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Guidance Update

S e p t e m b e r 2 0 1 3

N o . 2 0 1 3 - 0 7

business Development Companies—sepaRate FinanCial statements

oR summaRizeD FinanCial inFoRmation oF CeRtain subsiDiaRies

applicability of Regulation s-X Rules 3-09 and 4-08(g) to business Development

Companies (bDCs). In reviewing registration statements filed by BDCs, the staff has

observed that some BDCs that have certain significant subsidiaries do not provide

separate financial statements or summarized financial information for those subsid-

iaries as required by Regulation S-X. This written guidance reflects the comments that

the staff has provided to these BDCs. The bases of the staff’s comments are Regulation

S-X Rules 3-09 and 4-08(g), which apply to BDCs. Rule 3-09 describes, among other

things, the circumstances under which separate financial statements of an unconsolidated

majority-owned subsidiary are required to be filed. Rule 4-08(g) describes, among

other things, the circumstances under which summarized financial information must be

presented in the notes to the financial statements for subsidiaries not consolidated.

BDCs register their securities under the Securities Act of 1933 on Form N-2. For purposes

of Form N-2, “[a] business development company should comply with the provisions of

Regulation S-X generally applicable to registered management investment com panies.

(See . . . Sections 210.6-01 through 210.6-10 of Regulation S-X . . .).”

Under Regulation

S-X, in turn, “[t]he financial statements filed for persons to which [rules 6-01 to 6-10] are

applicable shall be prepared in accordance with the . . . special rules [6-01 to 6-10] in

addition to the general rules [1-01 to 4-10] (Articles 1, 2, 3, and 4). Where the requirements

of a special rule differ from those prescribed in a general rule, the requirements of the

special rule shall be met.”

Rules 3-09 and 4-08(g) apply to BDCs because they are

general rules and there are no special rules in Rules 6-01 through 6-10 that differ from

the requirements in Rules 3-09 and 4-08(g) related to whether, and for what periods,

financial statements and financial information are required to be presented.

Rule 4-08(g) generally requires registrants to present in the notes to their financial

statements summarized financial information for all unconsolidated subsidiaries when

any unconsolidated subsidiary, or combination of unconsolidated subsidiaries, meets

the definition of a “significant subsidiary” in Regulation S-X Rule 1-02(w). If a BDC is

required to present summarized financial information, the Division generally would not

US Securities and Exchange Commission

Division of Investment Management

Guidance Update No.2013-07 - Business Development Companies-Separate Financial Statements Or Summarized Financial Information Of Certain Subsidiaries - Us Securities And Exchange Commission