June 8, 2016

On May 19, a Senate Committee on Banking subcommittee held a hearing to discuss legislation that would ease regulation of Business Development Corporations, or BDCs. The proposed legislation would permit firms like Ares Capital Corporation to shift their focus away from small businesses and nearly double their investments in hedge funds and other Wall Street financial vehicles.

Sen. Elizabeth Warren grilled Ares Capital Co-Chairman Michael Arougheti (who is also Director, Co-Founder and President of Ares Management) about the legislation, questioning whether the bill “would allow firms like Ares to borrow a whole lot more money, divert billions of dollars away from small businesses, to hedge funds and other financial institutions, and collect even more management fees, all while preserving special tax breaks and not doing anything to help either small businesses or BDC investors.”

“If you really want to have more money to invest why don’t you lower your high fees and offer better returns to your investors?” asked Sen. Warren.

UNITE HERE, SEC Chairman Mary Jo White, and the North American Securities Administrators Association have raised concerns that the legislation would divert money from small businesses and expose retail BDC investors to heightened risk.

Read our issue brief on the proposed legislation here.

 

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