Other
Carlyle Global Credit Investment Management, L.L.C.
Oct. 19, 2023
October 19, 2023
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT
Re: Carlyle Global Credit Investment Management, L.L.C.
Your letter, dated July 14, 2023, requests confirmation of the oral position communicated by Kaitlin C. Bottock, Co-Chief Counsel, Division of Investment Management (“Division”), to Carlyle Global Credit Investment Management, L.L.C. (“CGCIM”) and Vertical Capital Income Fund, Inc. (since renamed Carlyle Credit Income Fund, Inc., the “Fund”), on May 25, 2023, that the staff would not recommend enforcement action to the Securities and Exchange Commission (“Commission”) under Section 17(d) of the Investment Company Act of 1940 (the “1940 Act”) and Rule 17d-1 thereunder, for consummating the series of actions contemplated under the Transaction Agreement described below.
Section 17(d) is one of the 1940 Act’s provisions designed to protect investment companies from self-dealing and overreaching by insiders.[1] The staff has stated that Section 17(d) and Rule 17d-1 thereunder are at the heart of the 1940 Act and serve as a fundamental protection for investors.[2] These provisions should be given appropriate consideration whenever an investment company participates in transactions involving an affiliated person or a principal underwriter (or their affiliated persons), acting on a principal basis. In particular, a series of actions that individually might not be prohibited under the 1940 Act may be a “joint enterprise or other joint arrangement or profit-sharing plan” within the meaning of Rule 17d-1, to the extent there is an element of combination between an investment company and its affiliated persons that links them together.[3]
You represent that on January 12, 2023, the Fund entered into a Transaction Agreement with CGCIM. Pursuant to the Transaction Agreement, among other actions, CGCIM would become the investment adviser to the Fund. As discussed in your letter, the series of actions contemplated under the Transaction Agreement could be deemed to be a “joint enterprise or other joint arrangement or profit-sharing plan” among the Fund, CGCIM, and the Supporting Shareholders (as defined in your letter), within the meaning of Rule 17d-1 under the 1940 Act (the “joint arrangement”). You represent, moreover, that the Supporting Shareholders, and CGCIM upon becoming the investment adviser to the Fund, may be deemed affiliated persons of the Fund, for which it would be unlawful “to participate in, or effect any transaction, in connection with” a joint arrangement under the rule.
Based on the facts and representations made in your letter, we would not recommend enforcement action to the Commission under Section 17(d) of the 1940 Act or Rule 17d-1 thereunder for consummating the series of actions contemplated under the Transaction Agreement. This response expresses the Division’s position on enforcement action only and does not purport to express any legal conclusions on the questions presented. Because our position is based upon all of the facts and representations in your letter, any facts or representations different from those presented in your letter might require a different conclusion.[4]
Steven I. Amchan
Senior Counsel
[1] See Request for Comments on Reform of the Regulation of Investment Companies, Investment Company Act Rel. No. 17534 (Jun. 21, 1990). See also, Investment Trusts and Investment Companies: Hearings on S. 3580 Before a Subcomm. of the Senate Comm. on Banking and Currency, 76th Cong., 3d Sess. 767 (1940) (discussing Section 17 generally).
[2] See Division of Investment Management, SEC, Protecting Investors: A Half Century of Investment Company Regulation, Procedures for Exemptive Orders, 483 (1992).
[3] See SEC v. Talley Industries, Inc., 399 F.2d 396, 403 (2d Cir. 1968), cert. denied, 393 U.S. 1015 (1969)) (stating that under Section 17(d), “some element of ‘combination’ is required.”).
[4] In light of the very fact-specific nature of your request, the position expressed in this letter applies only to the series of actions contemplated under the Transaction Agreement and no entity may rely on this position with respect to any other arrangement. Furthermore, no entity should draw any inference from this letter that arrangements different from that contemplated under the Transaction Agreement would not be “a joint enterprise or other joint arrangement or profit-sharing plan” under Rule 17d-1.