H.R.2225 - Access to Small Business Investor Capital Act (119th Congress)
Summary
H.R.2225, the Access to Small Business Investor Capital Act, allows registered investment companies to exclude certain fees from the calculation of Acquired Fund Fees and Expenses (AFFE) when those fees result from investments in business development companies (BDCs). This aims to simplify fee reporting for investment companies. The bill amends the Investment Company Act of 1940 by modifying how AFFE is calculated on investment company registration statements.
This adjustment is intended to encourage investment in small businesses by reducing the perceived cost and complexity of investing in BDCs. The Act specifically targets registered investment companies, impacting their reporting requirements to the Securities and Exchange Commission (SEC).
Ultimately, the goal is to facilitate greater capital flow to small businesses through investment companies.
Expected Effects
The primary effect of H.R.2225 will be a change in how registered investment companies report fees associated with investments in business development companies. By allowing the omission of certain fees from AFFE calculations, the bill may make BDCs appear more attractive to investment companies.
This could lead to increased investment in small businesses, as investment companies may be more willing to allocate capital to BDCs. The change in reporting requirements could also reduce administrative burdens for investment companies.
Potential Benefits
- Increased Investment in Small Businesses: By making BDCs more attractive to investment companies, the bill could lead to greater capital allocation to small businesses.
- Simplified Fee Reporting: The omission of certain fees from AFFE calculations could reduce the complexity and cost of reporting for investment companies.
- Enhanced Competitiveness of BDCs: Lower perceived costs may make BDCs more competitive investment options.
- Potential for Job Creation: Increased investment in small businesses could stimulate economic growth and job creation.
- Improved Access to Capital: Small businesses may find it easier to access capital through BDCs.
Most Benefited Areas:
Potential Disadvantages
- Potential for Reduced Transparency: Omitting certain fees from AFFE calculations could make it more difficult for investors to fully understand the costs associated with investing in BDCs.
- Risk of Misleading Investors: Investors may underestimate the true cost of investing in funds that invest in BDCs if fees are not fully disclosed.
- Unintended Consequences: The change in reporting requirements could have unforeseen impacts on the investment landscape.
- Limited Scope: The bill only addresses fee reporting for registered investment companies and may not significantly impact overall investment in small businesses.
- Potential for Abuse: Investment companies might exploit the omission to hide fees.
Constitutional Alignment
The bill appears to align with the Commerce Clause (Article I, Section 8, Clause 3) of the U.S. Constitution, which grants Congress the power to regulate commerce among the states. By influencing investment in business development companies, H.R.2225 indirectly affects interstate commerce.
There are no apparent conflicts with the Bill of Rights or other constitutional provisions. The bill primarily addresses financial reporting requirements and does not infringe upon individual liberties or states' rights.
However, the degree of alignment is moderate, as the bill's impact on interstate commerce is indirect and limited to specific financial reporting practices.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).