Order Granting a Limited Exemption From Rule 102(a) of Regulation M to Certain Business Development Companies Pursuant to Rule 102(e) of Regulation M, 78424 [2013-30763]

Download as PDF 78424 Federal Register / Vol. 78, No. 248 / Thursday, December 26, 2013 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71142; File No. TP 14–03] Order Granting a Limited Exemption From Rule 102(a) of Regulation M to Certain Business Development Companies Pursuant to Rule 102(e) of Regulation M December 19, 2013. emcdonald on DSK67QTVN1PROD with NOTICES By letter dated December 19, 2013 (‘‘letter’’), as supplemented by conversations with the staff of the Division of Trading and Markets ¯ (‘‘Staff’’), counsel for CION Investment Corporation (‘‘Company’’), an unlisted business development company (‘‘BDC’’),1 requested on behalf of the Company that the Securities and Exchange Commission (‘‘Commission’’) issue an exemption from Rule 102 of Regulation M.2 Specifically, the letter requests that the Commission exempt the Company from the requirements of Rule 102(a) so that the Company may conduct a periodic share repurchase program during the course of the continuous offering of shares of the Company (‘‘Shares’’). Rule 102(a) of Regulation M specifically prohibits issuers, selling security holders, and any of their affiliated purchasers from directly or indirectly bidding for, purchasing, or attempting to induce another person to bid for or purchase a ‘‘covered security’’ until the applicable restricted period has ended. As a consequence of the continuous offering of the Shares, the Company will be engaged in a distribution of the Shares pursuant to Rule 102. As a result, bids for or purchases of Shares or any reference security by the Company or any affiliated purchaser of the Company are prohibited during the restricted period specified in Rule 102, unless specifically excepted by or exempted from Rule 102. As the Company seeks to engage in periodic repurchases of Shares during the applicable restricted period, absent an exception these repurchases would violate Rule 102(a). The request is similar to a number of requests from unlisted BDCs for conditional exemptive relief from Rule 102 that were granted pursuant to delegated authority.3 Like other BDC 1 See Section 2(a)(48) of the Investment Company Act of 1940 (‘‘1940 Act’’) (defining ‘‘business development company’’). 2 17 CFR 242.102. 3 See, e.g., Order Granting Business Development Corporation of America a Limited Exemption from Rule 102(a) of Regulation M Pursuant to Rule 102(e), Exchange Act Rel. No. 67620 (August 8, 2012); Order Granting FS Investment Corporation II a Limited Exemption from Rule 102(a) of Regulation VerDate Mar<15>2010 18:06 Dec 24, 2013 Jkt 232001 repurchase programs that have been given exemptive relief from Rule 102, the repurchase program is designed to provide a limited source of liquidity for the Company’s shareholders as there is no trading market for the Shares. In addition, like other BDC repurchase programs, the repurchase program is fully disclosed to shareholders in the prospectus so the existence of the repurchase program should be known by investors, thus minimizing potential manipulative effects. The relief requested is also similar to that extended to unlisted real estate investment trusts to permit similar repurchase programs.4 Based on our experience with these prior requests, we believe that it is appropriate to extend exemptive relief for all BDC repurchase programs that meet the same criteria. Accordingly, we find that it is appropriate in the public interest and is consistent with the protection of investors to grant a conditional exemption from Rule 102(a) to permit any unlisted company, including the Company, that has elected to be treated as a BDC under the 1940 Act to engage in periodic repurchases of their shares during the applicable restricted period, subject to the conditions described below. Pursuant to the conditions to this exemptive relief, any BDC seeking to rely on this exemption must terminate their repurchase program should a secondary trading market for its common stock develop. As a result, the repurchase programs being given exemptive relief in this order should not have a manipulative effect on the applicable distribution. This exemptive relief is further conditioned on the repurchase program purchasing shares of common stock at a price that does not exceed the then current public offering price of such securities. This should help ensure that the repurchase programs being extended relief in this order do not have a manipulative effect on the price of such distributions as the purchases should not improve the offering price. Conclusion It is hereby ordered, pursuant to Rule 102(e), that any unlisted company that has elected to be treated as a BDC under the 1940 Act is exempt from Rule 102(a) M Pursuant to Rule 102(e), Exchange Act Rel. No. 67163 (June 7, 2012); and Letter from Josephine J. Tao, Assistant Director, to Steven B. Boehm, Sutherland Asbill and Brennan LLP regarding FS Investment Corporation (April 20, 2009). 4 Letter from James A. Brigagliano, Associate Director, to Dennis O. Garris, Alston & Bird LLP regarding Class Relief for REIT Share Redemption Programs (October 22, 2007). PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 for the limited purpose of engaging in periodic repurchases of their shares during the applicable restricted period, subject to the following conditions: • Any company relying upon this exemption shall terminate its repurchase program if a secondary market for the shares being repurchased develops; and • Any repurchase pursuant to this exemption will be made at a price that does not exceed the then current public offering price for such securities. This exemptive relief is subject to modification or revocation at any time the Commission determines that such action is necessary or appropriate in furtherance of the purposes of the Exchange Act. In addition, persons relying on this exemption are directed to the anti-fraud and anti-manipulation provisions of the federal securities laws, particularly Section 10(b) of the Exchange Act, and Rule 10b–5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with the persons relying on this exemption. This order should not be considered a view with respect to any other question that the transactions may raise, including, but not limited to the adequacy of the disclosure concerning, and the applicability of other federal or state laws to, such transactions. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.5 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–30763 Filed 12–24–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71137; File No. SR–CHX– 2013–22] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the Single-Sided Order Fees and Credits December 19, 2013. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on December 18, 2013, the Chicago Stock Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’) filed with 5 17 CFR 200.30–3(a)(6). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\26DEN1.SGM 26DEN1

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[Federal Register Volume 78, Number 248 (Thursday, December 26, 2013)]
[Notices]
[Page 78424]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30763]



[[Page 78424]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71142; File No. TP 14-03]


Order Granting a Limited Exemption From Rule 102(a) of Regulation 
M to Certain Business Development Companies Pursuant to Rule 102(e) of 
Regulation M

December 19, 2013.
    By letter dated December 19, 2013 (``letter''), as supplemented by 
conversations with the staff of the Division of Trading and Markets 
(``Staff''), counsel for C[Imacr]ON Investment Corporation 
(``Company''), an unlisted business development company (``BDC''),\1\ 
requested on behalf of the Company that the Securities and Exchange 
Commission (``Commission'') issue an exemption from Rule 102 of 
Regulation M.\2\ Specifically, the letter requests that the Commission 
exempt the Company from the requirements of Rule 102(a) so that the 
Company may conduct a periodic share repurchase program during the 
course of the continuous offering of shares of the Company 
(``Shares'').
---------------------------------------------------------------------------

    \1\ See Section 2(a)(48) of the Investment Company Act of 1940 
(``1940 Act'') (defining ``business development company'').
    \2\ 17 CFR 242.102.
---------------------------------------------------------------------------

    Rule 102(a) of Regulation M specifically prohibits issuers, selling 
security holders, and any of their affiliated purchasers from directly 
or indirectly bidding for, purchasing, or attempting to induce another 
person to bid for or purchase a ``covered security'' until the 
applicable restricted period has ended. As a consequence of the 
continuous offering of the Shares, the Company will be engaged in a 
distribution of the Shares pursuant to Rule 102. As a result, bids for 
or purchases of Shares or any reference security by the Company or any 
affiliated purchaser of the Company are prohibited during the 
restricted period specified in Rule 102, unless specifically excepted 
by or exempted from Rule 102. As the Company seeks to engage in 
periodic repurchases of Shares during the applicable restricted period, 
absent an exception these repurchases would violate Rule 102(a).
    The request is similar to a number of requests from unlisted BDCs 
for conditional exemptive relief from Rule 102 that were granted 
pursuant to delegated authority.\3\ Like other BDC repurchase programs 
that have been given exemptive relief from Rule 102, the repurchase 
program is designed to provide a limited source of liquidity for the 
Company's shareholders as there is no trading market for the Shares. In 
addition, like other BDC repurchase programs, the repurchase program is 
fully disclosed to shareholders in the prospectus so the existence of 
the repurchase program should be known by investors, thus minimizing 
potential manipulative effects. The relief requested is also similar to 
that extended to unlisted real estate investment trusts to permit 
similar repurchase programs.\4\ Based on our experience with these 
prior requests, we believe that it is appropriate to extend exemptive 
relief for all BDC repurchase programs that meet the same criteria. 
Accordingly, we find that it is appropriate in the public interest and 
is consistent with the protection of investors to grant a conditional 
exemption from Rule 102(a) to permit any unlisted company, including 
the Company, that has elected to be treated as a BDC under the 1940 Act 
to engage in periodic repurchases of their shares during the applicable 
restricted period, subject to the conditions described below.
---------------------------------------------------------------------------

    \3\ See, e.g., Order Granting Business Development Corporation 
of America a Limited Exemption from Rule 102(a) of Regulation M 
Pursuant to Rule 102(e), Exchange Act Rel. No. 67620 (August 8, 
2012); Order Granting FS Investment Corporation II a Limited 
Exemption from Rule 102(a) of Regulation M Pursuant to Rule 102(e), 
Exchange Act Rel. No. 67163 (June 7, 2012); and Letter from 
Josephine J. Tao, Assistant Director, to Steven B. Boehm, Sutherland 
Asbill and Brennan LLP regarding FS Investment Corporation (April 
20, 2009).
    \4\ Letter from James A. Brigagliano, Associate Director, to 
Dennis O. Garris, Alston & Bird LLP regarding Class Relief for REIT 
Share Redemption Programs (October 22, 2007).
---------------------------------------------------------------------------

    Pursuant to the conditions to this exemptive relief, any BDC 
seeking to rely on this exemption must terminate their repurchase 
program should a secondary trading market for its common stock develop. 
As a result, the repurchase programs being given exemptive relief in 
this order should not have a manipulative effect on the applicable 
distribution. This exemptive relief is further conditioned on the 
repurchase program purchasing shares of common stock at a price that 
does not exceed the then current public offering price of such 
securities. This should help ensure that the repurchase programs being 
extended relief in this order do not have a manipulative effect on the 
price of such distributions as the purchases should not improve the 
offering price.

Conclusion

    It is hereby ordered, pursuant to Rule 102(e), that any unlisted 
company that has elected to be treated as a BDC under the 1940 Act is 
exempt from Rule 102(a) for the limited purpose of engaging in periodic 
repurchases of their shares during the applicable restricted period, 
subject to the following conditions:
     Any company relying upon this exemption shall terminate 
its repurchase program if a secondary market for the shares being 
repurchased develops; and
     Any repurchase pursuant to this exemption will be made at 
a price that does not exceed the then current public offering price for 
such securities.
    This exemptive relief is subject to modification or revocation at 
any time the Commission determines that such action is necessary or 
appropriate in furtherance of the purposes of the Exchange Act. In 
addition, persons relying on this exemption are directed to the anti-
fraud and anti-manipulation provisions of the federal securities laws, 
particularly Section 10(b) of the Exchange Act, and Rule 10b-5 
thereunder. Responsibility for compliance with these and any other 
applicable provisions of the federal securities laws must rest with the 
persons relying on this exemption. This order should not be considered 
a view with respect to any other question that the transactions may 
raise, including, but not limited to the adequacy of the disclosure 
concerning, and the applicability of other federal or state laws to, 
such transactions.
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    \5\ 17 CFR 200.30-3(a)(6).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30763 Filed 12-24-13; 8:45 am]
BILLING CODE 8011-01-P