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Senators, witnesses press technical fix to 'AFFE' rule to free up capital for small businesses
Summary
Senators and industry witnesses said an SEC rule known as AFFE can double-count business development company expenses, making BDCs less attractive; they urged a statutory or technical fix so BDCs can attract more investment to finance small and mid-sized businesses.
Multiple senators raised a recurring technical complaint: SEC accounting for certain costs (referred to in testimony as AFFE) can lead to double-counting of Business Development Company expenses, inflating reported operating costs and making BDCs less attractive to investors. Ken Benson and Mike Flood said resolving the AFFE technical error would correct misrepresented disclosures and could allow BDCs to be included in indices, increasing investor interest and capital available to local businesses.
Sen. Russell Brooks (questioning the panel later in the hearing) cited the Access to Small Business Investor Capital Act (S.1808) as a legislative vehicle to address the problem, arguing that the technical fix would channel more capital to small and medium-sized firms. Panelists agreed the change is a narrow, corrective step that would not weaken investor protections but could increase funding for companies outside major finance centers.
