Demands by the Securities and Exchange Commission are placing a hurdle in Nicholas Financial — an indirect special finance company that originates subprime loans with more than 1,600 dealers — becoming an indirect wholly owned subsidiary of Prospect Capital Corp.

According to Prospect Capital’s latest quarterly filing with the SEC, agency officials asserted that certain unconsolidated holding company subsidiaries through which Prospect holds an investment in operating subsidiaries should be consolidated. Consequently, Prospect said the requirement is delaying the effectiveness of its registration statement on Form N-14 related to transaction involving Nicholas Financial.

Last December, Prospect entered into a definitive agreement to acquire 100 percent of the common stock of Nicholas Financial for $16 per share, pushing the total transaction figure to $340 million.

Prospect indicated the purchase agreement provides for this transaction to close by June 12, subject to certain terms, or on such other date as the parties to the arrangement may agree in writing.

“We are currently in discussions to extend the closing deadline to allow us time to appeal the SEC staff’s position. Based on the foregoing, we do not currently anticipate that the transaction will close by June 12,” said Prospect, which is a closed-end investment company that lends to and invests in private and public middle market businesses. Prospect’s investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.

Founded in 1986, Nicholas Financial is a specialty finance company headquartered in Clearwater, Fla. Nicholas is engaged primarily as an indirect lender in the consumer vehicle lending business, where Nicholas purchases loans originated by more than 1,600 dealerships.

Nicholas operates in 15 states through 65 branch offices, which manage the origination and collection of loans.

In the past year, Nicholas Financial financed the purchase of nearly 15,000 previously owned vehicles. The company currently employs more than 320 people and has an aggregate loan portfolio in excess of $290 million.

Nicholas Financial purchased more contracts during the third quarter of its current fiscal year as compared to a year earlier. The company brought in 3,426 contracts into its portfolio during Q3 that totaled up to be $36.24 million. Those figures are up from 3,004 contracts totaling more than $31.41 million a year ago.

The finance company wrapped up its fiscal year on March 31, but hasn’t released any updated financial performance information.

Nicholas Financial did disclose in its latest SEC filing that it received a notice on April 3 that Nasdaq decided to initiate proceedings to delist the company’s securities from the Nasdaq Stock Market, citing a rule that requires a listed company to hold an annual meeting of shareholders no later than one year after the end of its fiscal year. Officials also mentioned that another Nasdaq rule requires a listed company to solicit proxies and provide proxy statements for all meetings of shareholders and to provide copies of such proxy solicitations to Nasdaq.

“Nasdaq’s delisting determination will not immediately result in the delisting of the company’s securities,” Nicholas Financial officials said. “Under Nasdaq rules, the suspension of trading and delisting of the company’s securities will be stayed during the pendency of an appeal by the company of the delisting determination. The company intends to commence such an appeal within the required appeal period under Nasdaq rules.

“Accordingly, the company’s common shares will continue to trade on the Nasdaq Global Select Market while such appeal is pending. There can be no assurances whether the company will be successful in its appeal of the delisting determination,” they continued.

“The company entered into an arrangement agreement whereby the company has agreed to sell all of its issued and outstanding common shares to an indirect wholly-owned subsidiary of Prospect Capital Corp. The company has delayed the holding of its annual meeting of shareholders due to the pendency of this transaction,” Nicholas Financial officials went on to say.