Boston, MA 06/12/2014 (wallstreetpr) – Prospect Capital Corporation (NASDAQ:PSEC)‘s recent discussion with the Securities & Exchange Commission’s (SEC) Office of Chief Accountant and the Division of Investment Management (IM) has led to the company declaring on June 10. It is not necessary for the company to reinstate its financial statements which relate to prior period for the purpose of consolidating some of its subsidiaries that are wholly-owned or are owned by way of substantial ownership.
The need for consolidation:
On May 6, in Prospect Capital Corporation (NASDAQ:PSEC)’s Form 10-Q filing, it was mentioned that the Securities and Exchange Commission had asked the company to reinstate its historical financial statements by consolidating its subsidiaries. Which are either wholly owned by the company or in which the company has substantial stake, as these companies were being considered to be investment companies.
However, as a result of Prospect’s discussion with the SEC staff, the company has agreed to make these changes on a prospective basis. With the ASU 2013-08 adoption, the company will begin consolidating its wholly owned as well as substantially wholly owned subsidiaries as part of its June 30, 2015 fiscal year results. The ASU 2013-08 is an accounting standard amendment by FASB, which will lead to modification of the investment company definition under GAAP.
Investor Concerns:
The announcement has led to the removal of investor concerns about the reinstatement as it would have affected the company’s Leverage ratio, NAV and other important performance metrics. As a result, Prospect Capital Corporation (NASDAQ:PSEC)’s share price which had been languishing due to investor concerns and had fallen almost 10% since May, showed a rise of 5% after the announcement.
In yet another development, Powers Taylor LLP and Mr. Willie Briscoe, who is the founder of The Briscoe Law Firm, PLLC, have filed a class action lawsuit against several of the officers and directors of Prospect Capital Corporation (NASDAQ:PSEC). This lawsuit also relates to the classification of Prospect’s subsidiaries and alleges that Prospect’s financial results and its investment income have been misstated due to the wrong classification of its subsidiaries.
