[Federal Register Volume 75, Number 61 (Wednesday, March 31, 2010)]
[Notices]
[Pages 16211-16212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7206]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29191; File No. 812-13694]
MCG Capital Corporation; Notice of Application
March 25, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 23(c)(3) of
the Investment Company Act of 1940 (the ``Act'') for an exemption from
section 23(c) of the Act.
-----------------------------------------------------------------------
SUMMARY: Summary of the Application: MCG Capital Corporation (the
``Applicant''), requests an order to amend a prior order (the ``Prior
Order'') \1\ that permits the Applicant to issue restricted shares of
its common stock (``Restricted Stock'') to Applicant's employees and
non-employee directors (``Participants'') pursuant to the MCG Capital
Corporation 2006 Employee Restricted Stock Plan and the MCG Capital
Corporation 2006 Non-Employee Director Restricted Stock Plan (together,
the ``Plans'').\2\ Applicant seeks to amend the Prior Order in order to
engage in certain transactions, provided for in the MCG Capital
Corporation Second Amended and Restated 2006 Employee Restricted Stock
Plan and the MCG Capital Corporation Second Amended and Restated Non-
Employee Director Restricted Stock Plan (together, the ``Amended
Plans'') that may constitute purchases by the Applicant of its own
securities within the meaning of section 23(c) of the Act.
---------------------------------------------------------------------------
\1\ MCG Capital Corporation, Investment Company Act Release Nos.
27258 (Mar. 8, 2006) (notice) and 27280 (Apr. 4, 2006) (order).
\2\ The Plans were each amended and restated on April 23, 2008.
DATES: Filing Dates: The application was filed on September 4, 2009 and
amended on January 19, 2010 and March 16, 2010.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on April 19, 2010, and should be accompanied by proof of
service on applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
[[Page 16212]]
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090. Applicant, c/o Steven F.
Tunney, President and Chief Executive Officer, MCG Capital Corporation,
1100 Wilson Boulevard, Suite 3000, Arlington, Virginia 22209.
FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel,
at (202) 551-6990, or Jennifer L. Sawin, Branch Chief, at (202) 551-
6821, (Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicant's Representations
1. The Applicant is an internally managed, non-diversified, closed-
end management investment company that has elected to be regulated as a
business development company (``BDC'') under the Act. The Plans
authorize the Applicant to issue Restricted Stock to the Participants
in accordance with the terms and conditions of the Prior Order. The
Applicant seeks to amend the Prior Order to permit the Applicant to
withhold shares of the Applicant's common stock or purchase shares of
the Applicant's common stock from the Participants to satisfy tax
withholding obligations related to the vesting of Restricted Stock that
were or will be granted pursuant to the Plans or the Amended Plans. The
Applicant will continue to comply with all of the terms and conditions
of the Prior Order.
2. The Plans and the Amended Plans authorize the Applicant to issue
shares of Restricted Stock; at the time of issuance these shares are
subject to certain forfeiture restrictions. On the date that any
Restricted Stock vests, such vested shares of the Restricted Stock are
released to the Participant and are available for sale or transfer. For
Participants who are employees, the value of the vested shares is
deemed to be wage compensation for the employee. Applicant states that
any compensation income recognized by an employee is generally subject
to Federal withholding for income and employment tax purposes.\3\ The
Amended Plans provide that each Participant must satisfy all applicable
Federal, State, and local or other income and employment tax
withholding obligations before the Applicant will deliver stock
certificates or otherwise recognize ownership of common stock under an
award.
---------------------------------------------------------------------------
\3\ During the restricted period (i.e., prior to the lapse of
applicable forfeiture restrictions), the Restricted Stock generally
may not be sold, transferred, pledged, hypothecated, margined, or
otherwise encumbered by a Participant.
---------------------------------------------------------------------------
3. The Amended Plans will be subject to approval by the Applicant's
board of directors as well as the required majority of the Applicant's
directors within the meaning of section 57(o) of the Act. The Amended
Plans explicitly permit the Applicant to withhold shares of the
Applicant's common stock or purchase shares of the Applicant's common
stock from the Participants to satisfy tax withholding obligations
related to the vesting of Restricted Stock.\4\
---------------------------------------------------------------------------
\4\ The Amended Plans provide that shares withheld from an award
to satisfy tax withholding obligations are not returned to the plan
reserve, but are counted against the number of shares available
under the relevant plan.
---------------------------------------------------------------------------
Applicant's Legal Analysis
1. Section 23(c) of the Act, which is made applicable to BDCs by
section 63 of the Act, generally prohibits a BDC from purchasing any
securities of which it is the issuer except in the open market,
pursuant to tender offers or under other circumstances as the
Commission may permit to ensure that the purchase is made on a basis
that does not unfairly discriminate against any holders of the class or
classes of securities to be purchased. Applicant states that the
withholding of the Applicant's common stock or purchase of shares of
Applicant's common stock to satisfy tax withholding obligations related
to the vesting of Restricted Stock might be deemed to be purchases by
the Applicant of its own securities within the meaning of section
23(c), and that section 23(c) of the Act may therefore prohibit these
transactions.
2. Section 23(c)(3) of the Act permits a BDC to purchase securities
of which it is the issuer ``under such * * * circumstances as the
Commission may permit by * * * orders for the protection of investors
in order to insure that such purchases are made in a manner or on a
basis which does not unfairly discriminate against any holders of the
class or classes of securities to be purchased.'' Applicant believes
that the requested relief meets the standards of section 23(c)(3) of
the Act.
3. The Applicant states that any such purchases will be made in a
manner that does not unfairly discriminate against the Applicant's
other stockholders because any shares that the Participants deliver to
the Applicant to satisfy tax withholding obligations will be valued at
the closing sales price of Applicant's shares of common stock on the
NASDAQ Global Select Market (or any other such exchange on which its
shares of common stock may be traded in the future) as of the date of
the transaction. Applicant further states that no transaction will be
conducted pursuant to the requested order on days when there are no
reported market transactions involving the Applicant's shares.
Applicant submits that because all of the transactions between the
Applicant and the Participants with respect to the Amended Plans will
take place at the public market price for the Applicant's common stock,
these transactions will not be significantly different than could be
achieved by any stockholder selling in a market transaction.
4. Applicant submits that the withholding provisions in the Amended
Plans do not raise concerns about preferential treatment of the
Applicant's insiders because the Amended Plans are a bona fide
compensation plan of the type that is common among corporations
generally. Further, the vesting schedule is determined at the time of
the initial grant of the Restricted Stock. Applicant represents that
that the transactions may be made only as permitted by the Amended
Plans. The Applicant believes that its request for the order is
consistent with the policies underlying the provisions of the Act
permitting the use of equity compensation as well as prior exemptive
relief granted by the Commission for relief under section 23(c) of the
Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7206 Filed 3-30-10; 8:45 am]
BILLING CODE 8011-01-P