Business Development Companies-The Basics

12 Pages Posted: 22 Jun 2021 Last revised: 13 Apr 2022

See all articles by Christine Lazaro

Christine Lazaro

St. John's University - School of Law

Date Written: 2021


Business Development Companies (“BDCs”) are a type of closed end investment company, created when Congress amended the Investment Company Act of 1940 in 1980. BDCs were first created to make it easier to invest in venture capital pools and private equity investments. Over the past decade, interest in BDCs has increased. BDCs provide funding to small and mid-sized businesses. Following the financial crisis, BDCs were able to provide loans to businesses that may not have been able to receive financing from more traditional sources. In 2009, the first non-traded public BDCs were issued, raising almost $100 million that year. The following year, sales more than tripled to $369 million. Non-traded BDCs hit their peak in 2014, raising $5.5 billion. In 2020, broker-dealers sold only $362.3 million of non-traded BDCs, the lowest volume since 2010.

This article describes the regulations that govern BDCs: federal, state, and SRO. Next, the article examines recent enforcement actions concerning the sale of BDCs by broker-dealers. Finally, the article discusses concerns raised by the sale of non-traded BDCs to investors.

Keywords: FINRA, SEC, securities regulation, investment advice, fiduciary duty

Suggested Citation

Lazaro, Christine, Business Development Companies-The Basics (2021). St. John's Legal Studies Research Paper No. 21-0017, Available at SSRN: or

Christine Lazaro (Contact Author)

St. John's University - School of Law ( email )

8000 Utopia Parkway
Jamaica, NY 11439
United States

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