Court Opinion

ID: 9453534
Source: CourtListenerOpinion
Date Created: 2023-08-04 18:16:26.390305+00
Date Added: 2024-06-11T17:33:41.946138
License: Public Domain

On Petition for Rehearing

PER CURIAM.
The principal point made in the SEC’s petition for rehearing concerns the inference we drew, 393 F.2d at 218, from the exemption in § 17(a) (1) of the Investment Company Act which, even on the broad reading urged by the Commission, would cover a redemption by an investment company of its own securities held by an affiliate. The Commission argues that the exemption is explicable in light of the general provisions relating to redemptions of such securities and related matters in §§ 22 and 23.1 However, inspection of these provisions, notably § 23(c), shows that even if “purchase” were read to cover a redemption as the Commission contends, Congress established only certain basic safeguards and did not require Commission approval. The Commission’s explanation of this on the basis that these provisions cover all transactions and not simply those with affiliates reinforces the view that Congress did not regard affiliation as calling for special treatment of redemptions. Our inference that if Congress did not require SEC approval of a transaction of the sort with which the Act was primarily concerned — in this instance an affiliate’s causing an investment company to redeem its own securities held by the affiliate, it could hardly have meant to require such approval in the lower priority area of redemption of non-*221investment company securities, thus remains unimpaired.
After careful study of the Commission’s petition, we remain unconvinced that Congress was concerned over an investment company receiving the full redemption price specified in a security of an affiliate even when the affiliation stems from ownership by the affiliate in the investment company and a fortiori when, as here, the affiliation arises from the investment company’s ownership in the affiliate. In the absence of clear evidence of contrary purpose, such as we found to exist in FMC v. DeSmedt, 366 F.2d 464, 469-470 (2 Cir.), cert. denied, 385 U.S. 974, 87 S.Ct. 513, 17 L.Ed.2d 437 (1966), the words of Congress should be applied in their ordinary sense. If the problem here presented requires a remedy, which nothing in the record suggests, proposals for modification of the Investment Company Act now pending before Congress will provide an appropriate vehicle for an amendment more closely tailored to the asserted danger than the broad reading for which the SEC argues.
The petition for rehearing is denied.

. The “redeemable securities” dealt with in § 22 are securities “under the terms of which the holder, upon its presentation to the issuer or to a person designated by the issuer, is entitled (whether absolutely or only out of surplus) to receive approximately his proportionate share of the issuer’s current net assets, or the cash equivalent thereof.” § 2(31).