In two separate no-action letters, the SEC staff quietly expanded the ability of business development companies (BDCs) to invest in registered investment advisers.

Section 12(d)(3) of the Investment Company Act of 1940 generally prohibits registered investment companies from acquiring securities of issuers that are in the securities business. This prohibition extends to issuers that are broker-dealers and registered investment advisers and applies to closed end funds that elect to be treated as BDCs.