Exclude BDC Fees From Fund Disclosures

Summary#

This bill lets a registered investment company leave out certain fees from the “acquired fund fees and expenses” line on its registration statement. Specifically, it would allow omitting fees and expenses that the investment company paid indirectly because it invested in one or more acquired funds that are business development companies (BDCs). The stated aim (by the bill title) is to improve access to investment capital for small businesses.

  • Main change: Funds may exclude from the acquired-fund fee calculation any fees or expenses that came from owning shares of acquired funds that are BDCs.
  • Who is covered: Registered investment companies (for example mutual funds or ETFs that file Form N‑1A, N‑2, or N‑3) and any acquired funds that are BDCs.
  • Disclosure affected: The fee table on investment company registration statements would show lower acquired-fund fees when those fees came from BDC investments.
  • Policy goal implied: The bill appears intended to make investments in BDCs look less costly on registration statements, which could encourage funds to invest more in BDCs and so channel capital to small businesses.
  • What is unclear: The bill does not say whether the omitted fees must be disclosed elsewhere or how exactly to measure which fees "incurred indirectly" because of a BDC investment.

What it means for you#

  • Investors in funds (retail or institutional): Fee tables on some funds’ registration statements may show lower acquired-fund fees if the fund holds BDC shares. This could make a fund appear to have lower indirect costs. This could mean you need to look beyond the fee table or read other disclosures to see the full cost picture.
  • Managers of registered investment companies: You may be able to report lower acquired-fund fees on filings when those fees stem from investments in BDCs. That could affect how you present costs to potential investors.
  • Business development companies (BDCs): Funds may be more likely to invest in BDCs if doing so reduces reported acquired-fund fees, which could increase capital flowing to BDCs.
  • Advisers and compliance staff: You will need to decide which fees qualify as “incurred indirectly” because of investing in a BDC and adjust registration statements accordingly. The bill does not give detailed measurement rules.
  • Regulators and auditors: They may need to monitor whether funds correctly apply the omission and whether other disclosures compensate for any reduced fee reporting.

Expenses#

No publicly available information.

  • The bill text does not include a fiscal note or estimate of administrative costs.
  • Potential effects on government costs are not stated. For example, SEC staff might spend time issuing guidance or reviewing filings, but the bill does not address that.
  • Private costs or savings (for funds or advisers) are not estimated in the bill text.

Proponents' View#

  • The bill appears intended to encourage investment in BDCs. This could be seen as helping small businesses get more investor capital.
  • A possible argument is that the fee table can double‑count or overstate indirect fees when a fund invests in another vehicle; excluding BDC-related fees may give a clearer view of a fund’s direct costs.
  • Supporters may see this as making funds that support BDCs more competitive or attractive to investors.

Opponents' View#

  • One concern is that omitting BDC-related fees from the fee table could reduce transparency. Investors might not see the full indirect costs of owning a fund.
  • The bill does not explain whether omitted fees must be shown elsewhere. This may leave gaps in cost disclosure.
  • It is unclear how to calculate which fees are “incurred indirectly” because of a BDC investment. That could create inconsistent reporting or require new SEC guidance.
  • There is a possible trade-off between encouraging capital to BDCs and making fee comparisons across funds harder for investors.