualifications of the investment adviser to render
such management assistance.
(3) A description of its compensation; and
Instructions.
1. State generally what the adviser's fee is or will be as a
percentage of average net assets, including any break-point. It is not
necessary to include precise details as to how the fee is computed or
paid.
2. If the investment advisory fee is paid in some manner other than
on the basis of average net assets, briefly describe the basis of
payment.
(4) A statement, adjacent to the disclosure required by paragraph
1(b)(3) of this Item, that a discussion regarding the basis for the
board of directors approving any investment advisory contract of the
Registrant is available in the Registrant's annual or semi-annual
report to shareholders, as applicable, and providing the period covered
by the relevant annual or semi-annual report.
c. Portfolio Management. The name, title, and length of service of
the person or persons employed by or associated with the Registrant or
an investment adviser of the Registrant who are primarily responsible
for the day-to-day management of the Registrant's portfolio
(``Portfolio Manager''). Also state each Portfolio Manager's business
experience during the past 5 years. Include a statement, adjacent to
the foregoing disclosure, that the SAI provides additional information
about the Portfolio Manager's(s') compensation, other accounts managed
by the Portfolio Manager(s), and the Portfolio Manager's(s') ownership
of securities in the Registrant.
Instruction. If a committee, team, or other group of persons
associated with the Registrant or an investment adviser of the
Registrant is jointly and primarily responsible for the day-to-day
management of the Registrant's portfolio, information in response to
this Item is required for each member of such committee, team, or other
group. For each such member, provide a brief description of the
person's role on the committee, team, or other group (e.g., lead
member), including a description of any limitations on the person's
role and the relationship between the person's role and the roles of
other persons who have responsibility for the day- to-day management of
the Registrant's portfolio. If more than five persons are jointly and
primarily responsible for the day-to-day management of the Registrant's
portfolio, the Registrant need only provide information for the five
persons with the most significant responsibility for the day-to-day
management of the Registrant's portfolio.
d. Administrators. The identity of any other person who provides
significant administrative or business affairs management services
(e.g., an ``Administrator'' or ``Sub-Administrator''), a description of
the services provided, and the compensation to be paid;
e. Custodians. The name and principal business address of the
custodian(s), transfer agent, and dividend paying agent;
f. Expenses. The type of expenses for which the Registrant is
responsible, and, if organization expenses of the Registrant are to be
paid out of its assets, how the expenses will be amortized and the
period over which the amortization will occur; and
g. Affiliated Brokerage. If the Registrant pays (or will pay)
brokerage commissions to any broker that is an (1) affiliated person of
the Registrant, (2) affiliated person of such person, or (3) affiliated
person of an affiliated person of the Registrant, its investment
adviser,

[[Page 33377]]

or its principal underwriter, a statement to that effect.
2. Non-Resident Managers. If any non-resident officer, director,
underwriter, investment adviser, or expert named in the registration
statement has a substantial portion of its assets located outside the
United States, identify each person, and state how the enforcement by
investors of civil liabilities under the federal securities laws may be
affected. This disclosure should indicate whether:
a. Investors will be able to effect service of process within the
United States upon these persons;
b. investors will be able to enforce, in United States courts,
judgments against these persons obtained in such courts predicated upon
the civil liability provisions of the federal securities laws;
c. the appropriate foreign courts would enforce judgments of United
States courts obtained in actions against these persons predicated upon
the civil liability provisions of the federal securities laws; and
d. the appropriate foreign courts would enforce, in original
actions, liabilities against these persons predicated solely upon the
federal securities laws.
Instruction. If any portions of this disclosure are stated to be
based upon an opinion of counsel, name the counsel in the prospectus,
and include an appropriate manually signed consent to the use of
counsel's name and opinion as an exhibit to the registration statement.
3. Control Persons. Identify each person who, as of a specified
date no more than 30 days prior to the date of filing the registration
statement (or amendment to it), controls the Registrant.
Instruction. For the purposes of this Item, ``control'' means (1)
the beneficial ownership, either directly or through one or more
controlled companies, of more than 25 percent of the voting securities
of a company; (2) the acknowledgment or assertion by either the
controlled or controlling party of the existence of control; or (3) an
adjudication under Section 2(a)(9) of the Investment Company Act, which
has become final, that control exists.

Item 10. Capital Stock, Long-Term Debt, and Other Securities

1. Capital Stock. For each class of capital stock of the
Registrant, state the title of the class and briefly describe all of
the matters listed in paragraphs 1.a through 1.f that are relevant:
a. concisely discuss the nature and most significant attributes,
including, where applicable, (1) dividend rights, policies, or
limitations; (2) voting rights; (3) liquidation rights; (4) liability
to further calls or to assessments by the Registrant; (5) preemptive
rights, conversion rights, redemption provisions, and sinking fund
provisions; and (6) any material obligations or potential liability
associated with ownership of the security (not including investment
risks);
Instructions.
1. A complete legal description of the securities should not be
given.
2. If the Registrant has a policy of making distribution or
dividend payments at predetermined times and minimum rates, disclosure
should include a statement that, if the fund's investments do not
generate sufficient income, the fund may be required to liquidate a
portion of its portfolio to fund these distributions, and therefore
these payments may represent a reduction of the shareholders' principal
investment. The tax consequences of such payments also should be
described briefly.
b. with respect to preferred stock, (1) state whether there are any
restrictions on the Registrant while there is an arrearage in the
payment of dividends or sinking fund installments, and, if so,
concisely describe the restrictions and (2) briefly describe provisions
restricting the declaration of dividends, requiring the maintenance of
any ratio or assets, requiring the creation or maintenance of reserves,
or permitting or restricting the issuance of additional securities;
c. if the rights of holders of the security may be modified other
than by a vote of a majority or more of the shares outstanding, voting
as a class, so state, and briefly explain;
d. if rights evidenced by, or the amounts payable with respect to,
any class of securities being described are, or may be, materially
limited or qualified by the rights of any other authorized class of
securities, include sufficient information regarding the other
securities to enable investors to understand such rights and
limitations;
e. if the Registrant has a dividend reinvestment plan, briefly
discuss the material aspects of the plan including, but not limited to,
whether the plan is automatic or whether shareholders must
affirmatively elect to participate; (2) the method by which
shareholders can elect to reinvest stock dividends or, if the plan is
automatic, to receive cash dividends; (3) from whom additional
information about the plan may be obtained (including a telephone
number or address); (4) the method of determining the number of shares
that will be distributed in lieu of a cash dividend; (5) the income tax
consequences of participation in the plan (i.e., that capital gains and
income are realized, although cash is not received by the shareholder);
(6) how to terminate participation in the plan and rights upon
termination; (7) if applicable, that an investor holding shares that
participate in the dividend reinvestment plan in a brokerage account
may not be able to transfer the shares to another broker and continue
to participate in the dividend reinvestment plan; (8) the type and
amount (if known) of fees, commissions, and expenses payable by
participants in connection with the plan; and (9) if a cash purchase
plan option is available, any minimum or maximum investment required;
and
f. briefly describe any provision of the Registrant's charter or
bylaws that would have an effect of delaying, deferring, or preventing
a change of control of the Registrant and that would operate only with
respect to an extraordinary corporate transaction involving the
Registrant, such as a merger, reorganization, tender offer, sale or
transfer of substantially all of its assets, or liquidation.
Instruction. Provisions and arrangements required by law or imposed
by governmental or judicial authority need not be discussed. Provisions
or arrangements adopted by the Registrant to effect or further
compliance with laws or governmental or judicial mandate must be
described where compliance does not require the specific provisions or
arrangements adopted.
2. Long-Term Debt. If the Registrant is issuing or has outstanding
a class of long-term debt, state the title of the debt securities and
their principal amount, and concisely describe any of the matters
listed in paragraphs 2.a through 2.e that are relevant:
a. provisions concerning maturity, interest, conversion,
redemption, amortization, sinking fund, and/or retirement;
b. provisions restricting the declaration of dividends, requiring
the maintenance of any ratio or assets, and/or requiring the creation
or maintenance of reserves;
c. provisions permitting or restricting the issuance of additional
securities, the ability to incur additional debt, the release or
substitution of assets securing the issue, and/or the modification of
the terms of the securities;
Instruction. A complete legal description of the securities should
not be given.
d. for each trustee, its name, the nature of any material
relationship it has with the Registrant or any of its affiliates, the
percentage of securities

[[Page 33378]]

necessary to require the trustee to take action, and any
indemnification the trustee may require before proceeding against
assets of the Registrant; and
e. to the extent not otherwise disclosed in response to this Item,
whether the rights evidenced by the long-term debt are, or may be,
materially limited or qualified by the rights of any other authorized
class of securities, and, if so, include sufficient information
regarding such other securities to enable investors to understand such
rights and limitations.
3. General. Concisely describe the significant attributes of each
other class of the Registrant's authorized securities. The description
should be comparable to that called for by paragraphs 1 and 2 of this
Item. If the securities are subscription warrants or rights, state the
title and amount of securities called for and the period during which,
and the prices at which, the warrants or rights are exercised.
4. Taxes. Concisely describe the tax consequences to investors of
an investment in the securities being offered. If the Registrant
intends to qualify for treatment under Subchapter M of the Internal
Revenue Code of 1986 [26 U.S.C. 851-856], it is sufficient, in the
absence of special circumstances, to state that: (i) the Registrant
will distribute all of its net investment income and gains to
shareholders and that these distributions are taxable as ordinary
income or capital gains; (ii) shareholders may be proportionately
liable for taxes on income and gains of the Registrant but shareholders
not subject to tax on their income will not be required to pay tax on
amounts distributed on them: and (iii) the Registrant will inform
shareholders of the amount and nature of the income or gains.
Instructions.
1. The description should not include detailed discussions of
applicable law.
2. The Registrant should specifically address whether shareholders
will be subject to the alternative minimum tax.
5. Outstanding Securities. Furnish the following information, in
substantially the tabular form indicated, for each class of authorized
securities of the Registrant. The information must be current within 90
days of the filing of this registration statement or amendment to it.

----------------------------------------------------------------------------------------------------------------
Amount outstanding
Title of class Amount authorized Amount held by registrant exclusive of amount shown
or for its account under (3)
----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
----------------------------------------------------------------------------------------------------------------

6. Securities Ratings. If the prospectus relates to senior
securities of the Registrant that have been assigned a rating by a
nationally recognized securities rating organization and the rating is
disclosed in the prospectus, briefly discuss the significance of the
rating, the basis upon which ratings are issued, any conditions or
guidelines imposed by the NRSRO for the Registrant to maintain the
rating, and whether or not the Registrant intends, or has any
contractual obligation, to comply with these conditions or guidelines.
In addition, disclose the material terms of any agreement between the
Registrant or any of its affiliates and the NRSRO under which the NRSRO
provides such rating. If the prospectus relates to securities other
than senior securities of the Registrant that have been assigned a
rating by a NRSRO, the information required by this paragraph may be
provided in the Statement of Additional Information unless the rating
criteria will materially affect the investment policies of the
Registrant (e.g., if the rating agency establishes criteria for
selection of the Registrant's portfolio securities with which the
Registrant intends to comply), in which case it should be included in
the prospectus.
Instructions.
1. The term ``nationally recognized securities rating
organization'' has the same meaning as used in Rule 15c3-1(c)(2)(vi)(F)
under the Exchange Act [17 CFR 240.15c3-1].
2. Rule 436(g)(1) of Regulation C under the Securities Act [17 CFR
230.436] provides that a security rating assigned by an NRSRO to a
class of debt securities, a class of convertible debt securities, or a
class of preferred stock is not considered a part of the registration
statement for purposes of Sections 7 and 11 of the Securities Act.
Therefore, in the case of disclosure of a rating assigned to these
types of securities issued by the Registrant, the Registrant need not
include a written consent of the NRSRO as an exhibit to the
registration statement as required by Item 25.2.n but must provide the
disclosure called for by this Item.
3. Reference should be made to the statement of the Commission's
policy on security ratings set forth under the section ``General'' in
Regulation S-K [17 CFR 229.10] for the Commission's views on other
important matters to be considered in disclosing securities ratings.

Item 11. Defaults and Arrears on Senior Securities

1. State the nature, date, and amount of default of payment of
principal, interest, or amortization for each issue of long-term debt
of the Registrant that is in default on the date of filing.
2. If an issue of capital stock has any accumulated dividend in
arrears at the date of filing, state the title of each issue and the
amount per share in arrears.

Item 12. Legal Proceedings

Describe briefly any material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which the
Registrant, any subsidiary of the Registrant, or the Registrant's
investment adviser or principal underwriter is a party. Include the
name of the court where the case is pending, the date instituted, the
principal parties, a description of the factual basis alleged to
underlie the proceeding, and the relief sought. Include similar
information as to any proceeding instituted by a governmental authority
or known to be contemplated by a governmental authority.
Instruction. Legal Proceedings, for purposes of this Item, are
material only to the extent that they are likely to have a material
adverse effect upon: (1) the ability of the investment adviser or
principal underwriter to perform its contract with the Registrant; or
(2) the Registrant.

Item 13. [Removed and reserved.]

Part B--Information Required in a Statement of Additional Information

Item 14. Cover Page

1. The outside cover page must contain the following information:
a. the Registrant's name;
b. a statement or statements (1) that the Statement of Additional
Information is not a prospectus, (2) that the Statement of Additional
Information should be read with the prospectus, and (3) how a copy of
the prospectus may be obtained;
c. the date of the Statement of Additional Information;
d. the date of the related prospectus and any other identifying
information

[[Page 33379]]

that the Registrant deems appropriate; and
e. the statement required by paragraph (b)(2) of Rule 481 under the
Securities Act.
2. The cover page may include other information, provided that it
does not, by its nature, quantity, or manner of presentation, impede
understanding of required information.

Item 15. Table of Contents

List the contents of the Statement of Additional Information, and,
where useful, provide a cross-reference to related disclosure in the
prospectus.

Item 16. General Information and History

If the Registrant has engaged in a business other than that of an
investment company during the past five years, state the nature of the
other business and give the approximate date on which the Registrant
commenced business as an investment company. If the Registrant's name
was changed during that period, state its former name and the
approximate date on which it was changed. If the change in the
Registrant's business or name occurred in connection with any
bankruptcy, receivership, or similar proceeding or any other material
reorganization, readjustment, or succession, briefly describe the
nature and results of the same.

Item 17. Investment Objective and Policies

1. Describe clearly and concisely the investment policies of the
Registrant. It is not necessary to repeat information contained in the
prospectus, but, in augmenting the disclosure about those types of
investments, policies, or practices that are briefly discussed or
identified in the prospectus, the Registrant should refer to the
prospectus when necessary to clarify the additional information called
for by this Item.
2. Concisely describe any fundamental policy of the Registrant not
described in the prospectus with respect to each of the following
activities:
a. the issuance of senior securities;
b. short sales, purchases on margin, and the writing of put and
call options;
c. the borrowing of money (describe briefly any fundamental policy
that limits the Registrant's ability to borrow money, and state the
purpose for which the proceeds will be used);
d. the underwriting of securities of other issuers (include any
fundamental policy concerning the acquisition of restricted securities,
i.e., securities that must be registered under the Securities Act
before they may be offered or sold to the public);
e. the concentration of investments in a particular industry or
groups of industries;
f. the purchase or sale of real estate and real estate mortgage
loans;
g. the purchase or sale of commodities or commodity contracts,
including futures contracts;
h. the making of loans (for purposes of this Item, the term
``loans'' does not include the purchase of a portion of an issue of
publicly distributed bonds, debentures, or other securities, whether or
not the purchase was made upon the original issuance of the securities;
however, the term ``loan'' includes the loaning of cash or portfolio
securities to any person); and
i. any other policy that the Registrant deems fundamental.
Instructions.
1. For purposes of this Item, the term ``fundamental policy'' is
defined as any policy that the Registrant has deemed to be fundamental
or that may not be changed without the approval of a majority of the
Registrant's outstanding voting securities.
2. If the Registrant reserves freedom of action with respect to any
of the foregoing activities (other than the activity described in
paragraph e), it must disclose the maximum percentage of assets to be
devoted to the particular activity.
3. Describe fully any significant investment policies of the
Registrant not described in the prospectus that are not deemed
fundamental and that may be changed without the approval of the holders
of a majority of the voting securities (e.g., investing for control of
management, investing in foreign securities, or arbitrage activities).
Instruction. The Registrant should disclose the extent to which it
may engage in the above policies and the risks inherent in such
policies.
4. Briefly explain any significant change in the Registrant's
portfolio turnover rates over the last two fiscal years. If the
Registrant anticipates a significant change in the portfolio turnover
rate from that reported under caption k of Item 4.1 for its most recent
fiscal year, so state. In the case of a new registration, the
Registrant should state its policy with respect to portfolio turnover.

Item 18. Management

General Instructions.
1. For purposes of this Item 18, the terms below have the following
meanings:
a. The term ``family of investment companies'' means any two or
more registered investment companies that:
(1) Share the same investment adviser or principal underwriter; and
(2) Hold themselves out to investors as related companies for
purposes of investment and investor services.
b. The term ``fund complex'' means two or more registered
investment companies that:
(1) Hold themselves out to investors as related companies for
purposes of investment and investor services; or
(2) Have a common investment adviser or have an investment adviser
that is an affiliated person of the investment adviser of any of the
other registered investment companies.
c. The term ``immediate family member'' means a person's spouse;
child residing in the person's household (including step and adoptive
children); and any dependent of the person, as defined in Section 152
of the Internal Revenue Code [26 U.S.C. 152].
d. The term ``officer'' means the president, vice-president,
secretary, treasurer, controller, or any other officer who performs
policy-making functions.
2. When providing information about directors, furnish information
for directors who are interested persons of the Registrant, as defined
in Section 2(a)(19) of the Investment Company Act and the rules
thereunder, separately from the information for directors who are not
interested persons of the Registrant. For example, when furnishing
information in a table, you should provide separate tables (or separate
sections of a single table) for directors who are interested persons
and for directors who are not interested persons. When furnishing
information in narrative form, indicate by heading or otherwise the
directors who are interested persons and the directors who are not
interested persons.
1. Provide the information required by the following table for each
director and officer of the Registrant, and, if the Registrant has an
advisory board, member of the board. Explain in a footnote to the table
any family relationship between the persons listed.

[[Page 33380]]

----------------------------------------------------------------------------------------------------------------
Number of
Term of office Principal portfolios in Other
Name, address, Position(s) held and length of occupation(s) fund complex directorships
and age with registrant time served during past 5 overseen by held by director
years director
----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
----------------------------------------------------------------------------------------------------------------

Instructions.
1. For purposes of this paragraph, the term ``family relationship''
means any relationship by blood, marriage, or adoption, not more remote
than first cousin.
2. For each director who is an interested person of the Registrant,
as defined in Section 2(a)(19) of the Investment Company Act and the
rules thereunder, describe, in a footnote or otherwise, the
relationship, events, or transactions by reason of which the director
is an interested person.
3. State the principal business of any company listed under column
(4) unless the principal business is implicit in its name.
4. Indicate in column (6) directorships not included in column (5)
that are held by a director in any company with a class of securities
registered pursuant to Section 12 of the Exchange Act or subject to the
requirements of Section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act,
and name the companies in which the directorships are held. Where the
other directorships include directorships overseeing two or more
portfolios in the same fund complex, identify the fund complex and
provide the number of portfolios overseen as a director in the fund
complex rather than listing each portfolio separately.
2. For each individual listed in column (1) of the table required
by paragraph 1 of this Item 18, except for any director who is not an
interested person of the Registrant, as defined in Section 2(a)(19) of
the Investment Company Act and the rules thereunder, describe any
positions, including as an officer, employee, director, or general
partner, held with affiliated persons or principal underwriters of the
Registrant.
Instruction. When an individual holds the same position(s) with two
or more registered investment companies that are part of the same fund
complex, identify the fund complex and provide the number of registered
investment companies for which the position(s) are held rather than
listing each registered investment company separately.
3. Describe briefly any arrangement or understanding between any
director or officer and any other person(s) (naming the person(s))
pursuant to which he was selected as a director or officer.
Instruction. Do not include arrangements or understandings with
directors or officers acting solely in their capacities as such.
4. For each non-resident director or officer of the Registrant
listed in column (1) of the table required by paragraph 1, disclose
whether he has authorized an agent in the United States to receive
notice and, if so, disclose the name and address of the agent.
5. a. Briefly describe the leadership structure of the Registrant's
board, including whether the chairman of the board is an interested
person of the Registrant, as defined in Section 2(a)(19) of the
Investment Company Act. If the chairman of the board is an interested
person of the Registrant, disclose whether the Registrant has a lead
independent director and what specific role the lead independent
director plays in the leadership of the Registrant. This disclosure
should indicate why the Registrant has determined that its leadership
structure is appropriate given the specific characteristics or
circumstances of the Registrant. In addition, disclose the extent of
the board's role in the risk oversight of the Registrant, such as how
the board administers its oversight function, and the effect that this
has on the board's leadership structure.
b. Identify the standing committees of the Registrant's board of
directors, and provide the following information about each committee:
(1) A concise statement of the functions of the committee;
(2) The members of the committee;
(3) The number of committee meetings held during the last fiscal
year; and
(4) If the committee is a nominating or similar committee, state
whether the committee will consider nominees recommended by security
holders and, if so, describe the procedures to be followed by security
holders in submitting recommendations.
6. a. Unless disclosed in the table required by paragraph 1 of this
Item 18, describe any positions, including as an officer, employee,
director, or general partner, held by any director who is not an
interested person of the Registrant, as defined in Section 2(a)(19) of
the Investment Company Act and the rules thereunder, or immediate
family member of the director, during the two most recently completed
calendar years with:
(1) The Registrant;
(2) An investment company, or a person that would be an investment
company but for the exclusions provided by Sections 3(c)(1) and 3(c)(7)
of the Investment Company Act, having the same investment adviser or
principal underwriter as the Registrant or having an investment adviser
or principal underwriter that directly or indirectly controls, is
controlled by, or is under common control with an investment adviser or
principal underwriter of the Registrant;
(3) An investment adviser, principal underwriter, or affiliated
person of the Registrant; or
(4) Any person directly or indirectly controlling, controlled by,
or under common control with an investment adviser or principal
underwriter of the Registrant.
b. Unless disclosed in the table required by paragraph 1 of this
Item 18 or in response to paragraph 6.a of this Item 18, indicate any
directorships held during the past five years by each director in any
company with a class of securities registered pursuant to Section 12 of
the Exchange Act or subject to the requirements of Section 15(d) of the
Exchange Act or any company registered as an investment company under
the Investment Company Act, and name the companies in which the
directorships were held.
Instruction. When an individual holds the same position(s) with two
or more portfolios that are part of the same fund complex, identify the
fund complex and provide the number of portfolios for which the
position(s) are held rather than listing each portfolio separately.
7. For each director, state the dollar range of equity securities
beneficially owned by the director as required by the following table:
a. In the Registrant; and
b. On an aggregate basis, in any registered investment companies
overseen by the director within the same family of investment companies
as the Registrant.

[[Page 33381]]

----------------------------------------------------------------------------------------------------------------
Aggregate dollar range of equity
securities in all registered
Name of director Dollar range of equity securities investment companies overseen by
in the registrant director in family of investment
companies
----------------------------------------------------------------------------------------------------------------
(1) (2) (3)
----------------------------------------------------------------------------------------------------------------

Instructions.
1. Information should be provided as of the end of the most
recently completed calendar year. Specify the valuation date by
footnote or otherwise.
2. Determine ``beneficial ownership'' in accordance with Rule 16a-
1(a)(2) under the Exchange Act [17 CFR 240.16a-1].
3. In disclosing the dollar range of equity securities beneficially
owned by a director in columns (2) and (3), use the following ranges:
none, $1-$10,000, $10,001-$50,000, $50,001-$100,000, or over $100,000.
8. For each director who is not an interested person of the
Registrant, as defined in Section 2(a)(19) of the Investment Company
Act and the rules thereunder, and his immediate family members, furnish
the information required by the following table as to each class of
securities owned beneficially or of record in:
a. An investment adviser or principal underwriter of the
Registrant; or
b. person (other than a registered investment company) directly or
indirectly controlling, controlled by, or under common control with an
investment adviser or principal underwriter of the Registrant:

----------------------------------------------------------------------------------------------------------------
Name of owners
Name of director and relationships Company Title of class Value of Percent of class
to director securities
----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
----------------------------------------------------------------------------------------------------------------

Instructions.
1. Information should be provided as of the end of the most
recently completed calendar year. Specify the valuation date by
footnote or otherwise.
2. An individual is a ``beneficial owner'' of a security if he is a
``beneficial owner'' under either Rule 13d-3 [17 CFR 240.13d-3] or Rule
16a-1(a)(2) under the Exchange Act.
3. Identify the company in which the director or immediate family
member of the director owns securities in column (3). When the company
is a person directly or indirectly controlling, controlled by, or under
common control with an investment adviser or principal underwriter,
describe the company's relationship with the investment adviser or
principal underwriter.
4. Provide the information required by columns (5) and (6) on an
aggregate basis for each director and his immediate family members.
9. Unless disclosed in response to paragraph 8 of this Item 18,
describe any direct or indirect interest, the value of which exceeds
$120,000, of each director who is not an interested person of the
Registrant, as defined in Section 2(a)(19) of the Investment Company
Act and the rules thereunder, or immediate family member of the
director, during the two most recently completed calendar years, in:
a. An investment adviser or principal underwriter of the
Registrant; or
b. A person (other than a registered investment company) directly
or indirectly controlling, controlled by, or under common control with
an investment adviser or principal underwriter of the Registrant.
Instructions.
1. A director or immediate family member has an interest in a
company if he is a party to a contract, arrangement, or understanding
with respect to any securities of, or interest in, the company.
2. The interest of the director and the interests of his immediate
family members should be aggregated in determining whether the value
exceeds $120,000.
10. Describe briefly any material interest, direct or indirect, of
any director who is not an interested person of the Registrant, as
defined in Section 2(a)(19) of the Investment Company Act and the rules
thereunder, or immediate family member of the director, in any
transaction, or series of similar transactions, during the two most
recently completed calendar years, in which the amount involved exceeds
$120,000 and to which any of the following persons was a party:
a. The Registrant;
b. An officer of the Registrant;
c. An investment company, or a person that would be an investment
company but for the exclusions provided by Sections 3(c)(1) and 3(c)(7)
of the Investment Company, having the same investment adviser or
principal underwriter as the Registrant or having an investment adviser
or principal underwriter that directly or indirectly controls, is
controlled by, or is under common control with an investment adviser or
principal underwriter of the Registrant;
d. An officer of an investment company, or a person that would be
an investment company but for the exclusions provided by Sections
3(c)(1) and 3(c)(7) of the Investment Company Act, having the same
investment adviser or principal underwriter as the Registrant or having
an investment adviser or principal underwriter that directly or
indirectly controls, is controlled by, or is under common control with
an investment adviser or principal underwriter of the Registrant;
e. An investment adviser or principal underwriter of the
Registrant;
f. An officer of an investment adviser or principal underwriter of
the Registrant;
g. A person directly or indirectly controlling, controlled by, or
under common control with an investment adviser or principal
underwriter of the Registrant; or
h. An officer of a person directly or indirectly controlling,
controlled by, or under common control with an investment adviser or
principal underwriter of the Registrant.
Instructions.
1. Include the name of each director or immediate family member
whose interest in any transaction or series of similar transactions is
described and the nature of the circumstances by reason of which the
interest is required to be described.
2. State the nature of the interest, the approximate dollar amount
involved in the transaction, and, where practicable, the approximate
dollar amount of the interest.
3. In computing the amount involved in the transaction or series of
similar transactions, include all periodic payments in the case of any
lease or

[[Page 33382]]

other agreement providing for periodic payments.
4. Compute the amount of the interest of any director or immediate
family member of the director without regard to the amount of profit or
loss involved in the transaction(s).
5. As to any transaction involving the purchase or sale of assets,
state the cost of the assets to the purchaser and, if acquired by the
seller within two years prior to the transaction, the cost to the
seller. Describe the method used in determining the purchase or sale
price and the name of the person making the determination.
6. Disclose indirect, as well as direct, material interests in
transactions. A person who has a position or relationship with, or
interest in, a company that engages in a transaction with one of the
persons listed in paragraphs 10.a through 10.h of this Item 18 may have
an indirect interest in the transaction by reason of the position,
relationship, or interest. The interest in the transaction, however,
will not be deemed ``material'' within the meaning of paragraph 10 of
this Item 18 where the interest of the director or immediate family
member arises solely from the holding of an equity interest (including
a limited partnership interest, but excluding a general partnership
interest) or a creditor interest in a company that is a party to the
transaction with one of the persons specified in paragraphs 10.a
through 10.h of this Item 18, and the transaction is not material to
the company.
7. The materiality of any interest is to be determined on the basis
of the significance of the information to investors in light of all the
circumstances of the particular case. The importance of the interest to
the person having the interest, the relationship of the parties to the
transaction with each other, and the amount involved in the transaction
are among the factors to be considered in determining the significance
of the information to investors.
8. No information need be given as to any transaction where the
interest of the director or immediate family member arises solely from
the ownership of securities of a person specified in paragraphs 10.a
through 10.h of this Item 18 and the director or immediate family
member receives no extra or special benefit not shared on a pro rata
basis by all holders of the class of securities.
9. Transactions include loans, lines of credit, and other
indebtedness. For indebtedness, indicate the largest aggregate amount
of indebtedness outstanding at any time during the period, the nature
of the indebtedness and the transaction in which it was incurred, the
amount outstanding as of the end of the most recently completed
calendar year, and the rate of interest paid or charged.
10. No information need be given as to any routine, retail
transaction. For example, the Registrant need not disclose that a
director has a credit card, bank or brokerage account, residential
mortgage, or insurance policy with a person specified in paragraphs
10.a through 10.h of this Item 18 unless the director is accorded
special treatment.
11. Describe briefly any direct or indirect relationship, in which
the amount involved exceeds $120,000, of any director who is not an
interested person of the Registrant, as defined in Section 2(a)(19) of
the Investment Company Act and the rules thereunder, or immediate
family member of the director, that existed at any time during the two
most recently completed calendar years, with any of the persons
specified in paragraphs 10.a through 10.h of this Item 18.
Relationships include:
a. Payments for property or services to or from any person
specified in paragraphs 10.a through 10.h of this Item 18;
b. Provision of legal services to any person specified in
paragraphs 10.a through 10.h of this Item 18;
c. Provision of investment banking services to any person specified
in paragraphs 10.a through 10.h of this Item 18, other than as a
participating underwriter in a syndicate; and
d. Any consulting or other relationship that is substantially
similar in nature and scope to the relationships listed in paragraphs
11.a through 11.c of this Item 18.
Instructions.
1. Include the name of each director or immediate family member
whose relationship is described and the nature of the circumstances by
reason of which the relationship is required to be described.
2. State the nature of the relationship and the amount of business
conducted between the director or immediate family member and the
person specified in paragraphs 10.a through 10.h of this Item 18 as a
result of the relationship during the two most recently completed
calendar years.
3. In computing the amount involved in a relationship, include all
periodic payments in the case of any agreement providing for periodic
payments.
4. Disclose indirect, as well as direct, relationships. A person
who has a position or relationship with, or interest in, a company that
has a relationship with one of the persons listed in paragraphs 10.a
through 10.h of this Item 18 may have an indirect relationship by
reason of the position, relationship, or interest.
5. In determining whether the amount involved in a relationship
exceeds $120,000, amounts involved in a relationship of the director
should be aggregated with those of his immediate family members.
6. In the case of an indirect interest, identify the company with
which a person specified in paragraphs 10.a through 10.h of this Item
18 has a relationship; the name of the director or immediate family
member affiliated with the company and the nature of the affiliation;
and the amount of business conducted between the company and the person
specified in paragraphs 10.a through 10.h of this Item 18 during the
two most recently completed calendar years.
7. In calculating payments for property and services for purposes
of paragraph 11.a of this Item 18, the following may be excluded:
a. Payments where the transaction involves the rendering of
services as a common contract carrier, or public utility, at rates or
charges fixed in conformity with law or governmental authority; or
b. Payments that arise solely from the ownership of securities of a
person specified in paragraphs 10.a through 10.h of this Item 18 and no
extra or special benefit not shared on a pro rata basis by all holders
of the class of securities is received.
8. No information need be given as to any routine, retail
relationship. For example, the Registrant need not disclose that a
director has a credit card, bank or brokerage account, residential
mortgage, or insurance policy with a person specified in paragraphs
10.a through 10.h of this Item 18 unless the director is accorded
special treatment.
12. If an officer of an investment adviser or principal underwriter
of the Registrant, or an officer of a person directly or indirectly
controlling, controlled by, or under common control with an investment
adviser or principal underwriter of the Registrant, served during the
two most recently completed calendar years, on the board of directors
of a company where a director of the Registrant who is not an
interested person of the Registrant, as defined in Section 2(a)(19) of
the Investment Company Act and the rules thereunder, or immediate
family member of the director, was during the two most recently
completed calendar years, an officer, identify:
a. The company;

[[Page 33383]]

b. The individual who serves or has served as a director of the
company and the period of service as director;
c. The investment adviser or principal underwriter or person
controlling, controlled by, or under common control with the investment
adviser or principal underwriter where the individual named in
paragraph 12.b of this Item 18 holds or held office and the office
held; and
d. The director of the Registrant or immediate family member who is
or was an officer of the company; the office held; and the period of
holding the office.
13. In the case of a Registrant that is not a business development
company, provide the following for all directors of the Registrant, all
members of the advisory board of the Registrant, and for each of the
three highest paid officers or any affiliated person of the Registrant
with aggregate compensation from the Registrant for the most recently
completed fiscal year in excess of $60,000 (``Compensated Persons'').
a. Furnish the information required by the following table:

Compensation Table
----------------------------------------------------------------------------------------------------------------
Total compensation
Name of person, Aggregate Pension or retirement Estimated annual from fund and fund
position compensation from benefits accrued as benefits upon complex paid to
fund part of fund expenses retirement directors
----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
----------------------------------------------------------------------------------------------------------------

Instructions.
1. For column (1), indicate, if necessary, the capacity in which
the remuneration is received. For Compensated Persons that are
directors of the Registrant, compensation is amounts received for
service as a director.
2. If the Registrant has not completed its first full year since
its organization, furnish the information for the current fiscal year,
estimating future payments that would be made pursuant to an existing
agreement or understanding. Disclose in a footnote to the Compensation
Table the period for which the information is furnished.
3. Include in column (2) amounts deferred at the election of the
Compensated Person, whether pursuant to a plan established under
Section 401(k) of the Internal Revenue Code [26 U.S.C. 401(k)] or
otherwise for the fiscal year in which earned. Disclose in a footnote
to the Compensation Table the total amount of deferred compensation
(including interest) payable to or accrued for any Compensated Person.
4. Include in columns (3) and (4) all pension or retirement
benefits proposed to be paid under any existing plan in the event of
retirement at normal retirement date, directly or indirectly, by the
Registrant, any of its subsidiaries, or other companies in the Fund
Complex. Omit column (4) where retirement benefits are not
determinable.
5. For any defined benefit or actuarial plan under which benefits
are determined primarily by final compensation (or average final
compensation) and years of service, provide the information required in
column (4) in a separate table showing estimated annual benefits
payable upon retirement (including amounts attributable to any defined
benefit supplementary or excess pension award plans) in specified
compensation and years of service classifications. Also provide the
estimated credited years of service for each Compensated Person.
6. Include in column (5) only aggregate compensation paid to a
director for service on the board and all other boards of investment
companies in a Fund Complex specifying the number of such other
investment companies.
b. Describe briefly the material provisions of any pension,
retirement, or other plan or any arrangement other than fee
arrangements disclosed in paragraph (a) pursuant to which Compensated
Persons are or may be compensated for any services provided, including
amounts paid, if any, to the Compensated Person under any such
arrangements during the most recently completed fiscal year.
Specifically include the criteria used to determine amounts payable
under the plan, the length of service or vesting period required by the
plan, the retirement age or other event which gives rise to payments
under the plan, and whether the payment of benefits is secured or
funded by the Registrant.
14. In the case of a Registrant that is a business development
company, provide the information required by Item 402 of Regulation S-K
[17 CFR 229.402].
15. Codes of Ethics. Provide a brief statement disclosing whether
the Registrant and its investment adviser and principal underwriter
have adopted codes of ethics under Rule 17j-1 under the Investment
Company Act [17 CFR 270.17j-1] and whether these codes of ethics permit
personnel subject to the codes to invest in securities, including
securities that may be purchased or held by the Registrant. Also,
explain in the statement that these codes of ethics are available on
the EDGAR Database on the Commission's internet site at https://www.sec.gov, and that copies of these codes of ethics may be obtained,
after paying a duplicating fee, by electronic request at the following
email address: [email protected].
Instruction. A Registrant that is not required to adopt a code of
ethics under Rule 17j-1 under the Investment Company Act is not
required to respond to this Item.
16. Unless the Registrant invests exclusively in non-voting
securities, describe the policies and procedures that the Registrant
uses to determine how to vote proxies relating to portfolio securities,
including the procedures that the Registrant uses when a vote presents
a conflict between the interests of the Registrant's shareholders, on
the one hand, and those of the Registrant's investment adviser;
principal underwriter; or any affiliated person (as defined in Section
2(a)(3) of the Investment Company Act and the rules thereunder) of the
Registrant, its investment adviser, or its principal underwriter, on
the other. Include any policies and procedures of the Registrant's
investment adviser, or any other third party, that the Registrant uses,
or that are used on the Registrant's behalf, to determine how to vote
proxies relating to portfolio securities. Also, state that information
regarding how the Registrant voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30 is
available (i) without charge, upon request, by calling a specified
toll-free (or collect) telephone number; sending an email to a
specified email address, if any; or on or through the Registrant's
website at a specified internet address; and (ii) on the Commission's
website at https://www.sec.gov.
Instructions.
1. A Registrant may satisfy the requirement to provide a
description of the policies and procedures that it uses to determine
how to vote proxies

[[Page 33384]]

relating to portfolio securities by including a copy of the policies
and procedures themselves.
2. If a Registrant discloses that the Registrant's proxy voting
record is available by calling a toll-free (or collect) telephone
number or sending an email to a specified email address, if any, and
the Registrant (or financial intermediary through which shares of the
Registrant may be purchased or sold) receives a request for this
information, the Registrant (or financial intermediary) must send the
information disclosed in the Registrant's most recently filed report on
Form N-PX [17 CFR 274.129], within 3 business days of receipt of the
request, by first-class mail or other means designed to ensure equally
prompt delivery.
3. If a Registrant discloses that the Registrant's proxy voting
record is available on or through its website, the Registrant must make
available free of charge the information disclosed in the Registrant's
most recently filed report on Form N-PX on or through its website as
soon as reasonably practicable after filing the report with the
Commission. The information disclosed in the Registrant's most recently
filed report on Form N-PX must remain available on or through the
Registrant's website for as long as the Registrant remains subject to
the requirements of Rule 30b1-4 under the Investment Company Act [17
CFR 270.30b1-4] and discloses that the Registrant's proxy voting record
is available on or through its website.
17. For each director, briefly discuss the specific experience,
qualifications, attributes, or skills that led to the conclusion that
the person should serve as a director for the Registrant at the time
that the disclosure is made, in light of the Registrant's business and
structure. If material, this disclosure should cover more than the past
five years, including information about the person's particular areas
of expertise or other relevant qualifications.

Item 19. Control Persons and Principal Holders of Securities

Furnish the following information as of a specified date no more
than 30 days prior to the date of filing of the registration statement
or amendment to it.
1. State the name and address of each person who controls the
Registrant, and briefly explain the effect of such control on the
voting rights of other shareholders. For each control person, state the
percentage of the Registrant's voting securities owned or any other
basis of control. If the control person is a company, disclose the
state or other jurisdiction under the laws of which it is organized.
List all parents of each control person.
Instructions.
1. The term ``control'' is defined in the instruction to Item 9.3
of this Form.
2. A Registrant that is controlled by its adviser or underwriter(s)
before the effective date of the registration statement need not
respond to this Item if, immediately after the public offering, there
will be no control person.
2. State the name, address, and percentage of ownership of each
person who owns of record or is known by the Registrant to own of
record or beneficially five percent or more of any class of the
Registrant's outstanding equity securities.
Instructions.
1. Calculate the percentages on the basis of the amount of common
stock outstanding.
2. If securities are being registered in connection with or
pursuant to a plan of acquisition, reorganization, readjustment, or
succession, indicate, to the extent practicable, the status to exist
upon consummation of the plan on the basis of present holdings and
commitments.
3. If, to the knowledge of the Registrant or any principal
underwriter of its securities, five percent or more of any class of
voting securities of the Registrant are or will be held subject to any
voting trust or other similar agreement, disclose this fact.
4. Indicate whether the securities are owned both of record and
beneficially, or of record only, or beneficially only, and disclose the
respective percentage owned in each manner.
3. Disclose all equity securities of the Registrant owned by all
officers, directors, and members of the advisory board of the
Registrant as a group, without naming them. In any case where the
amount owned by directors and officers as a group is less than one
percent of the class, a statement to that effect is sufficient.

Item 20. Investment Advisory and Other Services

1. Furnish the following information about each investment adviser:
a. The names of all controlling persons, the basis of such control,
and, if material, the business history of any organization that
controls the adviser;
b. the names of any affiliated person of the Registrant who is also
an affiliated person of the investment adviser and a list of all
capacities in which such person named is affiliated with the Registrant
and/or with the investment adviser; and
Instruction. If an affiliated person of the Registrant, either
alone or together with others, is a controlling person of the
investment adviser, the Registrant must disclose that fact but need not
supply the specific amount of percentage of the outstanding voting
securities of the investment adviser that are owned by the controlling
person.
c. The method of computing the advisory fee payable by the
Registrant, including:
(1) The total dollar amounts paid to the adviser by the Registrant
under the investment advisory contract for the last three fiscal years;
(2) if applicable, any credits that reduced the advisory fee for
any of the last fiscal years; and
(3) any expense limitation provision.
Instructions.
1. If the advisory fee payable by the Registrant varies depending
on the Registrant's investment performance in relation to some
standard, set forth the standard along with a fee schedule in tabular
form. The Registrant may include examples showing the fees the adviser
would earn at various levels of performance, but such examples must
include calculations showing the maximum and minimum fee percentages
that could be earned under the contract.
2. State each type of credit or offset separately.
3. Where the Registrant is subject to more than one expense
limitation provision, describe only the most restrictive provision.
2. Concisely describe all services performed for or on behalf of
the Registrant that are supplied or paid for wholly or in substantial
part by the investment adviser in connection with the investment
advisory contract.
3. Describe briefly all fees, expenses, and costs of the Registrant
that are to be paid by persons other than the investment adviser or the
Registrant, and identify such persons.
4. Summarize any management-related service contract under which
services are provided to the Registrant that is not otherwise disclosed
in response to an Item of this Form and may be of interest to a
purchaser of the Registrant's securities, indicating the parties to the
contract and the total dollars paid, and by whom, for the past three
years.
Instructions.
1. A ``management-related service contract'' includes any agreement
whereby another person contracts with the Registrant to keep, prepare,
and/or file accounts, books, records, or other documents that the
Registrant may be required to keep under federal or state law, or to
provide any similar services with respect to the daily administration

[[Page 33385]]

of the Registrant, but does not include the following: (1) Any contract
with the Registrant to provide investment advice; (2) any agreement to
act as custodian, transfer agent, or dividend-paying agent; and (3)
bona fide contracts for outside legal or auditing services, or bona
fide contracts for personal employment entered into in the ordinary
course of business.
2. No information is required about the service of mailing proxies
or periodic reports to shareholders of the Registrant.
3. In summarizing the substantive provisions of a management-
related service contract, include: (1) The name of the person providing
the service; (2) any direct or indirect relationship of that person
with the Registrant, its investment adviser, or its principal
underwriter; (3) the nature of the services provided; and (4) the basis
of the compensation paid for the last three fiscal years.
5. If any person (other than a bona fide director, officer, member
of an advisory board, employee of the Registrant, or a person named as
an investment adviser in response to paragraph 1 of this Item),
pursuant to any understanding, whether formal or informal, regularly
furnishes advice to the Registrant or the investment adviser of the
Registrant with respect to the desirability of the Registrant's
investing in, purchasing, or selling securities or other property, or
is empowered to determine which securities or other property should be
purchased or sold by the Registrant, and receives direct or indirect
remuneration from the Registrant, furnish the following information:
a. The name of the person;
b. a description of the nature of the arrangement and the advice or
information given; and
c. any remuneration (including, for example, participation,
directly or indirectly, in commissions or other compensation paid in
connection with transactions in the Registrant's portfolio securities)
paid for the advice or information, and a statement as to how and by
whom such remuneration was paid for the last three fiscal years.
Instruction. No information is required with respect to any of the
following:
1. Persons whose advice was furnished solely through uniform
publications distributed to subscribers;
2. persons who furnished only statistical and other factual
information, advice regarding economic factors and trends, or advice as
to occasional transactions in specific securities, but without
generally furnishing advice or making recommendations regarding the
purchase or sale of securities by the Registrant;
3. a company that is excluded from the definition of ``investment
adviser'' of an investment company by reason of Section 2(a)(20)(iii)
of the Investment Company Act;
4. any person the character and amount of whose compensation for
such service must be approved by a court; or
5. such other persons as the Commission has by rules and
regulations or order determined not to be an ``investment adviser'' of
an investment company.
6. Furnish the name and principal business address of each of the
Registrant's custodians, the nature of the business of each such
person, and a general description of the services performed by each.
7. Furnish the name and principal business address of the
Registrant's independent public accountant, and provide a general
description of the services performed by such person.
8. If an affiliated person of the Registrant, or an affiliated
person of an affiliated person of the Registrant, acts as custodian,
transfer agent, or dividend-paying agent for the Registrant, furnish a
description of the services performed by that person and the basis for
remuneration (e.g., the method by which that person's fee is
calculated).

Item 21. Portfolio Managers

1. Other Accounts Managed. If a Portfolio Manager required to be
identified in response to Item 9.1.c is primarily responsible for the
day-to-day management of the portfolio of any other account, provide
the following information:
a. The Portfolio Manager's name;
b. The number of other accounts managed within each of the
following categories and the total assets in the accounts managed
within each category:
(1) Registered investment companies;
(2) Other pooled investment vehicles; and
(3) Other accounts.
c. For each of the categories in Item 21.1.b, the number of
accounts and the total assets in the accounts with respect to which the
advisory fee is based on the performance of the account; and
d. A description of any material conflicts of interest that may
arise in connection with the Portfolio Manager's management of the
Registrant's investments, on the one hand, and the investments of the
other accounts included in response to Item 21.1.b, on the other. This
description would include, for example, material conflicts between the
investment strategy of the Registrant and the investment strategy of
other accounts managed by the Portfolio Manager and material conflicts
in allocation of investment opportunities between the Registrant and
other accounts managed by the Portfolio Manager.
Instructions.
1. Provide the information required by Item 21.1 as of the end of
the Registrant's most recently completed fiscal year, except that, in
the case of an initial registration statement or an update to the
Registrant's registration statement that discloses a new Portfolio
Manager, information with respect to any newly identified Portfolio
Manager must be provided as of the most recent practicable date.
Disclose the date as of which the information is provided.
2. If a committee, team, or other group of persons that includes
the Portfolio Manager is jointly and primarily responsible for the day-
to-day management of the portfolio of an account, include the account
in responding to Item 21.1.
2. Compensation. Describe the structure of, and the method used to
determine, the compensation of each Portfolio Manager required to be
identified in response to Item 9.1.c. For each type of compensation
(e.g., salary, bonus, deferred compensation, retirement plans and
arrangements), describe with specificity the criteria on which that
type of compensation is based, for example, whether compensation is
fixed, whether (and, if so, how) compensation is based on the
Registrant's pre- or after-tax performance over a certain time period,
and whether (and, if so, how) compensation is based on the value of
assets held in the Registrant's portfolio. For example, if compensation
is based solely or in part on performance, identify any benchmark used
to measure performance and state the length of the period over which
performance is measured.
Instructions.
1. Provide the information required by Item 21.2 as of the end of
the Registrant's most recently completed fiscal year, except that, in
the case of an initial registration statement or an update to the
Registrant's registration statement that discloses a new Portfolio
Manager, information with respect to any newly identified Portfolio
Manager must be provided as of the most recent practicable date.
Disclose the date as of which the information is provided.
2. Compensation includes, without limitation, salary, bonus,
deferred compensation, and pension and retirement plans and
arrangements,

[[Page 33386]]

whether the compensation is cash or non-cash. Group life, health,
hospitalization, medical reimbursement, and pension and retirement
plans and arrangements may be omitted, provided that they do not
discriminate in scope, terms, or operation in favor of the Portfolio
Manager or a group of employees that includes the Portfolio Manager and
are available generally to all salaried employees. The value of
compensation is not required to be disclosed under this Item.
3. Include a description of the structure of, and the method used
to determine, any compensation received by the Portfolio Manager from
the Registrant, the Registrant's investment adviser, or any other
source with respect to management of the Registrant and any other
accounts included in the response to Item 21.1.b. This description must
clearly disclose any differences between the method used to determine
the Portfolio Manager's compensation with respect to the Registrant and
other accounts, e.g., if the Portfolio Manager receives part of an
advisory fee that is based on performance with respect to some accounts
but not the Registrant, this must be disclosed.
3. Ownership of Securities. For each Portfolio Manager required to
be identified in response to Item 9.1.c, state the dollar range of
equity securities in the Registrant beneficially owned by the Portfolio
Manager using the following ranges: none; $1-$10,000; $10,001-$50,000;
$50,001-$100,000; $100,001-$500,000; $500,001-$1,000,000; or over
$1,000,000.
Instructions.
1. Provide the information required by Item 21.3 as of the end of
the Registrant's most recently completed fiscal year, except that, in
the case of an initial registration statement or an update to the
Registrant's registration statement that discloses a new Portfolio
Manager, information with respect to any newly identified Portfolio
Manager must be provided as of the most recent practicable date.
Specify the valuation date.
2. Determine ``beneficial ownership'' in accordance with Rule 16a-
1(a)(2) under the Exchange Act.

Item 22. Brokerage Allocation and Other Practices

1. Concisely describe how transactions in portfolio securities are
or will be effected. Provide a general statement about brokerage
commissions and mark-ups on principal transactions and the aggregate
amount of any brokerage commissions paid by the Registrant during the
three most recent fiscal years. Concisely explain any material change
in brokerage commissions paid by the Registrant during the most recent
fiscal year as compared to the two prior fiscal years.
2. a. State the total dollar amount, if any, of brokerage
commissions paid by the Registrant during the three most recent fiscal
years to any broker that: (1) Is an affiliated person of the
Registrant; (2) is an affiliated person of an affiliated person of the
Registrant; or (3) has an affiliated person that is an affiliated
person of the Registrant, its investment adviser, or principal
underwriter. In the case of an initial public offering, disclose
whether or not the Registrant intends to use any brokers described in
this subparagraph, a. Identify each broker, and state the relationships
that cause the broker to be identified in this Item.
b. State for each broker identified in response to paragraph 2.a of
this Item:
(1) The percentage of the Registrant's aggregate brokerage
commissions paid to the broker during the most recent fiscal year; and
(2) the percentage of the Registrant's aggregate dollar amount of
transactions involving the payment of commissions effected through the
broker during the most recent fiscal year.
c. Where there is a material difference in the percentage of
brokerage commissions paid to, and the percentage of transactions
effected through, any broker identified in response to paragraph 2.a of
this Item, state the reasons for the difference.
3. Describe briefly how brokers will be selected to effect
securities transactions for the Registrant and how evaluations will be
made of the overall reasonableness of brokerage commissions paid,
including the factors considered.
Instructions.
1. If the receipt of products or services other than brokerage or
research services is a factor considered in the selection of brokers,
specify the products and services.
2. If the receipt of research services is a factor in selecting
brokers, identify the nature of the research services.
3. State whether persons acting on behalf of the Registrant are
authorized to pay a broker a commission in excess of that which another
broker might have charged for effecting the same transaction because of
the value of brokerage or research services provided by the broker.
4. If applicable, explain that research services furnished by
brokers through whom the Registrant effects securities transactions may
be used by the Registrant's investment adviser in servicing all of its
accounts and that not all the services may be used by the investment
adviser in connection with the Registrant; or, if other policies or
practices are applicable to the Registrant with respect to the
allocation of research services provided by brokers, concisely explain
the policies and practices.
5. Registrants should refer to Rule 17e-1 under the Investment
Company Act [17 CFR 270.17e-1] with respect to securities transactions
executed by exchange members.
4. If during the last fiscal year the Registrant or its investment
adviser, pursuant to an agreement or understanding with a broker or
otherwise through an internal allocation procedure, directed the
Registrant's brokerage transactions to a broker because of research
services provided, state the amount of the transactions and related
commissions.
5. If the Registrant has acquired during its most recent fiscal
year or during the period of time since organization, whichever is
shorter, securities of its regular brokers or dealers, as defined in
Rule 10b-1 under the Investment Company Act [17 CFR 270.10b-1], or
their parents, identify those brokers or dealers, and state the value
of the Registrant's aggregate holdings of the securities of each
subject issuer as of the close of the Registrant's most recent fiscal
year.
Instruction. The Registrant need only disclose information with
respect to the parent of a broker or dealer that derived more than
fifteen percent of its gross revenues from the business of a broker, a
dealer, an underwriter, or an investment adviser.

Item 23. Tax Status

Provide information about the Registrant's tax status that is not
required to be in the prospectus but that the Registrant believes is of
interest to investors, including, but not limited to, an explanation of
the legal basis for the Registrant's tax status. If the Registrant is
qualified or intends to qualify under Subchapter M of the Internal
Revenue Code and has not disclosed that fact in the prospectus, then
disclosure of that fact will be sufficient. If not otherwise disclosed,
concisely describe any special or unusual tax aspects of the
Registrant, e.g., taxes resulting from foreign investment or from
status as a personal holding company, or any tax loss carry-forward to
which the Registrant may be entitled.

Item 24. Financial Statements

Provide the financial statements of the Registrant.
Instructions.

[[Page 33387]]

1. a. Furnish, in a separate section following the responses to the
above items in Part B of the registration statement, the financial
statements and schedules required by Regulation S-X [17 CFR 210]. (See
Section 210.3-18 and Sections 210.6-01 through 210.6-10 of Regulation
S-X.)
b. A business development company that has had at least one fiscal
year of operations need provide financial statements under Item 8.6.c
of Part A only. A business development company with less than one
fiscal year of operations should refer to Item 8.6.c of Part A and
Instructions 1 and 2 thereunder in responding to this Item 24.
2. Notwithstanding the requirements of Instruction 1 above, the
following statements and schedules required by Regulation S-X may be
omitted from Part B and included in Part C of the registration
statement:
a. The statement of any subsidiary that is not a majority-owned
subsidiary; and
b. Columns C and D of Schedule III [17 CFR 210.12-14].
3. In addition to the requirements of Rule 3-18 of Regulation S-X
[17 CFR 210.3-18], any company registered under the Investment Company
Act that has not previously had an effective registration statement
under the Securities Act shall include in its initial registration
statement under the Securities Act such additional financial statements
and financial highlights (which need not be audited) as are necessary
to make the financial statements and financial highlights included in
the registration statement as of a date within 90 days prior to the
date of filing.
4. Every annual report to shareholders required by Section 30(e) of
the Investment Company Act and Rule 30e-1 thereunder shall contain the
following information:
a. The audited financial statements required by Regulation S-X for
the periods specified by Regulation S-X, modified to permit the
omission of the statements and schedules that may be omitted from Part
B of the registration statement by Instruction 2 above and as permitted
by Instruction 7 below;
b. the financial highlights required by Item 4.1 of this Form, for
the five most recent fiscal years, with at least the most recent year
audited;
c. unless shown elsewhere in the report as part of the financial
statements required by a above, the aggregate remuneration paid by the
company during the period covered by the report (1) to all directors
and to all members of any advisory board for regular compensation; (2)
to each director and to each member of an advisory board for special
compensation; (3) to all officers; and (4) to each person of whom any
officer or director of the company is an affiliated person;
d. the information concerning changes in and disagreements with
accountants and on accounting and financial disclosure required by Item
304 of Regulation S-K [17 CFR 229.304];
e. the management information required by paragraph 1 of Item 18;
and
f. a statement that the SAI includes additional information about
directors of the Registrant and is available, without charge, upon
request, and a toll-free (or collect) telephone number and email
address, if any, for shareholders to use to request the SAI.
g. Management's Discussion of Fund Performance. Disclose the
following information:
(1) Discuss the factors that materially affected the Fund's
performance during the most recently completed fiscal year, including
the relevant market conditions and the investment strategies and
techniques used by the Fund. The information presented may include
tables, charts, and other graphical depictions.
(2) (A) Provide a line graph comparing the initial and subsequent
account values at the end of each of the most recently completed 10
fiscal years of the Fund (or for the life of the Fund, if shorter), but
only for periods subsequent to the effective date of the Fund's
registration statement. Assume a $10,000 initial investment at the
beginning of the first fiscal year in an appropriate broad-based
securities market index for the same period.
1. Line Graph Computation.
(a) Assume that the initial investment was made at the offering
price last calculated on the business day before the first day of the
first fiscal year.
(b) Base subsequent account values on the market price (or, if
shares are not listed, the net asset value) of the Fund on the last
business day of the first and each subsequent fiscal year.
(c) Calculate the final account value by assuming the account was
closed and sale was at the market price (or, if shares are not listed,
the net asset value) on the last business day of the most recent fiscal
year.
(d) Base the line graph on the Fund's required minimum initial
investment if that amount exceeds $10,000.
2. Multiple Class Funds. The Fund can select which Class to
include, consistent with the requirements of Instruction 3(a) to Item
4(b)(2) of Form N-1A [17 CFR 274.11A].
(B) In a table placed within or next to the graph, provide the
Fund's average annual total returns for the 1-, 5-, and 10- year
periods as of the end of the last day of the most recent fiscal year
(or for the life of the Fund, if shorter), but only for periods
subsequent to the effective date of the Fund's registration statement.
Average annual total returns should be computed in accordance with Item
26(b)(1) of Form N-1A, except with respect to reinvestments of
dividends and distributions, which must be calculated consistent with
Item 4 of this Form. Include a statement accompanying the graph and
table to the effect that past performance does not predict future
performance and that the graph and table do not reflect the deduction
of taxes that a shareholder would pay on fund distributions or the sale
of fund shares.
(C) Sales Load. Reflect any sales load (or any other fees charged
at the time of purchasing shares or opening an account) by beginning
the line graph at the amount that actually would be invested (i.e.,
assume that the maximum sales load, and other charges deducted from
payments, is deducted from the initial $10,000 investment). For a Fund
whose shares are subject to a contingent deferred sales load, assume
the deduction of the maximum deferred sales load (or other charges)
that would apply for a complete sale that received the market price
(or, if shares are not listed, the net asset value) on the last
business day of the most recent fiscal year. For any other deferred
sales load, repurchase fee, or withdrawal charge, assume that the
deduction is in the amount(s) and at the time(s) that the sales load,
repurchase fee, or withdrawal charge actually would have been deducted.
(D) Dividends and Distributions. Assume reinvestment of all of the
Fund's dividends and distributions on the reinvestment dates during the
period, and reflect any sales load imposed upon reinvestment of
dividends or distributions or both.
(E) Account Fees. Reflect recurring fees that are charged to all
accounts.
1. For any account fees that vary with the size of the account,
assume a $10,000 account size.
2. Reflect, as appropriate, any recurring fees charged to
shareholder accounts that are paid other than by sale of the Fund's
shares.
3. Reflect an annual account fee that applies to more than one Fund
by allocating the fee in the following manner: Divide the total amount
of account fees collected during the year by the Funds' total average
market price, multiply the resulting percentage by the

[[Page 33388]]

average account value for each Fund and reduce the value of each
hypothetical account at the end of each fiscal year during which the
fee was charged.
(F) Appropriate Index. For purposes of this Item, an ``appropriate
broad-based securities market index'' is one that is administered by an
organization that is not an affiliated person of the Fund, its
investment adviser, or principal underwriter, unless the index is
widely recognized and used. Adjust the index to reflect the
reinvestment of dividends on securities in the index, but do not
reflect the expenses of the Fund.
(G) Additional Indexes. A Fund is encouraged to compare its
performance not only to the required broad-based index, but also to
other more narrowly based indexes that reflect the market sectors in
which the Fund invests. A Fund also may compare its performance to an
additional broad-based index, or to a non-securities index (e.g., the
Consumer Price Index), so long as the comparison is not misleading.
(H) Change in Index. If the Fund uses an index that is different
from the one used for the immediately preceding fiscal year, explain
the reason(s) for the change and compare the Fund's annual change in
the value of an investment in the hypothetical account with the new and
former indexes.
(I) Other Periods. The line graph may cover earlier fiscal years
and may compare the ending values of interim periods (e.g., monthly or
quarterly ending values), so long as those periods are after the
effective date of the Fund's registration statement.
(J) Scale. The axis of the graph measuring dollar amounts may use
either a linear or a logarithmic scale.
(K) New Funds. A New Fund is not required to include the
information specified by this Item in its prospectus (or annual
report), unless Form N-2 (or the annual report) contains audited
financial statements covering a period of at least 6 months.
(L) Change in Investment Adviser. If the Fund has not had the same
investment adviser for the previous 10 fiscal years, the Fund may begin
the line graph on the date that the current adviser began to provide
advisory services to the Fund so long as:
1. Neither the current adviser nor any affiliate is or has been in
``control'' of the previous adviser under Section 2(a)(9) of the
Investment Company Act;
2. The current adviser employs no officer(s) of the previous
adviser or employees of the previous adviser who were responsible for
providing investment advisory or portfolio management services to the
Fund; and
3. The graph is accompanied by a statement explaining that previous
periods during which the Fund was advised by another investment adviser
are not shown.
(3) Discuss the effect of any policy or practice of maintaining a
specified level of distributions to shareholders on the Fund's
investment strategies and per share net asset value during the last
fiscal year. Also discuss the extent to which the Fund's distribution
policy resulted in distributions of capital.
h. If the Registrant has filed a registration statement pursuant to
General Instruction A.2:
(1) Senior Securities. Include the information required by Item
4.3.
(2) Fee and Expense Table. Include the information required by Item
3.1.
(3) Share Price Data. Include the information required by Item 8.5.
(4) Unresolved Staff Comments. If the Registrant has received
written comments from the Commission staff regarding its periodic or
current reports under the Exchange Act or Investment Company Act or its
registration statement not less than 180 days before the end of its
fiscal period to which the annual report relates, and such comments
remain unresolved, disclose the substance of any such unresolved
comments that the Registrant believes are material. Such disclosure may
provide other information including the position of the Registrant with
respect to any such comment.
5. Every report to shareholders required by Section 30(e) of the
Investment Company Act and Rule 30e-1 thereunder, except the annual
report, shall contain the following information (which need not be
audited):
a. The financial statements required by Regulation S-X for the
period commencing either with (1) the beginning of the company's fiscal
year (or date of organization, if newly organized); or (2) a date not
later than the date after the close of the period included in the last
report conforming with the requirements of Rule 30e-1 and the most
recent preceding fiscal year, modified to permit the omission of the
statements and schedules that may be omitted from Part B of the
registration statement by Instruction 2 above and as permitted by
Instruction 7 below;
b. the financial highlights required by Item 4.1 of this Form, for
the period of the report as specified by subparagraph a of this
instruction, and the most recent preceding fiscal year;
c. unless shown elsewhere in the report as part of the financial
statements required by subparagraph a of this instruction, the
aggregate remuneration paid by the company during the period covered by
the report (1) to all directors and to all members of any advisory
board for regular compensation; (2) to each director and to each member
of an advisory board for special compensation; (3) to all officers; and
(4) to each person of whom an officer or director of the company is an
affiliated person; and
d. the information concerning changes in and disagreements with
accountants and on accounting and financial disclosure required by Item
304 of Regulation S-K.
6. Every annual and semi-annual report to shareholders required by
Section 30(e) of the Investment Company Act and Rule 30e-1 thereunder
shall contain the following information:
a. One or more tables, charts, or graphs depicting the portfolio
holdings of the Registrant by reasonably identifiable categories (e.g.,
type of security, industry sector, geographic region, credit quality,
or maturity) showing the percentage of net asset value or total
investments attributable to each. The categories and the basis of
presentation (e.g., net asset value or total investments) should be
selected, and the presentation should be formatted, in a manner
reasonably designed to depict clearly the types of investments made by
the Fund, given its investment objectives. If the Fund depicts
portfolio holdings according to credit quality, it should include a
description of how the credit quality of the holdings were determined,
and if credit ratings, as defined in Section 3(a)(60) of the Exchange
Act, assigned by a credit rating agency, as defined in Section 3(a)(61)
of the Exchange Act, are used, explain how they were identified and
selected. This description should be included near, or as part of, the
graphical representation.
b. Statement Regarding Availability of Quarterly Portfolio
Schedule. A statement that: (i) The Registrant files its complete
schedule of portfolio holdings with the SEC for the first and third
quarters of each fiscal year as an exhibit to its reports on Form N-
PORT [17 CFR 274.150]; (ii) the Registrant's Form N-PORT reports are
available on the Commission's website at https://www.sec.gov; (iii) if
the Registrant makes the information on Form N-PORT available to
shareholders on its website or upon request, a description of how the
information may be obtained from the Registrant.
c. A statement that a description of the policies and procedures
that the Registrant uses to determine how to vote proxies relating to
portfolio securities is

[[Page 33389]]

available (1) without charge, upon request, by calling a specified
toll-free (or collect) telephone number or sending an email to a
specified email address, if any; (2) on the Registrant's website, if
applicable; and (3) on the Commission's website at https://www.sec.gov;
and
d. A statement that information regarding how the Registrant voted
proxies relating to portfolio securities during the most recent 12-
month period ended June 30 is available (1) without charge, upon
request, by calling a specified toll-free (or collect) telephone
number; sending an email to a specified email address, if any; or on or
through the Registrant's website at a specified internet address; and
(2) on the Commission's website at https://www.sec.gov.
e. If the Registrant's board of directors approved any investment
advisory contract during the Registrant's most recent fiscal half-year,
discuss in reasonable detail the material factors and the conclusions
with respect thereto that formed the basis for the board's approval.
Include the following in the discussion:
(1) Factors relating to both the board's selection of the
investment adviser and approval of the advisory fee and any other
amounts to be paid by the Registrant under the contract. This would
include, but not be limited to, a discussion of the nature, extent, and
quality of the services to be provided by the investment adviser; the
investment performance of the Registrant and the investment adviser;
the costs of the services to be provided and profits to be realized by
the investment adviser and its affiliates from the relationship with
the Registrant; the extent to which economies of scale would be
realized as the Registrant grows; and whether fee levels reflect these
economies of scale for the benefit of the Registrant's investors. Also
indicate in the discussion whether the board relied upon comparisons of
the services to be rendered and the amounts to be paid under the
contract with those under other investment advisory contracts, such as
contracts of the same and other investment advisers with other
registered investment companies or other types of clients (e.g.,
pension funds and other institutional investors). If the board relied
upon such comparisons, describe the comparisons that were relied on and
how they assisted the board in concluding that the contract should be
approved; and
(2) If applicable, any benefits derived or to be derived by the
investment adviser from the relationship with the Registrant such as
soft dollar arrangements by which brokers provide research to the
Registrant or its investment adviser in return for allocating the
Registrant's brokerage.
f. Board approvals covered by Instruction 6.e to this Item include
both approvals of new investment advisory contracts and approvals of
contract renewals. Investment advisory contracts covered by Instruction
6.e include subadvisory contracts. Conclusory statements or a list of
factors will not be considered sufficient disclosure under Instruction
6.e. Relate the factors to the specific circumstances of the Registrant
and the investment advisory contract and state how the board evaluated
each factor. For example, it is not sufficient to state that the board
considered the amount of the investment advisory fee without stating
what the board concluded about the amount of the fee and how that
affected its decision to approve the contract. If any factor enumerated
in Instruction 6.e.(1) to this Item is not relevant to the board's
evaluation of an investment advisory contract, note this and explain
the reasons why the factor is not relevant.
g. Include on the front cover page or at the beginning of the
annual or semi-annual report a statement to the following effect, if
applicable:
Beginning on [date], as permitted by regulations adopted by the
Securities and Exchange Commission, paper copies of the Registrant's
shareholder reports like this one will no longer be sent by mail,
unless you specifically request paper copies of the reports from the
Registrant [or from your financial intermediary, such as a broker-
dealer or bank]. Instead, the reports will be made available on a
website, and you will be notified by mail each time a report is posted
and provided with a website link to access the report.
If you already elected to receive shareholder reports
electronically, you will not be affected by this change and you need
not take any action. You may elect to receive shareholder reports and
other communications from the Registrant [or your financial
intermediary] electronically by [insert instructions].
You may elect to receive all future reports in paper free of
charge. You can inform the Registrant [or your financial intermediary]
that you wish to continue receiving paper copies of your shareholder
reports by [insert instructions]. Your election to receive reports in
paper will apply to all funds held with [the fund complex/your
financial intermediary].
7. Schedule IX--Summary schedule of investments in securities of
unaffiliated issuers [17 CFR 210.12-12C] may be included in the
financial statements required under Instructions 4.a and 5.a of this
Item in lieu of Schedule I--Investments in securities of unaffiliated
issuers [17 CFR 210.12-12] if:
a. The Registrant states in the report that the Registrant's
complete schedule of investments in securities of unaffiliated issuers
is available (i) without charge, upon request, by calling a specified
toll-free (or collect) telephone number or sending an email to a
specified email address, if any; (ii) on the Registrant's website, if
applicable; and (iii) on the Commission's website at https://www.sec.gov; and
b. whenever the Registrant (or financial intermediary through which
shares of the Registrant may be purchased or sold) receives a request
for the Registrant's schedule of investments in securities of
unaffiliated issuers, the Registrant (or financial intermediary) sends
a copy of Schedule I--Investments in securities of unaffiliated issuers
within 3 business days of receipt by first-class mail or other means
designed to ensure equally prompt delivery.
8. a. When a Registrant (or financial intermediary through which
shares of the Registrant may be purchased or sold) receives a request
for a description of the policies and procedures that the Registrant
uses to determine how to vote proxies, the Registrant (or financial
intermediary) must send the information most recently disclosed in
response to Item 18.16 of this Form or Item 7 of Form N-CSR within 3
business days of receipt of the request, by first-class mail or other
means designed to ensure equally prompt delivery.
b. If a Registrant discloses that the Registrant's proxy voting
record is available by calling a toll-free (or collect) telephone
number or sending an email to a specified email address, if any, and
the Registrant (or financial intermediary through which shares of the
Registrant may be purchased or sold) receives a request for this
information, the Registrant (or financial intermediary) must send the
information disclosed in the Registrant's most recently filed report on
Form N-PX, within 3 business days of receipt of the request, by first-
class mail or other means designed to ensure equally prompt delivery.
c. If a Registrant discloses that the Registrant's proxy voting
record is available on or through its website, the Registrant must make
available free of charge the information disclosed in the Registrant's
most recently filed report

[[Page 33390]]

on Form N-PX on or through its website as soon as reasonably
practicable after filing the report with the Commission. The
information disclosed in the Registrant's most recently filed report on
Form N-PX must remain available on or through the Registrant's website
for as long as the Registrant remains subject to the requirements of
Rule 30b1-4 under the Investment Company Act and discloses that the
Registrant's proxy voting record is available on or through its
website.
9. See General Instruction F regarding Incorporation by Reference.
10. Every annual report filed under the Exchange Act by a business
development company must contain the information required by
Instructions 4.b and 4.h.

Part C--Other Information

Item 25. Financial Statements and Exhibits

List all financial statements and exhibits filed as part of the
registration statement.
1. Financial statements.
Instruction. Identify those financial statements that are included
in Parts A and B of the registration statement.
2. Exhibits.
Subject to General Instruction F regarding incorporation by
reference and Rule 483 under the Securities Act [17 CFR 230.483], file
the exhibits listed below as part of the registration statement. Letter
or number the exhibits in the sequence indicated, unless otherwise
required by Rule 483. Reflect any exhibit incorporated by reference in
the list below and identify the previously filed document containing
the incorporated material.
a. Copies of the charter as now in effect.
b. Copies of the existing bylaws or instruments corresponding
thereto.
c. Copies of any voting trust agreement with respect to more than
five percent of any class of equity securities of the Registrant.
d. Copies of the constituent instruments defining the rights of the
holders of the securities.
e. A copy of the document setting forth the Registrant's dividend
reinvestment plan, if any.
f. Copies of the constituent instruments defining the rights of the
holders of long-term debt of all subsidiaries for which consolidated or
unconsolidated financial statements are required to be filed (The
instrument relating to any class of long-term debt of the Registrant or
any subsidiary need not be filed if the total amount of securities
authorized thereunder amounts to less than two percent of the total
assets of the Registrant and its subsidiaries on a consolidated basis,
and if the Registrant files an agreement to furnish such copies to the
Commission upon request.).
g. Copies of all investment advisory contracts relating to the
management of the assets of the Registrant.
h. Copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies of all
agreements between principal underwriters and dealers.
i. Copies of all bonus, profit sharing, pension, or other similar
contracts or arrangements wholly or partly for the benefit of directors
or officers of the Registrant in their capacity as such (a reasonably
detailed description of any plan that is not set forth in a formal
document should be furnished).
j. Copies of all custodian agreements and depository contracts
entered into in conformance with Section 17(f) of the Investment
Company Act or rules thereunder with respect to securities and similar
investments of the Registrant, including the schedule of remuneration.
k. Copies of all other material contracts not made in the ordinary
course of business that are to be performed in whole or in part at or
after the date of filing the registration statement.
l. An opinion of counsel and consent to its use as to the legality
of the securities being registered, indicating whether they will be
legally issued, fully paid, and nonassessable.
m. If a non-resident director, officer, investment adviser, or
expert named in the registration statement has executed a consent to
service of process within the United States, a copy of that consent to
service.
n. Copies of any other opinions, appraisals, or rulings, and
consents to their use, relied on in preparing the registration
statement, and consents to the use of accountants' reports relating to
audited financial statements required by Section 7 of the Securities
Act.
o. All financial statements omitted from Items 8.6 or 24.
p. Copies of any agreements or understandings made in consideration
for providing the initial capital between or among the Registrant, the
underwriter, adviser, promoter, or initial stockholders and written
assurance from the promoters or initial stockholders that their
purchases were made for investment purposes without any present
intention of reselling.
q. Copies of the model plan used in the establishment of any
retirement plan in conjunction with which the Registrant offers its
securities, any instructions to it, and any other documents making up
the model plan (such form(s) should disclose the costs and fees charged
in connection with the plan).
r. Copies of any codes of ethics adopted under Rule 17j-1 under the
Investment Company Act and currently applicable to the Registrant
(i.e., the codes of the Registrant and its investment advisers and
principal underwriters). If there are no codes of ethics applicable to
the Registrant, state the reason (e.g., the Registrant is a Money
Market Fund).
Instructions.
1. Subject to the rules on incorporation by reference and
Instruction 2 below, the foregoing exhibits shall be filed as a part of
the registration statement. Exhibits required by paragraphs 2.h, 2.l,
2.n, and 2.o above need to be filed only as part of a Securities Act
registration statement. Exhibits shall be appropriately lettered or
numbered for convenient reference. Exhibits incorporated by reference
may bear the designation given in a previous filing. Where exhibits are
incorporated by reference, the reference shall be made in the list of
exhibits. The reference shall include the form, file number and date of
the previous filing, and the exhibit number (i.e., exhibit 2.a, 2.b,
etc.) under which the exhibit was previously filed.
2. A Registrant need not file an exhibit as part of a post-
effective amendment, if the exhibit has been filed in the Registrant's
initial registration statement or in a previous post-effective
amendment, unless there has been a change in the exhibit, or unless the
exhibit is a copy of a consent required by Section 7 of the Securities
Act or is a financial statement omitted from Items 8.6 or 24. The
reference to this exhibit shall include the number of the previous
filing (e.g., pre-effective amendment No. 1) where such exhibit was
filed.
3. If an exhibit to a registration statement (other than an opinion
or consent), filed in preliminary form, has been changed (1) only to
insert information as to interest, dividend or conversion rates,
redemption or conversion prices, purchase or offering prices,
underwriters' or dealers' commissions, names, addresses or
participation of underwriters or similar matters, which information
appears elsewhere in an amendment to the registration statement or a
prospectus filed pursuant to Rule 424(b) under the Securities Act or
(2) to correct typographical errors, insert signatures or

[[Page 33391]]

make other similar immaterial changes, then, notwithstanding any
contrary requirement of any rule or form, the Registrant need not
refile the exhibit as so amended. Any incomplete exhibit may not,
however, be incorporated by reference into any subsequent filing under
any Act administered by the Commission. If an exhibit required to be
executed (e.g., an underwriting agreement) is filed in final form, a
copy of an executed copy shall be filed.
4. Schedules (or similar attachments) to the exhibits required by
this Item are not required to be filed provided that they do not
contain information material to an investment or voting decision and
that information is not otherwise disclosed in the exhibit or the
disclosure document. Each exhibit filed must contain a list briefly
identifying the contents of all omitted schedules. Registrants need not
prepare a separate list of omitted information if such information is
already included within the exhibit in a manner that conveys the
subject matter of the omitted schedules and attachments. In addition,
the registrant must provide a copy of any omitted schedule to the
Commission or its staff upon request.
5. The registrant may redact information from exhibits required to
be filed by this Item if disclosure of such information would
constitute a clearly unwarranted invasion of personal privacy (e.g.,
disclosure of bank account numbers, social security numbers, home
addresses and similar information).
6. The registrant may redact provisions or terms of exhibits
required to be filed by paragraph k. of this Item if those provisions
or terms are both (1) not material and (2) would likely cause
competitive harm to the registrant if publicly disclosed. If it does
so, the registrant should mark the exhibit index to indicate that
portions of the exhibit or exhibits have been omitted and include a
prominent statement on the first page of the redacted exhibit that
certain identified information has been excluded from the exhibit
because it is both (1) not material and (2) would likely cause
competitive harm to the registrant if publicly disclosed. The
registrant also must indicate by brackets where the information is
omitted from the filed version of the exhibit.
If requested by the Commission or its staff, the registrant must
promptly provide an unredacted copy of the exhibit on a supplemental
basis. The Commission staff also may request the registrant to provide
its materiality and competitive harm analyses on a supplemental basis.
Upon evaluation of the registrant's supplemental materials, the
Commission or its staff may request the registrant to amend its filing
to include in the exhibit any previously redacted information that is
not adequately supported by the registrant's materiality and
competitive harm analyses. The registrant may request confidential
treatment of the supplemental material pursuant to Rule 83 [17 CFR
200.83] while it is in the possession of the Commission or its staff.
After completing its review of the supplemental information, the
Commission or its staff will return or destroy it at the request of the
registrant, if the registrant complies with the procedures outlined in
Rule 418 [17 CFR 230.418].
7. Each exhibit identified in the exhibit index (other than an
exhibit filed in eXtensible Business Reporting Language) must include
an active link to an exhibit that is filed with the registration
statement or, if the exhibit is incorporated by reference, an active
hyperlink to the exhibit separately filed on EDGAR. If the registration
statement is amended, each amendment must include active hyperlinks to
the exhibits required with the amendment.

Item 26. Marketing Arrangements

Briefly describe any arrangements known to the Registrant or to any
person named in response to Item 5, or to any person specified in Item
19.2, made for any of the following purposes:
1. to limit or restrict the sale of other securities of the same
class as those to be offered for the period of distribution;
2. to stabilize the market for any of the securities to be offered;
or
3. to hold each underwriter or dealer responsible for the
distribution of his or her participation.
Instruction. If the answer to this Item is contained in an exhibit,
the Item may be answered by cross-reference to the relevant
paragraph(s) of the exhibit.

Item 27. Other Expenses of Issuance and Distribution

Furnish a reasonably itemized statement of all expenses in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions. If any
of the securities being registered are to be offered for the account of
securityholders, indicate the portion of expenses to be borne by
securityholders.
Instruction. Insofar as practicable, separately itemize
registration fees, federal taxes, state taxes and fees, trustees' and
transfer agents' fees, costs of printing and engraving, rating agency
fees, and legal and accounting fees. The information may be given
subject to future contingencies. Provide estimates if the amounts of
any items are not known.

Item 28. Persons Controlled by or Under Common Control

Furnish a list or diagram of all persons directly or indirectly
controlled by, or under common control with, the Registrant, and as to
each of these persons indicate (1) if a company, the state or other
jurisdiction under whose laws it is organized, and (2) the percentage
of voting securities owned or other basis of control by the person, if
any, immediately controlling it.
Instructions.
1. The list or diagram shall include the Registrant and shall show
clearly the relationship of each company named to the Registrant and to
other companies named. If the company is controlled by the direct
ownership of its securities by two or more persons, so indicate by
appropriate cross-reference.
2. Identify, by appropriate symbols: (1) Subsidiaries for which
separate financial statements are filed; (2) subsidiaries included in
the respective consolidated financial statements; (3) subsidiaries
included in the respective group financial statements filed for
unconsolidated subsidiaries; and (4) other subsidiaries, indicating
briefly why statements of these subsidiaries are not filed.

Item 29. Number of Holders of Securities

State in substantially the tabular form indicated, as of a
specified date within 90 days prior to the date of filing, the number
of record holders of each class of securities of the Registrant.

------------------------------------------------------------------------
Number of
Title of class record holders
------------------------------------------------------------------------
(1).................................................... (2)
------------------------------------------------------------------------

Item 30. Indemnification

State the general effect of any contract, arrangement, or statute
under which any director, officer, underwriter, or affiliated person of
the Registrant is insured or indemnified in any manner against any
liability that may be incurred in such capacity, other than insurance
provided by any member of the board of directors, officer, underwriter,
or affiliated person for his or her own protection.
Instruction. In responding to this Item, the Registrant should note
the requirements of Rules 461(c) and 484 under the Securities Act [17
CFR 230.461 and 230.484] and Section 17 of the Investment Company Act.
(See Investment Company Act Rel. No. 11330 (Sept. 4, 1980) [45 FR 62423
(Sept. 19,

[[Page 33392]]

1980)] and Investment Company Act Rel. No. 7221 (June 9, 1972) [37 FR
12790 (June 29, 1972)].)

Item 31. Business and Other Connections of Investment Adviser

Describe briefly any other business, profession, vocation, or
employment of a substantial nature in which each investment adviser of
the Registrant, and each director, executive officer, or partner of any
such investment adviser, is or has been, at any time during the past
two fiscal years, engaged for his or her own account or in the capacity
of director, officer, employee, partner, or trustee.
Instructions.
1. State the name and principal business address of any company
with which any person specified above is connected in the capacity of
director, officer, employee, partner, or trustee and the nature of the
connection.
2. The names of investment advisory clients need not be provided.
3. For purposes of this Item, the term ``executive officer'' means
the investment adviser's president, any other officer who performs a
policy-making function for the investment adviser in connection with
its management of the closed-end fund, or any other person who performs
a similar policy-making function for the investment adviser. Executive
officers of subsidiaries of the investment adviser may be deemed
executive officers of the investment adviser, if they perform such
policy-making functions for the investment adviser.

Item 32. Location of Accounts and Records

Furnish the name and address of each person maintaining physical
possession of each account, book, or other document required to be
maintained by Section 31(a) of the Investment Company Act and the rules
thereunder.
Instruction. The Registrant may omit this information to the extent
it is provided in its most recent report on Form N-CEN [17 CFR
249.330].

Item 33. Management Services

Furnish a summary of the substantive provisions of any management-
related service contract not discussed in Part A or B of the
registration statement (because the contract was not believed to be of
interest to a purchaser of the Registrant's securities), indicating the
parties to the contract, the total dollars paid, and by whom, for the
last three fiscal years.
Instructions.
1. The instructions to Item 20.4 of this Form shall also apply to
this Item.
2. Information need not be provided for any service for which total
payments of less than $5,000 were made during each of the last three
fiscal years.

Item 34. Undertakings

Furnish the following undertakings in substantially the following
form in all registration statements filed under the Securities Act, as
applicable:
1. An undertaking to suspend the offering of shares until the
prospectus is amended if (1) subsequent to the effective date of its
registration statement, the net asset value declines more than ten
percent from its net asset value as of the effective date of the
registration statement or (2) the net asset value increases to an
amount greater than its net proceeds as stated in the prospectus.
Provided, however, that this paragraph does not apply if the
registration statement is filed pursuant to General Instruction A.2 of
this Form to register an offering in reliance on Rule 415 under the
Securities Act.
2. An undertaking to file a post-effective amendment with certified
financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons, if the Registrant
proposes to raise its initial capital under Section 14(a)(3) of the
Investment Company Act.
3. If the securities are being registered in reliance on Rule 415
under the Securities Act, an undertaking:
a. to file, during any period in which offers or sales are being
made, a post-effective amendment to the registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(2) to reflect in the prospectus any facts or events after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the ``Calculation of Registration
Fee'' table in the effective registration statement.
(3) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs a(1), a(2), and a(3) of this
section do not apply if the registration statement is filed pursuant to
General Instruction A.2 of this Form and the information required to be
included in a post-effective amendment by those paragraphs is contained
in reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference into the registration statement, or is
contained in a form of prospectus filed pursuant to Rule 424(b) that is
part of the registration statement.
b. that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of those securities at that time shall be
deemed to be the initial bona fide offering thereof;
c. to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering;
d. that, for the purpose of determining liability under the
Securities Act to any purchaser:
(1) if the Registrant is relying on Rule 430B [17 CFR 230.430B]:
(A) Each prospectus filed by the Registrant pursuant to Rule
424(b)(3) shall be deemed to be part of the registration statement as
of the date the filed prospectus was deemed part of and included in the
registration statement; and
(B) Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement in
reliance on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (x), or (xi) for the purpose of providing the information
required by Section 10(a) of the Securities Act shall be deemed to be
part of and included in the registration statement as of the earlier of
the date such form of prospectus is first used after effectiveness or
the date of the first contract of sale of securities in the offering
described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an
underwriter, such date shall be deemed to be a new effective date of
the registration statement relating to the securities in

[[Page 33393]]

the registration statement to which that prospectus relates, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part
of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective date,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such effective date; or
(2) if the Registrant is subject to Rule 430C [17 CFR 230.430C]:
each prospectus filed pursuant to Rule 424(b) under the Securities Act
as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part of and
included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such
document immediately prior to such date of first use.
e. that for the purpose of determining liability of the Registrant
under the Securities Act to any purchaser in the initial distribution
of securities:
The undersigned Registrant undertakes that in a primary offering of
securities of the undersigned Registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned Registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to the purchaser:
(1) Any preliminary prospectus or prospectus of the undersigned
Registrant relating to the offering required to be filed pursuant to
Rule 424 under the Securities Act;
(2) free writing prospectus relating to the offering prepared by or
on behalf of the undersigned Registrant or used or referred to by the
undersigned Registrants;
(3) the portion of any other free writing prospectus or
advertisement pursuant to Rule 482 under the Securities Act [17 CFR
230.482] relating to the offering containing material information about
the undersigned Registrant or its securities provided by or on behalf
of the undersigned Registrant; and
(4) any other communication that is an offer in the offering made
by the undersigned Registrant to the purchaser.
4. If the Registrant is filing a registration statement permitted
by Rule 430A under the Securities Act, an undertaking that:
a. for the purpose of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant under
Rule 424(b)(1) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective;
and
b. for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide offering
thereof.
5. Filings Incorporating Subsequent Exchange Act Documents by
Reference. Include the following if the registration statement
incorporates by reference any Exchange Act document filed subsequent to
the effective date of the registration statement:
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference into the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
6. Request for acceleration of effective date or filing of
registration statement becoming effective upon filing. Include the
following if acceleration is requested of the effective date of the
registration statement pursuant to Rule 461 under the Securities Act,
or if a registration statement filed pursuant to General Instruction
A.2 of this Form will become effective upon filing with the Commission
pursuant to Rule 462(e) or (f) under the Securities Act, and:
a. Any provision or arrangement exists whereby the Registrant may
indemnify a director, officer or controlling person of the Registrant
against liabilities arising under the Securities Act, or
b. The underwriting agreement contains a provision whereby the
Registrant indemnifies the underwriter or controlling persons of the
underwriter against such liabilities and a director, officer or
controlling person of the Registrant is such an underwriter or
controlling person thereof or a member of any firm which is such an
underwriter, and
c. The benefits of such indemnification are not waived by such
persons:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
7. An undertaking to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of
receipt of a written or oral request, any prospectus or Statement of
Additional Information.

Signatures

Pursuant to the requirements of the Securities Act of 1933 and/or
the Investment Company Act of 1940, the Registrant has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto

[[Page 33394]]

duly authorized, in the City of_____, and State of _____, on the ____
day of _____, ____.

-----------------------------------------------------------------------
Registrant

By---------------------------------------------------------------------
-----------------------------------------------------------------------
Signature

-----------------------------------------------------------------------
Title

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in
the capacities and on the dates indicated.
-----------------------------------------------------------------------
Signature

-----------------------------------------------------------------------
Title

-----------------------------------------------------------------------
Date

0
45. Effective August 1, 2021, amend Form 24F-2 (referenced in Sec.
274.24) by:
0
a. Amending Item 2 to add ``and EDGAR identifier'' after the word
``name'';
0
b. Amending Item 5 to add ``(if calculating on a class-by-class or
series-by-series basis, provide the EDGAR identifier for each such
class or series):'';
0
c. Adding Item 10;
0
d. Revising paragraph A.1. of the ``INSTRUCTIONS'' section; and
0
e. Revising paragraph A.3. of the ``INSTRUCTIONS'' section.
The addition and revisions read as follows:

Note: The text of Form 24F-2 does not, and these amendments will
not, appear in the Code of Federal Regulations.

United States

Securities and Exchange Commission

Washington, DC 20549

Form 24F-2

Annual Filing Under Rule 24f-2 of the Investment Company Act of 1940

* * * * *
2. The name and EDGAR identifier of each series or class of
securities for which this Form is filed (If the Form is being filed for
all series and classes of securities of the issuer, check the box but
do not list series of classes):
* * * * *
5. Calculation of registration fee (if calculating on a class-by-
class or series-by-series basis, provide the EDGAR identifier for each
such class or series):
* * * * *
10. Explanatory Notes (if any): The issuer may provide any
information it believes would be helpful in understanding the
information reported in response to any item of this Form. To the
extent responses relate to a particular item, provide the item
number(s), as applicable.
* * * * *

Instructions

A. * * *
1. This Form should be used by an open-end management investment
company, closed-end management company that makes periodic repurchase
offers pursuant to Sec. 270.23c-3(b) of this chapter, face amount
certificate company, or unit investment trust (``issuer'') for annual
filings required by rule 24f-2 under the Investment Company Act of 1940
[15 U.S.C. 80a] (``Investment Company Act''). If the issuer has
registered more than one class or series of securities on the same
registration statement under the Securities Act of 1933 [15 U.S.C. 77a-
aa] (``Securities Act''), the issuer may file a single Form 24F-2 for
those classes or series that have the same fiscal year end. Such an
issuer may calculate its fees based on aggregate net sales of the
series having the same fiscal year end. An issuer choosing to calculate
registration fees on a class-by-class or series-by-series basis should
make a single filing consisting of a separate Form 24F-2 for each class
or series in a single EDGAR document and provide the EDGAR identifier
for each such class or series.
* * * * *
3. Pursuant to rule 101(a)(1)(iv) of Regulation S-T [17 CFR
232.101(a)(1)(iv)] this Form must be submitted in electronic format
using the Commission's Electronic Data Gathering, Analysis, and
Retrieval (``EDGAR'') system. Consult the EDGAR Filer Manual and
Appendices for EDGAR filing instructions.
* * * * *

0
46. Amend Form N-CSR (referenced in Sec. Sec. 249.331 and 274.128) by
adding new paragraph 4 to General Instruction C to read as follows:

Note: The text of Form N-CSR does not, and these amendments will
not, appear in the Code of Federal Regulations.

United States

Securities and Exchange Commission

Washington, DC 20549

Form N-CSR

Certified Shareholder Report of Registered Management Investment
Companies

* * * * *

General Instructions

C. * * *
4. Interactive Data File. An Interactive Data File as defined in
Rule 11 of Regulation S-T [17 CFR 232.11] is required to be submitted
to the Commission in the manner provided by Rule 405 of Regulation S-T
[17 CFR 232.405] by a closed-end management investment company
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et
seq.) to the extent required by Rule 405 of Regulation S-T.

By the Commission.

Dated: April 8, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-07790 Filed 5-29-20; 8:45 am]
BILLING CODE 8011-01-P

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