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U.S. Securities and Exchange Commission

Securities Exchange Act of 1934 - Rule 14a-8(i)(7)
Medallion Financial Corp.

May 11, 2004

Michael C. Carroll, Senior Vice President
Medallion Financial Corp.
437 Madison Avenue
New York, NY 10022

Re: Medallion Financial Corp.
     SEC File No. 0-27812
     Shareholder Proposal of Opportunity Partners LLP

Dear Mr. Carroll:

In a letter dated March 18, 2004, you notified the staff of the Securities and Exchange Commission ("Commission") that Medallion Financial Corp. "Medallion") proposes to omit from its year 2004 proxy soliciting materials a shareholder proposal submitted by Opportunity Partners LP ("Proponent"). The proposal states:

RESOLVED: The stockholders of Medallion Financial Corp. ("Medallion") request that an investment banking firm be engaged to evaluate alternatives to maximize stockholder value including a sale of the company.

You request our assurance that we would not recommend enforcement action if Medallion omits the proposal in reliance on rule 14a-8(i)(7) under the Securities Exchange Act of 1934, which permits a company to exclude a shareholder proposal if it "deals with a matter relating to the company's ordinary business operations."1

There appears to be some basis for your view that Medallion may exclude the proposal under rule 14a-8(i)(7) relating to its ordinary business operations. We note that the proposal appears to relate to both extraordinary transactions and non-extraordinary transactions. Accordingly, we will not recommend enforcement action to the Commission if Medallion omits the proposal from its proxy materials in reliance on 14a-8(i)(7). In reaching this position, we have not found it necessary to address the alternative bases for omission upon which Medallion relies.

Sincerely,

Mary A. Cole
Senior Counsel


Endnotes

1 In connection with this request, we also received and considered a March 23, 2004, letter submitted to the staff by Proponent and a letter from Medallion dated April 7, 2004.


Incoming Letter

March 18, 2004

VIA FEDERAL EXPRESS

Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Office of Chief Counsel

Re: Medallion Financial Corp.
     Commission File No. 0-27812
     Omission of Shareholder Proposal

Ladies and Gentlemen:

Medallion Financial Corp., a Delaware corporation ("Medallion" or the "Company"), received a letter dated September 22, 2003 from Mr. Phillip Goldstein of Kimball & Winthrop, Inc. on behalf of Opportunity Partners L.P. (the "Proponent") submitting a shareholder proposal together with a supporting statement (the "Proposal"), a copy of which is attached hereto as Exhibit A, for inclusion in Medallion's proxy materials for its 2004 Annual Meeting. We hereby request confirmation that the Staff of the Division of Investment Management of the Securities and Exchange Commission (the "Staff") will not recommend an enforcement action if, in reliance on certain provisions of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Medallion omits the Proposal and supporting statement ("Supporting Statement") from its 2004 proxy materials.

Pursuant to Rule 14a-8(j)(2), this letter sets forth the grounds on which the Corporation proposes to omit the Proposal from its proxy materials. Further, Medallion files herewith six copies of the Proposal, and encloses six copies of this letter pursuant to Rule 14a-8(j). By copy of this letter and accompanying material, the Proponent is being notified, pursuant to Rule 14a-8(j), of Medallion's intention to omit the Proposal from Medallion's 2004 proxy materials.

Although Medallion has not yet finalized its schedule for the mailing of the definitive proxy statements and other materials to its stockholders and the filing of such materials with the Staff, the Company will not mail and file such definitive materials before June 6, 2004.

As described in detail below, it is the Company's position that this Proposal should be resolved in accordance with the guidance regarding the Staff's recent no-action relief determination in BKF Capital Group, Inc. (February 27, 2004), as we believe it relates to an identical proposal and is entirely on point.

The Proposal states:

RESOLVED: The stockholders of Medallion Financial Corp. ("Medallion") request that an investment banking firm be engaged to evaluate alternatives to maximize stockholder value including a sale of the Company.

Supporting Statement:

The shares of Medallion trade at market price that is significantly below their net asset value ("NAV") of approximately $9 per share. Recently, Medallion's shares have been trading at a discount of more than 20% from their NAV.

We think one reason for the discount may be Medallion's very high operating expenses. In 2003, operating expenses are on course to exceed 90 cents per share. If so, that will consume almost all of Medallion's income, leaving almost nothing to be distributed to shareholders. On the other hand, Medallion could be worth a substantial premium to a strategic acquirer with greater resources and a lower cost of capital like a bank that can cut expenses and capitalize on synergies to increase revenue. In short, we think a sale of Medallion is the surest way to enhance stockholder value. Therefore, the board should immediately engage an investment banking firm to evaluate alternatives to maximize shareholder value including a sale of Medallion.

As set forth in more detail below, Medallion proposes to exclude the Proposal from its 2004 proxy materials, because it believes that the Proposal can be excluded under Rules 14a-8(i)(7), (3), (1), and (10).

1. Exclusion under Rule 14a-8(i)(7)

Rule 14a-8(i)(7) provides that a proposal and statement in support thereof may be excluded from a registrant's proxy statement if it "deals with a matter relating to the company's ordinary business operations." Under this Rule, proposals may be excluded if they involve business matters that are mundane and the proposal does not implicate any substantial policy or other consideration. See Release No. 34-12999 (November 22, 1976). The Staff states that "the basic reason for this policy is that it is manifestly impracticable in most instances for stockholders to decide management problems at corporate meetings." See Release 34-19135 (October 14, 1982) Note 45. Accordingly, the Rule operates to exclude shareholder proposals that "deal with ordinary business matters of a complex nature that [stockholders], as a group, would not be qualified to make an informed judgment on, due to their lack of business expertise and their lack of intimate knowledge of the issuer's business." See Release No. 34-12999 (November 22, 1976).

The Staff has previously delineated the Rule's purpose and application by specifying that:

"[T]he general underlying policy of this exclusion is consistent with the policy of most state corporate laws: to confine the resolution of ordinary business problems to management and the board of directors, since it is impracticable for shareholders to decide to solve such problems at an annual meeting.

The policy underlying the ordinary business exclusion rests on two central considerations. The first relates to the subject matter of the proposal. Certain tasks are so fundamental to management's ability to run the company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight . . . the second consideration relates to the degree to which the proposal seeks to micro-manage the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment." Release No. 34-40018 (May 21, 1998).

The Proposal directs the Company to engage an investment banking firm to "evaluate alternatives to maximize stockholder value." However, maximizing the value of a corporation is one of the primary goals of the board of directors of a for-profit corporation. Similarly, monitoring and assessing the value of a company is an ongoing responsibility of a company's board of directors. Consistent therewith, the Board routinely considers and implements business strategies and oversees the management of the Company, including but not limited to considering the engagement of, and engaging, third-party advisers to aid the Company to increase shareholder value.

While the Proposal refers to a sale of the Company as a potential alternative, it does not limit the scope of the Proposal to a sale of the whole Company or another extraordinary corporate transaction involving all, or substantially all, of the Company's assets. The text of the Proposal on its face would cover ordinary business matters as well as extraordinary corporate transactions. The board of directors and management of the Company could maximize shareholder value through any number of actions short of an extraordinary corporate transaction, and as discussed below, the Company's board of directors has indeed been actively addressing shareholder value, and those other items within its purview.

Furthermore, such a broad mandate intrudes upon ordinary business matters that are reserved for management and the board of directors under applicable corporate law. Pursuant to Section 141(a) of the Delaware General Corporation Law (the "DGCL"), "the business and affairs of every [Delaware] corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may otherwise be provided (under other provisions of the DGCL) or in its certificate of incorporation." Thus, in the absence of a provision reserving power to the stockholders in the certificate of incorporation or a provision of the DGCL directing or requiring that stockholders take action, the directors, rather than the stockholders, manage the business and affairs of a Delaware corporation. The certificate of incorporation of Medallion contains no reservation by the stockholders of the power or duty to manage the business and affairs of Medallion. Rather, pursuant to Article FIFTH of the certificate of incorporation of Medallion, "the Board of Directors is expressly authorized and empowered to manage, or direct the management of, the business and affairs of [Medallion] and to exercise all such powers and do all such acts and things as may be exercised or done by [Medallion] subject, nevertheless, to the provisions of the Delaware General Corporation Law, [the] Restated Certificate of Incorporation and the Bylaws of the Corporation." It is well settled in Delaware that once the board of directors of a Delaware corporation becomes charged with managing the business and affairs of a corporation, it may not delegate the power and duty to manage the business and affairs of the corporation to third parties, including stockholders. In this regard, see Lehrman v. Cohen, 222 A.2d 800 (Del. 1966) wherein the Delaware Supreme Court stated, "it is settled, of course, as a general principle, that directors may not delegate their duty to manage the corporate enterprise . . . .The delegation of duty, if any, is made not by the directors, but by stockholder action under Section 141(a), via the certificate of incorporation." Id. at 808.

The Staff has taken the position that proposals relating to the determination and implementation of a company's business strategies are matters relating to the conduct of the company's ordinary business. Accordingly, the Staff has consistently allowed companies to exclude proposals under Rule 14a-8(i)(7) that in substance seek to have the board of directors retain the services of an independent third party for the general purpose of evaluating alternatives, even where some of the proposed strategic alternatives are of an extraordinary nature.

While the Proposal refers to a sale of the Company as a potential alternative, it does not limit the scope of the Proposal to a sale of the whole Company or another extraordinary corporate transaction involving all, or substantially all, of the Company's assets. The text of the Proposal on its face would cover ordinary business matters as well as extraordinary corporate transactions. The board of directors and management of the Company could maximize shareholder value through any number of actions short of an extraordinary corporate transaction, and as discussed below, the Company's board of directors has indeed been actively addressing shareholder value, and those other items within its purview.

Furthermore, such a broad mandate intrudes upon ordinary business matters that are reserved for management and the board of directors under applicable corporate law. Pursuant to Section 141(a) of the Delaware General Corporation Law (the "DGCL"), "the business and affairs of every [Delaware] corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may otherwise be provided (under other provisions of the DGCL) or in its certificate of incorporation." Thus, in the absence of a provision reserving power to the stockholders in the certificate of incorporation or a provision of the DGCL directing or requiring that stockholders take action, the directors, rather than the stockholders, manage the business and affairs of a Delaware corporation. The certificate of incorporation of Medallion contains no reservation by the stockholders of the power or duty to manage the business and affairs of Medallion. Rather, pursuant to Article FIFTH of the certificate of incorporation of Medallion, "the Board of Directors is expressly authorized and empowered to manage, or direct the management of, the business and affairs of [Medallion] and to exercise all such powers and do all such acts and things as may be exercised or done by [Medallion] subject, nevertheless, to the provisions of the Delaware General Corporation Law, [the] Restated Certificate of Incorporation and the Bylaws of the Corporation." It is well settled in Delaware that once the board of directors of a Delaware corporation becomes charged with managing the business and affairs of a corporation, it may not delegate the power and duty to manage the business and affairs of the corporation to third parties, including stockholders. In this regard, see Lehrman v. Cohen, 222 A.2d 800 (Del. 1966) wherein the Delaware Supreme Court stated, "it is settled, of course, as a general principle, that directors may not delegate their duty to manage the corporate enterprise . . . .The delegation of duty, if any, is made not by the directors, but by stockholder action under Section 141(a), via the certificate of incorporation." Id. at 808.

The Staff has taken the position that proposals relating to the determination and implementation of a company's business strategies are matters relating to the conduct of the company's ordinary business. Accordingly, the Staff has consistently allowed companies to exclude proposals under Rule 14a-8(i)(7) that in substance seek to have the board of directors retain the services of an independent third party for the general purpose of evaluating alternatives, even where some of the proposed strategic alternatives are of an extraordinary nature.

Specifically, the Company respectfully refers the Staff to the recent no-action relief granted to BKF Capital Group, Inc. pursuant to Rule 14a-8(i)(7) in a letter dated February 27, 2004, a copy of which is attached hereto as Exhibit B for the Staff's convenience. The proposal at issue in that matter was in all material respects identical to the instant Proposal, and although the identity of the shareholder is not necessarily material to the Staff's analysis, the proponent of that proposal was Mr. Phillip Goldstein on behalf of Opportunity Partners L.P., the same individual responsible for the instant Proposal. In granting the no-action relief by informing BKF Capital Group, Inc. that the Staff would not recommend enforcement, the Staff noted that the proposal "appear[ed] to relate to both extraordinary transactions and non-extraordinary transactions." See also, Telular Corporation (December 5, 2003) (excluding a proposal to appoint a board committee to explore strategic alternatives to maximize shareholder value appeared to relate in part to non-extraordinary transactions), Archon Corporation (March 10, 2003) (excluding a proposal to appoint a board committee to explore strategic alternatives to maximize shareholder value), Lancer Corporation (March 13, 2002) (excluding a proposal to retain an investment bank to develop valuation of the company's shares and to explore strategic alternatives to maximize shareholder value), Virginia Capital Bancshares (January 16, 2001) (excluding a proposal that board hire an investment bank to evaluate means to improve stock value, including sale of the company), Vista Bancorp, Inc. (January 22, 2001) (excluding a proposal calling for a qualified financial advisory and bank consulting firm to be retained to explore various strategic alternates [sic] for the future of Vista Bancorp, including a sale or merger), Bowl America, Inc. (Sept. 19, 2000) (excluding a proposal calling for board to retain an investment banker to recommend ways to enhance shareholder value), Marsh Supermarkets, Inc. (May 8, 2000) (excluding a proposal recommending that the board engage an investment banker to explore all alternatives to enhance the value of the company), NACCO Indust., Inc. (March 29, 2000) (excluding a proposal recommending that the board of directors engage the services of an investment banker to explore alternatives to enhancing shareholder value, including, but not limited to, possible sale, merger or other transaction for any or all assets of the company), Sears, Roebuck and Co. (February 7, 2000) (excluding a proposal requesting the company to hire an investment banker to arrange for the sale of all or parts of the company), Bel Fuse, Inc. (April 24, 1991) (excluding a proposal calling for the hiring of an investment banking firm to explore alternatives for maximizing stockholder value), The Statesman Group, Inc. (March 22, 1990) (excluding a proposal relating to a restructuring of the company, so as to maximize shareholder value, with the assistance of investment bankers), and Integrated Circuits Inc. (December 27, 1988) (excluding a proposal relating to the engagement of an investment banker to make recommendations to maximize shareholder value).

We are aware of instances in which the Staff has taken the position that the sale of the company or a line of business is an extraordinary event, and thus shareholder proposals relating thereto may not be omitted from the subject company's proxy materials. For example, in Allegheny Valley Bancorp, Inc. (January 3, 2001) the proposal recommended that the board retain an investment bank "to solicit offers for the purchase of the Bank's stock or assets." The proposal in Allegheny Valley Bancorp called for the retention of an investment bank for the specific purpose of soliciting offers for the purchase of the Bank's stock or assets, and not for the general purpose of exploring strategic alternatives to maximize shareholder value. Thus, in denying no-action relief, the Staff noted that "the proposal relates to the sale of the Company to the highest bidder." See also, Bergen Brunswig Corporation (December 6, 2000) (proposal that the board of directors arrange for the prompt sale of Bergen Brunswig Corporation to the highest bidder, not excludable), The Student Loan Corporation (March 18, 1999) (proposal to hire investment banker to explore all alternatives to enhance the value of the company including a sale, merger or premium tender offer share repurchases, not excludable).

The Proposal at issue here can be distinguished from Allegheny Valley Bancorp, Bergen Brunswig, and The Student Loan Corporation because the present Proposal does not seek a particular extraordinary corporate transaction. Unlike the proposals in these no-action letters, the Proposal is not focused on an extraordinary corporate transaction, but on the ordinary business matter of enlisting an investment banker to explore alternatives to maximize shareholder value. As discussed above, numerous no-action letters reflect the Staff's view that proposals related to hiring advisers to counsel a board of directors on "strategic alternatives" are generally regarded as relating to non-extraordinary matters and are considered part of the registrant's ordinary business. Moreover, the Proponent states "one reason" the Company's shares trade at a discount from their net asset value is its "high operating expenses." Addressing this issue would not require an extraordinary corporate transaction by either the Company or its Board. However, the Proposal is not in any manner limited to extraordinary corporate transactions, but rather focuses on general expense levels of the Company, which could be addressed through non-extraordinary means.

Medallion believes that the Proposal at hand is clearly more similar to the proposals set forth in BKF Capital Group, Inc., Telular Corporation, Archon Corporation, Lancer Corporation, Virginia Capital Bancshares, Vista Bancorp, Bowl America, Marsh Supermarkets, NACCO, Sears, Roebuck and Co., Bel Fuse, Inc., Statesman Group, Inc, and Integrated Circuits Inc. where the Staff granted no-action relief in each of those cases because the proposals at issue focused on non-extraordinary business matters that were part of such companies ordinary business operations: hiring an investment banker to "maximize stockholder value." Each of these proposals, and the instant Proposal, share a common demand: to require the board of directors of the respective companies to hire a third party to assess and/or maximize the value of the companies. Therefore, Medallion sees no basis for distinguishing between the foregoing proposals calling for the hiring of an investment banking firm to assist and advise a board of directors to maximize stockholder value, and the instant Proposal requiring the Board of Directors to engage an investment banking firm to "evaluate alternatives to maximize stockholder value including a sale of the Company." In each case, the proposals relate to the ordinary business operations of the subject company. Choosing to retain an investment banker as an adviser or consultant on matters of general business strategy (i.e. to determine Medallion's value or enhance such value) is a non-extraordinary transaction incident to the Board's managerial and supervisory decisions concerning the development, implementation, and oversight of business strategies designed to enhance Medallion's financial performance and market value, functions the Board takes very seriously. Indeed, as further described below, Medallion's Board has engaged investment banking firms over the past years, including very recently, as part of its responsibilities as charged under corporate law. The responsibility of making such decisions is so essential and fundamental to the core functions of the Board and so regularly carried out on an ongoing basis, it must be considered part of Medallion's ordinary business operations.

In sum, a review of no-action letters in this area shows that the Staff has made an important distinction between proposals requesting the Board of Directors or management to hire an investment banker (or take other action) to proceed with a specific extraordinary transaction (which proposals may not be omitted in reliance on subsection (i)(7)), and those proposals which call on a board of directors or management to hire an investment banker (or proceed with some other action) to assist in enhancing shareholder value in a general way (which proposals may be omitted in reliance on subsection (i)(7)). We submit the instant Proposal falls into this latter category.

Additionally, it should be noted that Proponent's Supporting Statement amply demonstrates that Proponent's Proposal focuses entirely on matters reasonably considered ordinary business determinations, including decisions essential to the Company's business strategy (i.e. assess market value and decide on strategies to enhance such value, addressing company operating expenses). When the Proposal and Supporting Statement are read together, it is readily apparent that the scope of corporate business matters that the Proposal addresses is not exclusively extraordinary corporate transactions. The Proposal and its Supporting Statement make clear that the sale of Medallion is not mandated, but rather, that an investment banker be engaged for the much more general purpose of evaluating "alternatives to maximize shareholder value including sale of the Company." Accordingly, for the reasons stated above Medallion believes the Proposal may be properly omitted pursuant to Rule 14a-8(i)(7).

2. Exclusion under Rule 14a-8(i)(10)

Rule 14a-8(i)(10) permits omission of a proposal if it has already been substantially implemented. The Staff has previously taken the position that proposals to engage an investment banker are rendered moot by the engagement of an investment banker. See, e.g., Health Insurance of Vermont, Inc. , (February 28, 1995) (proposal for company to hire an outside firm to review potential alternatives to enhance shareholder value, including a merger of business and sale of the company rendered moot by subsequent hiring of investment banker); Borden Inc. , (February 23, 1994) (proposal for board to undertake investment banking study to determine value of the company if non-food businesses were divested and to make such study available to shareholders rendered moot by prior engagement of investment banking firm).

The facts in these letters are closely analogous to the situation at hand. As previously disclosed in the Company's Annual Report on Form 10-K, filed with the Staff on March 15, 2004 (the relevant excerpts of which are attached hereto as Exhibit C) and in connection with its long term strategic business plan, Medallion has recently engaged two nationally-recognized investment banking firms "to analyze and investigate opportunities to maximize shareholder value, including a possible sale" of two of its operating subsidiaries, Business Lenders, LLC and Medallion Taxi Media, Inc. In effect, Medallion and its Board, as part of its business strategy and responsibilities under corporate law, have carried out the material content of the Proposal. The hiring of yet another investment bank to follow the literal terms of the Proposal would involve undue expense and would be a waste of corporate assets, and would divert management's attention from the successful implementation of its present business plan (i.e., the analysis and investigation of strategic opportunities at two of its operating subsidiaries and capitalizing on the financial synergies that Medallion Bank offers (as described below), in each case with a view to maximize shareholder value). Moreover, the Proposal's Supporting Statement that the Company will benefit from a bank's lower cost of funds is now mooted by the recent regulatory approval of the Company's new bank subsidiary, Medallion Bank, which is further described below.

Accordingly, because the Proposal has been "substantially implemented" so as to render the Proposal moot, Medallion believes that the Proposal may be properly omitted pursuant to Rule 14a-8(i)(10).

3. Exclusion under Rule 14a-8(i)(3)

Rule 14a-8(i)(3) provides that a registrant may exclude a proposal from its proxy materials if the proposal or supporting statement is contrary to the Staff's proxy rules, including Rule 14a-9, which prohibits false or misleading statements in proxy soliciting materials. Medallion believes that significant portions of the Proposal are false and/or misleading.

The Proposal states, "Recently, Medallion's shares have been trading at a discount of more than 20% from their NAV." In December 2003, Medallion's stock price reached as high as $9.50 per share, or 6.86% above the net asset value of $8.89 as reported in Medallion's Annual Report on Form 10-K for the period ending December 31, 2003. Medallion shares continue to currently trade at or near book value, not at a "discount of more than 20%" as the Proponent portrays in the Supporting Statement. Indeed, the Company's stock market price increased a cumulative 137.25% in 2003, from $4.00 per share on January 1, 2003 to $9.49 per share on December 31, 2003. This statement is therefore significantly misleading.

The phrase "Medallion could be worth a substantial premium to a strategic acquirer with greater resources and a lower cost of capital like a bank" is materially misleading. In October 2003, Medallion received approval from the Federal Deposit Insurance Corporation (the "FDIC") for federal deposit insurance for its wholly-owned subsidiary, Medallion Bank. Medallion Bank, a Utah industrial loan corporation, is a depository banking institution subject to regulatory oversight and examination by both the FDIC and the Utah Department of Financial Institutions. One of the many benefits of FDIC approval is Medallion Bank's ability to accept federally-insured deposits, which will greatly lower the cost of funds throughout the entire Company. Medallion believes that Medallion Bank will reduce its borrowing costs and increase its margins significantly. Thus, the instant Proposal that implores Medallion to sell to an acquirer who benefits from a bank cost of funds is now misleading (and also moot) given that the new Medallion Bank provides benefits to the Company identical to those suggested by the Proposal's Supporting Statement.

Finally, the phrase "we think a sale of Medallion is the surest way to enhance stockholder value" is misleading. It is Medallion's argument that a sale of the Company is not only imprudent in light of its recent financial strides, but may have the reverse effect of reducing stockholder value. Medallion has issued a press release, dated October 7, 2003, that indicates the belief of management that "Medallion Bank will give [the Company] an excellent platform to grow two of [its] most profitable lending areas, taxicab medallion lending and asset-based lending. One of the many benefits of this approval is the ability to accept FDIC-insured deposits, which will greatly lower [the Company's] cost of funds." In a subsequent press release, dated January 8, 2004, Medallion announced that "[c]ustomers of Medallion Financial won [approximately] 80%, or 40 of the 50 non-limited taxicab medallions that were auctioned" in the City of Chicago. In discussing the possibility that 900 new taxicab medallions will be issued in the City of New York over the next three years, Medallion stated, "Many of [its] customers were successful bidders at [the last] auction, and [the Company is] hopeful they will also be successful at this upcoming auction." Thus, not only does Medallion believe that the recent establishment of Medallion Bank, the recent acquisition of medallions in Chicago, and the issuance of medallions in the New York City market will enhance stockholder value, but it has made available to the public specific evidence of its beliefs.

In sum, as described above, the Proposal is false and misleading. Thus, the Proposal violates Rule 14a-9, which prohibits false or misleading statements in proxy soliciting materials. Accordingly, Medallion believes the Proposal can properly be omitted from its 2004 proxy materials pursuant to Rule 14a-8(i)(3), which provides that a registrant may exclude a proposal from its proxy materials if the proposal or supporting statement is contrary to the Staff's proxy rules.

Based on the foregoing discussion, Medallion believes that the Proposal may properly be omitted from its 2004 proxy materials pursuant to subsections (3), (7), and (10) of Rule 14a-8(i). Medallion respectfully requests the Staff confirm that it will not recommend enforcement if the Proposal is omitted from the 2004 proxy materials. If the Staff disagrees with Medallion's conclusion that the Proposal may be so omitted, we request the opportunity to confer with the Staff prior to the issuance of its position.

If you have any questions or need any additional information with regard to the enclosed or the foregoing, please contact the undersigned at (212) 328-3615.

Please indicate your receipt of this letter and the enclosures by signing the enclosed copy of this letter and returning it to the undersigned in the enclosed stamped, self-addressed envelope.

Very truly yours,

Michael C. Carroll

Enclosures

cc:

Mr. Phillip Goldstein
Opportunity Partners L.P.


Incoming Letter 2:

April 7, 2004

VIA FEDERAL EXPRESS

Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Office of Chief Counsel

Re: Medallion Financial Corp.
     Commission File No. 0-27812
     Omission of Shareholder Proposal

Ladies and Gentlemen:

Medallion Financial Corp. ("Medallion" or the "Company") is writing in response to the March 23, 2004 letter from Mr. Phillip Goldstein on behalf of Opportunity Partners L.P. (the "Proponent") to the Staff of the Division of Investment Management of the Securities and Exchange Commission (the "Staff") regarding a shareholder proposal and supporting statement (the "Proposal") submitted for inclusion in Medallion's proxy materials for its 2004 Annual Meeting of Shareholders. A copy of the letter is attached hereto as Exhibit A (the "Proponent Response Letter").

On March 18, 2004, Medallion submitted a letter (the "No-Action Letter Request") to request confirmation that the Staff would not recommend an enforcement action if, in reliance on certain provisions of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Medallion excluded the Proposal from its 2004 proxy materials.

As described in detail below, the Company respectfully disagrees with the assertions in the Proponent Response Letter, and again requests the relief specified in the No-Action Letter Request.

Pursuant to Rule 14a-8(j), Medallion files herewith six copies of this letter and a copy of this letter and accompanying material is being forwarded to the Proponent.

1. Discussion

The Proponent Response Letter fails to state an effective case against exclusion. In fact, the Proponent concedes that Medallion will likely prevail in this matter, based on the Staff's recent no-action relief provided in BKF Capital Group, Inc. (February 27, 2004). Moreover, the Proponent Response Letter further concedes that Medallion has, consistent with the Proposal, hired two nationally-recognized investment banking firms to consider alternatives to maximize shareholder value. Finally, the Proponent admits that the Company's shares have been trading at a "narrower discount" from the data presented in the Proponent's supporting statement. For the reasons set forth in the No-Action Letter request and in the brief discussion below, the Company respectfully asserts that the Proposal fails to comply with Rule 14a-8.

1. Proponent's Response Regarding Exclusion under Rule 14a-8(a)(i)(7): Ordinary Business Operations of the Company

The Proponent concedes that the instant Proposal is "substantially identical" to the recent proposal the Proponent submitted to BKF Capital Group, Inc. and that "the Company should be granted no action relief" under Rule 14a-8(i)(7) in light of the Staff's no-action assurances in BKF Capital Group, Inc. (February 27, 2004). However, the Proponent Response Letter states that the Staff's analysis under Rule 14a-8(i)(7) was entirely incorrect. The Proponent attempts to establish that the standard used by the Staff in BKF Capital Group, Inc. was inappropriate. In fact, the Proponent states an intention "to bring an action for declaratory and injunctive relief if [the] proposal is not included in BKF Capital Group's proxy material." Ultimately, we believe the Proponent will not prevail, given the exacting standard employed by the courts to overturn a Staff no-action decision. In Amalgamated Clothing & Textile Workers Union v. Wal-Mart Stores, Inc. , the federal district court case cited by the Proponent, the court noted that "the ultimate criterion" for interpreting an administrative regulation is the agency's interpretation of the regulation, "which becomes of controlling weight unless that interpretation is 'plainly erroneous or inconsistent with the regulation. '" (emphasis added) 821 F.Supp. 877, 883. While we recognize that no-action letters are not on a precedential par with formal SEC rulemaking or adjudication, we contend, as the court held, "courts have relied on the consistency of the SEC staff's position and reasoning on a given issue, or the lack of consistency, in determining whether a proposal that was deemed excludable by the SEC staff can in fact be omitted under Rule 14a-8[(i)]7." Id. at 885.

As discussed in detail in the No-Action Letter Request, the Proposal is in all material respects identical to the proposal in BKF Capital Group, Inc., and is substantially similar to shareholder proposals in which the Staff previously determined that it would not recommend enforcement action if such proposals were excluded, as such proposals related to ordinary business operations of the companies.

We respectfully submit that, in accordance with state corporate law, the day-to-day business affairs of the Company should be managed by its officers and directors. See Del. Code Ann. Tit. 8 141(a). Clearly, the Proponent feels that the Proposal is important, but that alone does not make it a proper subject for shareholder action.

2. Proponent's Response Regarding Exclusion under Rule 14a-8(i)(10): Substantially Implemented

The Proponent acknowledges that the Company "is in the process of engaging an investment banking firm to explore the sale of one of its subsidiaries and has recently retained another investment banking firm to explore the sale of another subsidiary." However, the Proponent argues the Proposal has not been substantially implemented because the investment banking firms were not hired to evaluate the sale of the Company as a whole.

We respectfully disagree with the Proponent's interpretation of the Proposal's language. The Proposal requests "an investment banking firm be engaged to evaluate alternatives to maximize stockholder value," and while the Proposal suggests a sale of the Company be explored (by using the word "including"), it is not in any way limited by such measures. We submit that Medallion has conformed to the Proposal's request to maximize shareholder value in two material ways. First, consistent with the Proposal, Medallion has hired two nationally-recognized investment banking firms to "analyze and investigate opportunities to maximize shareholder value, including a possible sale of part or all of the subsidiar[ies]." See Medallion Financial Corp.'s Annual Report on Form 10-K, filed on March 15, 2004 (The Company hired two investment banking firms to consider strategic alternatives for two of its operating subsidiaries). Second, the formation of our Medallion Bank subsidiary will greatly lower the cost of funds throughout the entire Company. Medallion believes that Medallion Bank will reduce borrowing costs throughout the Company and increase its margins significantly, which we believe will further enhance shareholder value. The Proponent's supporting statement states that the Company could benefit from the lower cost of funds of a bank. We fully believe that our FDIC-insured Medallion Bank is indeed such a bank.

Accordingly, because the Proposal has been "substantially implemented" by the Company so as to render the Proposal moot, Medallion reasserts its belief that it may be properly omitted pursuant to Rule 14a-8(i)(10).

3. Proponent's Response to Exclusion under Rule 14a-8(i)(3): False or Misleading Statements

Finally, the Proponent "concede[s] that [the Company's shares] have recently been trading at a narrower discount." However, the Proponent contends, "nothing [contained in the supporting statement] said or omitted is false or misleading." We respectfully disagree with this contention, and first refer the Staff to our discussion of this item on pages 8 and 9 of the No-Action Letter Request.

Second, contrary to the implication in the Proponent Response Letter, the Board of Directors of the Company conducted "a fair and balanced discussion" (Proponent's request) of the Proposal in addition to its ordinary business at its March 2, 2004 quarterly meeting. In fact, the Company has spoken with the Proponent on several occasions prior to the filing of the No-Action Letter Request. During those conversations, the Proponent was informed that the Proposal had been (and would be) discussed with the Company's management and Board of Directors. The Board determined that the action contemplated in the Proposal was appropriate for management and within Board oversight. While the Company appreciates the input of the Proponent, we firmly believe the substance of the Proposal is within the purview of the Board and management and should remain there.

Based on the foregoing discussion, Medallion reasserts its belief that the Proposal may properly be omitted from its 2004 proxy materials pursuant to subsections (3), (7) and (10) of Rule 14a-8(i). Accordingly, Medallion respectfully requests the Staff confirm that it will not recommend enforcement if the Proposal is omitted from the 2004 proxy materials. If the Staff disagrees with Medallion's conclusion that the Proposal may be so omitted, we request the opportunity to confer with the Staff prior to the issuance of its position.

If the Staff has any questions or needs any additional information with regard to the enclosed or the foregoing, please contact the undersigned at (212) 328-3615.

Please indicate your receipt of this letter and the enclosures by signing the enclosed copy of this letter and returning it to the undersigned in the enclosed stamped, self-addressed envelope.

Very truly yours,

Michael C. Carroll

cc:

Mr. Phillip Goldstein
Opportunity Partners L.P.


http://www.sec.gov/divisions/investment/noaction/medallion051104.htm


Modified: 05/13/2002