61790 Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices 

to BDCs by section 57(i)) prohibit 

affiliated persons of a registered 

investment company, or an affiliated 

person of such person, acting as 

principal, from participating in any joint 

transaction or arrangement in which the 

registered company or a company it 

controls is a participant, unless the 

Commission has issued an order 

authorizing the arrangement. Section 

57(a)(4) of the Act imposes substantially 

the same prohibitions on joint 

transactions involving any BDC and an 

affiliated person of such BDC, or an 

affiliated person of such affiliated 

person, as specified in section 57(b) of 

the Act. Section 57(i) of the Act 

provides that rules and regulations 

under section 17(d) of the Act will 

apply to transactions subject to section 

57(a)(4) in the absence of rules under 

that section. The Commission has not 

adopted rules under section 57(a)(4) 

with respect to joint transactions and, 

accordingly, the standards set forth in 

rule 17d–1 govern applicants’ request 

for relief. 

12. The Prior Order only extends 

relief from section 57(a)(4) and rule 

17d–1 for joint transactions between 

Triangle and TMF. Accordingly, 

applicants request relief under section 

57(i) and rule 17d–1 to permit any joint 

transaction that would otherwise be 

prohibited by section 57(a)(4), in which 

TMF (as a BDC) and another Subsidiary 

participate, but only to the extent that 

the transaction would not be prohibited 

if Triangle and the Subsidiaries were a 

single company. 

13. In determining whether to grant 

an order under section 57(i) and rule 

17d–1, the Commission considers 

whether the participation of the BDC in 

the joint transaction is consistent with 

the provisions, policies, and purposes of 

the Act, and the extent to which such 

participation is on a basis different from 

or less advantageous than that of other 

participants. Applicants note that the 

proposed transactions are consistent 

with the policy and provisions of the 

Act and will enhance the interests of 

Triangle and TMF while retaining the 

important protections afforded by the 

Act. In addition, because the joint 

participants will conduct their 

operations as though they comprise one 

company, the participation of one will 

not be on a basis different from or less 

advantageous than the others. 

Accordingly, applicants believe that the 

standard for relief under section 57(i) 

and rule 17d–1 is satisfied. 

14. Applicants note that the 

conditions in the Prior Order will be 

replaced by the conditions set forth 

herein. These conditions are the same 

conditions as in the Prior Order, except 

that (a) the defined terms have been 

revised to include all current and future 

Subsidiaries, (b) condition 6 has been 

added in the event that a person serves 

or acts as an investment adviser to SBIC 

II or a future Subsidiary, and (c) the two 

conditions relating to consolidated 

reporting, which applicants no longer 

believe to be necessary, will be deleted 

from the Prior Order. 

Applicants’ Conditions 

Applicants agree that the Amended 

Order will be subject to the following 

conditions: 

1. Triangle will at all times own and 

hold, beneficially and of record, all of 

the outstanding equity interests in any 

Subsidiary, including all of the 

outstanding membership interests in 

any general partner of any Subsidiary, 

or otherwise own and hold beneficially, 

all of the outstanding voting securities 

and other equity interests in such 

Subsidiary. 

2. The SBIC Subsidiaries will have 

investment policies not inconsistent 

with those of Triangle, as set forth in 

Triangle’s registration statement. 

3. No person shall serve as a member 

of any board of directors of any 

Subsidiary unless such person shall also 

be a member of the Triangle Board. The 

board of directors or the managers, as 

applicable, of any Subsidiary will be 

appointed by the equity owners of such 

Subsidiary. 

4. Triangle will not itself issue or sell 

any senior security, and Triangle will 

not cause or permit any SBIC Subsidiary 

to issue or sell any senior security of 

which Triangle or such SBIC Subsidiary 

is the issuer except to the extent 

permitted by section 18 (as modified for 

BDCs by section 61) of the Act; provided 

that immediately after the issuance or 

sale of any such senior security by 

either Triangle or any SBIC Subsidiary, 

Triangle individually and on a 

consolidated basis shall have the asset 

coverage required by section 18(a) (as 

modified by section 61(a)), except that, 

in determining whether Triangle and 

any SBIC Subsidiary on a consolidated 

basis have the asset coverage required 

by section 61(a), any borrowings by any 

SBIC Subsidiary shall not be considered 

senior securities and, for purposes of the 

definition of ‘‘asset coverage’’ in section 

18(h), shall be treated as indebtedness 

not represented by senior securities. 

5. Triangle will acquire securities of 

any SBIC Subsidiary representing 

indebtedness only if, in each case, the 

prior approval of the SBA has been 

obtained. In addition, Triangle and any 

SBIC Subsidiary will purchase and sell 

portfolio securities between themselves 

only if, in each case, the prior approval 

of the SBA has been obtained. 

6. No person shall serve or act as 

investment adviser to SBIC II or any 

future Subsidiary unless the Triangle 

Board and the stockholders of Triangle 

shall have taken such action with 

respect thereto that is required to be 

taken pursuant to the Act by the 

functional equivalent of the board of 

directors of SBIC II or any future 

Subsidiary and the stockholders of SBIC 

II or any future Subsidiary as if SBIC II 

or such future Subsidiary were a BDC. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–25073 Filed 10–5–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29450; 812–13769] 

Capital Southwest Corporation; Notice 

of Application 

September 29, 2010. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(c) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from sections 

23(a), 23(b) and 63 of the Act, and under 

sections 57(a)(4) and 57(i) of the Act and 

rule 17d–1 under the Act permitting 

certain joint transactions otherwise 

prohibited by section 57(a)(4) of the Act. 

SUMMARY OF THE APPLICATION: Applicant, 

Capital Southwest Corporation (‘‘Capital 

Southwest’’), requests an order to permit 

it to issue restricted shares of its 

common stock to its officers and 

employees under the terms of its 

employee compensation plan. 

FILING DATES: The application was filed 

on May 5, 2010, and amended on May 

17, 2010 and September 24, 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 October 25, 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 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices 61791 

1Capital Southwest was incorporated in Texas in 

1961. On March 30, 1988 Capital Southwest elected 

to be regulated as a BDC. Section 2(a)(48) of the Act 

defines a BDC to be any closed-end investment 

company that operates for the purpose of making 

investments in securities described in sections 

55(a)(1) through 55(a)(3) of the Act and makes 

available significant managerial assistance with 

respect to the issuers of such securities. 

2The Compensation Committee of the Board (the 

‘‘Compensation Committee’’) is comprised solely of 

the Non-interested Directors. 

3For purposes of calculating compliance with 

this limit, Capital Southwest will count as 

Restricted Stock all shares of its common stock that 

are issued pursuant to the Plan less any shares that 

are forfeited back to Capital Southwest and 

cancelled as a result of forfeiture restrictions not 

lapsing. 

4The term ‘‘required majority,’’ when used with 

respect to the approval of a proposed transaction, 

plan, or arrangement, means both a majority of a 

BDC’s directors or general partners who have no 

financial interest in such transaction, plan, or 

arrangement and a majority of such directors or 

general partners who are not interested persons of 

such company. 

the nature of the writer’s interest, the 

reason for the request, and the issues 

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, 12900 Preston Road, 

Suite 700, Dallas, TX 75230. 

FOR FURTHER INFORMATION CONTACT: John 

Yoder, Senior Counsel, at (202) 551– 

6878, or Michael W. Mundt, Assistant 

Director, 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 for 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. Capital Southwest, a Texas 

corporation, is an internally managed, 

non-diversified, closed-end investment 

company that has elected to be 

regulated as a business development 

company (‘‘BDC’’) under the Act.1

Capital Southwest provides debt and 

equity growth capital to privately-held 

middle-market companies and its 

investment objective is to achieve 

capital appreciation through long-term 

investments in businesses believed to 

have favorable growth potential. Capital 

Southwest’s investment interests are 

focused on expansion financings, 

management buyouts, minority 

recapitalizations, industry 

consolidations and early-stage 

financings in a broad range of industry 

segments. Shares of Capital Southwest’s 

common stock are traded on the 

NASDAQ Global Select Market under 

the symbol ‘‘CSWC.’’ As of April 13, 

2010, there were 3,741,638 shares of 

Capital Southwest’s common stock 

outstanding. As of that date, Capital 

Southwest had 514 employees, 

including employees of its whollyowned subsidiaries. 

2. Capital Southwest currently has a 

five-member board of directors (the 

‘‘Board’’) of whom one is an ‘‘interested 

person’’ of Capital Southwest within the 

meaning of section 2(a)(19) of the Act 

and four are not interested persons (the 

‘‘Non-interested Directors’’). Capital 

Southwest has four directors who are 

neither officers nor employees of Capital 

Southwest. 

3. Capital Southwest believes that its 

successful performance depends on its 

ability to offer fair compensation 

packages to its professionals that are 

competitive with those offered by other 

investment management businesses. 

Capital Southwest believes that the 

ability to offer equity-based 

compensation to its professionals is 

vital to Capital Southwest’s future 

growth and success. Capital Southwest 

wishes to adopt the Capital Southwest 

Corporation 2010 Restricted Stock 

Award Plan (the ‘‘Plan’’) providing for 

the periodic issuance of shares of 

restricted stock (i.e., stock that, at the 

time of issuance, is subject to certain 

forfeiture restrictions, and thus is 

restricted as to its transferability until 

such forfeiture restrictions have lapsed) 

(the ‘‘Restricted Stock’’) for its 

employees and officers, and employees 

of its wholly-owned subsidiaries (each a 

‘‘Participant,’’ and collectively, the 

‘‘Participants’’). 

4. The Plan will authorize the 

issuance of shares of Restricted Stock 

subject to certain forfeiture restrictions. 

These restrictions may relate to 

continued employment (lapsing either 

on an annual or other period basis or on 

a ‘‘cliff’’ basis, i.e., at the end of a stated 

period of time), or other restrictions 

deemed by the Compensation 

Committee (as defined below) to be 

appropriate.2 The Restricted Stock will 

be subject to restrictions on 

transferability and other restrictions as 

required by the Compensation 

Committee. Except to the extent 

restricted under the terms of the Plan, 

a Participant granted Restricted Stock 

will have all the rights of any other 

shareholder, including the right to vote 

the Restricted Stock and the right to 

receive dividends. During the restriction 

period, the Restricted Stock generally 

may not be sold, transferred, pledged, 

hypothecated, margined, or otherwise 

encumbered by the Participant. Except 

as the Board otherwise determines, 

upon termination of a Participant’s 

employment during the applicable 

restriction period, Restricted Stock for 

which forfeiture restrictions have not 

lapsed at the time of such termination 

shall be forfeited. 

5. The maximum amount of Restricted 

Stock that may be issued under the Plan 

will be 10% of the outstanding shares of 

common stock of Capital Southwest on 

the effective date of the Plan plus 10% 

of the number of shares of Capital 

Southwest’s common stock issued or 

delivered by Capital Southwest (other 

than pursuant to compensation plans) 

during the term of the Plan.3 The Plan 

limits the total number of shares that 

may be awarded to any single 

Participant in a single year to 6250 

shares. In addition, no Restricted Stock 

Participant may be granted more than 

25% of the shares reserved for issuance 

under the Plan. The Plan will be 

administered by the Compensation 

Committee, which, upon approval of the 

required majority, as defined in section 

57(o) of the Act,4 of the Board, will 

award shares of Restricted Stock to the 

Participants from time to time as part of 

the Participants’ compensation based on 

a Participant’s actual or expected 

performance and value to Capital 

Southwest. 

6. Each issuance of Restricted Stock 

under the Plan will be approved by the 

required majority, as defined in section 

57(o) of the Act, of Capital Southwest’s 

directors on the basis that the issuance 

is in the best interests of Capital 

Southwest and its shareholders. The 

date on which the required majority 

approves an issuance of Restricted Stock 

will be deemed the date on which the 

subject Restricted Stock is granted. 

7. The Plan has been approved by the 

Compensation Committee, as well as the 

Board, including the required majority 

as defined in section 57(o) of the Act. 

The Plan will be submitted for approval 

to Capital Southwest’s shareholders, 

and will become effective upon such 

approval, subject to and following 

receipt of the order. 

Applicant’s Legal Analysis 

Sections 23(a) and (b), Section 63 

1. Under section 63 of the Act, the 

provisions of section 23(a) of the Act 

generally prohibiting a registered 

closed-end investment company from 

issuing securities for services or for 

mstockstill on DSKH9S0YB1PROD with NOTICES

61792 Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices 

5Capital Southwest asks that the order apply also 

to any future officers and employees of Capital 

Southwest and future employees of Capital 

Southwest’s wholly-owned subsidiaries that are 

eligible to receive Restricted Stock under the Plan. 

Additionally, to the extent that Capital Southwest 

creates or acquires additional wholly-owned 

subsidiaries, and to the extent that such future 

subsidiaries have employees to whom the relief 

requested herein would otherwise apply, Capital 

Southwest asks that such relief, if granted, be 

extended to such employees of any future 

subsidiaries. 

6Capital Southwest will comply with the 

amendments to the disclosure requirements for 

executive and director compensation, related party 

transactions, director independence and other 

corporate governance matters, and security 

ownership of officers and directors to the extent 

adopted and applicable to BDCs. See Executive 

Compensation and Related Party Disclosure, 

Securities Act Release No. 8655 (Jan. 27, 2006) 

(proposed rule); Executive Compensation and 

Related Party Disclosure, Securities Act Release No. 

8732A (Aug. 29, 2006) (final rule and proposed 

rule), as amended by Executive Compensation 

Disclosure, Securities Act Release No. 8765 (Dec. 

22, 2006) (adopted as interim final rules with 

request for comments). 

property other than cash or securities 

are made applicable to BDCs. This 

provision would prohibit the issuance 

of Restricted Stock as a part of the Plan. 

2. Section 23(b) generally prohibits a 

closed-end management investment 

company from selling its common stock 

at a price below its current net asset 

value (‘‘NAV’’). Section 63(2) makes 

section 23(b) applicable to BDCs unless 

certain conditions are met. Because 

Restricted Stock that would be granted 

under the Plan would not meet the 

terms of section 63(2), sections 23(b) 

and 63 prohibit the issuance of the 

Restricted Stock. 

3. Section 6(c) provides that the 

Commission may, by order upon 

application, conditionally or 

unconditionally exempt any person, 

security, or transaction, or any class or 

classes of persons, securities or 

transactions, from any provision of the 

Act, if and to the extent that the 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. 

4. Capital Southwest requests an order 

pursuant to section 6(c) of the Act 

granting an exemption from the 

provisions of sections 23(a) and (b) and 

section 63 of the Act.5 Capital 

Southwest states that the concerns 

underlying those sections include: (a) 

Preferential treatment of investment 

company insiders and the use of options 

and other rights by insiders to obtain 

control of the investment company; (b) 

complication of the investment 

company’s structure that makes it 

difficult to determine the value of the 

company’s shares; and (c) dilution of 

shareholders’ equity in the investment 

company. Capital Southwest states that 

the Plan does not raise concerns about 

preferential treatment of Capital 

Southwest’s insiders because the Plan is 

a bona fide compensation plan of the 

type common among corporations 

generally. In addition, section 

61(a)(3)(B) of the Act permits a BDC to 

issue to its officers, directors and 

employees, pursuant to an executive 

compensation plan, warrants, options 

and rights to purchase the BDC’s voting 

securities, subject to certain 

requirements. Capital Southwest states 

that, for reasons that are unclear, section 

61 and its legislative history do not 

address the issuance by a BDC of 

restricted stock as incentive 

compensation. Capital Southwest states, 

however, that the issuance of Restricted 

Stock is substantially similar, for 

purposes of investor protection under 

the Act, to the issuance of warrants, 

options, and rights as contemplated by 

section 61. Capital Southwest also 

asserts that the Plan would not become 

a means for insiders to obtain control of 

Capital Southwest because the number 

of shares of Capital Southwest issuable 

under the Plan would be limited as set 

forth in the application. Moreover, no 

individual Restricted Stock Participant 

could be issued more than 25% of the 

shares reserved for issuance under the 

Plan. 

5. Capital Southwest further states 

that the Plan will not unduly complicate 

Capital Southwest’s structure because 

equity-based compensation 

arrangements are widely used among 

corporations and commonly known to 

investors. Capital Southwest notes that 

the Plan will be submitted to its 

shareholders for their approval. Capital 

Southwest represents that a concise, 

‘‘plain English’’ description of the Plan, 

including its potential dilutive effect, 

will be provided in the proxy materials 

that will be submitted to Capital 

Southwest’s shareholders. Capital 

Southwest also states that it will comply 

with the proxy disclosure requirements 

in Item 10 of Schedule 14A under the 

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’). Capital Southwest 

further notes that the Plan will be 

disclosed to investors in accordance 

with the requirements of the Form N– 

2 registration statement for closed-end 

investment companies, and pursuant to 

the standards and guidelines adopted by 

the Financial Accounting Standards 

Board for operating companies. In 

addition, Capital Southwest will comply 

with the disclosure requirements for 

executive compensation plans 

applicable to operating companies 

under the Exchange Act.6 Capital 

Southwest thus concludes that the Plan 

will be adequately disclosed to investors 

and appropriately reflected in the 

market value of Capital Southwest’s 

shares. 

6. Capital Southwest acknowledges 

that, while awards granted under the 

Plan would have a dilutive effect on the 

shareholders’ equity in Capital 

Southwest, that effect would be 

outweighed by the anticipated benefits 

of the Plan to Capital Southwest and its 

shareholders. Capital Southwest asserts 

that it needs the flexibility to provide 

the requested equity-based employee 

compensation in order to be able to 

compete effectively with other financial 

services firms for talented professionals. 

These professionals, Capital Southwest 

suggests, in turn are likely to increase 

Capital Southwest’s performance and 

shareholder value. Capital Southwest 

also asserts that equity-based 

compensation would more closely align 

the interests of Capital Southwest’s 

employees with those of its 

shareholders. In addition, Capital 

Southwest states that its shareholders 

will be further protected by the 

conditions to the requested order that 

assure continuing oversight of the 

operation of the Plan by Capital 

Southwest’s Board. 

Section 57(a)(4), Rule 17d–1 

7. Section 57(a) proscribes certain 

transactions between a BDC and persons 

related to the BDC in the manner 

described in section 57(b) (‘‘57(b) 

persons’’), absent a Commission order. 

Section 57(a)(4) generally prohibits a 

57(b) person from effecting a transaction 

in which the BDC is a joint participant 

absent such an order. Rule 17d–1, made 

applicable to BDCs by section 57(i), 

proscribes participation in a ‘‘joint 

enterprise or other joint arrangement or 

profit-sharing plan,’’ which includes a 

stock option or purchase plan. 

Employees and directors of a BDC are 

57(b) persons. Thus, the issuance of 

shares of Restricted Stock could be 

deemed to involve a joint transaction 

involving a BDC and a 57(b) person in 

contravention of section 57(a)(4). Rule 

17d–1(b) provides that, in considering 

relief pursuant to the rule, the 

Commission will consider (i) whether 

the participation of the company in a 

joint enterprise is consistent with the 

Act’s policies and purposes and (ii) the 

extent to which that participation is on 

a basis different from or less 

advantageous than that of other 

participants. 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices 61793 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 62318 

(June 17, 2010), 75 FR 36461 (‘‘Notice’’). 

4See letter from David M. Sobel, Esq., EVP/CCO, 

Abel/Noser Corp., to Elizabeth M. Murphy, 

Secretary, Commission, dated July 6, 2010 (‘‘Abel/ 

Noser Letter’’); letter from Larry Taunt, Chief 

Executive Officer, Regal Financial Group, to 

Elizabeth M. Murphy, Secretary, Commission, dated 

July 7, 2010 (‘‘Regal Letter’’); letter from Lisa Roth, 

NAIBD Member Advocacy Committee Chair, CEO/ 

CCO, National Association of Independent BrokerDealers, Inc., to Elizabeth M. Murphy, Secretary, 

Commission, dated July 9, 2010 (‘‘NAIBD Letter’’); 

letter from Chris Charles, President, Wulff, Hansen, 

& Co., to Elizabeth M. Murphy, Secretary, 

Commission, dated July 13, 2010 (‘‘Wulff Hansen 

Letter’’); letter from Tamara K. Salmon, Senior 

Associate Counsel, Investment Company Institute, 

to Elizabeth M. Murphy, Secretary, Commission, 

dated July 14, 2010 (‘‘ICI Letter’’); letter from Byron 

‘‘Pat’’ Treat, President/CEO, Great Nation 

Investment Corporation, to Elizabeth M. Murphy, 

Secretary, Commission, dated July 15, 2010 (‘‘Great 

Nation Letter’’); letter from Eric Segall, Sr. V.P., 

Manager, Business Conduct, and Edward W. 

Wedbush, President, Wedbush Securities, Inc., to 

Elizabeth M. Murphy, Secretary, Commission, dated 

July 15, 2010 (‘‘Wedbush Letter’’); letter from 

Raymond C. Holland, Vice-Chairman, Triad 

Securites Corp., to Elizabeth M. Murphy, Secretary, 

Commission, dated July 15, 2010 (‘‘Triad Letter I’’); 

letter from Sis DeMarco, Director of Compliance, 

Triad Securities Corp., to Elizabeth M. Murphy, 

Secretary, Commission, dated July 15, 2010 (‘‘Triad 

Letter II’’); letter from S. Kendrick Dunn, Assistant 

Vice President, Pacific Select Distributors, Inc. to 

Elizabeth M. Murphy, Secretary, Commission, dated 

July 16, 2010 (‘‘PSD Letter’’); and letter from Howard 

Spindel, Senior Managing Director, Integrated 

Management Solutions, to Elizabeth M. Murphy, 

Secretary, Commission, dated July 16, 2010 (‘‘IMS 

Letter’’). 

5See letter from Stan Macel, Assistant General 

Counsel, FINRA, to Elizabeth M. Murphy, 

Secretary, Commission, dated September 14, 2010 

(‘‘FINRA Letter’’). 

6See FINRA By-Laws, Article V, Section 4(a) 

(Retention of Jurisdiction). 

8. Capital Southwest requests an order 

pursuant to section 57(a)(4) and rule 

17d–1 to permit the Plan. Capital 

Southwest states that the Plan, although 

benefiting the Participants and Capital 

Southwest in different ways, is in the 

interests of Capital Southwest’s 

shareholders because the Plan will help 

align the interests of Capital 

Southwest’s employees and officers 

with those of its shareholders, which 

will encourage conduct on the part of 

those employees and officers designed 

to produce a better return for Capital 

Southwest’s shareholders. 

Applicant’s Conditions 

Applicant agrees that the order 

granting the requested relief will be 

subject to the following conditions: 

1. The Plan will be authorized by 

Capital Southwest’s shareholders. 

2. Each issuance of Restricted Stock to 

officers and employees will be approved 

by the required majority, as defined in 

section 57(o) of the Act, of Capital 

Southwest’s directors on the basis that 

such issuance is in the best interests of 

Capital Southwest and its shareholders. 

3. The amount of voting securities 

that would result from the exercise of all 

of Capital Southwest’s outstanding 

warrants, options, and rights, together 

with any Restricted Stock issued 

pursuant to the Plan, at the time of 

issuance shall not exceed 25% of the 

outstanding voting securities of Capital 

Southwest, except that if the amount of 

voting securities that would result from 

the exercise of all of Capital Southwest’s 

outstanding warrants, options, and 

rights issued to Capital Southwest’s 

directors, officers, and employees, 

together with any Restricted Stock 

issued pursuant to the Plan, would 

exceed 15% of the outstanding voting 

securities of Capital Southwest, then the 

total amount of voting securities that 

would result from the exercise of all 

outstanding warrants, options, and 

rights, together with any Restricted 

Stock issued pursuant to the Plan, at the 

time of issuance shall not exceed 20% 

of the outstanding voting securities of 

Capital Southwest. 

4. The maximum amount of shares of 

Restricted Stock that may be issued 

under the Plan will be 10% of the 

outstanding shares of common stock of 

Capital Southwest on the effective date 

of the Plan plus 10% of the number of 

shares of Capital Southwest’s common 

stock issued or delivered by Capital 

Southwest (other than pursuant to 

compensation plans) during the term of 

the Plan. 

5. The Board will review the Plan at 

least annually. In addition, the Board 

will review periodically the potential 

impact that the issuance of Restricted 

Stock under the Plan could have on 

Capital Southwest’s earnings and NAV 

per share, such review to take place 

prior to any decisions to grant Restricted 

Stock under the Plan, but in no event 

less frequently than annually. Adequate 

procedures and records will be 

maintained to permit such review. The 

Board will be authorized to take 

appropriate steps to ensure that the 

grant of Restricted Stock under the Plan 

would not have an effect contrary to the 

interests of Capital Southwest’s 

shareholders. This authority will 

include the authority to prevent or limit 

the granting of additional Restricted 

Stock under the Plan. All records 

maintained pursuant to this condition 

will be subject to examination by the 

Commission and its staff. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–25069 Filed 10–5–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63016; File No. SR–FINRA– 

2010–021] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change to Amend 

FINRA Rule 8210 to Require 

Information Provided via Portable 

Media Device be Encrypted 

September 29, 2010. 

I. Introduction 

On June 2, 2010, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (the 

‘‘Commission’’ or ‘‘SEC’’), pursuant to 

Section 19(b)(1) of the Securities 

Exchange Act of 1934 (the ‘‘Exchange 

Act’’ or ‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend FINRA Rule 8210 to require that 

information provided via portable 

media device to FINRA in response to 

a request under the rule be encrypted. 

The proposed rule change was 

published for comment in the Federal 

Register on June 25, 2010.3

The Commission received eleven 

comment letters on the proposal.4

FINRA responded to these comment 

letters in a letter dated September 14, 

2010.5 This order approves the 

proposed rule change. 

II. Background and Description of 

Proposal 

FINRA Rule 8210 (Provision of 

Information and Testimony and 

Inspection and Copying of Books) 

confers on FINRA staff the authority to 

compel a member, person associated 

with a member, or other person over 

whom FINRA has jurisdiction, to 

produce documents, provide testimony, 

or supply written responses or 

electronic data in connection with an 

investigation, complaint, examination or 

adjudicatory proceeding. The rule 

applies to all members, associated 

persons, and other persons over whom 

FINRA has jurisdiction, including 

former associated persons subject to 

FINRA’s jurisdiction as described in the 

FINRA By-Laws.6 FINRA Rule 8210(c) 

provides that a member’s or person’s 

failure to provide information or 

testimony or to permit an inspection 

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