Business Development Companies (BDCs) are companies that are created to help grow small companies in the initial stages of their development. They are very similar to venture capital funds. Many are set up like closed-end investment funds and can be public companies listed on stock exchanges. They are investment entities created by Congress in 1980 and are required to have at least 70 percent of their assets in the non-public debt and equity of small and middle-market U.S. companies. They annually distribute at least 90 percent of their income to stockholders. The risks associated with BDCs include their illiquidity risk, and capital market risk. The average BDC is down 10 percent since the beginning of this year and this decline comes from fears of rising interest rates to concerns about the soundness of their underlying investments. They can be highly volatile and are only suited for the most aggressive of investors. Your broker has a duty to recommend only suitable investments for you, and, if he does not, his brokerage firm may be responsible for your investment losses. If you have investments in BDCs, please call our Chicago-based securities law firm for a free consultation with an attorney.
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