Gladstone Investment Corporation
Dec. 5, 2019
Investment Company Act of 1940 – Section 63, Section 23(c), and Rule 23c-2
Gladstone Investment Corporation
December 5, 2019
Response of the Chief Counsel’s Office
Division of Investment Management
Your letter, dated December 4, 2019, requests our assurance that we would not recommend enforcement action to the Commission against Gladstone Investment Corporation (the “Company”) for violations of Sections 63 and 23(c) of the Investment Company Act of 1940 (the “Act”), and Rule 23c-2 thereunder, if the Company files Form N-23C-2 with the Commission fewer than 30 days prior to, including on the same business day as, the Company’s redemption of an entire class or series of its preferred shares, as described in your letter. The Company is a closed-end management investment company that has elected to be treated as a business development company (“BDC”) under the Act.
Section 23(c) of the Act prohibits a registered closed-end investment company from repurchasing its securities, with certain exceptions. Section 23(c)(3) excepts repurchases by a registered closed-end investment company under such circumstances as the Commission may permit by rules, regulations or orders. In 1942, the Commission adopted Rule 23c-2, to allow a registered closed-end investment company to “call or redeem any securities of which it is the issuer, in accordance with the terms of such securities or the charter, indenture or other instrument pursuant to which such securities were issued,” subject to certain requirements.
Rule 23c-2 requires, among other things, that the investment company file with the Commission a notice of its intention to call or redeem the securities at least 30 days prior to the date of such redemption, on Form N-23C-2. If all of the outstanding securities of a class or series are to be called or redeemed, the notice needs to state only the title of the securities, the date on which the securities will be called or redeemed, and the applicable provisions of the governing instrument.
You state that calls or redemptions of securities pursuant to Rule 23c-2 often are done as part of a BDC’s or closed-end fund’s refinancing of its capital structure, and the 30 day notice requirement can impair the Company’s ability to raise new capital without incurring additional leverage. You also note that a call or redemption of all of the outstanding securities of a class or series does not present any of the unfair discrimination concerns that are reflected in Section 23(c) and Rule 23c-2.
Based on the facts and representations set forth in your letter, we would not recommend that the Commission take any enforcement action against the Company for violations of Sections 63 and 23(c) of the Act and Rule 23c-2 thereunder if the Company files Form N-23C-2 with the Commission fewer than 30 days prior to, including on the same business day as, the Company’s redemption of an entire class or series of its preferred shares. Because our position is based upon the representations made to us in your letter, any different facts or representations may require a different conclusion.
The statements in this letter represent the views of the Division of Investment Management. This letter is not a rule, regulation or statement of the Commission, and the Commission has neither approved nor disapproved its content.
 See The Adoption of Updated EDGAR Manual, 62 F.R. 8877 (Feb. 27, 1997), adding EDGAR submission type “N-23C-2” to accommodate filings under Rule 23c-2(b). See also EDGAR Filing Manual (Volume II) EDGAR Filing (Chapter 3, Index to Forms).
 Section 23 is made generally applicable to BDCs by Section 63 of the Act.
 See Call and Redemption of Securities Issued by Closed-End Registered Investment Companies, 7 F.R. 6669 (Aug. 25, 1942).
 See Rule 23c-2(b).