iXBRL mandate for CEF & BDC – All you need to know
The Securities and Exchange Commission (the “Commission”) has adopted rules that will modify the registration, communications, and offering processes for business development companies (“BDCs”) and other closed-end investment companies (CEF) under the Securities Act of 1933.
The adoption of these amendments requires
- BDCs must submit financial statements using Inline XBRL (iXBRL) format.
- However, Registered CEFs and BDCs must tag the cover page information and prospectus information on Form N-2 in iXBRL format.
- Filings of Forms 24F-2 must be submitted in eXtensible Markup Language (XML) format.
Who will be affected?
- Affected funds also include all BDCs and registered CEFs, including interval funds.
Seasoned funds ( A2 Qualified Funds)
- The affected funds are current and timely reporting and therefore generally eligible to file a short-form registration statement if they have at least $75 million in “public float.”
Well-Known Seasoned Issuers (WKSIs)
- Seasoned funds with at least $700 million in “public float.”
Exchange-Traded Products (ETPs)
- Issuers that are not registered investment companies
- Assets consist primarily of commodities, currencies, or derivative instruments that reference commodities or currencies; whose securities are listed for trading on a national securities exchange; and that purchase or redeem securities for a ratable share of their assets at NAV.
Content for iXBRL tagging:
The rule requires seasoned funds to tag the
- Fee Table
- Senior Securities Table,
- Investment Objectives and Policies,
- Risk Factors,
- Share Price Data,
- Capital Stock,
- Long-Term Debt, and
- Other Securities using iXBRL.
When to file?
Affected Funds will be required to submit “Interactive Data Files”, i.e., iXBRL format as below;
- For any registration statements and post-effective amendments, must file Interactive Data Files, either concurrently with the filing or in a subsequent revision that is filed on or before the date of the registration statement or post-effective amendment that contains the related information becomes effective.
- For any prospectus filed under Rule 424, one has to submit the Interactive Data Files concurrently with the filing; and
- For any Exchange Act report or Investment Company Act, as applicable, an Affected Fund filing a registration statement on Form N-2 under General Instruction A.2 (often referred to as short-form N-2), “Interactive Data Files” must be submitted concurrently with the filing.
Structured Data Reporting Requirements for FORM 24-F:
As part of the Securities Offering Reform for Closed-End Investment Companies release, the Commission also required that filings on Form 24F-2 be submitted in a structured format. There will be an update on EDGAR to convert Form 24F-2 to an online form. Variants of this form are:
Workflow Consideration for BDC & CEF:
- BDC and CEF are subject to iXBRL tagging requirements for Financial statements, notes to accounts and schedules.
- The complexity of tagging financials with US-GAAP necessitates significant changes in the quarterly and annual reports workflow.
- IXBRL for the Schedule of Investment presents a unique challenge.
- IXBRL for 8K is required for BDC but not for CEF
Important Dates to remember:
These amendments took effect on August 1, 2020, excluding the amendments related to registration fee payments by interval funds and other exchange-traded products, which took effect on August 1, 2021. For funds eligible to file a short-form registration statement, iXBRL compliance will require 24 months after the effective date. All other filers will need to comply by February 1, 2023.
- 1, 2022: The compliance date for funds eligible to file a short-form registration statement to meet inline XBRL reporting requirements for a financial report, registration statement information, and prospectus information
- 1, 2022: Compliance date for Form 24F-2(XML format)
- 1, 2023: The compliance date for all other funds to meet inline XBRL reporting requirements for financial statement, registration statement information, and prospectus information
One can find the detailed description of the rule and learn more about its impact here.
The latest CEF Taxonomy tagging guide provides further guidance on the technical specifications of using the iXBRL format to submit certain disclosures required of registered closed-end funds (CEFs) and business development companies (BDCs) file registration statements on Form N-2.
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