SEC Proposes Amendments Governing Registered Offerings Related to Form N-2 and Preemption of State Securities Law Registration

At a Glance

• Although the proposals remain subject to a public comment period and are not yet effective, fund sponsors and boards should begin considering the potential impact on their capital-raising strategies and compliance infrastructure.
• For fund sponsors and their boards, the proposed ELI and SELI framework would significantly lower the barrier to shelf registration for exchange-listed BDCs and CEFs by eliminating the $75 million public float requirement.
• For nontraded BDC sponsors, the proposed federal preemption of state blue-sky registration and qualification requirements could fundamentally reshape the economics of publicly offered nontraded BDC programs.
• The public comment period for both the Registered Offering Reform Proposal and the Filer Status Proposal will remain open for 60 days following publication of the proposing releases in the Federal Register.

On May 19, 2026, the Securities and Exchange Commission (SEC) proposed the Registered Offering Reform Proposal (Release No. 33-11418), which includes the most significant proposed changes to the registered offering framework over the past two decades. This alert focuses on two aspects of the proposal that are of particular significance to fund clients: (1) proposed changes to the registration, communication, and offering process for certain business development companies (BDCs) and closed-end funds (CEFs) that register securities on Form N-2; and (2) a proposed redefinition of "qualified purchaser" under Section 18(b)(3) of the Securities Act that would preempt state securities law registration and qualification requirements for all registered offerings, a development with major implications for nontraded BDCs.

Key Takeaways

The Registered Offering Reform Proposal, if adopted, would meaningfully expand the universe of BDCs and CEFs that can access shelf offerings and enhanced registration benefits. The proposal introduces new Eligible Listed Issue (ELI) and Seasoned Eligible Listed Issuer (SELI) categories to replace the current public float and seasoning requirements for Short-Form N-2 eligibility. Perhaps most significantly for the nontraded BDC space, the proposed preemption of state securities law registration and qualification requirements for all registered offerings would eliminate the costs and complexity of multistate blue-sky compliance, a development that could revitalize the publicly offered nontraded BDC market.

Business Development Companies and Closed-End Funds

BDCs and CEFs typically register their offerings on Form N-2. Following reforms adopted in 2020 (2020 CEF Offering Reform), these funds may conduct shelf offerings under Rule 415(a)(1)(x) using the short-form shelf registration statement on Form N-2 (Short-Form N-2), provided they meet certain requirements — including timely filing of all reports over the prior 12 months and having a public float of $75 million or more on a delayed basis. These public float and seasoning requirements have excluded many newly public and smaller funds from the shelf registration process.

The proposed amendments would eliminate these barriers. The SEC explains that the original eligibility criteria reflected information disparity concerns from an era when filings were available only in paper format. Today, widespread internet and smartphone access enables investors to obtain issuer-specific information readily, making public float an unnecessary proxy for market following.

The New ELI and SELI Framework

Rather than simply eliminating existing eligibility requirements, the proposed amendments introduce two new defined categories for affected funds. Under proposed amendments to Rule 405, the SEC would define an ELI as an issuer that meets Form S-3's proposed registrant requirements and is exchange-listed. Specifically, an affected fund that is exchange-listed would qualify as an ELI if it has timely filed all required Exchange Act and Investment Company Act reports during the preceding 12 calendar months, or such shorter period that the affected fund had been required to file such reports. Consistent with the proposed amendments for operating companies, the amendments would prohibit certain "ineligible issuers," as defined in Rule 405, from using Short-Form N-2.

An affected fund would qualify as a SELI if it meets the ELI definition and has been subject to Exchange Act and Investment Company Act reporting requirements for a period of at least 12 calendar months. This distinction is significant because, under the proposed amendments, only SELI affected funds would be eligible for automatic shelf registration, a benefit for which only well-known seasoned issuers (WKSIs) currently are eligible. Although the SEC does not believe an initial seasoning requirement is necessary for purposes of Short-Form N-2 eligibility generally, it is not proposing to extend automatic shelf registration to all ELI affected funds at this time. The one-year seasoning condition would give the Division of Investment Management an opportunity to monitor an affected fund's reporting compliance during its first year prior to the fund's ability to use automatic shelf registration.

Enhanced Registration and Communication Benefits

Certain benefits that are currently only available to affected funds that qualify as WKSIs (generally requiring $700 million in public float) would be available to ELI affected funds — that is, exchange-listed affected funds regardless of whether they have reported for 12 calendar months. These benefits include, among other features, the ability to exercise greater flexibility with respect to pre-filing communications (Rules 163 and 163A), the ability to omit certain information from a base prospectus (Rule 430B(a)), the ability to register additional classes of securities (Rule 413), and the ability to pay filing fees on a "pay-as-you-go" basis at the time of takedown (Rules 456(b)/457(r)).

The SEC is also proposing to amend Rule 139b to remove the minimum public float requirement, thereby allowing all covered investment funds — including affected funds with no public float and funds with less than 12 calendar months of reporting history — to utilize Rule 139b's safe harbor for covered investment fund research reports.

The following table summarizes the key changes for affected funds:

Unlisted Affected Funds: Rule 486 Framework Preserved

Importantly, the SEC is not proposing to expand the eligibility criteria to use Short-Form N-2 to unlisted affected funds. As noted above, the SEC has established, under Rule 486, a tailored registration process for affected funds that do not list their securities on an exchange, including most interval funds, tender offer funds, and nontraded BDCs. Following the 2020 CEF Offering Reform, this framework allows unlisted affected funds to file post-effective amendments and certain registration statements that are either immediately effective upon filing under Rule 486(b) or automatically effective 60 days after filing under Rule 486(a). The SEC believes this framework continues to offer unlisted affected funds a comparable offering process which would be afforded to exchange-listed affected funds under the proposed amendments. Accordingly, the primary benefit of the Registered Offering Reform Proposal for nontraded BDCs is not enhanced shelf registration, but rather the preemption of state securities laws discussed below.

Preemption of State Securities Law Registration and Qualification of Covered Securities

Section 18(a) of the Securities Act provides that states may not require registration or qualification of "covered securities." Section 18(b)(3) of the Securities Act states that a security "is a covered security with respect to the offer or sale of the security to qualified purchasers, as defined by the SEC by rule." The SEC proposes to add a new definition of "qualified purchaser" under Section 18(b)(3) to preempt state securities law registration and qualification requirements with respect to any registered offering under the Securities Act.

Under the proposed amendment, the term "qualified purchaser" under Section 18(b)(3) would be defined to include any person to whom securities are offered or sold pursuant to an offering registered under the Securities Act. As a result, these securities would become "covered securities" and, consequently, exempt from state securities law registration and qualification requirements.

Expansion beyond Current Preemption

While the current preemption only applies to registered offerings in which securities offered and sold are listed or approved for listing on a national securities exchange, the proposed amendment would extend the preemption to registered offerings of unlisted securities. This distinction is particularly significant for nontraded BDCs. Nontraded BDCs that issue securities publicly do not list their shares on a national securities exchange nor are they registered investment companies (instead, they are companies that have elected to be subject to certain provisions of the Investment Company Act). Accordingly, the securities issued by nontraded BDCs, unlike the securities issued by exchange-listed BDCs or registered investment companies, currently are not "covered securities" under Section 18(b) of the Securities Act.

Practical Significance for Nontraded BDCs

Under the current framework, nontraded BDCs conducting registered offerings must comply with the registration and qualification requirements of each state in which their securities are offered and sold. State securities laws have varying frameworks, often based on one or more model acts; and issuers seeking to sell securities in merit-review states must satisfy potentially different substantive standards for each state or risk being unable to sell in that state. Consequently, attempting to comply with state securities law registration and qualification requirements may involve interacting with multiple states, retaining "blue sky" counsel, and addressing varying complex provisions and potentially duplicative requirements, all of which may lead to transactional delays.

By reducing this regulatory oversight and simplifying the process for conducting registered offerings of unlisted securities, the proposed amendments would enhance efficiency and eliminate compliance costs, in turn facilitating capital formation. This development could significantly reduce the barriers to entry for nontraded BDC offerings and potentially revitalize this segment of the market.

Retained State Authority

Notwithstanding the proposed preemption, states would retain certain authority under Section 18(c) of the Securities Act. Specifically, states would retain: (1) jurisdiction to investigate and bring enforcement actions with respect to fraud or deceit or unlawful conduct by brokers or dealers; (2) the ability to require the filing of any document filed with the SEC, solely for notice purposes and the assessment of any fee, together with a consent to service of process; and (3) the power to suspend the offer or sale of securities within the state as a result of the failure to submit any required filing or fee.

Practical Implications

Although the proposals remain subject to a public comment period and are not yet effective, fund sponsors and boards should begin considering the potential impact on their capital-raising strategies and compliance infrastructure.

For fund sponsors and their boards, the proposed ELI and SELI framework would significantly lower the barrier to shelf registration for exchange-listed BDCs and CEFs by eliminating the $75 million public float requirement. Funds that have not previously qualified for Short-Form N-2 should evaluate whether they would meet the proposed ELI criteria — principally, exchange listing and timely filing of all required reports — and consider the operational and governance steps necessary to take advantage of shelf registration upon adoption. Funds seeking the additional flexibility of automatic shelf registration should note that SELI status requires at least 12 months of Exchange Act and Investment Company Act reporting, meaning newly listed funds will need to plan their capital-raising timelines accordingly.

For nontraded BDC sponsors, the proposed federal preemption of state blue-sky registration and qualification requirements could fundamentally reshape the economics of publicly offered nontraded BDC programs. Sponsors should assess the potential cost savings from eliminating multistate compliance — including blue-sky counsel fees, state filing fees, and the delays associated with merit-review states — and evaluate whether these savings alter the viability of new or planned offerings. Sponsors should also note that states would retain enforcement authority over fraud and deceit, notice filing and fee assessment rights, and the power to suspend offerings for failure to comply with notice requirements; so state-level compliance obligations would not be entirely eliminated.

All market participants should consider submitting comments during the 60-day public comment period to shape the final rules.

Comment Period and Next Steps

The public comment period for both the Registered Offering Reform Proposal and the Filer Status Proposal will remain open for 60 days following publication of the proposing releases in the Federal Register. Comments may be submitted electronically through the SEC’s internet comment form or by email to rule-comments@sec.gov, referencing File Number S7-2026-17 for the Registered Offering Reform Proposal.

These proposals are part of a broader agenda that Chairman Atkins has indicated will include future proposals to transform the public company regulatory framework, including reforming the Regulation S-K disclosure requirements with materiality as its "north star." We will continue to monitor developments and provide updates as the rulemaking process progresses.