Small Business Group Joins Call for Changes to SEC’s Derivatives Rule

A group representing small business investors joined larger funds in calling for changes to a proposed Securities and Exchange Commission rule that would place conditions and fund limits on using derivatives.

The SEC’s rule, first proposed in December, would place overly burdensome restrictions on business development companies that invest in small- and medium-sized firms, Small Business Investor Alliance President Brett Palmer said in a March 28 comment letter to the SEC.

Palmer said the rule doesn’t differentiate enough between funds regulated by the Investment Act of 1940, also known as ’40 Act funds. He said the failure to distinguish business development companies from other funds “goes in the opposite direction of what Congress intended, for instance, by capping their use of derivatives to that of what a ’40 Act fund should be doing, or by treating their revolving lending facilities as financial commitment transactions, thereby subjecting them to coverage requirements.”

The Small Business Investor Alliance, a Washington-based trade group representing lower middle market private equity funds, filed its comments on the last day public comments were due for the SEC proposal. A group of large funds, including AQR Capital and John Hancock, also criticized the proposal.


Finance Brief: Week in Review & What’s Ahead

President Donald Trump signed three executive actions affecting the financial services industry. The actions included two presidential memorandums — one directing the Treasury Department to examine the Dodd-Frank process for winding down failing banks, and another directing the agency to review the Financial Stability Oversight Council’s authority to designate firms systemically important. The third item was an executive order directing the Treasury Department to analyze tax rules adopted in the last 18 months and identify any regulations deemed convoluted or onerous.

Finance Brief: Week in Review & What’s Ahead

President Donald Trump expressed support for the Export-Import Bank, a longtime target of fiscal conservatives who see it as a government interloper in private markets. The export credit agency has faced limited financing powers for more than a year due to board vacancies. To resolve that, the White House said Trump intends to nominate two Ex-Im candidates, both requiring Senate confirmation: former Rep. Scott Garrett (R-N.J.), who voted against renewing the bank’s charter while he was in Congress, would be head of the credit agency; and former Rep. Spencer Bachus (R-Ala.), who previously led the House Financial Services Committee, would serve on the agency’s board.

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