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SEC Provides Temporary Flexibility Allowing BDCs to Issue Senior Securities

The SEC provided limited and temporary exemptions that allow business development companies ("BDCs") "to issue and sell senior securities and participate in certain joint enterprises or other joint arrangements that would otherwise be prohibited by section 57(a)(4) of the Investment Company Act and Rule 17d-1 thereunder."

According to the SEC, the relief aims to encourage BDCs to provide capital to small- and medium-sized businesses impacted by COVID-19. The relief is subject to investor protection conditions, including: (i) obtaining an independent evaluation of the issuances' terms; and (ii) majority approval from the BDC's independent board members.

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