On June 8, 2017, the U.S. House of Representatives, by a vote mostly along party lines, approved a bill that would repeal many of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) requirements and significantly reduce the regulatory burden for financial institutions. If enacted in its current form, the Financial CHOICE Act of 2017 (the “CHOICE Act”) would also alter the regulatory landscape for business development companies (“BDCs”), investment companies and investment advisers. Among other things, the CHOICE Act would:
- Loosen some restrictions on BDCs concerning leverage, preferred stock, proxy procedures and investments;
- Tighten the burden of proof for plaintiffs suing investment advisers for breach of fiduciary duty;
- Broaden the exemption from the definition of an “investment company” available to venture capital funds; and
- Streamline the process for investment companies and investment advisers to obtain exemptive orders.
The CHOICE Act, which passed 233-186, was sent to the Senate for consideration on June 12, 2017. Here is a summary of key provisions of the CHOICE Act that affect BDCs, investment companies and investment advisers.