PIABA 28th Annual Meeting Materials
Business Development Companies (“BDCs”) are a type of closed end fund. They were created by Congress in 1980, through amendments to the Investment Company Act of 1940 (the “1940 Act”).
BDCs were first created when a venture capital pool manager lobbied Congress to make it easier to invest in venture capital pools and private equity investments. While there was early interest in BDCs, their popularity waned through the 1990s. Since 2000, they have once again regained their popularity.
BDCs provide funding to small and mid-sized businesses. Following the financial crisis, BDCs were able to provide loans to businesses that may not have been able to receive financing from more traditional sources. In 2009, the first non-traded public REITs were issued, raising almost $100 million that year.
This article will describe the regulations that govern BDCs: federal, state, and SRO. Next, the article will examine recent enforcement actions concerning the sale of BDCs by broker-dealers. Finally, the article will discuss concerns raised by the sale of non-traded BDCs to investors.