Staff from the SEC divisions have recently released guidance on a number of issues. The Division of Corporation Finance published new Compliance and Disclosure Interpretations (“CDI”) concerning the definition of “accredited investor.” The CDIs address Securities Act Rules 501 (Definitions and Terms Used in Regulation D) and Rule 506 (Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering). The CDIs concerning Rule 501 can be found at New Question 255.48 (the calculation of annual income when income is not reported in U.S. dollars) and New Question 255.49 (satisfaction of the net worth test). The CDIs concerning Rule 506 can be found at New Question 260.35 (using IRS forms to verify income), New Question 260.36 (use of foreign tax forms to verify income), New Question 260.37 (use of tax assessments to verify income), and New Question 260.38 (use of non-U.S. consumer reports).
The Division of Economic and Risk Analysis published a report on its assessment of the quality of XBRL exhibits submitted by filers of financial statement information in an XBRL format. The Division of Corporation Finance also advised that they have sent certain filers a letter concerning the adequacy of the filers’ reports on Form 10-Q and the XBRL requirement to include calculation relationships.
The Divisions of Investment Management and Corporation Finance jointly issued a Legal Bulletin on proxy voting. The Bulletin discusses an investment adviser’s responsibilities in voting client proxies and retaining proxy advisory firms, and on the availability and requirements of two exemptions to the federal proxy rules that are often relied upon by proxy advisory firms.
The Division of Investment Management also issued guidance regarding business development companies (“BDC”) with wholly-owned small business investment company subsidiaries. The guidance concerns exemptive orders granting BDCs limited relief from the asset coverage requirements of Sections 18(a) and 61(a) of the 1940 Act. The relief permits a BDC to treat certain indebtedness issued by its wholly owned subsidiary operating as a small business investment company (“SBIC Subsidiary”) as indebtedness not represented by senior securities for purposes of determining the BDC’s consolidated asset coverage. The guidance notes that the relief should not be relied upon in connection with SBICs that have not issued indebtedness that is held or guaranteed by the Small Business Administration.