Probes Reporter: Prospect Capital Has Undisclosed SEC Investigation, Is Using 'Coordinated' Attacks To Silence Critics

Prospect Capital Corporation PSEC is down roughly 1 percent on Tuesday following an update from Probes Reporter on the company's undisclosed SEC investigation.

The financial services company has endured similar claims in the past, said Probes Reporter in a note addressing the company.

"When we last issued a warning like we are doing today, Prospect Capital mounted an offensive. This included at least one letter sent by the company's general counsel viciously attacking Probes Reporter and our founder, John Gavin," the report shared.

Previous ‘Attack' From Prospect Not The Only Instance Of Defensive Moves

"It turns out that the attack on us was but one of several coordinated efforts undertaken by Prospect Capital to silence its critics," it added.

While defensive actions are of course allowable and a right companies hold, Probes Reporter categorized Prospect Capital's actions as "bullying" and "trying to intimidate the press," moves that could potentially shush the media from presenting news accurately.

Related Link: What's Going On With Prospect Capital?

In a move to "aggressively control the message," Prospect Capital has on multiple occasions, acted "out-of-bounds" by making personal attacks and "leveling threats against well-respected analysts or journalists," according to the research.

Probes Reporter concluded this list of issues by stating: "Finally, it is flat-out wrong when they try taking an eraser to entire sections of the internet the company or one of its executives wants kept hidden."

Timeline Of Events

Probes Reporter provided the following timeline of events it deems worthy of attention regarding Prospect Capital's behavior.

May 2014: Investigation into Prospect Capital began.

August–September 2015: "According to the author, Jordan Wathen, Prospect Capital was behind having three of his articles pulled from the Motley Fool website originally published between Aug-Sep, 2015."

December 2015: Prospect Capital received notice formally closing the investigation from May 2014.

December 8, 2015: Seeking Alpha author Lawrence Zack Galler posted an article titled "Prospect's Board Adds Vote Interference To Its Resume."

December 10, 2015: Prospect Capital requested "immediate removal" of Galler's article.

December 11, 2015: 8-K filed and Seeking Alpha website showed Probes Reporter warning of undisclosed SEC probe.

December 14, 2015: "Mr. Joseph Ferraro, General Counsel for Prospect Capital, sent a letter to Seeking Alpha, accusing Probes Reporter and John Gavin of making ‘false and misleading statements' about his company, among other things," the document read.

"As we said in our letter of reply, our exhaustive and repeated searches through company filings, and review by not one but two senior analysts, found the representations by Mr. Ferraro that his company's SEC probe, supposedly form May-2014, was ‘well-disclosed', and ‘fully and truthfully disclosed', are untrue. In our response letter, in an abundance of fairness, we defied Mr. Ferraro to prove otherwise. He failed to provide any such proof."

January 12, 2016: Once more, information was obtained from the SEC indicating Prospect Capital could be involved in "unspecified SEC investigative activity."

February 10, 2016: Statement by CEO, chairman John Barry, including the following tidbit: "We know of no current or pending SEC investigation, inquiries or whatever you want to call it."

The statement continued, "We are amazed how many of the things we have seen written ever passed muster for editorial and quantity control with the management of a Wall Street research department, or a quality publication. This appears to be nothing short of a smear campaign to use lies as a campaign to try to hurt our company, and our shareholders."

February 25, 2016: SEC confirmed Prospect Capital's "involvement in on-going [emphasis omitted] enforcement proceedings."

Probes Reporter noted that the letter was postmarked March 7, while the letter included was dated February 25.

Probes Reporter concluded, "In that same light, Probes Reporter will not be denied its First Amendment right to report on government documents related to matters of public concern, and to provide the investing public with its analysis. If we make an error, we will own it and fix it. But absent errors, Prospect Capital would do better to improve their disclosure practices than attack the press.

"We otherwise offer no further opinion or analysis in this report but to say we stand firmly by every word we have published on Prospect Capital."