SEC proposes sweeping changes to registered offering rules: considerations for regulated funds

On May 19, 2026, the SEC announced two major proposals to reform the registered offering and disclosure framework for public reporting companies, including business development companies (BDCs) and registered closed-end funds (CEFs and together with BDCs, Regulated Funds). This Legal Briefing discusses the proposed amendments to the registered offering process applicable to Regulated Funds (Offering Proposal) and highlights what Regulated Funds should evaluate during the comment period. We will be posting a separate Legal Briefing that addresses the proposed amendments that would significantly scale back the disclosure requirements for certain Exchange Act¹ filers.

At a high level, the Offering Proposal would expand shelf registration statement eligibility to a broader set of Regulated Funds, extend the availability of registration and communication accommodations currently reserved for “well-known seasoned issuers” (WKSIs),² and preempt blue sky regulation for all registered offerings. These changes would build on the modifications to the registration and offering process for Regulated Funds adopted by the SEC in 2020. 

Expanded Registered Offering Benefits for Regulated Funds 

The Offering Proposal would redefine how issuers are categorized, expanding certain registered offering efficiencies to a larger pool of listed Regulated Funds. Specifically, the Offering Proposal would allow more Regulated Funds to file short-form registration statements on Form N-2 (Short Form N-2). Short Form N-2 allows an eligible Regulated Fund to satisfy Form N-2’s disclosure requirements by incorporating information by reference from past and future Exchange Act reports. Short Form N-2 also allows eligible Regulated Funds to omit certain information from their base prospectus and later provide that information in a prospectus supplement filed pursuant to Rule 424(b) under the Securities Act.³

In addition, the Offering Proposal would extend the automatic shelf registration statement currently available only to WKSIs to other Regulated Funds. 

New Issuer Classifications

Currently, a Regulated Fund must satisfy the following key requirements (among others) in order to utilize Short Form N-2:

• Seasoning Requirement:
  • For BDCs, the fund must have been subject to the Exchange Act and timely filed all Exchange Act reports (other than reports required by certain items of Current Report on Form 8-K) during the prior 12 months;
  • For CEFs, the fund must have been registered under, and timely filed all reports required by, the Investment Company Act⁴ during the prior 12 months.
• Transaction Requirement: For both BDCs and CEFs, the fund must have a public float of $75.0 million or more (or satisfy other transaction size thresholds).

The Offering Proposal would narrow the seasoning requirement and eliminate the transaction requirement altogether, effectively replacing the current rubric for whether a Regulated Fund can utilize Short Form N-2 with two new issuer categories: Eligible Listed Issuers (ELIs) and Seasoned Eligible Listed Issuers (SELIs):⁵

Requirement	ELIs	SELIs
Listing Status	At least one of the common equity listed on a securities exchange
Timely Reporting Requirement	Timely file all Exchange Act or Investment Company Act reports, as applicable, that the fund was required to file during the preceding 12 months
Seasoning Requirement	None	Must be subject to Exchange Act or Investment Company Act reporting requirements for at least 12 months
Transaction Requirement	None

 

Currently, Short Form N-2 and the associated benefits are only available once a Regulated Fund has been subject to Exchange Act or Investment Company Act reporting requirements for 12 months (among other eligibility criteria). Based on the proposed amendment to the seasoning requirement, a listed Regulated Fund with less than 12 months of reporting would gain access to Short Form N-2 and certain WKSI-style benefits without needing to reach a specific size threshold. Further, by eliminating the transaction requirement, an ELI would immediately become a SELI after it has been subject to reporting requirements for 12 months, making that fund eligible to file an automatic shelf registration statement.

Importantly, these issuer categories require a Regulated Fund to be listed on a national securities exchange to qualify as an ELI or a SELI. As a result, unlisted Regulated Funds, such as non-traded BDCs, would remain ineligible to use Short Form N-2. Specifically, the Offering Proposal would maintain the current offering framework for non-traded BDCs set forth in Rule 486 under the Investment Company Act. This aspect of the Offering Proposal is discussed further below under “Practical Considerations for Short Form N-2 Eligibility—Limited applicability to unlisted Regulated Funds.”

Benefits to New Issuer Classifications 

The new issuer classifications for listed Regulated Funds set forth in the Offering Proposal would broaden access to both the shelf registration process and certain benefits currently reserved for WKSIs. The Offering Proposal would allow for more streamlined “shelf” offerings by listed Regulated Funds that are currently ineligible to file Short Form N-2 because their public float does not meet the existing $75.0 million threshold. The elimination of the public float requirement also would generally allow any listed Regulated Fund that has been subject to SEC reporting requirements for 12 months to file a registration statement that would be effective automatically upon filing, allowing more efficient access to the capital markets for SELIs.

Certain benefits extend further to include all eligible Regulated Funds, not just those that qualify as an ELI or SELI. For example, the Offering Proposal would allow all Regulated Funds to publish and distribute research reports without such publication being deemed an offer of securities, a safe harbor that is currently reserved only for certain listed Regulated Funds. 

The table below summarizes the key changes for Regulated Funds under the Offering Proposal compared to the status quo:

Registered Offering Benefits	Current Eligibility	Proposed Eligibility
		ELI	SELI	Unlisted Regulated Funds
Automatic Shelf Registration	WKSIs only		X
Short Form N-2	Regulated Funds meeting the seasoning requirement (at least 12 months of reporting) and transaction requirement (typically, $75.0 mm in public float)	X	X
Pay-as-you-go:  allowing registrants to register an indeterminate amount of securities under the shelf registration statement and to pay the SEC registration fee at the time of each takedown	WKSIs only	X	X
Omission of Certain Base Prospectus Information pursuant to Rule 430B under the Securities Act	WKSIs only	X	X
Flexibility to Conduct Certain Pre-Filing Communications	WKSIs only	X	X
Safe Harbor for Research Reports	Regulated Funds with $75.0 mm in public float	X	X	X

Practical Considerations for Short Form N-2 Eligibility 

Managers of listed Regulated Funds should consider the potential benefits of expanded access to Short Form N-2 and the registered offering process, while unlisted Regulated Funds should be aware of the limitations of the Offering Proposal on registered offerings by those vehicles:

• Impact on capital raising efforts: By eliminating the $75.0 million public float requirement, Short Form N-2 and the shelf registration process would become more widely available to listed Regulated Funds. Additionally, the revised seasoning requirement would enable ELIs (meaning, in general, any listed Regulated Fund) to conduct a shelf offering using Short Form N-2 on day one, rather than after 12 months of reporting. Fund managers should consider whether smaller listed vehicles could benefit from a shelf offering structure, which may streamline debt and equity offerings for those vehicles, including through the use of at-the-market offerings.
• Emphasis on listing status: The Offering Proposal would shift the analysis of whether a vehicle is eligible for WKSI-style benefits away from the public float of the Regulated Fund, focusing instead on whether a Regulated Fund has publicly listed its shares and has been reporting for at least 12 months for additional benefits. This may encourage more Regulated Funds to consider a public offering to access more efficient offering structures, without needing to factor in whether that Regulated Fund can retain its public float.
• Limited applicability to unlisted Regulated Funds: Although the Offering Proposal would extend the availability of Short Form N-2 to a broader group of Regulated Funds, it would not provide similar benefits to unlisted Regulated Funds. For example, a non-traded BDC conducting a continuous registered offering would remain ineligible to forward incorporate by reference the information filed in its Exchange Act reports into its prospectus. By maintaining the existing offering rules for non-traded BDCs under Rule 486, those Regulated Funds would still be required to supplement their prospectuses or file post-effective amendments to their registration statements on at least an annual basis.
  • The SEC has solicited comments on this point, asking whether to permit Regulated Funds “relying on Rule 486 to forward incorporate… into their prospectuses,” which would “avoid the need to file post-effective amendments” on an annual basis. This request for comment may indicate that the SEC is interested in exploring at least some other benefits for non-traded BDCs and other unlisted Regulated Funds, even if they remain ineligible to file on Short Form N-2.
• Removal of WKSI benefits for certain Regulated Funds: Notably, the Offering Proposal does not just remove the public float barrier to accessing registered offering benefits, it removes the transaction requirement more generally. This means that certain unlisted Regulated Funds that qualify as a WKSI under the current regime using an alternative transaction requirement may be ineligible for WKSI-style benefits that they can currently access. For example, certain non-traded BDCs currently qualify as a WKSI because they have issued at least $1.0 billion in aggregate principal amount of non-convertible securities (other than common equity) in the past three years in registered offerings. As a result, these non-traded BDCs can offer their debt securities using Short Form N-2 with the full suite of benefits available to WKSIs. By broadly eliminating the transaction requirement, the Offering Proposal would remove this avenue for an unlisted Regulated Fund to qualify as a WKSI.
  • The SEC has solicited comment on whether “the proposal to eliminate the requirement that funds have a minimum public float” would be beneficial for funds and their shareholders, which may indicate that the SEC is willing to consider the impact of the elimination of the transaction requirement on unlisted Regulated Funds.

Blue Sky Preemption for all Registered Offering

In the Offering Proposal, the SEC proposes to preempt state securities law qualification requirements for all registered offering under the Securities Act. The Securities Act provides that certain “covered securities” are exempt from state registration. Currently, to qualify as “covered securities,” a Regulated Fund’s securities must either be listed on a national securities exchange, or the Regulated Fund must be a CEF registered under the Investment Company Act. As a result, registered offerings by non-traded BDCs, for instance, remain subject to state regulation because the securities of these issuers are not listed on an exchange and such issuers are not registered under the Investment Company Act.

The Offering Proposal, if adopted, would change this landscape by defining a “qualified purchaser” under the Securities Act as any person to whom securities are offered or sold pursuant to a registered offering.⁶ This would mean that any securities sold in a registered offering (not just listed securities or those sold by CEFs) would be “covered securities” under the Securities Act, thereby preempting state qualification requirements for such registered offerings. This change would remove the significant delays associated with blue sky qualification, streamline the regulatory framework applicable to offerings by those Regulated Funds and reduce offering costs for non-traded BDCs.

The current regulatory framework has required non-traded BDCs to separately comply with the qualification requirements of each state in which they intend to offer securities, which creates uncertainty for distributors and confusion for investors. For example, in their review process, state regulators have requested amendments to the governing documents of non-traded BDCs relating to indemnification and annual shareholder meetings, including the quorum needed to hold shareholder meetings. Some state regulators also impose limitations on the fees payable to certain affiliates of the Regulated Fund, such as its administrator. 

Similar to the foregoing corporate governance issues, the blue sky framework also has historically created a patchwork of investor suitability standards, requiring non-traded BDCs to meet minimum gross income and net worth thresholds that can vary state by state. Because these offerings are continuous, they are subject to ongoing review. As a result, non-traded BDCs are often subject to evolving requirements that impact their offering structure or corporate governance practices, even where that fund was previously approved to offer in a specific jurisdiction. 

This process imposes significant costs on non-traded BDCs. For example, these vehicles incur additional expenses compared to their competitors because they are required to pay filing fees to each state, in addition to SEC registration fees. Further, the state review process often results in significant delays for both new and existing non-traded BDCs. Typically, a new offering requires at least 12 months to clear each state, while a follow-on offering can take up to nine months. This leaves non-traded BDCs at a disadvantage compared to their listed or privately offered peers in terms of their ability to efficiently reach and secure investors. 

Practical Considerations for Blue Sky Preemption 

Non-traded BDCs and other issuers of unlisted securities that are currently subject to blue sky regulation should evaluate the following as the SEC considers formally adopting the Offering Proposal:

• Reduced offering and compliance costs: The Offering Proposal would significantly reduce the costs associated with registered offerings by non-traded BDCs by eliminating the state qualification process. Additionally, non-traded BDCs should assess whether they have made changes to their offering structure and governing practices in response to state specific comments during the review process and evaluate whether those changes should be maintained in light of the federal preemption of state blue sky laws for these registered offerings.
  • Notably, the Offering Proposal would not eliminate state oversight of offerings by unlisted Regulated Funds; states would maintain authority to bring enforcement actions for fraud and to require notice filings and the associated fee payments. Fund managers should be mindful of these retained authorities when evaluating how to revise their compliance policies to account for federal preemption if the Offering Proposal is adopted.
  • The SEC has asked whether to instead preempt only certain types of registered offerings, such as registered offerings of equity securities. Non-traded BDCs should take note of any changes to the final rules with respect to the types of registered offerings that may continue to be subject to state regulation.
• Impact on potential investor base: Sponsors and distributors may have greater flexibility to market a non-traded BDC to a wider base of investors if the Offering Proposal is adopted. For example, non-traded BDCs may currently choose to narrow their offering to investors that satisfy the most restrictive state suitability standard. By contrast, the Offering Proposal would eliminate the suitability standards that vary state by state, and fund managers should consider whether federal preemption in this area could allow new and existing unlisted Regulated Funds to offer to a broader pool of investors.
• Level playing field for all unlisted Regulated Funds: Managers of unlisted Regulated Funds that privately offer their shares may consider evaluating whether a public offering would now be feasible given the potential for reduced offering and compliance costs resulting from federal preemption. Non-traded BDCs conducting a continuous public offering would no longer be subject to the costs associated with the multi-state review process, which could position them as more competitive alternatives to those privately offered vehicles and may allow new non-traded BDCs to launch their offerings more quickly.

Key Next Steps 

The comment period for the Offering Proposal ends on July 27, 2026, after which the SEC will consider the implementation of final rules to adopt the proposed changes to the registered offering rules. The SEC has requested comment in various areas, particularly focusing on questions where industry participants may have a unique point of view based on their day-to-day experience with current regulations. For example, non-traded BDCs may consider providing the SEC with details regarding the “transactional delays,” “specific costs” and “burdens of complying with [s]tate securities law registration and qualification requirements.”

Fund managers also should evaluate the practical considerations detailed above and determine whether and how to take advantage of the additional flexibility described in the Offering Proposal. The Short Form N-2 changes may be especially relevant for smaller, listed Regulated Funds that would be able to access the capital markets more efficiently if the rules in the Offering Proposal are ultimately adopted. Additionally, the preemption of blue sky regulation would significantly reduce offering costs and the time to get to market for non-traded BDCs. As a result, fund managers should consider whether this public offering structure may now be a more attractive product offering to include on their platform in light of the federal preemption of state qualification requirements.

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.

<sub>1. The Securities Exchange Act of 1934, as amended (Exchange Act). 
2. A “well-known seasoned issuer” is generally required to have a public float of its common equity of at least $700.0 million or satisfy an alternative size requirement. 
3. The Securities Act of 1933, as amended (Securities Act).
4. The Investment Company Act of 1940, as amended (Investment Company Act). 
5. The Offering Proposal would apply these same categories to eligible operating companies filing registration statements on Forms S-1 or S-3. In addition to the criteria described herein, a listed Regulated Fund also must not be an “ineligible issuer” (i.e., the Regulated Fund cannot be a blank check, shell company or penny stock issuer, foreign government, or foreign private issuer, and must not have been convicted of a felony or misdemeanor or subject to other judicial or administrative proceedings for the past three years). 
6. Note that this does not change the definition of “qualified purchaser” under the Investment Company Act, which is unrelated to and differs from the definition of “qualified purchaser” under the Securities Act.</sub>