4 versions

CosmeticWhat changed in REFERRED IN SENATEcompared with ENGROSSED IN HOUSE (Jun 23, 2025)

Technical corrections only. The changes between v3 and v4 reflect the bill's procedural progression from the House to the Senate, including updated attestation information and header details. No substantive policy changes were made to the text of the bill.

H.R. 2225119th CongressIntroduced Mar 18, 2025

Access to Small Business Investor Capital Act

Passed HouseFinance and Financial SectorSubstantive

View bill text

Sponsor: Rep. Sherman, Brad [D-CA-32]
Committees: Banking, Housing, and Urban Affairs Committee (primary)
Last action: Jun 24, 2025

Bottom line

The bill provides optional relief for registered investment companies from reporting certain indirect fees associated with business development company investments, aiming to streamline disclosure and potentially boost capital for small businesses.

What it actually does

This bill allows registered investment companies (RICs) to exclude certain indirect fees and expenses from their 'Acquired Fund Fees and Expenses' (AFFE) calculation when those fees stem from investments in business development companies (BDCs). Currently, RICs must report these indirect fees in their registration statements, which can make their overall expense ratios appear higher. By permitting this omission, the bill aims to reduce reporting burdens and potentially make BDCs more attractive investment vehicles for RICs.

Proponents argue

Proponents argue that the current requirement to include BDC fees in AFFE can be misleading, as BDCs have unique fee structures that differ from typical acquired funds. Excluding these fees would provide a clearer, more accurate picture of a RIC's direct costs to investors. Furthermore, by making BDCs more appealing to RICs, this measure could indirectly increase capital flow to the small and medium-sized businesses that BDCs primarily invest in, thereby fostering economic growth and job creation, consistent with the bill's short title.

Opponents contend

Opponents contend that this bill reduces transparency for investors by allowing RICs to omit certain fees from their disclosures. They argue that investors deserve a complete picture of all costs, both direct and indirect, associated with their investments to make informed decisions. Removing these fees could obscure the true expense of investing in RICs that hold BDCs, potentially leading investors to underestimate their total costs and creating an uneven playing field compared to other investment vehicles.

The bill text is very short and can be read quickly, but understanding its implications requires familiarity with SEC regulations and investment company structures.

Section 2(b)

Exclusion of Business Development Company Fees from Acquired Fund Fees and Expenses

prominently featuredmoderately complex

This provision grants registered investment companies (RICs) the option to exclude fees and expenses they incur indirectly from investing in business development companies (BDCs) when calculating their 'Acquired Fund Fees and Expenses' (AFFE) for SEC registration statements. This means that if a mutual fund (a type of RIC) invests in a BDC, it would no longer be required to include the BDC's management and performance fees in its own reported expense ratio, though it may still choose to do so.

GroupImpactMechanismScale

GroupRegistered Investment Companies (RICs)ImpactReduced regulatory burden and increased flexibility in fee reporting.MechanismRICs are no longer mandated to include BDC-related fees in their AFFE calculations.ScaleApplies to all RICs that invest in BDCs.

GroupInvestors in RICsImpactPotentially less comprehensive fee disclosure, but possibly a clearer representation of direct fund costs.MechanismReported expense ratios for RICs investing in BDCs may appear lower due to the omission of indirect BDC fees.ScaleAffects all investors holding shares in RICs that utilize this optional exclusion.

GroupBusiness Development Companies (BDCs)ImpactPotentially increased attractiveness as an investment for RICs, leading to greater capital inflows.MechanismRICs may be more inclined to invest in BDCs if it simplifies their own fee reporting.ScaleCould broadly benefit the BDC industry.

GroupSmall and Medium-sized BusinessesImpactIndirectly increased access to capital.MechanismIf BDCs receive more capital from RICs, they can in turn invest more in small businesses.ScalePotential broad economic impact, though indirect.

Supporters argue

Supporters argue that this provision corrects an anomaly where BDC fees, particularly performance-based fees, are not directly comparable to those of other acquired funds and can inflate reported expense ratios without providing meaningful investor insight. They believe this change will streamline compliance for RICs and encourage more investment in BDCs, ultimately benefiting the small businesses that BDCs fund.

Critics contend

Critics argue that this provision creates a loophole in fee disclosure, making it harder for investors to understand the true cost of their investments. They contend that all fees, regardless of their source, should be transparently reported to ensure investors can make fully informed decisions and compare investment products accurately.

Tradeoffs

This provision navigates the tension between regulatory burden reduction for investment companies and comprehensive fee transparency for investors. It also balances the goal of facilitating capital access for small businesses against the potential for reduced clarity in investment product disclosures.

About this analysis. AI-Generated from the official bill text and available committee reports. Gaps in available data are noted explicitly. Verify important details with the official Congress.gov record.