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US (United States) Code. Title 15. Chapter 14B: Small business investment program

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15 USC CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

-HEAD-

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

-MISC1-

SUBCHAPTER I - GENERAL PROVISIONS

Sec.

661. Congressional declaration of policy.

662. Definitions.

SUBCHAPTER II - SMALL BUSINESS INVESTMENT DIVISION OF SMALL

BUSINESS ADMINISTRATION

671. Establishment; Associate Administrator; appointment and

compensation.

672. Repealed.

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

PART A - SMALL BUSINESS INVESTMENT COMPANIES

681. Organization.

(a) Incorporation and charter under State law, period

of succession; area of operations.

(b) Articles of incorporation; approval.

(e) Fees.

682. Capital requirements.

(a) Amount.

(b) Financial institution investments.

683. Borrowing operations.

(a) Authority to issue obligations.

(b) Debentures and participating securities.

(d) Required certifications.

(e) Capital impairment.

(f) Redemption or repurchase of preferred stock.

(g) Guarantee of payment of and authority to purchase

participating securities.

(h) Computation of amounts due under participating

securities.

(i) Leverage fee.

(j) Calculation of subsidy rate.

684. Equity capital for small-business concerns.

(a) Function of investment companies.

(b) Conditions.

(d) Direct or cooperative provision of capital.

685. Long-term loans to small-business concerns.

(a) Authorization.

(b) Direct loans; loans on participation basis.

(d) Maturity.

(e) Soundness of loan; security.

(f) Extension or renewal.

686. Aggregate limitations on amount of assistance to any single

enterprise.

(a) Percentage limitation of private capital.

(b) Repealed.

prior to effective date of section.

687. Operation and regulation of companies.

(a) Cooperation with banks and other financial

institutions.

(b) Use of advisory services; depository or fiscal

agents; investment of funds.

(d) Forfeiture of rights, privileges, and franchises;

jurisdiction.

(e) Liability of United States.

(f) Performance of functions, powers, and duties by

Administration and Administrator.

(g) Annual report on Small Business Investment

activities.

(h) Certifications of eligibility.

(i) Interest rates.

687a. Revocation and suspension of licenses; cease and desist

orders.

(a) Grounds for suspension or revocation.

(b) Grounds for cease and desist order.

and service.

(d) Subpena of person, and books, papers and

documents; fees and mileage; enforcement.

(e) Petition to modify or set aside order; filing,

time and place, Administration to submit

record; action of court; review.

(f) Enforcement of order.

687b. Investigations and examinations; power to subpena and take

oaths and affirmations; aid of courts; examiners; reports.

(a) Investigation of violations.

(b) Examinations and reports.

companies.

(d) Valuations.

687c. Injunctions and other orders.

(a) Grounds; jurisdiction of court.

(b) Equity jurisdiction of licensee and assets

thereof.

687d. Conflicts of interest.

687e. Removal or suspension of management officials.

(a) Definition of ''management official''.

(b) Removal of management officials.

(d) Authority to suspend on criminal charges.

(e) Notification to licensees.

(f) Procedural provisions; judicial review.

687f. Unlawful acts and omissions by officers, directors,

employees, or agents.

(a) Violation by licensee deemed violation by persons

participating.

(b) Breach of fiduciary duty.

dishonesty, fraud, or breach of trust.

687g. Penalties and forfeitures.

(a) Report violations.

(b) Exemption from reporting requirements.

687h. Jurisdiction and service of process.

687i, 687j. Repealed.

687k. Guaranteed obligations not eligible for purchase by Federal

Financing Bank.

687l. Issuance and guarantee of trust certificates.

(a) Issuance; debentures or participating securities

composing trust or pool.

(b) Terms and conditions of guarantee; payment of

principal and interest.

(d) Collection of fees.

(e) Subrogation rights; ownership rights in

debentures or participating securities.

(f) Central registration requirements; regulation of

brokers and dealers.

687m. Periodic issuance of guarantees and trust certificates.

688. Repealed.

PART B - NEW MARKETS VENTURE CAPITAL PROGRAM

689. Definitions.

689a. Purposes.

689b. Establishment.

689c. Selection of New Markets Venture Capital companies.

(a) Eligibility.

(b) Application.

(d) Requirements to be met for final approval.

(e) Final approval; designation.

689d. Debentures.

(a) In general.

(b) Terms and conditions.

(d) Maximum guarantee.

689e. Issuance and guarantee of trust certificates.

(a) Issuance.

(b) Guarantee.

(d) Fees.

(e) Subrogation and ownership rights.

(f) Management and administration.

689f. Fees.

689g. Operational assistance grants.

(a) In general.

(b) Supplemental grants.

689h. Bank participation.

(a) In general.

(b) Limitation.

689i. Federal Financing Bank.

689j. Reporting requirement.

689k. Examinations.

(a) In general.

(b) Assistance of private sector entities.

(d) Deposit of funds.

689l. Injunctions and other orders.

(a) In general.

(b) Jurisdiction.

689m. Additional penalties for noncompliance.

(a) In general.

(b) Adjudication of noncompliance.

689n. Unlawful acts and omissions; breach of fiduciary duty.

(a) Parties deemed to commit a violation.

(b) Fiduciary duties.

689o. Removal or suspension of directors or officers.

689p. Regulations.

689q. Authorization of appropriations.

(a) In general.

(b) Funds collected for examinations.

SUBCHAPTER IV - STATE CHARTERED INVESTMENT COMPANIES AND STATE

DEVELOPMENT COMPANIES

691. Repealed.

SUBCHAPTER IV-A - GUARANTEES

PART A - COMMERCIAL OR INDUSTRIAL LEASE AND QUALIFIED CONTRACT

GUARANTEES

692. Authority of Administration to guarantee payment of rentals by

small business concerns under leases of commercial and industrial

property.

(a) Nonavailability of guarantees from other sources;

participation with qualified sureties.

(b) Uniform annual fee; processing fees.

provisions.

693. Powers of Administration respecting loans; liquidation of

obligations through creation of new leases, execution of

subleases, and assignments of leases.

694. Repealed.

694-1. Planning design or installation of pollution control

facilities.

(a) Definitions.

(b) Financing disadvantage; guarantee of payment by

Administration; restrictions and limitations.

condition for payment; periodic review.

(d) Requirements of Administration; escrow; default;

discretionary provisions.

(e) Assignment of guarantee.

(f) Application of section 693 of this title.

694-2. Revolving fund for qualified contract guarantees; investment

of idle funds.

PART B - SURETY BOND GUARANTEES

694a. Definitions.

694b. Surety bond guarantees.

(a) Authority of Administration to guarantee surety

against loss from principal's breach of bond.

(b) Indemnification of surety against loss from

avoiding breach.

(d) Regulations.

(e) Reimbursement of surety; conditions.

(f) Procedure for reimbursement.

(g) Audit.

(h) Administrative provisions.

(i) Powers of Administration respecting loans.

694c. Revolving fund for surety bond guarantees.

SUBCHAPTER V - LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES

695. State development companies.

(a) Congressional finding and declaration of purpose.

(b) Loans; obligations of development companies.

(d) Eligibility for assistance.

696. Loans for plant acquisition, construction, conversion and

expansion.

697. Development company debentures.

(a) Guarantees; Administration authority; regulatory

terms and conditions; full faith and credit;

subordination of debentures.

(b) Statutory terms and conditions.

(d) Charges for Administration expenses.

(e) ''Qualified State or local development company''

defined; exception for rural company;

authority.

(f) Effective date.

(g) Calculation of subsidy rate.

(h) Required actions upon default.

(i) Two-year waiver of fees.

697a. Private debenture sales.

697b. Pooling of debentures.

(a) Issuance; debentures composing trust or pool.

(b) Terms and conditions of guarantee; payment of

principal and interest.

(d) Collection of fees.

(e) Subrogation rights; ownership rights in

debentures.

(f) Central registration requirements; regulation of

brokers and dealers; electronic registration.

697c. Restrictions on development company assistance.

697d. Accredited Lenders Program.

(a) Establishment.

(b) Requirements.

(d) Suspension or revocation of designation.

(e) ''Qualified State or local development company''

defined.

697e. Premier Certified Lenders Program.

(a) Establishment.

(b) Requirements.

(d) Sale of certain defaulted loans.

(e) Loan approval authority.

(f) Review.

(g) Suspension or revocation.

(h) Effect of suspension or revocation.

(i) Program goals.

(j) Report.

697f. Prepayment of development company debentures.

(a) In general.

(b) Requirements.

(d) Refinancing limitations.

(e) Definitions.

(f) Regulations.

(g) Authorization.

697g. Foreclosure and liquidation of loans.

(a) Delegation of authority.

(b) Eligibility for delegation.

(d) Suspension or revocation of authority.

(e) Report.

-SECREF-

CHAPTER REFERRED TO IN OTHER SECTIONS

This chapter is referred to in sections 77c, 77ddd, 80a-2,

80a-18, 80a-60, 634, 637, 645, 1691c of this title; title 12

section 4702; title 26 sections 243, 246A, 542, 586, 1242, 1243.

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15 USC SUBCHAPTER I - GENERAL PROVISIONS 01/06/03

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TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER I - GENERAL PROVISIONS

-HEAD-

SUBCHAPTER I - GENERAL PROVISIONS

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15 USC Sec. 661 01/06/03

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TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER I - GENERAL PROVISIONS

-HEAD-

Sec. 661. Congressional declaration of policy

-STATUTE-

It is declared to be the policy of the Congress and the purpose

of this chapter to improve and stimulate the national economy in

general and the small-business segment thereof in particular by

establishing a program to stimulate and supplement the flow of

private equity capital and long-term loan funds which

small-business concerns need for the sound financing of their

business operations and for their growth, expansion, and

modernization, and which are not available in adequate supply:

Provided, however, That this policy shall be carried out in such

manner as to insure the maximum participation of private financing

sources.

It is the intention of the Congress that the provisions of this

chapter shall be so administered that any financial assistance

provided hereunder shall not result in a substantial increase of

unemployment in any area of the country. It is the intention of

the Congress that in the award of financial assistance under this

chapter, when practicable, priority be accorded to small business

concerns which lease or purchase equipment and supplies which are

produced in the United States and that small business concerns

receiving such assistance be encouraged to continue to lease or

purchase such equipment and supplies.

-SOURCE-

(Pub. L. 85-699, title I, Sec. 102, Aug. 21, 1958, 72 Stat. 689;

Pub. L. 102-366, title IV, Sec. 416, Sept. 4, 1992, 106 Stat.

1019.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in text, was in the original ''this

Act'', meaning Pub. L. 85-699, which enacted this chapter, amended

sections 77c, 77ddd, 80a-18, 633 and 636 of this title, and

sections 217 (now 212), 218 (now 213), 221 (now 216), 657, 1006 and

1014 of Title 18, Crimes and Criminal Procedure, repealed section

352a of Title 12, Banks and Banking, and enacted notes set out

under this section and section 352a of Title 12. For complete

classification of this Act to the Code, see Short Title note set

out below and Tables.

-MISC2-

AMENDMENTS

1992 - Pub. L. 102-366 inserted at end ''It is the intention of

the Congress that in the award of financial assistance under this

chapter, when practicable, priority be accorded to small business

concerns which lease or purchase equipment and supplies which are

produced in the United States and that small business concerns

receiving such assistance be encouraged to continue to lease or

purchase such equipment and supplies.''

SHORT TITLE OF 2001 AMENDMENT

Pub. L. 107-100, Sec. 1, Dec. 21, 2001, 115 Stat. 966, provided

that: ''This Act (amending sections 636, 683, 687d, 687e, and 697

of this title, section 1833a of Title 12, Banks and Banking, and

section 1014 of Title 18, Crimes and Criminal Procedure, and

enacting provisions set out as notes under sections 636, 683, and

697 of this title) may be cited as the 'Small Business Investment

Company Amendments Act of 2001'.''

SHORT TITLE OF 2000 AMENDMENT

Pub. L. 106-554, Sec. 1(a)(8) (Sec. 1(a)), Dec. 21, 2000, 114

Stat. 2763, 2763A-653, provided that: ''This section (enacting part

B of subchapter III of this chapter, amending section 683 of this

title, section 109 of Title 11, Bankruptcy, and section 1464 of

Title 12, Banks and Banking, and amending provisions set out as a

note under section 631 of this title) may be cited as the 'New

Markets Venture Capital Program Act of 2000'.''

Pub. L. 106-554, Sec. 1(a)(9) (title III, Sec. 301), Dec. 21,

2000, 114 Stat. 2763, 2763A-684, provided that: ''This title

(enacting section 697g of this title, amending sections 695 to 697

and 697e of this title, enacting provisions set out as a note under

section 697g of this title, and repealing provisions set out as a

note under section 697e of this title) may be cited as the

'Certified Development Company Program Improvements Act of 2000'.''

Pub. L. 106-554, Sec. 1(a)(9) (title IV, Sec. 401), Dec. 21,

2000, 114 Stat. 2763, 2763A-690, provided that: ''This title

(amending sections 662, 682, 683, and 687b of this title) may be

cited as the 'Small Business Investment Corrections Act of 2000'.''

SHORT TITLE OF 1999 AMENDMENT

Pub. L. 106-9, Sec. 1, Apr. 5, 1999, 113 Stat. 17, provided that:

''This Act (amending sections 662, 683, 687, and 687m of this title

and provisions set out as notes under this section and section 631

of this title) may be cited as the 'Small Business Investment

Improvement Act of 1999'.''

SHORT TITLE OF 1994 AMENDMENT

Pub. L. 103-403, title V, Sec. 501, Oct. 22, 1994, 108 Stat.

4198, provided that: ''This title (enacting section 697f of this

title and provisions set out as a note under section 697f of this

title) may be cited as the 'Small Business Prepayment Penalty

Relief Act of 1994'.''

SHORT TITLE OF 1992 AMENDMENT

Section 401 of title IV of Pub. L. 102-366 provided that: ''This

Act (probably means ''This title'', amending this section and

sections 662, 682, 683, 685 to 687, 687b, and 687l of this title,

enacting provisions set out as notes under this section and

sections 681 and 687b of this title, and amending provisions set

out as a note under section 631 of this title) may be cited as the

'Small Business Equity Enhancement Act of 1992'.''

SHORT TITLE OF 1988 AMENDMENT

Pub. L. 100-590, title II, Sec. 201, Nov. 3, 1988, 102 Stat.

3007, provided that: ''This title (amending sections 694b and 694c

of this title and enacting provisions set out as notes under

section 694b of this title) may be cited as the 'Preferred Surety

Bond Guarantee Program Act of 1988'.''

SHORT TITLE OF 1972 AMENDMENT

Section 1 of Pub. L. 92-595, Oct. 27, 1972, 86 Stat. 1314,

provided: ''That this Act (enacting sections 687i and 687j of this

title and amending sections 80a-18, 633, 636, 662, 681, 683, 684,

and 686 of this title) may be cited as the 'Small Business

Investment Act Amendments of 1972'.''

SHORT TITLE OF 1967 AMENDMENT

Section 201 of Pub. L. 90-104, title II, Oct. 11, 1967, 81 Stat.

269, provided that: ''This title (amending sections 681, 682, 683,

684, 686, 687, 687b, and 692 of this title) may be cited as the

'Small Business Investment Act Amendments of 1967'.''

SHORT TITLE OF 1966 AMENDMENT

Section 1 of Pub. L. 89-779, Nov. 6, 1966, 80 Stat. 1359,

provided: ''That this Act (enacting sections 687e, 687f, 687g, and

687h of this title and amending sections 633, 671, 687, 687a, 687b,

and 687c of this title, and sections 5315 and 5316 of Title 5,

Government Organization and Employees) may be cited as the 'Small

Business Investment Act Amendments of 1966'.''

SHORT TITLE OF 1964 AMENDMENT

Section 1 of Pub. L. 88-273, Feb. 28, 1964, 78 Stat. 146,

provided: ''That this Act (enacting section 687d and amending

sections 682, 686, and 687 of this title) may be cited as the

'Small Business Investment Act Amendments of 1963'.''

SHORT TITLE OF 1961 AMENDMENT

Section 1 of Pub. L. 87-341, Oct. 3, 1961, 75 Stat. 752,

provided: ''That this Act (enacting sections 687a, 687b, and 687c

of this title, amending sections 633, 662, 681, 683 to 687, and 696

of this title, and enacting provisions set out as notes under

sections 631 and 686 of this title) may be cited as the 'Small

Business Investment Act Amendments of 1961'.''

SHORT TITLE OF 1960 AMENDMENT

Section 1 of Pub. L. 86-502, June 11, 1960, 74 Stat. 196,

provided: ''That this Act (amending sections 662, 681, 682, and 684

of this title, and section 26-610 of the District of Columbia Code,

1973 edition) may be cited as the 'Small Business Investment Act

Amendments of 1960'.''

SHORT TITLE

Section 101 of Pub. L. 85-699, as amended by Pub. L. 106-9, Sec.

2(d)(3), Apr. 5, 1999, 113 Stat. 18, provided that: ''This Act

(enacting this chapter, amending sections 77c, 77ddd, 80a-18, 633

and 636 of this title, and sections 217 (now 212), 218 (now 213),

221 (now 216), 657, 1006 and 1014 of Title 18, Crimes and Criminal

Procedure, repealing section 352a of Title 12, Banks and Banking,

and enacting notes set out under this section and former section

352a of title 12) may be cited as the 'Small Business Investment

Act of 1958'.''

REGULATIONS

Section 415 of title IV of Pub. L. 102-366 provided that:

''Notwithstanding any law, rule, regulation or administrative

moratorium, except as otherwise expressly provided in this Act

(probably means ''this title'', see Short Title of 1992 Amendment

note above), the Small Business Administration shall -

''(1) within 90 days after the date of enactment of this Act

(Sept. 4, 1992), publish in the Federal Register proposed rules

and regulations implementing this Act and the amendments made by

this Act; and

''(2) within 180 days after the date of enactment of this Act,

publish in the Federal Register final rules and regulations

implementing this Act, and enter such contracts as are necessary

to implement this Act and the amendments made by this Act.''

EFFECT OF SMALL BUSINESS EQUITY ENHANCEMENT ACT OF 1992 ON

SECURITIES LAWS

Section 418 of title IV of Pub. L. 102-366 provided that:

''Nothing in this Act (probably means ''this title'', see Short

Title of 1992 Amendment note above) (and no amendment made by this

Act) shall be construed to affect the applicability of the

securities laws, as that term is defined in section 3(a)(47) of the

Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), or any of

the rules and regulations thereunder, or otherwise supersede or

limit the jurisdiction of the Securities and Exchange Commission or

the authority at any time conferred under the securities laws.''

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15 USC Sec. 662 01/06/03

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TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER I - GENERAL PROVISIONS

-HEAD-

Sec. 662. Definitions

-STATUTE-

As used in this chapter -

(1) the term ''Administration'' means the Small Business

Administration;

(2) the term ''Administrator'' means the Administrator of the

Small Business Administration;

(3) the terms ''small business investment company'',

''company'', and ''licensee'' mean a company approved by the

Administration to operate under the provisions of this chapter

and issued a license as provided in section 681 of this title;

(4) the term ''State'' includes the several States, the

territories and possessions of the United States, the

Commonwealth of Puerto Rico, and the District of Columbia;

(5) the term ''small-business concern'' shall have the same

meaning as in the Small Business Act (15 U.S.C. 631 et seq.),

except that, for purposes of this chapter -

(A) an investment by a venture capital firm, investment

company (including a small business investment company)

employee welfare benefit plan or pension plan, or trust,

foundation, or endowment that is exempt from Federal income

taxation -

(i) shall not cause a business concern to be deemed not

independently owned and operated regardless of the allocation

of control during the investment period under any investment

agreement between the business concern and the entity making

the investment;

(ii) shall be disregarded in determining whether a business

concern satisfies size standards established pursuant to

section 3(a)(2) of the Small Business Act (15 U.S.C.

632(a)(2)); and

(iii) shall be disregarded in determining whether a small

business concern is a smaller enterprise; and

(B) in determining whether a business concern satisfies net

income standards established pursuant to section 3(a)(2) of the

Small Business Act (15 U.S.C. 632(a)(2)), if the business

concern is not required by law to pay Federal income taxes at

the enterprise level, but is required to pass income through to

the shareholders, partners, beneficiaries, or other equitable

owners of the business concern, the net income of the business

concern shall be determined by allowing a deduction in an

amount equal to the sum of -

(i) if the business concern is not required by law to pay

State (and local, if any) income taxes at the enterprise

level, the net income (determined without regard to this

subparagraph), multiplied by the marginal State income tax

rate (or by the combined State and local income tax rates, as

applicable) that would have applied if the business concern

were a corporation; and

(ii) the net income (so determined) less any deduction for

State (and local) income taxes calculated under clause (i),

multiplied by the marginal Federal income tax rate that would

have applied if the business concern were a corporation;

(6) the term ''development companies'' means enterprises

incorporated under State law with the authority to promote and

assist the growth and development of small-business concerns in

the areas covered by their operations;

(7) the term ''license'' means a license issued by the

Administration as provided in section 681 of this title;

(8) the term ''articles'' means articles of incorporation for

an incorporated body and means the functional equivalent or other

similar documents specified by the Administrator for other

business entities;

(9) the term ''private capital'' -

(A) means the sum of -

(i) the paid-in capital and paid-in surplus of a corporate

licensee, the contributed capital of the partners of a

partnership licensee, or the equity investment of the members

of a limited liability company licensee; and

(ii) unfunded binding commitments, from investors that meet

criteria established by the Administrator, to contribute

capital to the licensee: Provided, That such unfunded

commitments may be counted as private capital for purposes of

approval by the Administrator of any request for leverage,

but leverage shall not be funded based on such commitments;

and

(B) does not include any -

(i) funds borrowed by a licensee from any source;

(ii) funds obtained through the issuance of leverage; or

(iii) funds obtained directly or indirectly from any

Federal, State, or local government, or any government agency

or instrumentality, except for -

(I) funds obtained from the business revenues (excluding

any governmental appropriation) of any federally chartered

or government-sponsored corporation established prior to

October 1, 1987;

(II) funds invested by an employee welfare benefit plan

or pension plan; and

(III) any qualified nonprivate funds (if the investors of

the qualified nonprivate funds do not control, directly or

indirectly, the management, board of directors, general

partners, or members of the licensee);

(10) the term ''leverage'' includes -

(A) debentures purchased or guaranteed by the Administration;

(B) participating securities purchased or guaranteed by the

Administration; and

(11) the term ''third party debt'' means any indebtedness for

borrowed money, other than indebtedness owed to the

Administration;

(12) the term ''smaller enterprise'' means any small business

concern that, together with its affiliates -

(A) has -

(i) a net financial worth of not more than $6,000,000, as

of the date on which assistance is provided under this

chapter to that business concern; and

(ii) an average net income for the 2-year period preceding

the date on which assistance is provided under this chapter

to that business concern, of not more than $2,000,000, after

Federal income taxes (excluding any carryover losses) except

that, for purposes of this clause, if the business concern is

not required by law to pay Federal income taxes at the

enterprise level, but is required to pass income through to

the shareholders, partners, beneficiaries, or other equitable

owners of the business concern, the net income of the

business concern shall be determined by allowing a deduction

in an amount equal to the sum of -

(I) if the business concern is not required by law to pay

State (and local, if any) income taxes at the enterprise

level, the net income (determined without regard to this

clause), multiplied by the marginal State income tax rate

(or by the combined State and local income tax rates, as

applicable) that would have applied if the business concern

were a corporation; and

(II) the net income (so determined) less any deduction

for State (and local) income taxes calculated under

subclause (I), multiplied by the marginal Federal income

tax rate that would have applied if the business concern

were a corporation; or

(B) satisfies the standard industrial classification size

standards established by the Administration for the industry in

which the small business concern is primarily engaged;

(13) the term ''qualified nonprivate funds'' means any -

(A) funds directly or indirectly invested in any applicant or

licensee on or before August 16, 1982, by any Federal agency,

other than the Administration, under a provision of law

explicitly mandating the inclusion of those funds in the

definition of the term ''private capital'';

(B) funds directly or indirectly invested in any applicant or

licensee by any Federal agency under a provision of law enacted

after September 4, 1992, explicitly mandating the inclusion of

those funds in the definition of the term ''private capital'';

and

more State or local government entities (including any

guarantee extended by those entities) in an aggregate amount

that does not exceed 33 percent of the private capital of the

applicant or licensee;

(14) the terms ''employee welfare benefit plan'' and ''pension

plan'' have the same meanings as in section 3 of the Employee

Retirement Income Security Act of 1974 (29 U.S.C. 1002), and are

intended to include -

(A) public and private pension or retirement plans subject to

such Act (29 U.S.C. 1001 et seq.); and

(B) similar plans not covered by such Act that have been

established and that are maintained by the Federal Government

or any State or political subdivision, or any agency or

instrumentality thereof, for the benefit of employees;

(15) the term ''member'' means, with respect to a licensee that

is a limited liability company, a holder of an ownership interest

or a person otherwise admitted to membership in the limited

liability company;

(16) the term ''limited liability company'' means a business

entity that is organized and operating in accordance with a State

limited liability company statute approved by the Administration;

and

(17) the term ''long term'', when used in connection with

equity capital or loan funds invested in any small business

concern or smaller enterprise, means any period of time not less

than 1 year.

-SOURCE-

(Pub. L. 85-699, title I, Sec. 103, Aug. 21, 1958, 72 Stat. 690;

Pub. L. 86-502, Sec. 3, June 11, 1960, 74 Stat. 196; Pub. L.

87-341, Sec. 2, Oct. 3, 1961, 75 Stat. 752; Pub. L. 92-595, Sec.

2(a), Oct. 27, 1972, 86 Stat. 1314; Pub. L. 94-305, title I, Sec.

106(a), June 4, 1976, 90 Stat. 666; Pub. L. 102-366, title IV, Sec.

410, Sept. 4, 1992, 106 Stat. 1017; Pub. L. 104-208, div. D, title

II, Sec. 208(a), Sept. 30, 1996, 110 Stat. 3009-739; Pub. L.

105-135, title II, Sec. 213, Dec. 2, 1997, 111 Stat. 2601; Pub. L.

106-9, Sec. 2(c), Apr. 5, 1999, 113 Stat. 17; Pub. L. 106-554, Sec.

1(a)(9) (title IV, Sec. 402), Dec. 21, 2000, 114 Stat. 2763,

2763A-690.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in text, see

References in Text note set out under section 661 of this title.

The Small Business Act, referred to in par. (5), is Pub. L.

85-536, July 18, 1958, 72 Stat. 384, as amended, which is

classified to chapter 14A (Sec. 631 et seq.) of this title. For

complete classification of this Act to the Code, see Short Title

note set out under section 631 of this title and Tables. The term

''small-business concern'' is defined in section 632 of this title.

The Employee Retirement Income Security Act of 1974, referred to

in par. (14), is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829, as

amended, which is classified principally to chapter 18 (Sec. 1001

et seq.) of Title 29, Labor. For complete classification of this

Act to the Code, see Short Title note set out under section 1001 of

Title 29 and Tables.

-MISC2-

AMENDMENTS

2000 - Par. (5)(A)(i). Pub. L. 106-554, Sec. 1(a)(9) (title IV,

Sec. 402(a)), inserted before semicolon at end ''regardless of the

allocation of control during the investment period under any

investment agreement between the business concern and the entity

making the investment''.

Par. (17). Pub. L. 106-554, Sec. 1(a)(9) (title IV, Sec. 402(b)),

added par. (17).

1999 - Par. (5). Pub. L. 106-9, Sec. 2(c)(1), designated existing

provisions after ''for purposes of this chapter'' as subpar. (A),

redesignated former subpars. (A) to (C) as cls. (i) to (iii),

respectively, and added subpar. (B).

Par. (12)(A)(ii). Pub. L. 106-9, Sec. 2(c)(2), inserted before

''; or'': ''except that, for purposes of this clause, if the

business concern is not required by law to pay Federal income taxes

at the enterprise level, but is required to pass income through to

the shareholders, partners, beneficiaries, or other equitable

owners of the business concern, the net income of the business

concern shall be determined by allowing a deduction in an amount

equal to the sum of -

''(I) if the business concern is not required by law to pay

State (and local, if any) income taxes at the enterprise level,

the net income (determined without regard to this clause),

multiplied by the marginal State income tax rate (or by the

combined State and local income tax rates, as applicable) that

would have applied if the business concern were a corporation;

and

''(II) the net income (so determined) less any deduction for

State (and local) income taxes calculated under subclause (I),

multiplied by the marginal Federal income tax rate that would

have applied if the business concern were a corporation''.

1997 - Par. (9)(B)(iii). Pub. L. 105-135 added subcl. (I) and

redesignated former subcls. (I) and (II) as (II) and (III),

respectively.

1996 - Par. (5). Pub. L. 104-208, Sec. 208(a)(1), inserted before

semicolon at end '', except that, for purposes of this chapter, an

investment by a venture capital firm, investment company (including

a small business investment company) employee welfare benefit plan

or pension plan, or trust, foundation, or endowment that is exempt

from Federal income taxation -

''(A) shall not cause a business concern to be deemed not

independently owned and operated;

''(B) shall be disregarded in determining whether a business

concern satisfies size standards established pursuant to section

3(a)(2) of the Small Business Act; and

''(C) shall be disregarded in determining whether a small

business concern is a smaller enterprise''.

Par. (9). Pub. L. 104-208, Sec. 208(a)(2), amended par. (9)

generally. Prior to amendment, par. (9) read as follows:

''notwithstanding any other provision of law, the term 'private

capital' means the private paid-in capital and paid-in surplus of a

corporate licensee, or the private partnership capital of an

unincorporate licensee, inclusive of (A) any funds invested in the

licensee by a public or private pension fund, (B) any funds

invested in the licensee by State or local government entities, to

the extent that such investment does not exceed 33 percent of a

licensee's total private capital and otherwise meets criteria

established by the Administration, and (C) unfunded commitments

from institutional investors that meet criteria established by the

Administration, but it excludes any funds which are borrowed by the

licensee from any source or which are obtained or derived, directly

or indirectly, from any Federal source, including the

Administration: Provided, That no unfunded commitment from an

institutional investor may be used for the purpose of meeting the

minimum amount of private capital required by this chapter or as

the basis for the Administration to issue obligations to provide

financing; and''.

Pars. (10) to (16). Pub. L. 104-208, Sec. 208(a)(3), added pars.

(10) to (16) and struck out former par. (10) which read as follows:

''the term 'leverage' includes debentures purchased or guaranteed

by the Administration, participating securities purchased or

guaranteed by the Administration, or preferred securities issued by

companies licensed under section 681(d) of this title and which

have been purchased by the Administration.''

1992 - Pars. (9), (10). Pub. L. 102-366 added pars. (9) and (10).

1976 - Par. (8). Pub. L. 94-305 added par. (8).

1972 - Par. (3). Pub. L. 92-595 substituted ''section 681'' for

''section 681(c)''.

Par. (7). Pub. L. 92-595 substituted ''section 681'' for

''section 681(c)''.

1961 - Par. (3). Pub. L. 87-341, Sec. 2(1), inserted ''licensee''

and substituted ''company approved by the Administration to operate

under the provisions of this chapter and issued a license as

provided in section 681(c) of this title'' for ''small business

investment company organized as provided in subchapter III of this

chapter, including (except for purposes of sections 681 and 687(f)

of this title) a State-chartered investment company which has

obtained the approval of the Administrator to operate under the

provisions of this chapter as provided in section 688 of this title

and a company converted into a small business investment company

under section 691 of this title''.

Par. (7). Pub. L. 87-341, Sec. 2(2), added par. (7).

1960 - Par. (4). Pub. L. 86-502 substituted definition of

''State'' for definition of ''United States''.

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section

3 of Pub. L. 105-135, set out as a note under section 631 of this

title.

EFFECT OF SMALL BUSINESS EQUITY ENHANCEMENT ACT OF 1992 ON

SECURITIES LAWS

Nothing in amendment by Pub. L. 102-366 to be construed to affect

applicability of securities laws or to otherwise supersede or limit

jurisdiction of Securities and Exchange Commission, see section 418

of Pub. L. 102-366, set out as a note under section 661 of this

title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 683 of this title; title

12 section 635; title 18 sections 20, 1014.

-CITE-

15 USC SUBCHAPTER II - SMALL BUSINESS INVESTMENT DIVISION

OF SMALL BUSINESS ADMINISTRATION 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER II - SMALL BUSINESS INVESTMENT DIVISION OF SMALL

BUSINESS ADMINISTRATION

-HEAD-

SUBCHAPTER II - SMALL BUSINESS INVESTMENT DIVISION OF SMALL

BUSINESS ADMINISTRATION

-CITE-

15 USC Sec. 671 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER II - SMALL BUSINESS INVESTMENT DIVISION OF SMALL

BUSINESS ADMINISTRATION

-HEAD-

Sec. 671. Establishment; Associate Administrator; appointment and

compensation

-STATUTE-

There is hereby established in the Small Business Administration

a division to be known as the Small Business Investment Division.

The Division shall be headed by an Associate Administrator who

shall be appointed by the Administrator, and shall receive

compensation at the rate provided by law for other Associate

Administrators of the Small Business Administration.

-SOURCE-

(Pub. L. 85-699, title II, Sec. 201, Aug. 21, 1958, 72 Stat. 690;

Pub. L. 89-117, title III, Sec. 316(b), Aug. 10, 1965, 79 Stat.

484; Pub. L. 89-779, Sec. 2, Nov. 6, 1966, 80 Stat. 1359.)

-MISC1-

AMENDMENTS

1966 - Pub. L. 89-779 substituted ''Associated Administrator''

for ''Deputy Administrator'' as the head of the Small Business

Investment Division of the Small Business Administration,

substituted the rate provided by law for other Associate

Administrators of the Small Business Administration for the rate

provided by law for the other Deputy Administrators of the Small

Business Administration as the standard of compensation for the

head of the Small Business Investment Division, and struck out

provisions spelling out the proper exercise of the powers conferred

on the Administration and on the Administrator through the Small

Business Investment Division and the Division head. See section

687(f) of this title.

1965 - Pub. L. 89-117 provided that the powers conferred by

subchapters IV-A and V of this chapter shall be exercised through

such divisions, sections, or other personnel as the Administrator

in his discretion determines.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 633, 693 of this title.

-CITE-

15 USC Sec. 672 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER II - SMALL BUSINESS INVESTMENT DIVISION OF SMALL

BUSINESS ADMINISTRATION

-HEAD-

Sec. 672. Repealed. Pub. L. 87-341, Sec. 11(h)(1), Oct. 3, 1961, 75

Stat. 757

-MISC1-

Section, Pub. L. 85-699, title II, Sec. 202(b), Aug. 21, 1958, 72

Stat. 691, authorized appropriations for business expenses.

-CITE-

15 USC SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

-HEAD-

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

-SECREF-

SUBCHAPTER REFERRED TO IN OTHER SECTIONS

This subchapter is referred to in sections 633, 634, 697f of this

title.

-CITE-

15 USC Part A - Small Business Investment Companies 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Part A - Small Business Investment Companies

-CITE-

15 USC Sec. 681 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 681. Organization

-STATUTE-

(a) Incorporation and charter under State law, period of

succession; area of operations

A small business investment company shall be an incorporated

body, a limited liability company, or a limited partnership

organized and chartered or otherwise existing under State law

solely for the purpose of performing the functions and conducting

the activities contemplated under this subchapter, which, if

incorporated, has succession for a period of not less than thirty

years unless sooner dissolved by its shareholders, and if a limited

partnership, has succession for a period of not less than ten

years, and possesses the powers reasonably necessary to perform

such functions and conduct such activities. The area in which the

company is to conduct its operations, and the establishment of

branch offices or agencies (if authorized by the articles), shall

be subject to the approval of the Administration.

(b) Articles of incorporation; approval

The articles of any small business investment company shall

specify in general terms the objects for which the company is

formed, the name assumed by such company, the area or areas in

which its operations are to be carried on, the place where its

principal office is to be located, and the amount and classes of

its shares of capital stock. Such articles may contain any other

provisions not inconsistent with this chapter that the company may

see fit to adopt for the regulation of its business and the conduct

of its affairs. Such articles and any amendments thereto adopted

from time to time shall be subject to the approval of the

Administration.

(1) Submission of application

Each applicant for a license to operate as a small business

investment company under this chapter shall submit to the

Administrator an application, in a form and including such

documentation as may be prescribed by the Administrator.

(2) Procedures

(A) Status

Not later than 90 days after the initial receipt by the

Administrator of an application under this subsection, the

Administrator shall provide the applicant with a written report

detailing the status of the application and any requirements

remaining for completion of the application.

(B) Approval or disapproval

Within a reasonable time after receiving a completed

application submitted in accordance with this subsection and in

accordance with such requirements as the Administrator may

prescribe by regulation, the Administrator shall -

(i) approve the application and issue a license for such

operation to the applicant if the requirements of this

section are satisfied; or

(ii) disapprove the application and notify the applicant in

writing of the disapproval.

(3) Matters considered

In reviewing and processing any application under this

subsection, the Administrator -

(A) shall determine whether -

(i) the applicant meets the requirements of subsections (a)

and (c) of section 682 of this title; and

(ii) the management of the applicant is qualified and has

the knowledge, experience, and capability necessary to comply

with this chapter;

(B) shall take into consideration -

(i) the need for and availability of financing for small

business concerns in the geographic area in which the

applicant is to commence business;

(ii) the general business reputation of the owners and

management of the applicant; and

(iii) the probability of successful operations of the

applicant, including adequate profitability and financial

soundness; and

or unavailability of leverage.

(4) Exception

(A) In general

Notwithstanding any other provision of this chapter, the

Administrator may, in the discretion of the Administrator and

based on a showing of special circumstances and good cause,

approve an application and issue a license under this

subsection with respect to any applicant that -

(i) has private capital of not less than $3,000,000;

(ii) would otherwise be issued a license under this

subsection, except that the applicant does not satisfy the

requirements of section 682(a) of this title; and

(iii) has a viable business plan reasonably projecting

profitable operations and a reasonable timetable for

achieving a level of private capital that satisfies the

requirements of section 682(a) of this title.

(B) Leverage

An applicant licensed pursuant to the exception provided in

this paragraph shall not be eligible to receive leverage as a

licensee until the applicant satisfies the requirements of

section 682(a) of this title, unless the applicant -

(i) files an application for a license not later than 180

days after December 2, 1997;

(ii) is located in a State that is not served by a

licensee; and

(iii) agrees to be limited to 1 tier of leverage available

under section 682(b) of this title, until the applicant meets

the requirements of section 682(a) of this title.

(e) (FOOTNOTE 1) Fees

(FOOTNOTE 1) So in original. No subsec. (d) has been enacted.

(1) In general

The Administration may prescribe fees to be paid by each

applicant for a license to operate as a small business investment

company under this chapter.

(2) Use of amounts

Fees collected under this subsection -

(A) shall be deposited in the account for salaries and

expenses of the Administration; and

(B) are authorized to be appropriated solely to cover the

costs of licensing examinations.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 301, Aug. 21, 1958, 72 Stat. 691;

Pub. L. 86-502, Sec. 4, June 11, 1960, 74 Stat. 196; Pub. L.

87-341, Sec. 11(a), (b), Oct. 3, 1961, 75 Stat. 756; Pub. L.

90-104, title II, Sec. 202, Oct. 11, 1967, 81 Stat. 269; Pub. L.

92-595, Sec. 2(b), Oct. 27, 1972, 86 Stat. 1314; Pub. L. 94-305,

title I, Sec. 106(b)-(d), June 4, 1976, 90 Stat. 666; Pub. L.

95-507, title I, Sec. 104, Oct. 24, 1978, 92 Stat. 1758; Pub. L.

100-590, title I, Sec. 105, Nov. 3, 1988, 102 Stat. 2993; Pub. L.

104-208, div. D, title II, Sec. 208(b)(1)-(3)(A), Sept. 30, 1996,

110 Stat. 3009-741, 3009-742; Pub. L. 105-135, title II, Sec. 212,

214, Dec. 2, 1997, 111 Stat. 2601.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsecs. (b),

(c), and (e), see References in Text note set out under section 661

of this title.

-MISC2-

AMENDMENTS

1997 - Subsec. (c)(4)(B). Pub. L. 105-135, Sec. 212, amended

heading and text of subpar. (B) generally. Prior to amendment,

text read as follows: ''An applicant licensed pursuant to the

exception provided in this paragraph shall not be eligible to

receive leverage as a licensee until the applicant satisfies the

requirements of section 682(a) of this title.''

Subsec. (e). Pub. L. 105-135, Sec. 214, added subsec. (e).

1996 - Subsec. (a). Pub. L. 104-208, Sec. 208(b)(1), substituted

''body, a limited liability company, or'' for ''body or'' in first

sentence.

Subsec. (c). Pub. L. 104-208, Sec. 208(b)(2), inserted heading

and amended text of subsec. (c) generally. Prior to amendment,

subsec. (c) read as follows: ''The articles and amendments thereto

shall be forwarded to the Administration for consideration and

approval or disapproval. In determining whether to approve such a

company's articles and permit it to operate under the provisions of

this chapter, the Administration shall give due regard, among other

things, to the need and availability for the financing of small

business concerns in the geographic area in which the proposed

company is to commence business, the general business reputation

and character of the proposed owners and management of the company,

and the probability of successful operations of such company

including adequate profitability and financial soundness. After

consideration of all relevant factors, if it approves the company's

articles, the Administration may in its discretion approve the

company to operate under the provisions of this chapter and issue

the company a license for such operation.''

Subsec. (d). Pub. L. 104-208, Sec. 208(b)(3)(A), struck out

subsec. (d) which read as follows: ''Notwithstanding any other

provision of this chapter, a small business investment company, the

investment policy of which is that its investments will be made

solely in small business concerns which will contribute to a

well-balanced national economy by facilitating ownership in such

concerns by persons whose participation in the free enterprise

system is hampered because of social or economic disadvantages may

be organized and chartered under State business or nonprofit

corporation statutes, or formed as a limited partnership, and may

be licensed by the Administration to operate under the provisions

of this chapter.''

1988 - Subsec. (a). Pub. L. 100-590 substituted '', if

incorporated, has succession for a period of not less than thirty

years unless sooner dissolved by its shareholders, and if a limited

partnership, has succession for a period of not less than ten

years,'' for ''has succession for a period of not less than thirty

years unless sooner dissolved by its shareholders or partners''.

1978 - Subsec. (d). Pub. L. 95-507 authorized small business

investment companies to form as limited partnerships.

1976 - Subsec. (a). Pub. L. 94-305, Sec. 106(b), inserted

reference to limited partnership and reference to partners, struck

out ''of incorporation'' after ''by the articles'', and inserted

''or otherwise existing'' after ''chartered''.

Subsec. (b). Pub. L. 94-305, Sec. 106(c), struck out ''of

incorporation'' after ''The articles''.

Subsec. (c). Pub. L. 94-305, Sec. 106(d), struck out ''of

incorporation'' after ''articles'' wherever appearing.

1972 - Subsec. (d). Pub. L. 92-595 added subsec. (d).

1967 - Subsec. (c). Pub. L. 90-104 provided for consideration of

availability of financing, the geographic area, the business

reputation, ownership factor, and probability of successful

operations of company including adequate profitability and

financial soundness and eliminated from consideration the number of

such companies previously organized in the United States and the

volume of their operations.

1961 - Subsec. (a). Pub. L. 87-341, Sec. 11(a), provided that

small business investment companies shall be incorporated,

organized and chartered under State law, with a minimum succession

period of thirty years unless sooner dissolved by its activities

and functions, its area of operation shall be subject to the

Administration's approval, and deleted provisions setting the

minimum number of incorporators at 10, no company shall be

chartered by the Administration unless it determined that none

could be chartered under the laws of the State and operate in

accordance with this chapter, and that no such company shall be

chartered by the Administration under this section after June 30,

1961.

Subsec. (c). Pub. L. 87-341, Sec. 11(b)(1), (2), substituted

''such a company's articles of incorporation and permit it to

operate under the provisions of this chapter'' for ''the

establishment of such a company and its proposed articles of

incorporation'', and provided that if the Administration approves

the company to operate under the provisions of this chapter, it may

issue the company a license for such operation.

Subsec. (d). Pub. L. 87-341, Sec. 11(b)(3), repealed subsec. (d)

which specified the general powers of a company formed under this

section.

Subsec. (e). Pub. L. 87-341, Sec. 11(b)(3), repealed subsec. (e)

which provided for a board of directors for a company formed under

this section.

1960 - Subsec. (d)(9) to (11). Pub. L. 86-502 repealed par. (9)

which empowered companies to act as depositories or fiscal agents

of the United States, and redesignated pars. (10) and (11) as (9)

and (10), respectively.

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section

3 of Pub. L. 105-135, set out as a note under section 631 of this

title.

EFFECTIVE DATE OF 1967 AMENDMENT

Section 211 of title II of Pub. L. 90-104 provided that: ''The

effective date of this title (amending this section and sections

682 to 684, 686, 687, 687b, and 692 of this title) shall be ninety

days after enactment (Oct. 11, 1967), except that, with respect to

section 207 (amending section 686 of this title), it shall be

January 1, 1968.''

SAVINGS PROVISION

Section 208(b)(3)(B) of div. D of Pub. L. 104-208 provided that:

''The repeal under subparagraph (A) (repealing subsec. (d) of this

section) shall not be construed to require the Administrator to

cancel, revoke, withdraw, or modify any license issued under

section 301(d) of the Small Business Investment Act of 1958

(subsec. (d) of this section) before the date of enactment of this

Act (Sept. 30, 1996).''

REGULATORY REVIEW

Pub. L. 102-366, title IV, Sec. 408(d), Sept. 4, 1992, 106 Stat.

1017, directed Small Business Administration, not later than 90

days after Sept. 4, 1992, to complete a review of regulations

intended to provide for safety and soundness of small business

investment companies which obtain financing from the Administration

under provisions of the Small Business Investment Act of 1958, 15

U.S.C. 661 et seq., and to exempt from such regulations, or to

separately regulate, companies which do not obtain financing from

the Administration.

REPORTS TO CONGRESS

Pub. L. 102-366, title IV, Sec. 408(e), Sept. 4, 1992, 106 Stat.

1017, directed Administration, within 180 days after Sept. 4, 1992,

to report on actions taken pursuant to section 408(d) of Pub. L.

102-366, formerly set out above, to the Committees on Small

Business of the Senate and the House of Representatives, including

the rationale for its actions.

Pub. L. 102-366, title IV, Sec. 417(b), Sept. 4, 1992, 106 Stat.

1019, provided that: ''Not later than 4 years after the date of

enactment of this Act (Sept. 4, 1992), the Comptroller General of

the United States shall transmit to the Committees on Small

Business of the House of Representatives and the Senate a report

that reviews the Small Business Investment Company program

(established under the Small Business Investment Act of 1958 (15

U.S.C. 661 et seq.)) for the 3-year period following the date of

enactment of this Act, with respect to each item listed in section

308(g)(3) of the Small Business Investment Act of 1958 (15 U.S.C.

687(g)(3)), as amended by subsection (a).''

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78c, 662, 682, 683, 687,

689, 697f of this title; title 11 section 109; title 12 sections

1431, 1464; title 26 sections 1044, 1202; title 42 sections 5305,

9815.

-CITE-

15 USC Sec. 682 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 682. Capital requirements

-STATUTE-

(a) Amount

(1) In general

Except as provided in paragraph (2), the private capital of

each licensee shall be not less than -

(A) $5,000,000; or

(B) $10,000,000, with respect to each licensee authorized or

seeking authority to issue participating securities to be

purchased or guaranteed by the Administration under this

chapter.

(2) Exception

The Administrator may, in the discretion of the Administrator

and based on a showing of special circumstances and good cause,

permit the private capital of a licensee authorized or seeking

authorization to issue participating securities to be purchased

or guaranteed by the Administration to be less than $10,000,000,

but not less than $5,000,000, if the Administrator determines

that such action would not create or otherwise contribute to an

unreasonable risk of default or loss to the Federal Government.

(3) Adequacy

In addition to the requirements of paragraph (1), the

Administrator shall -

(A) determine whether the private capital of each licensee is

adequate to assure a reasonable prospect that the licensee will

be operated soundly and profitably, and managed actively and

prudently in accordance with its articles; and

(B) determine that the licensee will be able (FOOTNOTE 1)

both prior to licensing and prior to approving any request for

financing, to make periodic payments on any debt of the company

which is interest bearing and shall take into consideration the

income which the company anticipates on its contemplated

investments, the experience of the company's owners and

managers, the history of the company as an entity, if any, and

the company's financial resources.

(FOOTNOTE 1) So in original. Probably should be followed by a

comma.

(4) Exemption from capital requirements

The Administrator may, in the discretion of the Administrator,

approve leverage for any licensee licensed under subsection (c)

or (d) of section 681 of this title before September 30, 1996,

that does not meet the capital requirements of paragraph (1), if

(A) the licensee certifies in writing that not less than 50

percent of the aggregate dollar amount of its financings after

September 30, 1996, will be provided to smaller enterprises;

and

(B) the Administrator determines that such action would not

create or otherwise contribute to an unreasonable risk of

default or loss to the United States Government.

(b) Financial institution investments

(1) Certain banks

Notwithstanding the provisions of section 1845(a)(1) (FOOTNOTE

2) of title 12, any national bank, or any member bank of the

Federal Reserve System or nonmember insured bank to the extent

permitted under applicable State law, may invest in any 1 or more

small business investment companies, or in any entity established

to invest solely in small business investment companies, except

that in no event shall the total amount of such investments of

any such bank exceed 5 percent of the capital and surplus of the

bank.

(FOOTNOTE 2) See References in Text note below.

(2) Certain savings associations

Notwithstanding any other provision of law, any Federal savings

association may invest in any one or more small business

investment companies, or in any entity established to invest

solely in small business investment companies, except that in no

event may the total amount of such investments by any such

Federal savings association exceed 5 percent of the capital and

surplus of the Federal savings association.

The Administrator shall ensure that the management of each

licensee licensed after September 30, 1996, is sufficiently

diversified from and unaffiliated with the ownership of the

licensee in a manner that ensures independence and objectivity in

the financial management and oversight of the investments and

operations of the licensee.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 302, Aug. 21, 1958, 72 Stat. 692;

Pub. L. 86-502, Sec. 5, June 11, 1960, 74 Stat. 196; Pub. L.

87-341, Sec. 3, Oct. 3, 1961, 75 Stat. 752; Pub. L. 88-273, Sec. 2,

Feb. 28, 1964, 78 Stat. 146; Pub. L. 90-104, title II, Sec. 203(a),

204, Oct. 11, 1967, 81 Stat. 269, 270; Pub. L. 94-305, title I,

Sec. 106(e), 107, June 4, 1976, 90 Stat. 666; Pub. L. 95-89, title

II, Sec. 210, Aug. 4, 1977, 91 Stat. 558; Pub. L. 95-507, title I,

Sec. 105, Oct. 24, 1978, 92 Stat. 1758; Pub. L. 102-366, title IV,

Sec. 406(a), 409, Sept. 4, 1992, 106 Stat. 1015, 1017; Pub. L.

104-208, div. D, title II, Sec. 208(c), Sept. 30, 1996, 110 Stat.

3009-742; Pub. L. 105-135, title II, Sec. 215(a), Dec. 2, 1997, 111

Stat. 2601; Pub. L. 106-554, Sec. 1(a)(9) (title IV, Sec. 403),

Dec. 21, 2000, 114 Stat. 2763, 2763A-690.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsec.

(a)(1)(B), see References in Text note set out under section 661 of

this title.

Subsection (d) of section 681 of this title, referred to in

subsec. (a)(4), was repealed by Pub. L. 104-208, div. D, title II,

Sec. 208(b)(3)(A), Sept. 30, 1996, 110 Stat. 3009-742.

Section 1845(a)(1) of title 12, referred to in subsec. (b)(1),

was repealed by Pub. L. 89-485, Sec. 9, July 1, 1966, 80 Stat. 240.

See section 371c of Title 12, Banks and Banking.

-COD-

CODIFICATION

September 30, 1996, referred to in subsecs. (a)(4) and (c), was

in the original ''the date of enactment of the Small Business

Program Improvement Act of 1996'', which was translated as meaning

the date of enactment of the Small Business Programs Improvement

Act of 1996, to reflect the probable intent of Congress.

-MISC3-

AMENDMENTS

2000 - Subsec. (b). Pub. L. 106-554 inserted subsec. heading,

designated existing provisions as par. (1), inserted par. heading,

and added par. (2).

1997 - Subsec. (b). Pub. L. 105-135 substituted ''any national

bank, or any member bank of the Federal Reserve System or nonmember

insured bank to the extent permitted under applicable State law,

may invest in any 1 or more small business investment companies, or

in any entity established to invest solely in small business

investment companies, except that in no event shall the total

amount of such investments of any such bank exceed 5 percent of the

capital and surplus of the bank.'' for ''shares of stock in small

business investment companies shall be eligible for purchase by

national banks, and shall be eligible for purchase by other member

banks of the Federal Reserve System and nonmember insured banks to

the extent permitted under applicable State law; except that in no

event may any such bank acquire shares in any small business

investment company if, upon the making of that acquisition, the

aggregate amount of shares in small business investment companies

then held by the bank would exceed 5 percent of its capital and

surplus.''

1996 - Subsec. (a). Pub. L. 104-208, Sec. 208(c)(1), inserted

heading and substituted pars. (1) to (3)(A) and ''determine that

the licensee will be able'' in par. (3)(B) for ''The combined

private paid-in capital and paid-in surplus of any company licensed

pursuant to section 681(c) and (d) of this title shall not be less

than $150,000: Provided, however, That the combined private paid-in

capital and paid-in surplus of any company licensed on or after

October 1, 1992 pursuant to section 681(c) of this title shall be

not less than $2,500,000 and pursuant to section 681(d) of this

title shall be not less than $1,500,000. In all cases, such capital

and surplus shall be adequate to assure a reasonable prospect that

the company will be operated soundly and profitably, and managed

actively and prudently in accordance with its articles. The

Administration shall also determine the ability of the company,''.

Subsec. (a)(4). Pub. L. 104-208, Sec. 208(c)(2), added par. (4).

Subsec. (c). Pub. L. 104-208, Sec. 208(c)(3), inserted heading

and amended text of subsec. (c) generally. Prior to amendment,

text read as follows: ''The aggregate amount of shares in any such

company or companies which may be owned or controlled by any

stockholder, or by any group or class of stockholders, may be

limited by the Administration.''

1992 - Subsec. (a). Pub. L. 102-366 substituted ''1992 pursuant

to section 681(c) of this title shall be not less than $2,500,000

and pursuant to section 681(d) of this title shall be not less than

$1,500,000'' for ''1979 pursuant to section 681(c) and (d) of this

title shall be not less than $500,000'' and inserted at end ''The

Administration shall also determine the ability of the company,

both prior to licensing and prior to approving any request for

financing, to make periodic payments on any debt of the company

which is interest bearing and shall take into consideration the

income which the company anticipates on its contemplated

investments, the experience of the company's owners and managers,

the history of the company as an entity, if any, and the company's

financial resources.''

1978 - Subsec. (a). Pub. L. 95-507 provided that the combined

private paid-in capital and paid-in surplus of any company licensed

on or after Oct. 1, 1979 pursuant to section 681(c) and (d) of this

title would not be less than $500,000.

1977 - Subsec. (b). Pub. L. 95-89 inserted ''and'' between

''capital'' and ''surplus''.

1976 - Subsec. (a). Pub. L. 94-305, Sec. 106(e), struck out ''of

incorporation'' after ''its articles''.

Subsec. (b). Pub. L. 94-305, Sec. 107, struck out provisions

prohibiting the bank from acquiring shares in a small business

investment company if the bank would hold 50 percent or more of any

class of equity securities issued by that investment company and

having actual or potential voting rights.

1967 - Subsec. (a). Pub. L. 90-104, Sec. 203(a), substituted

small business investment company minimum capital requirement, a

combined private paid-in capital and paid-in surplus, of $150,000

and adequate to assure reasonable prospect of sound and profitable

company operations and active and prudent management in accordance

with the articles of incorporation for former requirement of a

paid-in capital and surplus equal to at least $300,000, and

eliminated provisions for purchase of debentures of such companies

in an amount not to exceed the lesser of $700,000 or the amount of

paid-in capital and surplus of the company from other sources and

for subordination of debentures (both incorporated in section

686(b) of this title), for such purchases by the Administration

only during certain prescribed period, and deeming the debentures

part of the capital and surplus for certain purposes.

Subsec. (b). Pub. L. 90-104, Sec. 204, substituted prohibition

against bank acquisition of small business investment company stock

if, upon such acquisition, the aggregate amount of shares in such

companies then held by the bank would exceed 5 percent of the

capital and surplus, or the bank would hold 50 percent or more of

any class of equity securities issued by that investment company

and having actual or potential voting rights for former prohibition

against holding of shares in an amount aggregating more than 2

percent of its capital and surplus.

1964 - Subsec. (a). Pub. L. 88-273 increased the limitation on

Administration purchase of debentures from $400,000 to $700,000 and

extended the period for such purchase from three years after date

of issuance of license or date of enactment of Pub. L. 87-341, the

Small Business Investment Act Amendments of 1961 (Oct. 3, 1961),

whichever is later, to five years after date of issuance of license

or date of enactment of Pub. L. 88-273, the Small Business

Investment Act Amendments of 1963 (Feb. 28, 1964), whichever is

later.

1961 - Subsec. (a). Pub. L. 87-341, Sec. 3(a), inserted ''and

growth'', limited the purchase of debentures to the extent that

necessary funds are not available to the company involved from

private sources on reasonable terms, increased the amount of

purchasable debentures to not more than the lesser of $400,000 or

the paid-in capital and surplus of the company from other sources,

and restricted such purchases to such period as may be fixed by the

Administration, but not ending more than three years after the date

of issuance of the company's license under section 681c of this

title, or Oct. 3, 1961, whichever is later, and deleted provisions

limiting purchase of debentures to $150,000.

Subsec. (b). Pub. L. 87-341, Sec. 3(b), increased the maximum

amount of shares a bank may hold in small business investment

companies to 2 percent of the capital and surplus.

1960 - Subsec. (b). Pub. L. 86-502 substituted ''Notwithstanding

the provisions of section 1845(a)(1) of title 12, shares'' for

''Shares''.

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section

3 of Pub. L. 105-135, set out as a note under section 631 of this

title.

EFFECTIVE DATE OF 1967 AMENDMENT

Amendment by Pub. L. 90-104 effective 90 days after Oct. 11,

1967, see section 211 of Pub. L. 90-104, set out as a note under

section 681 of this title.

EFFECT OF SMALL BUSINESS EQUITY ENHANCEMENT ACT OF 1992 ON

SECURITIES LAWS

Nothing in amendment by Pub. L. 102-366 to be construed to affect

applicability of securities laws or to otherwise supersede or limit

jurisdiction of Securities and Exchange Commission, see section 418

of Pub. L. 102-366, set out as a note under section 661 of this

title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 681, 683 of this title;

title 42 section 9815.

-CITE-

15 USC Sec. 683 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 683. Borrowing operations

-STATUTE-

(a) Authority to issue obligations

Each small business investment company shall have authority to

borrow money and to issue its securities, promissory notes, or

other obligations under such general conditions and subject to such

limitations and regulations as the Administration may prescribe.

(b) Debentures and participating securities

To encourage the formation and growth of small business

investment companies the Administration is authorized when

authorized in appropriation Acts, to purchase, or to guarantee the

timely payment of all principal and interest as scheduled on,

debentures or participating securities issued by such companies.

Such purchases or guarantees may be made by the Administration on

such terms and conditions as it deems appropriate, pursuant to

regulations issued by the Administration. The full faith and credit

of the United States is pledged to the payment of all amounts which

may be required to be paid under any guarantee under this

subsection. Debentures purchased or guaranteed by the

Administration under this subsection shall be subordinate to any

other debenture bonds, promissory notes, or other debts and

obligations of such companies, unless the Administration in its

exercise of reasonable investment prudence and in considering the

financial soundness of such company determines otherwise. Such

debentures may be issued for a term of not to exceed fifteen years

and shall bear interest at a rate not less than a rate determined

by the Secretary of the Treasury taking into consideration the

current average market yield on outstanding marketable obligations

of the United States with remaining periods to maturity comparable

to the average maturities on such debentures, adjusted to the

nearest one-eighth of 1 percent, plus, for debentures obligated

after September 30, 2001, an additional charge, in an amount

established annually by the Administration, as necessary to reduce

to zero the cost (as defined in section 661a of title 2) to the

Administration of purchasing and guaranteeing debentures under this

chapter, which amount may not exceed 1.38 percent per year, and

which shall be paid to and retained by the Administration. The

debentures or participating securities shall also contain such

other terms as the Administration may fix, and shall be subject to

the following restrictions and limitations:

(1) The total amount of debentures and participating securities

that may be guaranteed by the Administration and outstanding from

a company licensed under section 681(c) of this title shall not

exceed 300 per centum of the private capital of such company:

Provided, That nothing in this paragraph shall require any such

company that on March 31, 1993, has outstanding debentures in

excess of 300 per centum of its private capital to prepay such

excess: And provided further, That any such company may apply for

an additional debenture guarantee or participating security

guarantee with the proceeds to be used solely to pay the amount

due on such maturing debenture, but the maturity of the new

debenture or security shall be not later than September 30, 2002.

(2) Maximum leverage. -

(A) In general. - After March 31, 1993, the maximum amount of

outstanding leverage made available to a company licensed under

section 681(c) of this title shall be determined by the amount

of such company's private capital -

(i) if the company has private capital of not more than

$15,000,000, the total amount of leverage shall not exceed

300 percent of private capital;

(ii) if the company has private capital of more than

$15,000,000 but not more than $30,000,000, the total amount

of leverage shall not exceed $45,000,000 plus 200 percent of

the amount of private capital over $15,000,000; and

(iii) if the company has private capital of more than

$30,000,000, the total amount of leverage shall not exceed

$75,000,000 plus 100 percent of the amount of private capital

over $30,000,000 but not to exceed an additional $15,000,000.

(B) Adjustments. -

(i) In general. - The dollar amounts in clauses (i), (ii),

and (iii) of subparagraph (A) shall be adjusted annually to

reflect increases in the Consumer Price Index established by

the Bureau of Labor Statistics of the Department of Labor.

(ii) Initial adjustments. - The initial adjustments made

under this subparagraph after December 2, 1997, (FOOTNOTE 1)

shall reflect only increases from March 31, 1993.

(FOOTNOTE 1) See Codification note below.

calculating the outstanding leverage of a company for the

purposes of subparagraph (A), the Administrator shall not

include the amount of the cost basis of any equity investment

made by the company in a smaller enterprise located in a

low-income geographic area (as defined in section 689 of this

title), to the extent that the total of such amounts does not

exceed 50 percent of the company's private capital.

(3) Subject to the foregoing dollar and percentage limits, a

company licensed under section 681(c) of this title may issue and

have outstanding both guaranteed debentures and participating

securities: Provided, That the total amount of participating

securities outstanding shall not exceed 200 per centum of private

capital.

(4) Maximum aggregate amount of leverage. -

(A) In general. - Except as provided in subparagraph (B), the

aggregate amount of outstanding leverage issued to any company

or companies that are commonly controlled (as determined by the

Administrator) may not exceed $90,000,000, as adjusted annually

for increases in the Consumer Price Index.

(B) Exceptions. - The Administrator may, on a case-by-case

basis -

(i) approve an amount of leverage that exceeds the amount

described in subparagraph (A) for companies under common

control; and

(ii) impose such additional terms and conditions as the

Administrator determines to be appropriate to minimize the

risk of loss to the Administration in the event of default.

issued to a company or companies commonly controlled in an

amount that exceeds $90,000,000, whether as a result of an

increase in the Consumer Price Index or a decision of the

Administrator, is subject to subsection (d) of this section.

(D) Investments in low-income geographic areas. - In

calculating the aggregate outstanding leverage of a company for

the purposes of subparagraph (A), the Administrator shall not

include the amount of the cost basis of any equity investment

made by the company in a smaller enterprise located in a

low-income geographic area (as defined in section 689 of this

title), to the extent that the total of such amounts does not

exceed 50 percent of the company's private capital.

For purposes of this subsection, the term ''venture capital''

includes such common stock, preferred stock, or other financing

with subordination or nonamortization characteristics as the

Administration determines to be substantially similar to equity

financing.

The Administrator -

(1) shall not permit a licensee having outstanding leverage to

incur third party debt that would create or contribute to an

unreasonable risk of default or loss to the Federal Government;

and

(2) shall permit such licensees to incur third party debt only

on such terms and subject to such conditions as may be

established by the Administrator, by regulation or otherwise.

(d) Required certifications

(1) In general

The Administrator shall require each licensee, as a condition

of approval of an application for leverage, to certify in writing

(A) for licensees with leverage less than or equal to

$90,000,000, that not less than 20 percent of the licensee's

aggregate dollar amount of financings will be provided to

smaller enterprises; and

(B) for licensees with leverage in excess of $90,000,000,

that, in addition to satisfying the requirements of

subparagraph (A), 100 percent of the licensee's aggregate

dollar amount of financings made in whole or in part with

leverage in excess of $90,000,000 will be provided to smaller

enterprises (as defined in section 662(12) of this title).

(2) Multiple licensees

Multiple licensees under common control (as determined by the

Administrator) shall be considered to be a single licensee for

purposes of determining both the applicability of and compliance

with the investment percentage requirements of this subsection.

(e) Capital impairment

Before approving any application for leverage submitted by a

licensee under this chapter, the Administrator -

(1) shall determine that the private capital of the licensee

meets the requirements of section 682(a) of this title; and

(2) shall determine, taking into account the nature of the

assets of the licensee, the amount and terms of any third party

debt owed by such licensee, and any other factors determined to

be relevant by the Administrator, that the private capital of the

licensee has not been impaired to such an extent that the

issuance of additional leverage would create or otherwise

contribute to an unreasonable risk of default or loss to the

Federal Government.

(f) Redemption or repurchase of preferred stock

Notwithstanding any other provision of law -

(1) the Administrator may allow the issuer of any preferred

stock sold to the Administration before November 1, 1989 to

redeem or repurchase such stock, upon the payment to the

Administration of an amount less than the par value of such

stock, for a repurchase price determined by the Administrator

after consideration of all relevant factors, including -

(A) the market value of the stock;

(B) the value of benefits provided and anticipated to accrue

to the issuer;

and

(D) the estimate of the Administrator of any anticipated

redemption; and

(2) any moneys received by the Administration from the

repurchase of preferred stock shall be available solely to

provide debenture leverage to licensees having 50 percent or more

in aggregate dollar amount of their financings invested in

smaller enterprises.

(g) Guarantee of payment of and authority to purchase participating

securities

In order to encourage small business investment companies to

provide equity capital to small businesses, the Administration is

authorized to guarantee the payment of the redemption price and

prioritized payments on participating securities issued by such

companies which are licensed pursuant to section 681(c) of this

title, and a trust or a pool acting on behalf of the Administration

is authorized to purchase such securities. Such guarantees and

purchases shall be made on such terms and conditions as the

Administration shall establish by regulation. For purposes of this

section, (A) the term ''participating securities'' includes

preferred stock, a preferred limited partnership interest or a

similar instrument, including debentures under the terms of which

interest is payable only to the extent of earnings and (B) the term

''prioritized payments'' includes dividends on stock, interest on

qualifying debentures, or priority returns on preferred limited

partnership interests which are paid only to the extent of

earnings. Participating securities guaranteed under this

subsection shall be subject to the following restrictions and

limitations, in addition to such other restrictions and limitations

as the Administration may determine:

(1) Participating securities shall be redeemed not later than

15 years after their date of issuance for an amount equal to 100

per centum of the original issue price plus the amount of any

accrued prioritized payment: Provided, That if, at the time the

securities are redeemed, whether as scheduled or in advance, the

issuing company (A) has not paid all accrued prioritized payments

in full as provided in paragraph (2) below and (B) has not sold

or otherwise disposed of all investments subject to profit

distributions pursuant to paragraph (11), the company's

obligation to pay accrued and unpaid prioritized payments shall

continue and payment shall be made from the realized gain, if

any, on the disposition of such investments, but if on

disposition there is no realized gain, the obligation to pay

accrued and unpaid prioritized payments shall be extinguished:

Provided further, That in the interim, the company shall not make

any in-kind distributions of such investments unless it pays to

the Administration such sums, up to the amount of the unrealized

appreciation on such investments, as may be necessary to pay in

full the accrued prioritized payments.

(2) Prioritized payments on participating securities shall be

preferred and cumulative and payable out of the retained earnings

available for distribution, as defined by the Administration, of

the issuing company at a rate determined by the Secretary of the

Treasury taking into consideration the current average market

yield on outstanding marketable obligations of the United States

with remaining periods to maturity comparable to the average

maturities on such securities, adjusted to the nearest one-eighth

of 1 percent, plus, for participating securities obligated after

September 30, 2001, an additional charge, in an amount

established annually by the Administration, as necessary to

reduce to zero the cost (as defined in section 661a of title 2)

to the Administration of purchasing and guaranteeing

participating securities under this chapter, which amount may not

exceed 1.38 percent per year, and which shall be paid to and

retained by the Administration.

(3) In the event of liquidation of the company, participating

securities shall be senior in priority for all purposes to all

other equity interests in the issuing company, whenever created.

(4) Any company issuing a participating security under this

subsection shall commit to invest or shall invest an amount equal

to the outstanding face value of such security solely in equity

capital. As used in this subsection, ''equity capital'' means

common or preferred stock or a similar instrument, including

subordinated debt with equity features which is not amortized and

which provides for interest payments contingent upon and limited

to the extent of earnings.

(5) The only debt (other than leverage obtained in accordance

with this subchapter) which any company issuing a participating

security under this subsection may have outstanding shall be

temporary debt in amounts limited to not more than 50 per centum

of private capital.

(6) The Administration may permit the proceeds of a

participating security to be used to pay the principal amount due

on outstanding debentures guaranteed by the Administration, if

(A) the company has outstanding equity capital invested in an

amount equal to the amount of the debentures being refinanced and

(B) the Administration receives profit participation on such

terms and conditions as it may determine, but not to exceed the

per centums specified in paragraph (11).

(7) For purposes of computing profit participation under

paragraph (11), except as otherwise determined by the

Administration, the management expenses of any company which

issues participating securities shall not be greater than 2.5 per

centum per annum of the combined capital of the company, plus

$125,000 if the company's combined capital is less than

$20,000,000. For purposes of this paragraph, (A) the term

''combined capital'' means the aggregate amount of private

capital and outstanding leverage and (B) the term ''management

expenses'' includes salaries, office expenses, travel, business

development, office and equipment rental, bookkeeping and the

development, investigation and monitoring of investments, but

does not include the cost of services provided by specialized

outside consultants, outside lawyers and outside auditors, who

perform services not generally expected of a venture capital

company nor does such term include the cost of services provided

by any affiliate of the company which are not part of the normal

process of making and monitoring venture capital investments.

(8) Notwithstanding paragraph (9), if a company is operating as

a limited partnership or as a subchapter S corporation or an

equivalent pass-through entity for tax purposes and if there are

no accumulated and unpaid prioritized payments, the company may

make annual distributions to the partners, shareholders, or

members in amounts not greater than each partner's,

shareholder's, or member's maximum tax liability. For purposes

of this paragraph, the term ''maximum tax liability'' means the

amount of income allocated to each partner, shareholder, or

member (including an allocation to the Administration as if it

were a taxpayer) for Federal income tax purposes in the income

tax return filed or to be filed by the company with respect to

the fiscal year of the company immediately preceding such

distribution, multiplied by the highest combined marginal Federal

and State income tax rates for corporations or individuals,

whichever is higher, on each type of income included in such

return. For purposes of this paragraph, the term ''State income

tax'' means the income tax of the State where the company's

principal place of business is located. A company may also elect

to make a distribution under this paragraph at any time during

any calendar quarter based on an estimate of the maximum tax

liability. If a company makes 1 or more interim distributions

for a calendar year, and the aggregate amount of those

distributions exceeds the maximum amount that the company could

have distributed based on a single annual computation, any

subsequent distribution by the company under this paragraph shall

be reduced by an amount equal to the excess amount distributed.

(9) After making any distributions as provided in paragraph

(8), a company with participating securities outstanding may

distribute the balance of income to its investors, specifically

including the Administration, in the per centums specified in

paragraph (11), if there are no accumulated and unpaid

prioritized payments and if all amounts due the Administration

pursuant to paragraph (11) have been paid in full, subject to the

following conditions:

(A) As of the date of the proposed distribution, if the

amount of leverage outstanding is more than 200 per centum of

the amount of private capital, any amounts distributed shall be

made to private investors and to the Administration in the

ratio of leverage to private capital.

(B) As of the date of the proposed distribution, if the

amount of leverage outstanding is more than 100 per centum but

not more than 200 per centum of the amount of private capital,

50 per centum of any amounts distributed shall be made to the

Administration and 50 per centum shall be made to the private

investors.

or less, of the amount of private capital, the ratio shall be

that for distribution of profits as provided in paragraph (11).

(D) Any amounts received by the Administration under

subparagraph (A) or (B) shall be applied first as profit

participation as provided in paragraph (11) and any remainder

shall be applied as a prepayment of the principal amount of the

participating securities or debentures.

(10) After making any distributions pursuant to paragraph (8),

a company with participating securities outstanding may return

capital to its investors, specifically including the

Administration, if there are no accumulated and unpaid

prioritized payments and if all amounts due the Administration

pursuant to paragraph (11) have been paid in full. Any

distributions under this paragraph shall be made to private

investors and to the Administration in the ratio of private

capital to leverage as of the date of the proposed distribution:

Provided, That if the amount of leverage outstanding is less than

50 per centum of the amount of private capital or $10,000,000,

whichever is less, no distribution shall be required to be made

to the Administration unless the Administration determines, on a

case by case basis, to require distributions to the

Administration to reduce the amount of outstanding leverage to an

amount less than $10,000,000.

(11)(A) A company which issues participating securities shall

agree to allocate to the Administration a share of its profits

determined by the relationship of its private capital to the

amount of participating securities guaranteed by the

Administration in accordance with the following:

(i) If the total amount of participating securities is 100

per centum of private capital or less, the company shall

allocate to the Administration a per centum share computed as

follows: the amount of participating securities divided by

private capital times 9 per centum.

(ii) If the total amount of participating securities is more

than 100 per centum but not greater than 200 per centum of

private capital, the company shall allocate to the

Administration a per centum share computed as follows:

(I) 9 per centum, plus

(II) 3 per centum of the amount of participating securities

minus private capital divided by private capital.

(B) Notwithstanding any other provision of this paragraph -

(i) in no event shall the total per centum required by this

paragraph exceed 12 per centum, unless required pursuant to the

provisions of (ii) below,

(ii) if, on the date the participating securities are

marketed, the interest rate on Treasury bonds with a maturity

of 10 years is a rate other than 8 per centum, the

Administration shall adjust the rate specified in paragraph (A)

above, either higher or lower, by the same per centum by which

the Treasury bond rate is higher or lower than 8 per centum,

and

(iii) this paragraph shall not be construed to create any

ownership interest of the Administration in the company.

(12) A company may elect to make an in-kind distribution of

securities only if such securities are publicly traded and

marketable. The company shall deposit the Administration's share

of such securities for disposition with a trustee designated by

the Administration or, at its option and with the agreement of

the company, the Administration may direct the company to retain

the Administration's share. If the company retains the

Administration's share, it shall sell the Administration's share

and promptly remit the proceeds to the Administration. As used in

this paragraph, the term ''trustee'' means a person who is

knowledgeable about and proficient in the marketing of thinly

traded securities.

(h) Computation of amounts due under participating securities

The computation of amounts due the Administration under

participating securities shall be subject to the following terms

and conditions:

(1) The formula in subsection (g)(11) of this section shall be

computed annually and the Administration shall receive

distributions of its profit participation at the same time as

other investors in the company.

(2) The formula shall not be modified due to an increase in the

private capital unless the increase is provided for in a proposed

business plan submitted to and approved by the Administration.

(3) After distributions have been made, the Administration's

share of such distributions shall not be recomputed or reduced.

(4) If the company prepays or repays the participating

securities, the Administration shall receive the requisite

participation upon the distribution of profits due to any

investments held by the company on the date of the repayment or

prepayment.

(5) If a company is licensed on or before March 31, 1993, it

may elect to exclude from profit participation all investments

held on that date and in such case the Administration shall

determine the amount of the future expenses attributable to such

prior investment: Provided, That if the company issues

participating securities to refinance debentures as authorized in

subsection (g)(6) of this section, it may not elect to exclude

profits on existing investments under this paragraph.

(i) Leverage fee

With respect to leverage granted by the Administration to a

licensee, the Administration shall collect from the licensee a

nonrefundable fee in an amount equal to 3 percent of the face

amount of leverage granted to the licensee in the following manner:

1 percent upon the date on which the Administration enters into any

commitment for such leverage with the licensee, and the balance of

2 percent (or 3 percent if no commitment has been entered into by

the Administration) on the date on which the leverage is drawn by

the licensee.

(j) Calculation of subsidy rate

All fees, interest, and profits received and retained by the

Administration under this section shall be included in the

calculations made by the Director of the Office of Management and

Budget to offset the cost (as that term is defined in section 661a

of title 2) to the Administration of purchasing and guaranteeing

debentures and participating securities under this chapter.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 303, Aug. 21, 1958, 72 Stat. 692;

Pub. L. 87-341, Sec. 4, Oct. 3, 1961, 75 Stat. 752; Pub. L. 88-273,

Sec. 3, Feb. 28, 1964, 78 Stat. 146; Pub. L. 90-104, title II, Sec.

205, Oct. 11, 1967, 81 Stat. 270; Pub. L. 92-213, Sec. 10, Dec. 22,

1971, 85 Stat. 776; Pub. L. 92-595, Sec. 2(c), (d), Oct. 27, 1972,

86 Stat. 1314; Pub. L. 94-305, title I, Sec. 104, June 4, 1976, 90

Stat. 665; Pub. L. 95-507, title I, Sec. 101, Oct. 24, 1978, 92

Stat. 1757; Pub. L. 101-162, title V, (4), Nov. 21, 1989, 103 Stat.

1025; Pub. L. 101-574, title II, Sec. 215(a)(1), (b), Nov. 15,

1990, 104 Stat. 2822; Pub. L. 102-366, title IV, Sec. 402, 403,

412, 413, Sept. 4, 1992, 106 Stat. 1008, 1009, 1018; Pub. L.

103-403, title II, Sec. 215, Oct. 22, 1994, 108 Stat. 4184; Pub. L.

104-208, div. D, title II, Sec. 208(d)(1)-(4)(A), (5), (6),

(h)(1)(A), Sept. 30, 1996, 110 Stat. 3009-743, 3009-744, 3009-746;

Pub. L. 105-135, title II, Sec. 215(b)-(d), Dec. 2, 1997, 111 Stat.

2602, 2603; Pub. L. 106-9, Sec. 2(d)(1), Apr. 5, 1999, 113 Stat.

18; Pub. L. 106-554, Sec. 1(a)(8) (Sec. 1(d)), Sec. 1(a)(9) (title

IV, Sec. 404, 405), Dec. 21, 2000, 114 Stat. 2763, 2763A-664,

2763A-690, 2763A-691; Pub. L. 107-100, Sec. 2(a), Dec. 21, 2001,

115 Stat. 966.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsecs. (b),

(e), (g)(2), and (j), see References in Text note set out under

section 661 of this title.

-COD-

CODIFICATION

December 2, 1997, referred to in subsec. (b)(2)(B)(ii), was in

the original ''the date of the enactment of the Small Business

Reauthorization Act of 1937'' which was translated as meaning the

date of enactment of the Small Business Reauthorization Act of

1997, Pub. L. 105-135, as the probable intent of Congress.

-MISC3-

AMENDMENTS

2001 - Subsec. (b). Pub. L. 107-100, Sec. 2(a)(1), in

introductory provisions, substituted ''September 30, 2001'' for

''September 30, 2000'', struck out ''of not more than 1 percent per

year'' after ''annually by the Administration,'', and inserted

''which amount may not exceed 1.38 percent per year, and'' before

''which shall be paid''.

Subsec. (g)(2). Pub. L. 107-100, Sec. 2(a)(2), substituted

''September 30, 2001'' for ''September 30, 2000'', struck out ''of

not more than 1 percent per year'' after ''annually by the

Administration,'', and inserted ''which amount may not exceed 1.38

percent per year, and'' before ''which shall be paid''.

2000 - Subsec. (b). Pub. L. 106-554, Sec. 1(a)(9) (title IV, Sec.

404(a)), in introductory provisions, substituted ''plus, for

debentures obligated after September 30, 2000, an additional

charge, in an amount established annually by the Administration, of

not more than 1 percent per year as necessary to reduce to zero the

cost (as defined in section 661a of title 2) to the Administration

of purchasing and guaranteeing debentures under this chapter, which

shall be paid to and retained by the Administration'' for ''plus an

additional charge of 1 percent per annum which shall be paid to and

retained by the Administration''.

Subsec. (b)(2). Pub. L. 106-554, Sec. 1(a)(8) (Sec. 1(d)(1)),

amended par. (2) generally, revising structure of par. from one

consisting of introductory provisions and subpars. (A) to (D) to

one consisting of subpars. (A) and (B), and adding subpar. (C).

Subsec. (b)(4)(D). Pub. L. 106-554, Sec. 1(a)(8) (Sec. 1(d)(2)),

added subpar. (D).

Subsec. (g)(2). Pub. L. 106-554, Sec. 1(a)(9) (title IV, Sec.

404(b)), substituted ''plus, for participating securities obligated

after September 30, 2000, an additional charge, in an amount

established annually by the Administration, of not more than 1

percent per year as necessary to reduce to zero the cost (as

defined in section 661a of title 2) to the Administration of

purchasing and guaranteeing participating securities under this

chapter, which shall be paid to and retained by the

Administration'' for ''plus an additional charge of 1 percent per

annum which shall be paid to and retained by the Administration''.

Subsec. (g)(8). Pub. L. 106-554, Sec. 1(a)(9) (title IV, Sec.

405), substituted ''subchapter S corporation'' for ''subchapter s

corporation'', ''any time during any calendar quarter based on an''

for ''the end of any calendar quarter based on a quarterly'', and

''interim distributions for a calendar year,'' for ''quarterly

distributions for a calendar year,''.

1999 - Subsec. (g)(13). Pub. L. 106-9 struck out heading and text

of par. (13). Text read as follows:

''(A) In general. - Subject to the provisions of subparagraph

(B), of the amount of the annual program level of participating

securities approved in appropriations Acts, 50 percent shall be

reserved for funding small business investment companies with

private capital of not more than $20,000,000.

''(B) Exception. - During the last quarter of each fiscal year,

if the Administrator determines that there is a lack of qualified

applicants with private capital of not more than $20,000,000, the

Administrator may utilize all or any part of the program level for

securities reserved under subparagraph (A) for qualified applicants

with private capital of more than $20,000,000.''

1997 - Subsec. (b)(2)(D). Pub. L. 105-135, Sec. 215(b)(1)(A),

added subpar. (D).

Subsec. (b)(4). Pub. L. 105-135, Sec. 215(b)(1)(B), added par.

(4) and struck out former par. (4) which read as follows: ''In no

event shall the aggregate amount of outstanding leverage of any

such company or companies which are commonly controlled as

determined by the Administration exceed $90,000,000, unless the

Administration determines on a case by case basis to permit a

higher amount for companies under common control and imposes such

additional terms and conditions as it determines appropriate to

minimize the risk of loss to the Administration in the event of

default.''

Subsec. (d). Pub. L. 105-135, Sec. 215(b)(2), added subsec. (d)

and struck out heading and text of former subsec. (d). Text read as

follows: ''The Administrator shall require each licensee, as a

condition of approval of an application for leverage, to certify in

writing that not less than 20 percent of the aggregate dollar

amount of the financings of the licensee will be provided to

smaller enterprises.''

Subsec. (g)(8). Pub. L. 105-135, Sec. 215(c), inserted at end ''A

company may also elect to make a distribution under this paragraph

at the end of any calendar quarter based on a quarterly estimate of

the maximum tax liability. If a company makes 1 or more quarterly

distributions for a calendar year, and the aggregate amount of

those distributions exceeds the maximum amount that the company

could have distributed based on a single annual computation, any

subsequent distribution by the company under this paragraph shall

be reduced by an amount equal to the excess amount distributed.''

Subsec. (i). Pub. L. 105-135, Sec. 215(d), substituted ''in the

following manner: 1 percent upon the date on which the

Administration enters into any commitment for such leverage with

the licensee, and the balance of 2 percent (or 3 percent if no

commitment has been entered into by the Administration) on the date

on which the leverage is drawn by the licensee'' for '', payable

upon the earlier of the date of entry into any commitment for such

leverage or the date on which the leverage is drawn by the

licensee'' before period at end.

1996 - Subsec. (a). Pub. L. 104-208, Sec. 208(h)(1)(A)(i),

substituted ''securities,'' for ''debenture bonds,''.

Subsec. (b). Pub. L. 104-208, Sec. 208(d)(1), (6)(A), in first

sentence struck out ''(but only to the extent that the necessary

funds are not available to said company from private sources on

reasonable terms)'' after ''is authorized'' and in fifth sentence

substituted ''1 percent, plus an additional charge of 1 percent per

annum which shall be paid to and retained by the Administration''

for ''1 per centum, plus such additional charge, if any, toward

covering other costs of the program as the Administration may

determine to be consistent with its purposes''.

Subsec. (c). Pub. L. 104-208, Sec. 208(d)(2), inserted heading

and amended text of subsec. (c) generally. Prior to amendment,

text consisted of 7 pars. which authorized the Administration to

purchase securities and to purchase or guarantee payments on

debentures issued by small business investment companies operating

under section 681(d) of this title.

Subsec. (d). Pub. L. 104-208, Sec. 208(d)(3), inserted heading

and amended text of subsec. (d) generally. Prior to amendment,

text read as follows: ''If the Administration guarantees debentures

issued by a small business investment company operating under

authority of section 681(d) of this title, it shall make, on behalf

of the company payments in such amounts as will reduce the

effective rate of interest to be paid by the company during the

first five years of the term of such debentures to a rate of

interest 3 points below the market rate of interest determined

pursuant to section 687l of this title. Such payments shall be

made by the Administration to the holder of the debenture, its

agents or assigns, or to the appropriate central registration

agent, if any. The authority to reduce interest rates as provided

in this subsection shall be limited to amounts provided in advance

in appropriations Acts, and the total amount shall be reserved

within the business loan and investment fund to pay an amount equal

to the amount of the reduction as it becomes due.''

Subsec. (e). Pub. L. 104-208, Sec. 208(d)(4)(A), inserted heading

and amended text of subsec. (e) generally. Prior to amendment,

text read as follows: ''In determining the private capital of a

small business investment company licensed under section 681(d) of

this title and notwithstanding section 662(9) of this title,

Federal, State, or local government funds received from sources

other than the Administration shall be included solely for

regulatory purposes, and not for the purpose of obtaining financial

assistance from or licensing by the Administration, providing such

funds were invested to November 21, 1989: Provided, That such

companies may include in private capital for any purpose funds

indirectly obtained from State or local governments. As used in

this subsection, the term 'capital indirectly obtained' includes

income generated by a State financing authority or similar State

institution or agency or from the investment of State or local

money or amounts originally provided to nonprofit institutions or

corporations which such institutions or corporations, in their

discretion, determine to invest in a company licensed under section

681(d) of this title.''

Subsec. (f). Pub. L. 104-208, Sec. 208(h)(1)(A)(ii), added

subsec. (f) and struck out former subsec. (f) which read as

follows: ''Notwithstanding the provisions of any other law, rule,

or regulation, the Administration is authorized to allow the issuer

of any preferred stock heretofore sold to the Administration to

redeem or repurchase such stock upon the payment to the

Administration of an amount less than the par value of such stock.

The Administration, in its sole discretion, shall determine the

repurchase price after considering factors including, but not

limited to, the market value of the stock, the value of benefits

previously provided and anticipated to accrue to the issuer, the

amount of dividends previously paid, accrued, and anticipated, and

the Administration's estimate of any anticipated redemption. The

Administration may guarantee debentures as provided in paragraph

(5) of subsection (c) of this section and allow the issuer to use

the proceeds to make the payments authorized herein. Any monies

received by the Administration from the repurchase of preferred

stock shall be deposited in the business loan and investment fund

and shall be available solely to provide assistance to companies

operating under the authority of section 681(d) of this title, to

the extent and in the amounts provided in advance in appropriations

Acts.''

Subsec. (g)(2). Pub. L. 104-208, Sec. 208(d)(6)(B), substituted

''1 percent, plus an additional charge of 1 percent per annum which

shall be paid to and retained by the Administration'' for ''1 per

centum, plus, at the time the guarantee is issued, such additional

charge, if any, toward covering other costs of the program as the

Administration may determine to be consistent with its purposes,

but not to exceed 2 per centum''.

Subsec. (g)(4). Pub. L. 104-208, Sec. 208(d)(5), struck out ''and

maintain'' after ''shall invest''.

Subsec. (g)(8). Pub. L. 104-208, Sec. 208(h)(1)(A)(iii),

substituted ''partners, shareholders, or members'' for ''partners

or shareholders'', ''partner's, shareholder's, or member's'' for

''partner's or shareholder's'', and ''partner, shareholder, or

member'' for ''partner or shareholder''.

Subsecs. (i), (j). Pub. L. 104-208, Sec. 208(d)(6)(C), added

subsecs. (i) and (j).

1994 - Subsec. (g)(13). Pub. L. 103-403 added par. (13).

1992 - Subsec. (b). Pub. L. 102-366, Sec. 402(1), inserted ''or

participating securities'' after ''debentures'' in first and sixth

sentences.

Subsec. (b)(1) to (4). Pub. L. 102-366, Sec. 402(2), added pars.

(1) to (4) and struck out former pars. (1) to (3) which read as

follows:

''(1) The total amount of debentures purchased or guaranteed and

outstanding at any one time from a company which does not qualify

under the terms of paragraph (2) of this subsection, shall not

exceed 300 percent of the combined private paid-in capital and

paid-in surplus of such company. In no event shall the debentures

guaranteed and outstanding under this subchapter of any such

company or companies which are commonly controlled as determined by

the Administration exceed $35,000,000.

''(2) The total amount of debentures which may be purchased or

guaranteed and outstanding at any one time from a company not

complying with section 681(d) of this title, which has investments

or legal commitments of 65 per centum or more of its total funds

available for investment in small business concerns invested or

committed in venture capital, and which has combined private

paid-in capital and paid-in surplus of $500,000 or more shall not

exceed 400 per centum of its combined private paid-in capital and

paid-in surplus. In no event shall the debentures of any such

company purchased or guaranteed and outstanding under this

paragraph exceed $35,000,000. Such additional purchases or

guarantees which the Administration makes under this paragraph

shall contain conditions to insure appropriate maintenance by the

company receiving such assistance of the described ratio during the

period in which debentures under this paragraph are outstanding.

''(3) Outstanding amounts of financial assistance provided to a

company by the Administration prior to the effective date of the

Small Business Investment Act Amendments of 1967 shall be deducted

from the maximum amount of debentures which the Administration

would otherwise be authorized to purchase or guarantee under this

subsection.''

Subsec. (c). Pub. L. 102-366, Sec. 412(1), (2), struck out

''preferred'' before ''securities'' in first sentence and inserted

at end ''As used in this subsection, the term 'securities' means

shares of nonvoting stock or other corporate securities or limited

partnership interests which have similar characteristics.''

Subsec. (c)(1). Pub. L. 102-366, Sec. 412(3), in introductory

provisions substituted ''such securities'' for ''shares of

nonvoting stock (or other corporate securities having similar

characteristics)''.

Subsec. (c)(6). Pub. L. 102-366, Sec. 402(3), inserted before

period at end '', except as provided in paragraph (7)''.

Subsec. (c)(7). Pub. L. 102-366, Sec. 402(4), added par. (7).

Subsec. (e). Pub. L. 102-366, Sec. 413, inserted ''licensed under

section 681(d) of this title and notwithstanding section 662(9) of

this title'' after ''company'' and substituted ''to November 21,

1989: Provided, That such companies may include in private capital

for any purpose funds indirectly obtained from State or local

governments. As used in this subsection, the term 'capital

indirectly obtained' includes income generated by a State financing

authority or similar State institution or agency or from the

investment of State or local money or amounts originally provided

to nonprofit institutions or corporations which such institutions

or corporations, in their discretion, determine to invest in a

company licensed under section 681(d) of this title.'' for ''prior

to November 21, 1989.''

Subsecs. (g), (h). Pub. L. 102-366, Sec. 403, added subsecs. (g)

and (h).

1990 - Subsec. (b)(1). Pub. L. 101-574, Sec. 215(a)(1), amended

last sentence generally. Prior to amendment, last sentence read as

follows: ''In no event shall the debentures of any such company

purchased or guaranteed and outstanding under this paragraph exceed

$35,000,000.''

Subsec. (c)(6). Pub. L. 101-574, Sec. 215(b)(1), inserted ''under

the provisions of this subchapter,'' after ''debentures or

securities''.

Subsec. (d). Pub. L. 101-574, Sec. 215(b)(2), struck out after

second sentence ''The aggregate amount of debentures with interest

rate reductions as provided in this subsection or as provided in

section 687i of this title which may be outstanding at any time

from any such company shall not exceed 200 per centum of the

private paid-in capital and paid-in surplus of such company.''

1989 - Subsec. (c). Pub. L. 101-162 added subsec. (c) and struck

out former subsec. (c) which contained provisions substantially

similar to introductory provisions and pars. (1) to (4).

Subsecs. (d) to (f). Pub. L. 101-162 added subsecs. (d) to (f).

1978 - Subsec. (c)(1). Pub. L. 95-507 increased the amount of

preferred stock small business investment companies were authorized

to sell to the Administration so long as such preferred stock

leverage did not exceed 200 per centum of the qualified paid-in

capital and so long as the amount of such stock purchased by the

Administration was not greater in amount than the investment

companies' outstanding equity investments and inserted definition

of ''equity securities''.

1976 - Subsec. (b)(1). Pub. L. 94-305, Sec. 104(a), substituted

''300'' for ''200'' and ''$35,000,000'' for ''$15,000,000''.

Subsec. (b)(2). Pub. L. 94-305, Sec. 104(b), substituted ''400''

for ''300'' and ''$35,000,000'' for ''$20,000,000''.

Subsec. (c)(2)(iii). Pub. L. 94-305, Sec. 104(c), substituted

''400'' for ''300'' and ''300'' for ''200''.

Subsec. (c)(4). Pub. L. 94-305, Sec. 104(c)(2), substituted

''300'' for ''200''.

1972 - Subsec. (b)(1). Pub. L. 92-595, Sec. 2(c)(1), (2),

substituted ''combined private paid-in capital'' for ''combined

paid-in capital'' and ''$15,000,000'' for ''$7,500,000''.

Subsec. (b)(2). Pub. L. 92-595, Sec. 2(c)(3), substituted

provisions relating to the purchase of debentures from companies

not complying with section 681(d) of this title having investments

or legal commitments of 65 per cent or more and whose combined

private paid-in capital and paid-in surplus is $500,000 or more for

provisions relating to such purchase from companies having

investments or legal commitments of 65 per cent or more and whose

combined paid-in capital and paid-in surplus is $1,000,000 or more,

and increased the maximum amount of outstanding debentures from

$10,000,000 to $20,000,000.

Subsec. (c). Pub. L. 92-595, Sec. 2(d), added subsec. (c).

1971 - Subsec. (b). Pub. L. 92-213 inserted provision for a

guaranty authority for the Administration and inserted requirement

that such guaranty authority of the Administration be exercised

only when authorized in appropriation Acts, authorized the purchase

or guaranty on such terms as the Administration deems appropriate

pursuant to regulations issued by the Administration, pledged the

full faith and credit of the United States to the payment of

amounts required to be paid in full under such guaranty, and struck

out provision authorizing Administration cooperation with banks or

other lending institutions in the purchase of debentures.

1967 - Subsec. (b). Pub. L. 90-104 substituted purchase of

debenture provisions of former section 682(a) of this title for

former provision for loans (eliminating participation on deferred

(standby) basis), incorporated subordination provision of such

former section 682(a) (inserting provision for Administration

exercise of reasonable investment prudence and for consideration of

financial soundness of the company), provided for maximum term of

fifteen years, substituted rate of interest taking into

consideration current average market yield on outstanding

marketable Treasury obligations with remaining periods to maturity

comparable to average maturities on such debentures, as adjusted

plus charge toward cost of programs, for rate of interest not lower

than average investment yield on marketable Treasury obligations

outstanding at time of loan involved, and added pars. (1) to (3)

and definition of venture capital, former par. (1) limiting

Administration purchases of company obligations to 50 per centum of

paid-in capital and surplus or $4,000,000, whichever is less, and

par. (2) requiring loans to be of such sound value as reasonably to

assure repayment.

1964 - Subsec. (b). Pub. L. 88-273 provided for participation

loans by Administration with lending institutions on an immediate

or deferred basis and for a minimum interest rate measured by the

average investment yield on marketable obligations of the United

States outstanding at the time of the loan involved, and designated

existing provisions as clauses (1) and (2).

1961 - Subsec. (b). Pub. L. 87-341 limited the Administration's

authorization to lend funds to the extent that the funds are not

available to the company involved from private sources on

reasonable terms, and the total amount of obligations, including

commitments to purchase such obligations, which can be purchased in

any one company to not more than 50 percent of the paid-in capital

and surplus or $4,000,000, whichever is less, and inserted ''All

loans made by the Administration under this subsection shall be of

such sound value as reasonably to assure repayment.''

EFFECTIVE DATE OF 2001 AMENDMENT

Pub. L. 107-100, Sec. 2(b), Dec. 21, 2001, 115 Stat. 966,

provided that: ''The amendments made by this section (amending this

section) shall become effective on October 1, 2001.''

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section

3 of Pub. L. 105-135, set out as a note under section 631 of this

title.

EFFECTIVE DATE OF 1990 AMENDMENT

Section 215(a)(2) of Pub. L. 101-574, as amended by Pub. L.

102-140, title VI, Sec. 609(c), Oct. 28, 1991, 105 Stat. 825,

provided that: ''The amendments made by paragraph (1) (amending

this section) shall become effective on July 1, 1992.''

EFFECTIVE DATE OF 1967 AMENDMENT

Amendment by Pub. L. 90-104 effective 90 days after Oct. 11,

1967, see section 211 of Pub. L. 90-104, set out as a note under

section 681 of this title.

REGULATIONS

Section 208(d)(4)(B) of div. D of Pub. L. 104-208 provided that:

''(i) Uniform applicability. - Any regulation issued by the

Administration to implement section 303(e) of the Small Business

Investment Act of 1958 (15 U.S.C. 683(e)) that applies to any

licensee with outstanding leverage obtained before the effective

date of that regulation, shall apply uniformly to all licensees

with outstanding leverage obtained before that effective date.

''(ii) Definitions. - For purposes of this subparagraph, the

terms 'Administration', 'leverage' and 'licensee' have the same

meanings as in section 103 of the Small Business Investment Act of

1958 (15 U.S.C. 662).''

EFFECT OF SMALL BUSINESS EQUITY ENHANCEMENT ACT OF 1992 ON

SECURITIES LAWS

Nothing in amendment by Pub. L. 102-366 to be construed to affect

applicability of securities laws or to otherwise supersede or limit

jurisdiction of Securities and Exchange Commission, see section 418

of Pub. L. 102-366, set out as a note under section 661 of this

title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 687l, 687m, 689, 697 of

this title; title 42 section 9815.

-CITE-

15 USC Sec. 684 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 684. Equity capital for small-business concerns

-STATUTE-

(a) Function of investment companies

It shall be a function of each small business investment company

to provide a source of equity capital for incorporated and

unincorporated small-business concerns, in such manner and under

such terms as the small business investment company may fix in

accordance with the regulations of the Administration.

(b) Conditions

Before any capital is provided to a small-business concern under

this section -

(1) the company may require such concern to refinance any or

all of its outstanding indebtedness so that the company is the

only holder of any evidence of indebtedness of such concern; and

(2) except as provided in regulations issued by the

Administration, such concern shall agree that it will not

thereafter incur any indebtedness without first securing the

approval of the company and giving the company the first

opportunity to finance such indebtedness.

Stat. 271

(d) Direct or cooperative provision of capital

Equity capital provided to incorporated small business concerns

under this section may be provided directly or in cooperation with

other investors, incorporated or unincorporated, through agreements

to participate on an immediate basis.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 304, Aug. 21, 1958, 72 Stat. 693;

Pub. L. 86-502, Sec. 6, June 11, 1960, 74 Stat. 196; Pub. L.

87-341, Sec. 5, Oct. 3, 1961, 75 Stat. 752; Pub. L. 90-104, title

II, Sec. 206, Oct. 11, 1967, 81 Stat. 271; Pub. L. 92-595, Sec.

2(e), Oct. 27, 1972, 86 Stat. 1316.)

-MISC1-

AMENDMENTS

1972 - Subsec. (a). Pub. L. 92-595 extended the function of small

business investment companies to provide a source of equity capital

to unincorporated business concerns.

1967 - Subsec. (c). Pub. L. 90-104 repealed subsec. (c) which

authorized purchase of stock of investment companies by

small-business concerns in an amount equal to 5 per centum of

capital provided.

1961 - Subsec. (d). Pub. L. 87-341 added subsec. (d).

1960 - Subsec. (a). Pub. L. 86-502 struck out ''primary'' before

''function'', and substituted ''a source of equity capital for

incorporated small-business concerns, in such manner and under such

terms as the small business investment company may fix in

accordance with the regulations of the Administration'' for ''a

source of needed equity capital for small-business concerns in the

manner and subject to the conditions described in this section''.

Subsec. (b). Pub. L. 86-502 redesignated subsec. (c) as (b), and

repealed former subsec. (b) which required capital to be secured

only through the purchase of debenture bonds.

Subsecs. (c), (d). Pub. L. 86-502 redesignated subsec. (d) as

(c), and substituted ''such concern shall have the right,

exercisable in whole or in such part as such concern may elect, to

become a stockholder-proprietor by investing in the capital stock

of the company 5 per centum'' for ''such concern shall be required

to become a stockholder-proprietor of the company by investing in

the capital stock of the company, in an amount equal to not less

than 2 percent nor more than 5 percent''. Former subsec. (c)

redesignated (b).

EFFECTIVE DATE OF 1967 AMENDMENT

Amendment by Pub. L. 90-104 effective 90 days after Oct. 11,

1967, see section 211 of Pub. L. 90-104, set out as a note under

section 681 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in title 26 section 1243.

-CITE-

15 USC Sec. 685 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 685. Long-term loans to small-business concerns

-STATUTE-

(a) Authorization

Each company is authorized to make loans, in the manner and

subject to the conditions described in this section, to

incorporated and unincorporated small-business concerns in order to

provide such concerns with funds needed for sound financing,

growth, modernization, and expansion.

(b) Direct loans; loans on participation basis

Loans made under this section may be made directly or in

cooperation with other lenders, incorporated or unincorporated,

through agreements to participate on an immediate or deferred

basis.

The maximum rate of interest for the company's share of any loan

made under this section shall be determined by the Administration:

Provided, That the Administration also shall permit those companies

which have issued debentures pursuant to this chapter to charge a

maximum rate of interest based upon the coupon rate of interest on

the outstanding debentures, determined on an annual basis, plus

such other expenses of the company as may be approved by the

Administration.

(d) Maturity

Any loan made under this section shall have a maturity not

exceeding twenty years.

(e) Soundness of loan; security

Any loan made under this section shall be of such sound value, or

so secured, as reasonably to assure repayment.

(f) Extension or renewal

Any company which has made a loan to a small-business concern

under this section is authorized to extend the maturity of or renew

such loan for additional periods, not exceeding ten years, if the

company finds that such extension or renewal will aid in the

orderly liquidation of such loan.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 305, Aug. 21, 1958, 72 Stat. 693;

Pub. L. 87-341, Sec. 6, Oct. 3, 1961, 75 Stat. 753; Pub. L. 94-305,

title I, Sec. 105, June 4, 1976, 90 Stat. 666; Pub. L. 102-366,

title IV, Sec. 411, Sept. 4, 1992, 106 Stat. 1018.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsec. (c),

see References in Text note set out under section 661 of this

title.

-MISC2-

AMENDMENTS

1992 - Subsec. (c). Pub. L. 102-366 inserted before period at end

'': Provided, That the Administration also shall permit those

companies which have issued debentures pursuant to this chapter to

charge a maximum rate of interest based upon the coupon rate of

interest on the outstanding debentures, determined on an annual

basis, plus such other expenses of the company as may be approved

by the Administration''.

1976 - Subsec. (b). Pub. L. 94-305 struck out provision that in

agreements to participate in loans on a deferred basis, the

participation by the company shall not be in excess of 90 percentum

of the balance of the loan outstanding at the time of disbursement.

1961 - Subsec. (b). Pub. L. 87-341 substituted ''other lenders,

incorporated or unincorporated'' for ''other lending

institutions''.

EFFECT OF SMALL BUSINESS EQUITY ENHANCEMENT ACT OF 1992 ON

SECURITIES LAWS

Nothing in amendment by Pub. L. 102-366 to be construed to affect

applicability of securities laws or to otherwise supersede or limit

jurisdiction of Securities and Exchange Commission, see section 418

of Pub. L. 102-366, set out as a note under section 661 of this

title.

-CITE-

15 USC Sec. 686 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 686. Aggregate limitations on amount of assistance to any

single enterprise

-STATUTE-

(a) Percentage limitation of private capital

If any small business investment company has obtained financing

from the Administration and such financing remains outstanding, the

aggregate amount of obligations and securities acquired and for

which commitments may be issued by such company under the

provisions of this subchapter for any single enterprise shall not

exceed 20 per centum of the private capital of such company,

without the approval of the Administration.

(b) Repealed. Pub. L. 92-595, Sec. 2(f), Oct. 27, 1972, 86 Stat.

1316

effective date of section

With respect to obligations or securities acquired prior to the

effective date of the Small Business Investment Act Amendments of

1967, and with respect to legally binding commitments issued prior

to such date, the provisions of this section as in effect

immediately prior to such effective date shall continue to apply.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 306, Aug. 21, 1958, 72 Stat. 694;

Pub. L. 87-341, Sec. 7(a), Oct. 3, 1961, 75 Stat. 753; Pub. L.

88-273, Sec. 4, Feb. 28, 1964, 78 Stat. 146; Pub. L. 90-104, title

II, Sec. 207, Oct. 11, 1967, 81 Stat. 271; Pub. L. 92-595, Sec.

2(f), Oct. 27, 1972, 86 Stat. 1316; Pub. L. 102-366, title IV, Sec.

408(a), Sept. 4, 1992, 106 Stat. 1016.)

-REFTEXT-

REFERENCES IN TEXT

For effective date of the Small Business Investment Act

Amendments of 1967, referred to in subsec. (c), see Effective Date

of 1967 Amendment note set out under section 681 of this title.

-MISC2-

AMENDMENTS

1992 - Subsec. (a). Pub. L. 102-366 amended subsec. (a)

generally. Prior to amendment, subsec. (a) read as follows:

''Without the approval of the Administration, the aggregate amount

of obligations and securities acquired and for which commitments

may be issued by any small business investment company under the

provisions of this chapter for any single enterprise shall not

exceed 20 percent of the combined private paid-in capital and

paid-in surplus of such company.''

1972 - Subsec. (a). Pub. L. 92-595, Sec. 2(f)(1), substituted

''combined private paid-in capital'' for ''combined paid-in

capital''.

Subsec. (b). Pub. L. 92-595, Sec. 2(f)(2), repealed subsec. (b)

which enumerated the items making up the combined paid-in capital

and paid-in surplus of companies licensed prior to January 1, 1968.

1967 - Subsec. (a). Pub. L. 90-104 substituted ''paid-in capital

and paid-in surplus of such company'' for ''capital and surplus of

such small business investment company authorized by this

chapter''.

Subsecs. (b), (c). Pub. L. 90-104 added subsecs. (b) and (c).

1964 - Pub. L. 88-273 struck out the $500,000 limitation on

amount of assistance to any single enterprise.

1961 - Pub. L. 87-341 inserted ''or (2) $500,000, whichever is

the lesser''.

EFFECTIVE DATE OF 1967 AMENDMENT

Amendment by Pub. L. 90-104 effective Jan. 1, 1968, see section

211 of Pub. L. 90-104, set out as a note under section 681 of this

title.

EFFECTIVE DATE OF 1961 AMENDMENT

Section 7(b) of Pub. L. 87-341 provided that: ''The amendment

made by subsection (a) (amending this section) shall apply only

with respect to obligations and securities acquired by a small

business investment company on or after the date of the enactment

of this Act (Oct. 3, 1961); except that such amendment shall not

apply with respect to any obligations or securities so acquired

pursuant to a commitment issued before such date.''

EFFECT OF SMALL BUSINESS EQUITY ENHANCEMENT ACT OF 1992 ON

SECURITIES LAWS

Nothing in amendment by Pub. L. 102-366 to be construed to affect

applicability of securities laws or to otherwise supersede or limit

jurisdiction of Securities and Exchange Commission, see section 418

of Pub. L. 102-366, set out as a note under section 661 of this

title.

-CITE-

15 USC Sec. 687 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687. Operation and regulation of companies

-STATUTE-

(a) Cooperation with banks and other financial institutions

Wherever practicable the operations of a small business

investment company, including the generation of business, may be

undertaken in cooperation with banks or other investors or lenders,

incorporated or unincorporated, and any servicing or initial

investigation required for loans or acquisitions of securities by

the company under the provisions of this chapter may be handled

through such banks or other investors or lenders on a fee basis.

Any small business investment company may receive fees for services

rendered to such banks and other investors and lenders.

(b) Use of advisory services; depository or fiscal agents;

investment of funds

Each small business investment company may make use, wherever

practicable, of the advisory services of the Federal Reserve System

and of the Department of Commerce which are available for and

useful to industrial and commercial businesses, and may provide

consulting and advisory services on a fee basis and have on its

staff persons competent to provide such services. Any Federal

Reserve bank is authorized to act as a depository or fiscal agent

for any company operating under provisions of this chapter. Such

companies with outstanding financings are authorized to invest

funds not reasonably needed for their operations in direct

obligations of, or obligations guaranteed as to principal and

interest by, the United States, or in certificates of deposit

maturing within one year or less, issued by any institution the

accounts of which are insured by the Federal Deposit Insurance

Corporation or the Federal Savings and Loan Insurance Corporation,

or in savings accounts of such institutions.

The Administration is authorized to prescribe regulations

governing the operations of small business investment companies,

and to carry out the provisions of this chapter, in accordance with

the purposes of this chapter.

(d) Forfeiture of rights, privileges, and franchises; jurisdiction

Should any small business investment company violate or fail to

comply with any of the provisions of this chapter or of regulations

prescribed hereunder, all of its rights, privileges, and franchises

derived therefrom may thereby be forfeited. Before any such

company shall be declared dissolved, or its rights, privileges, and

franchises forfeited, any noncompliance with or violation of this

chapter shall be determined and adjudged by a court of the United

States of competent jurisdiction in a suit brought for that purpose

in the district, territory, or other place subject to the

jurisdiction of the United States, in which the principal office of

such company is located. Any such suit shall be brought by the

United States at the instance of the Administration or the Attorney

General.

(e) Liability of United States

Except as expressly provided otherwise in this chapter, nothing

in this chapter or in any other provision of law shall be deemed to

impose any liability on the United States with respect to any

obligation entered into, or stocks issued, or commitments made, by

any company operating under the provisions of this chapter.

(f) Performance of functions, powers, and duties by Administration

and Administrator

In the performance of, and with respect to the functions, powers,

and duties vested by this chapter, the Administrator and the

Administration shall (in addition to any authority otherwise vested

by this chapter) have the functions, powers, and duties set forth

in the Small Business Act (15 U.S.C. 631 et seq.), and the

provisions of sections 13 and 16 of that Act (15 U.S.C. 642, 645),

insofar as applicable, are extended to the functions of the

Administrator and the Administration under this chapter.

(g) Annual report on Small Business Investment activities

(1) The Administration shall include in its annual report, made

pursuant to section 10(a) of the Small Business Act (15 U.S.C.

639(a)), a full and detailed account of its operations under this

chapter. Such report shall set forth the amount of losses

sustained by the Government as a result of such operations during

the preceding fiscal year, together with an estimate of the total

losses which the Government can reasonably expect to incur as a

result of such operations during the then current fiscal year.

(2) In its annual report for the year ending December 31, 1967,

and in each succeeding annual report made pursuant to section 10(a)

of the Small Business Act (15 U.S.C. 639(a)), the Administration

shall include full and detailed accounts relative to the following

matters:

(A) The Administration's recommendations with respect to the

feasibility and organization of a small business capital bank to

encourage private financing of small business investment

companies to replace Government financing of such companies.

(B) The Administration's plans to insure the provision of small

business investment company financing to all areas of the country

and to all eligible small business concerns including steps taken

to accomplish same.

Government funds incident to the inauguration and administration

of the small business investment company program and to insure

compliance with statutory and regulatory standards relating

thereto.

(D) An accounting by the Office of Management and Budget with

respect to Federal expenditures to business by executive

agencies, specifying the proportion of said expenditures going to

business concerns falling above and below small business size

standards applicable to small business investment companies.

(E) An accounting by the Treasury Department with respect to

tax revenues accruing to the Government from business concerns,

incorporated and unincorporated, specifying the source of such

revenues by concerns falling above and below the small business

size standards applicable to small business investment companies.

(F) An accounting by the Treasury Department with respect to

both tax losses and increased tax revenues related to small

business investment company financing of both individual and

corporate business taxpayers.

(G) Recommendations of the Treasury Department with respect to

additional tax incentives to improve and facilitate the

operations of small business investment companies and to

encourage the use of their financing facilities by eligible small

business concerns.

(H) A report from the Securities and Exchange Commission

enumerating actions undertaken by that agency to simplify and

minimize the regulatory requirements governing small business

investment companies under the Federal securities laws and to

eliminate overlapping regulation and jurisdiction as between the

Securities and Exchange Commission, the Administration, and other

agencies of the executive branch.

(I) A report from the Securities and Exchange Commission with

respect to actions taken to facilitate and stabilize the access

of small business concerns to the securities markets.

(J) Actions undertaken by the Securities and Exchange

Commission to simplify compliance by small business investment

companies with the requirements of the Investment Company Act of

1940 (15 U.S.C. 80a-1 et seq.) and to facilitate the election to

be taxed as regulated investment companies pursuant to section

851 of title 26.

(3) In its annual report for the year ending on December 31,

1993, and in each succeeding annual report made pursuant to section

10(a) of the Small Business Act (15 U.S.C. 639(a)), the

Administration shall include a full and detailed description or

account relating to -

(A) the number of small business investment companies the

Administration licensed, the number of licensees that have been

placed in liquidation, and the number of licensees that have

surrendered their licenses in the previous year, identifying the

amount of government leverage each has received and the type of

leverage instruments each has used;

(B) the amount of government leverage that each licensee

received in the previous year and the types of leverage

instruments each licensee used;

geographic locations, and other characteristics of the small

business investment companies using them, including the extent to

which the investment companies have used the leverage from each

instrument to make small business loans, equity investments, or

both; and

(D) the frequency with which each type of investment instrument

has been used in the current year and a comparison of the current

year with previous years.

(h) Certifications of eligibility

(1) Certification by small business concern

Prior to receiving financial assistance from a company licensed

pursuant to section 681 of this title, a small business concern

shall certify in writing that it meets the eligibility

requirements of the Small Business Investment Company Program or

the Specialized Small Business Investment Company Program, as

applicable.

(2) Certification by company

Prior to providing financial assistance to a small business

concern under this chapter, a company licensed pursuant to

section 681 of this title shall certify in writing that it has

reviewed the application for assistance of the small business

concern and that all documentation and other information supports

the eligibility of the applicant.

(3) Retention of certifications

Certificates made pursuant to paragraphs (1) and (2) shall be

retained by the company licensed pursuant to section 681 of this

title for the duration of the financial assistance.

(i) Interest rates

(1) The purpose of this subsection is to facilitate the orderly

and necessary flow of long-term loans and equity funds from small

business investment companies to small business concerns.

(2) In the case of a business loan, the small business investment

company making such loan may charge interest on such loan at a rate

which does not exceed the maximum rate prescribed by regulation by

the Administration for loans made by any licensee (determined

without regard to any State rate incorporated by such regulation).

In this paragraph, the term ''interest'' includes only the maximum

mandatory sum, expressed in dollars or as a percentage rate, that

is payable with respect to the business loan amount received by the

small business concern, and does not include the value, if any, of

contingent obligations, including warrants, royalty, or conversion

rights, granting the small business investment company an ownership

interest in the equity or increased future revenue of the small

business concern receiving the business loan.

(3) A State law or constitutional provision shall be preempted

for purposes of paragraph (2) with respect to any loan if such loan

is made before the date, on or after April 1, 1980, on which such

State adopts a law or certifies that the voters of such State have

voted in favor of any provision, constitutional or otherwise, which

states explicitly and by its terms that such State does not want

the provisions of this subsection to apply with respect to loans

made in such State, except that such State law or constitutional or

other provision shall be preempted in the case of a loan made, on

or after the date on which such law is adopted or such

certification is made, pursuant to a commitment to make such loan

which was entered into on or after April 1, 1980, and prior to the

date on which such law is adopted or such certification is made.

(4)(A) If the maximum rate of interest authorized under paragraph

(2) on any loan made by a small business investment company exceeds

the rate which would be authorized by applicable State law if such

State law were not preempted for purposes of this subsection, the

charging of interest at any rate in excess of the rate authorized

by paragraph (2) shall be deemed a forfeiture of the greater of (i)

all interest which the loan carries with it, or (ii) all interest

which has been agreed to be paid thereon.

(B) In the case of any loan with respect to which there is a

forfeiture of interest under subparagraph (A), the person who paid

the interest may recover from a small business investment company

making such loan an amount equal to twice the amount of the

interest paid on such loan. Such interest may be recovered in a

civil action commenced in a court of appropriate jurisdiction not

later than two years after the most recent payment of interest.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 308, Aug. 21, 1958, 72 Stat. 694;

Pub. L. 87-341, Sec. 8, 11(c)(d), Oct. 3, 1961, 75 Stat. 753, 756;

Pub. L. 88-273, Sec. 5, Feb. 28, 1964, 78 Stat. 147; Pub. L.

89-779, Sec. 3, Nov. 6, 1966, 80 Stat. 1359; Pub. L. 90-104, title

II, Sec. 210, Oct. 11, 1967, 81 Stat. 271; 1970 Reorg. Plan No. 2,

Sec. 102, eff. July 1, 1970, 35 F.R. 7959, 84 Stat. 2085; Pub. L.

93-501, title II, Sec. 204, Oct. 29, 1974, 88 Stat. 1559; Pub. L.

95-507, title I, Sec. 102, Oct. 24, 1978, 92 Stat. 1757; Pub. L.

96-104, title I, Sec. 104, Nov. 5, 1979, 93 Stat. 790; Pub. L.

96-161, title II, Sec. 204, Dec. 28, 1979, 93 Stat. 1236; Pub. L.

96-221, title V, Sec. 524, 529, Mar. 31, 1980, 94 Stat. 166, 168;

Pub. L. 99-226, Sec. 1, Dec. 28, 1985, 99 Stat. 1744; Pub. L.

99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 102-366,

title IV, Sec. 408(c), 417(a), Sept. 4, 1992, 106 Stat. 1016, 1019;

Pub. L. 103-403, title II, Sec. 214, Oct. 22, 1994, 108 Stat. 4184;

Pub. L. 104-208, div. D, title II, Sec. 208(e), (h)(1)(B), Sept.

30, 1996, 110 Stat. 3009-745, 3009-747; Pub. L. 106-9, Sec. 2(a),

Apr. 5, 1999, 113 Stat. 17.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsecs. (a)

to (h), see References in Text note set out under section 661 of

this title.

The Small Business Act, referred to in subsec. (f), is Pub. L.

85-536, July 18, 1958, 72 Stat. 384, as amended, which is

classified generally to chapter 14A (Sec. 631 et seq.) of this

title. For complete classification of this Act to the Code, see

Short Title note set out under section 631 of this title and

Tables.

The Investment Company Act of 1940, referred to in subsec.

(g)(2)(J), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789,

as amended, which is classified generally to subchapter I (Sec.

80a-1 et seq.) of chapter 2D of this title. For complete

classification of this Act to the Code, see section 80a-51 of this

title and Tables.

-COD-

CODIFICATION

Section 204 of Pub. L. 96-161, cited as a credit to this section,

was repealed by section 529 of Pub. L. 96-221 effective at the

close of Mar. 31, 1980. The amendment of this section by that

repealed provision, described in the 1979 Amendment note set out

under this section, shall continue to apply to any loan made, any

deposit made, or any obligation issued in any State during any

period when the amendment was in effect in such State.

Section 104 of Pub. L. 96-104, cited as a credit to this section,

was repealed by section 212 of Pub. L. 96-161, effective at the

close of Dec. 27, 1979. The amendment of this section by that

repealed provision, described in the 1979 Amendment note set out

under this section, shall continue in effect for limited purposes

pursuant to section 212 of Pub. L. 96-161. See Saving Provisions

note, describing the provisions of section 212 of Pub. L. 96-161,

set out under section 85 of Title 12, Banks and Banking.

Section 204 of Pub. L. 93-501, cited as a credit to this section,

was repealed by Pub. L. 96-104, Sec. 1, Nov. 5, 1979, 93 Stat. 789.

The amendment of this section by that repealed provision, described

in the 1974 Amendment note, shall continue in effect for limited

purposes pursuant to section 1 of Pub. L. 96-104. See Savings

Provisions note, describing the provisions of section 1 of Pub. L.

96-104, set out under section 85 of Title 12, Banks and Banking.

-MISC3-

AMENDMENTS

1999 - Subsec. (i)(2). Pub. L. 106-9 inserted at end: ''In this

paragraph, the term 'interest' includes only the maximum mandatory

sum, expressed in dollars or as a percentage rate, that is payable

with respect to the business loan amount received by the small

business concern, and does not include the value, if any, of

contingent obligations, including warrants, royalty, or conversion

rights, granting the small business investment company an ownership

interest in the equity or increased future revenue of the small

business concern receiving the business loan.''

1996 - Subsec. (e). Pub. L. 104-208, Sec. 208(e), substituted

''Except as expressly provided otherwise in this chapter, nothing''

for ''Nothing''.

Subsec. (h). Pub. L. 104-208, Sec. 208(h)(1)(B), substituted

''section 681 of this title'' for ''subsection (c) or (d) of

section 681 of this title'' in pars. (1) to (3).

1994 - Subsec. (h). Pub. L. 103-403 added subsec. (h).

1992 - Subsec. (b). Pub. L. 102-366, Sec. 408(c), inserted ''with

outstanding financings'' after ''Such companies'' in third

sentence.

Subsec. (g)(3). Pub. L. 102-366, Sec. 417(a), added par. (3).

1986 - Subsec. (g)(2)(J). Pub. L. 99-514 substituted ''Internal

Revenue Code of 1986'' for ''Internal Revenue Code of 1954'', which

for purposes of codification was translated as ''title 26'' thus

requiring no change in text.

1985 - Subsec. (i)(2). Pub. L. 99-226, Sec. 1(a), substituted

''the maximum rate prescribed by regulation by the Administration

for loans made by any licensee (determined without regard to any

State rate incorporated by such regulation).'' for ''the lowest of

the rates described in subparagraphs (A), (B), and (C)'' and struck

out subpars. (A), (B), and (C) which described the rates.

Subsec. (i)(3). Pub. L. 99-226, Sec. 1(b), substituted

''paragraph (2)'' for ''paragraph (2)(B)''.

1980 - Subsec. (h). Pub. L. 96-221, Sec. 529, repealed Pub. L.

96-104 and title II of Pub. L. 96-161, resulting in the striking

out of subsec. (h) which related to the limitation on interest

rates, overcharges, forfeitures, and the recovery of interest

payments. See subsec. (i) of this section for successor

provisions. See also Codification and 1979 Amendment notes under

this section.

Subsec. (i). Pub. L. 96-221, Sec. 524, added subsec. (i).

1979 - Subsec. (h). Pub. L. 96-161 reenacted subsec. (h) (as

added by Pub. L. 96-104) with three substitutions of dates: in par.

(3)(A) ''in the case of a State statute, July 1, 1980'' was

substituted for ''July 1, 1981'', in par. (3)(B) ''December 28,

1979'' was substituted for ''November 5, 1979'', and in par. (3)(C)

''December 28, 1979'' was substituted for ''November 5, 1979''.

Pub. L. 96-104 added subsec. (h). A prior subsec. (h), also

relating to limitation on interest rates, overcharges, forfeitures,

and the recovery of interest payments, was repealed by section 1 of

Pub. L. 96-104.

1978 - Subsec. (b). Pub. L. 95-507 inserted provisions

authorizing small business investment companies to invest funds not

reasonably needed for their operations in certificates of deposit

maturing within one year or less issued by particular insured

institutions and savings accounts of institutions insured by the

Federal Deposit Insurance Corporation.

1974 - Subsec. (h). Pub. L. 93-501 added subsec. (h).

1967 - Subsec. (g). Pub. L. 90-104 designated existing provisions

as par. (1) and added par. (2).

1966 - Subsec. (c). Pub. L. 89-779, Sec. 3(1), struck out

provisions subjecting each small business investment company to

examinations by examiners approved by the Administration and

requiring the submission of reports by the companies. See section

687b(b) of this title.

Subsecs. (f), (g). Pub. L. 89-799, Sec. 3(2), added subsecs. (f)

and (g).

1964 - Subsec. (b). Pub. L. 88-273 authorized investment of funds

in insured savings accounts (up to the amount of insurance) in

institutions insured by the Federal Savings and Loan Insurance

Corporation.

1961 - Subsec. (a). Pub. L. 87-341, Sec. 8, substituted

''investors or lenders'' for ''financial institutions'' wherever

appearing, and provided that these investors or lenders can be

either incorporated or unincorporated.

Subsec. (b). Pub. L. 87-341, Sec. 11(c), substituted ''operating

under the provisions of this chapter'' for ''organized under this

chapter''.

Subsec. (e). Pub. L. 87-341, Sec. 11(d), redesignated subsec. (g)

as (e), substituted ''operating under the provisions of this

chapter'' for ''organized under this chapter'', and repealed former

subsec. (e) which related to obtaining restraining orders against

violators of this chapter.

Subsec. (f). Pub. L. 87-341, Sec. 11(d), repealed subsec. (f)

which permitted small business investment companies to extend their

corporate existence for a term of not more than 30 years. See

subsec. (a) of section 681 of this title.

Subsec. (g). Pub. L. 87-341, Sec. 11(d), redesignated subsec. (g)

as (e).

EFFECTIVE DATE OF 1985 AMENDMENT

Section 2 of Pub. L. 99-226 provided that: ''This Act (amending

this section) shall apply to maximum interest rates prescribed by

the Administration on or after April 1, 1980.''

EFFECTIVE DATE OF 1980 AMENDMENT

Section 529 of Pub. L. 96-221 provided that the amendment made by

that section is effective at the close of Mar. 31, 1980.

EFFECTIVE DATE OF 1979 AMENDMENTS

Section 207 of Pub. L. 96-161, which provided that amendment by

Pub. L. 96-161 was applicable to loans made in any State during the

period beginning on Dec. 28, 1979, and ending on the earliest of

(1) in the case of a State statute, July 1, 1980; (2) the date,

after Dec. 28, 1979, on which such State adopts a law stating in

substance that such State does not want the amendment of this

section made by Pub. L. 96-161 to apply with respect to loans made

in such State; or (3) the date on which such State certifies that

the voters of such State, after Dec. 28, 1979, have voted in favor

of, or to retain, any law, provision of the constitution of such

State, or amendment to the constitution of such State which

prohibits the charging of interest at the rates provided in the

amendment of this section by Pub. L. 96-161, was repealed by Pub.

L. 96-221, title V, Sec. 529, Mar. 31, 1980, 94 Stat. 168.

Section 107 of Pub. L. 96-104, which provided that amendment by

Pub. L. 96-104 was applicable to loans made by any State during the

period beginning on Nov. 5, 1979, and ending on the earlier of July

1, 1981, or the date after Nov. 5, 1979, on which such State adopts

a law stating in substance that such State does not want the

amendment of this section to apply with respect to loans made in

such State, or the date on which such State certifies that the

voters of such State have voted in favor of, or to retain, any law,

provision of the constitution of such State, or amendment of the

constitution of such State, which prohibits the charging of

interest at the rates provided in the amendment of this section,

was repealed by Pub. L. 96-161, title II, Sec. 212, Dec. 28, 1979,

93 Stat. 1239.

EFFECTIVE DATE OF 1974 AMENDMENT

Section 206 of Pub. L. 93-501, which provided that amendment by

Pub. L. 93-501 was applicable to loans made in any state after Oct.

29, 1974, but prior to the earlier of July 1, 1977 or the date of

enactment by the state of a law prohibiting the charging of

interest at the rates provided in the amendment of this section,

was repealed by Pub. L. 96-104, Sec. 1, Nov. 5, 1979, 93 Stat. 789.

EFFECTIVE DATE OF 1967 AMENDMENT

Amendment by Pub. L. 90-104 effective 90 days after Oct. 11,

1967, see section 211 of Pub. L. 90-104, set out as a note under

section 681 of this title.

SAVINGS PROVISION

Section 529 of Pub. L. 96-221 provided in part that,

notwithstanding the repeal of Pub. L. 96-104 and title II of Pub.

L. 96-161, the provisions of subsec. (h) of this section (which had

been added to this section by those repealed laws) shall continue

to apply to any loan made, any deposit made, or any obligation

issued to any State during any period when those provisions were in

effect in such State.

EFFECT OF SMALL BUSINESS EQUITY ENHANCEMENT ACT OF 1992 ON

SECURITIES LAWS

Nothing in amendment by Pub. L. 102-366 to be construed to affect

applicability of securities laws or to otherwise supersede or limit

jurisdiction of Securities and Exchange Commission, see section 418

of Pub. L. 102-366, set out as a note under section 661 of this

title.

-TRANS-

TRANSFER OF FUNCTIONS

Federal Savings and Loan Insurance Corporation abolished and

functions transferred, see sections 401 to 406 of Pub. L. 101-73,

set out as a note under section 1437 of Title 12, Banks and

Banking.

Bureau of the Budget designated as Office of Management and

Budget and Offices of Director, Deputy Director, and Assistant

Directors of Bureau of the Budget designated Director, Deputy

Director, and Assistant Directors of Office of Management and

Budget, respectively. Records, property, personnel, and funds of

Bureau of the Budget transferred to Office of Management and

Budget. See Part I of Reorganization Plan 2 of 1970, set out in the

Appendix to Title 5, Government Organization and Employees.

-MISC5-

CHOICE OF HIGHEST APPLICABLE INTEREST RATE

In any case in which one or more provisions of, or amendments

made by, title V of Pub. L. 96-221, section 1735f-7a of Title 12,

Banks and Banking, or any other provisions of law, including

section 85 of Title 12, apply with respect to the same loan,

mortgage, credit sale, or advance, such loan, mortgage, credit

sale, or advance may be made at the highest applicable rate, see

section 528 of Pub. L. 96-221, set out as a note under section

1735f-7a of Title 12.

STATES HAVING CONSTITUTIONAL PROVISIONS REGARDING MAXIMUM INTEREST

RATES

Section 213 of Pub. L. 96-161 provided that the provisions of

title II of Pub. L. 96-161, which amended this section and repealed

provisions which had formerly amended this section, to continue to

apply until July 1, 1981, in the case of any State having a

constitutional provision regarding maximum interest rates.

-CROSS-

DEFINITION OF ''STATE''

For purposes of subsec. (i) of this section, the term ''State''

to include the several States, the Commonwealth of Puerto Rico, the

District of Columbia, Guam, the Trust Territories of the Pacific

Islands, the Northern Mariana Islands, and the Virgin Islands, see

section 527 of Pub. L. 96-221, set out as a note under section

1735f-7a of Title 12, Banks and Banking.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 687h of this title.

-CITE-

15 USC Sec. 687a 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687a. Revocation and suspension of licenses; cease and desist

orders

-STATUTE-

(a) Grounds for suspension or revocation

A license may be revoked or suspended by the Administration -

(1) for false statements knowingly made in any written

statement required under this subchapter, or under any regulation

issued under this subchapter by the Administration;

(2) if any written statement required under this subchapter, or

under any regulation issued under this subchapter by the

Administrator, fails to state a material fact necessary in order

to make the statement not misleading in the light of the

circumstances under which the statement was made;

(3) for willful or repeated violation of, or willful or

repeated failure to observe, any provision of this chapter;

(4) for willful or repeated violation of, or willful or

repeated failure to observe, any rule or regulation of the

Administration authorized by this chapter; or

(5) for violation of, or failure to observe, any cease and

desist order issued by the Administration under this section.

(b) Grounds for cease and desist order

Where a licensee or any other person has not complied with any

provision of this chapter, or of any regulation issued pursuant

thereto by the Administration, or is engaging or is about to engage

in any acts or practices which constitute or will constitute a

violation of such chapter or regulation, the Administration may

order such licensee or other person to cease and desist from such

action or failure to act. The Administration may further order

such licensee or other person to take such action or to refrain

from such action as the Administration deems necessary to insure

compliance with this chapter and the regulations. The

Administration may also suspend the license of a licensee, against

whom an order has been issued, until such licensee complies with

such order.

Before revoking or suspending a license pursuant to subsection

(a) of this section, or issuing a cease and desist order pursuant

to subsection (b) of this section, the Administration shall serve

upon the licensee and any other person involved an order to show

cause why an order revoking or suspending the license or a cease

and desist order should not be issued. Any such order to show

cause shall contain a statement of the matters of fact and law

asserted by the Administration and the legal authority and

jurisdiction under which a hearing is to be held, and shall set

forth that a hearing will be held before the Administration at a

time and place stated in the order. If after hearing, or a waiver

thereof, the Administration determines on the record that an order

revoking or suspending the license or a cease and desist order

should issue, it shall promptly issue such order, which shall

include a statement of the findings of the Administration and the

grounds and reasons therefor and specify the effective date of the

order, and shall cause the order to be served on the licensee and

any other person involved.

(d) Subpena of person, and books, papers and documents; fees and

mileage; enforcement

The Administration may require by subpena the attendance and

testimony of witnesses and the production of all books, papers, and

documents relating to the hearing from any place in the United

States. Witnesses summoned before the Administration shall be paid

by the party at whose instance they were called the same fees and

mileage that are paid witnesses in the courts of the United States.

In case of disobedience to a subpena, the Administration, or any

party to a proceeding before the Administration, may invoke the aid

of any court of the United States in requiring the attendance and

testimony of witnesses and the production of books, papers, and

documents.

(e) Petition to modify or set aside order; filing, time and place,

Administration to submit record; action of court; review

An order issued by the Administration under this section shall be

final and conclusive unless within thirty days after the service

thereof the licensee, or other person against whom an order is

issued, appeals to the United States court of appeals for the

circuit in which such licensee has its principal place of business

by filing with the clerk of such court a petition praying that the

Administration's order be set aside or modified in the manner

stated in the petition. After the expiration of such thirty days,

a petition may be filed only by leave of court on a showing of

reasonable grounds for failure to file the petition theretofore.

The clerk of the court shall immediately cause a copy of the

petition to be delivered to the Administration, and the

Administration shall thereupon certify and file in the court a

transcript of the record upon which the order complained of was

entered. If before such record is filed the Administration amends

or sets aside its order, in whole or in part, the petitioner may

amend the petition within such time as the court may determine, on

notice to the Administration. The filing of a petition for review

shall not of itself stay or suspend the operation of the order of

the Administration, but the court of appeals in its discretion may

restrain or suspend, in whole or in part, the operation of the

order pending the final hearing and determination of the petition.

The court may affirm, modify, or set aside the order of the

Administration. If the court determines that the just and proper

disposition of the case requires the taking of additional evidence,

the court shall order the Administration to reopen the hearing for

the taking of such evidence, in such manner and upon such terms and

conditions as the court may deem proper. The Administration may

modify its findings as to the facts, or make new findings, by

reason of the additional evidence so taken, and it shall file its

modified or new findings and the amendments, if any, of its order,

with the record of such additional evidence. No objection to an

order of the Administration shall be considered by the court unless

such objection was urged before the Administration or, if it was

not so urged, unless there were reasonable grounds for failure to

do so. The judgment and decree of the court affirming, modifying,

or setting aside any such order of the Administration shall be

subject only to review by the Supreme Court of the United States

upon certification or certiorari as provided in section 1254 of

title 28.

(f) Enforcement of order

If any licensee or other person against which or against whom an

order is issued under this section fails to obey the order, the

Administration may apply to the United States court of appeals,

within the circuit where the licensee has its principal place of

business, for the enforcement of the order, and shall file a

transcript of the record upon which the order complained of was

entered. Upon the filing of the application the court shall cause

notice thereof to be served on the licensee or other person. The

evidence to be considered, the procedure to be followed, and the

jurisdiction of the court shall be the same as is provided in

subsection (e) of this section for applications to set aside or

modify orders.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 309, as added Pub. L. 87-341, Sec.

9, Oct. 3, 1961, 75 Stat. 753; amended Pub. L. 89-779, Sec. 4, Nov.

6, 1966, 80 Stat. 1359; Pub. L. 98-620, title IV, Sec. 402(15)(A),

(B), Nov. 8, 1984, 98 Stat. 3358.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsecs.

(a)(3), (4) and (b), see References in Text note set out under

section 661 of this title.

-MISC2-

AMENDMENTS

1984 - Subsec. (e). Pub. L. 98-620, Sec. 402(15)(A), struck out

provision that the proceedings in such cases in the court of

appeals had to be made a preferred cause and had to be expedited in

every way.

Subsec. (f). Pub. L. 98-620, Sec. 402(15)(B), struck out

provision that the proceedings in such cases had to be made a

preferred cause and expedited in every way.

1966 - Subsec. (a). Pub. L. 89-779, Sec. 4(b), inserted reference

to revocation in introductory text preceding par. (1), and, in

pars. (1) and (2), deleted restriction which limited the grounds

for suspension or revocation for false or misleading statements to

the situation in which such statements were made for the purpose of

obtaining a license.

Subsec. (b). Pub. L. 89-779, Sec. 4(c), expanded the

Administration's authority to issue cease and desist orders by

authorizing their issuance against individuals who have not

complied with provisions of this chapter and against both licensees

and individuals who have violated or are about to violate this

chapter or regulations issued pursuant thereto.

Subsec. (c). Pub. L. 89-779, Sec. 4(d), inserted references to

persons involved other than the licensee and to the revocation of

licenses so as to conform the subsec. to the expansion of the

Administration's authority to revoke licenses and to issue cease

and desist orders to persons other than licensees under subsecs.

(a) and (b).

Subsec. (e). Pub. L. 89-779, Sec. 4(e), authorized the appeal

from an order issued by the Administration under this section by

other persons, besides the licensee, against whom an order is

issued.

Subsec. (f). Pub. 89-779, Sec. 4(f), provided that individuals as

well as licensees are to be affected by subsec. (f).

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-620 not applicable to cases pending on

Nov. 8, 1984, see section 403 of Pub. L. 98-620, set out as an

Effective Date note under section 1657 of Title 28, Judiciary and

Judicial Procedure.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 687h of this title.

-CITE-

15 USC Sec. 687b 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687b. Investigations and examinations; power to subpena and

take oaths and affirmations; aid of courts; examiners; reports

-STATUTE-

(a) Investigation of violations

The Administration may make such investigations as it deems

necessary to determine whether a licensee or any other person has

engaged or is about to engage in any acts or practices which

constitute or will constitute a violation of any provision of this

chapter, or of any rule or regulation under this chapter, or of any

order issued under this chapter. The Administration shall permit

any person to file with it a statement in writing, under oath or

otherwise as the Administration shall determine, as to all the

facts and circumstances concerning the matter to be investigated.

For the purpose of any investigation, the Administration is

empowered to administer oaths and affirmations, subpena witnesses,

compel their attendance, take evidence, and require the production

of any books, papers, and documents which are relevant to the

inquiry. Such attendance of witnesses and the production of any

such records may be required from any place in the United States.

In case of contumacy by, or refusal to obey a subpena issued to,

any person, including a licensee, the Administration may invoke the

aid of any court of the United States within the jurisdiction of

which such investigation or proceeding is carried on, or where such

person resides or carries on business, in requiring the attendance

and testimony of witnesses and the production of books, papers, and

documents; and such court may issue an order requiring such person

to appear before the Administration, there to produce records, if

so ordered, or to give testimony touching the matter under

investigation. Any failure to obey such order of the court may be

punished by such court as a contempt thereof. All process in any

such case may be served in the judicial district whereof such

person is an inhabitant or wherever he may be found.

(b) Examinations and reports

Each small business investment company shall be subject to

examinations made by direction of the Investment Division of the

Administration, which may be conducted with the assistance of a

private sector entity that has both the qualifications to conduct

and expertise in conducting such examinations, and the cost of such

examinations, including the compensation of the examiners, may in

the discretion of the Administration be assessed against the

company examined and when so assessed shall be paid by such

company. Fees collected under this subsection shall be deposited

in the account for salaries and expenses of the Administration, and

are authorized to be appropriated solely to cover the costs of

examinations and other program oversight activities. Every such

company shall make such reports to the Administration at such times

and in such form as the Administration may require; except that the

Administration is authorized to exempt from making such reports any

such company which is registered under the Investment Company Act

of 1940 (15 U.S.C. 80a-1 et seq.) to the extent necessary to avoid

duplication in reporting requirements.

Each small business investment company shall be examined at least

every two years in such detail so as to determine whether or not -

(1) it has engaged solely in lawful activities and those

contemplated by this subchapter;

(2) it has engaged in prohibited conflicts of interest;

(3) it has acquired or exercised illegal control of an assisted

small business;

(4) it has made investments in small businesses for not less

than 1 year;

(5) it has invested more than 20 per centum of its capital in

any individual small business, if such restriction is applicable;

(6) it has engaged in relending, foreign investments, or

passive investments; or

(7) it has charged an interest rate in excess of the maximum

permitted by law:

Provided, That the Administration may waive the examination (A) for

up to one additional year if, in its discretion, it determines such

a delay would be appropriate, based upon the amount of debentures

being issued by the company and its repayment record, the prior

operating experience of the company, the contents and results of

the last examination and the management expertise of the company,

or (B) if it is a company whose operations have been suspended

while the company is involved in litigation or is in receivership.

(d) Valuations

(1) Frequency of valuations

(A) In general

Each licensee shall submit to the Administrator a written

valuation of the loans and investments of the licensee not less

often than semiannually or otherwise upon the request of the

Administrator, except that any licensee with no leverage

outstanding shall submit such valuations annually, unless the

Administrator determines otherwise.

(B) Material adverse changes

Not later than 30 days after the end of a fiscal quarter of a

licensee during which a material adverse change in the

aggregate valuation of the loans and investments or operations

of the licensee occurs, the licensee shall notify the

Administrator in writing of the nature and extent of that

change.

(i) In general

Not less than once during each fiscal year, each licensee

shall submit to the Administrator the financial statements of

the licensee, audited by an independent certified public

accountant approved by the Administrator.

(ii) Audit requirements

Each audit conducted under clause (i) shall include -

(I) a review of the procedures and documentation used by

the licensee in preparing the valuations required by this

section; and

(II) a statement by the independent certified public

accountant that such valuations were prepared in conformity

with the valuation criteria applicable to the licensee

established in accordance with paragraph (2).

(2) Valuation criteria

Each valuation submitted under this subsection shall be

prepared by the licensee in accordance with valuation criteria,

which shall -

(A) be established or approved by the Administrator; and

(B) include appropriate safeguards to ensure that the noncash

assets of a licensee are not overvalued.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 310, as added Pub. L. 87-341, Sec.

9, Oct. 3, 1961, 75 Stat. 755; amended Pub. L. 89-779, Sec. 5, Nov.

6, 1966, 80 Stat. 1360; Pub. L. 90-104, title II, Sec. 208, Oct.

11, 1967, 81 Stat. 271; Pub. L. 100-590, title I, Sec. 104, Nov. 3,

1988, 102 Stat. 2992; Pub. L. 102-366, title IV, Sec. 406(b),

407(a), 408(b), Sept. 4, 1992, 106 Stat. 1016; Pub. L. 104-208,

div. D, title II, Sec. 208(f), (h)(1)(C), Sept. 30, 1996, 110

Stat. 3009-745, 3009-747; Pub. L. 105-135, title II, Sec. 216, Dec.

2, 1997, 111 Stat. 2603; Pub. L. 106-554, Sec. 1(a)(9) (title IV,

Sec. 406), Dec. 21, 2000, 114 Stat. 2763, 2763A-691.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsec. (a),

see References in Text note set out under section 661 of this

title.

The Investment Company Act of 1940, referred to in subsec. (b),

is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as amended,

which is classified generally to subchapter I (Sec. 80a-1 et seq.)

of chapter 2D of this title. For complete classification of this

Act to the Code, see section 80a-51 of this title and Tables.

-MISC2-

AMENDMENTS

2000 - Subsec. (c)(4). Pub. L. 106-554 substituted ''1 year'' for

''five years''.

1997 - Subsec. (b). Pub. L. 105-135 inserted after first sentence

''Fees collected under this subsection shall be deposited in the

account for salaries and expenses of the Administration, and are

authorized to be appropriated solely to cover the costs of

examinations and other program oversight activities.''

1996 - Subsec. (b). Pub. L. 104-208, Sec. 208(f)(1), inserted

''which may be conducted with the assistance of a private sector

entity that has both the qualifications to conduct and expertise in

conducting such examinations,'' after ''Investment Division of the

Administration,'' in first sentence.

Subsec. (c)(4). Pub. L. 104-208, Sec. 208(h)(1)(C), struck out

''not less than four years in the case of section 301(d) licensees

and in all other cases,'' after ''small businesses for''.

Subsec. (d). Pub. L. 104-208, Sec. 208(f)(2), inserted heading

and amended text of subsec. (d) generally. Prior to amendment,

text read as follows: ''Each small business investment company

shall adopt written guidelines for determination of the value of

investments made by such company. The board of directors of

corporations and the general partners of partnerships shall have

the sole responsibility for making a good faith determination of

the fair market value of the investments made by such company.

Determinations shall be made and reported to the Administration not

less than semiannually or at more frequent intervals as the

Administration determines appropriate: Provided, That any company

which does not have outstanding financial assistance under the

provisions of this subchapter shall be required to make such

determinations and reports to the Administration annually, unless

the Administration, in its discretion, determines otherwise.''

1992 - Subsec. (b). Pub. L. 102-366, Sec. 407(a), substituted

''Investment Division of'' for ''Administration by examiners

selected or approved by''.

Subsec. (c)(5). Pub. L. 102-366, Sec. 408(b), inserted before

semicolon at end '', if such restriction is applicable''.

Subsec. (d). Pub. L. 102-366, Sec. 406(b), added subsec. (d).

1988 - Subsec. (b). Pub. L. 100-590 struck out second sentence,

which read as follows: ''Each such company shall be examined at

least once each year, except that the Administrator may waive

examination in the case of a company whose operations have been

suspended by reason of the fact that the company is involved in

litigation or is in receivership.''

Subsec. (c). Pub. L. 100-590 added subsec. (c).

1967 - Subsec. (b). Pub. L. 90-104 required at least annual

examination of small business investment companies but provided for

waiver of examination of a company whose operations have been

suspended because the company is involved in litigation or is in

receivership.

1966 - Pub. L. 89-779 designated existing provisions as subsec.

(a) and added subsec. (b).

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section

3 of Pub. L. 105-135, set out as a note under section 631 of this

title.

EFFECTIVE DATE OF 1967 AMENDMENT

Amendment by Pub. L. 90-104 effective 90 days after Oct. 11,

1967, see section 211 of Pub. L. 90-104, set out as a note under

section 681 of this title.

EFFECT OF SMALL BUSINESS EQUITY ENHANCEMENT ACT OF 1992 ON

SECURITIES LAWS

Nothing in amendment by Pub. L. 102-366 to be construed to affect

applicability of securities laws or to otherwise supersede or limit

jurisdiction of Securities and Exchange Commission, see section 418

of Pub. L. 102-366, set out as a note under section 661 of this

title.

TRANSFER OF RESOURCES

Section 407(b) of Pub. L. 102-366 provided that: ''Effective

October 1, 1992, the personnel, assets, liabilities, contracts,

property, records, and unexpended balances of appropriations,

authorizations, and other funds employed, held, used, arising from,

available or to be made available, which are related to the

examination function provided by section 310 of the Small Business

Investment Act of 1958 (15 U.S.C. 687b) shall be transferred by the

Inspector General of the Small Business Administration to the

Investment Division of the Small Business Administration.''

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 687g of this title.

-CITE-

15 USC Sec. 687c 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687c. Injunctions and other orders

-STATUTE-

(a) Grounds; jurisdiction of court

Whenever, in the judgment of the Administration, a licensee or

any other person has engaged or is about to engage in any acts or

practices which constitute or will constitute a violation of any

provision of this chapter, or of any rule or regulation under this

chapter, or of any order issued under this chapter, the

Administration may make application to the proper district court of

the United States or a United States court of any place subject to

the jurisdiction of the United States for an order enjoining such

acts or practices, or for an order enforcing compliance with such

provision, rule, regulation, or order, and such courts shall have

jurisdiction of such actions and, upon a showing by the

Administration that such licensee or other person has engaged or is

about to engage in any such acts or practices, a permanent or

temporary injunction, restraining order, or other order, shall be

granted without bond.

(b) Equity jurisdiction of licensee and assets thereof

In any such proceeding the court as a court of equity may, to

such extent as it deems necessary, take exclusive jurisdiction of

the licensee or licensees and the assets thereof, wherever located;

and the court shall have jurisdiction in any such proceeding to

appoint a trustee or receiver to hold or administer under the

direction of the court the assets so possessed.

The Administration shall have authority to act as trustee or

receiver of the licensee. Upon request by the Administration, the

court may appoint the Administration to act in such capacity unless

the court deems such appointment inequitable or otherwise

inappropriate by reason of the special circumstances involved.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 311, as added Pub. L. 87-341, Sec.

9, Oct. 3, 1961, 75 Stat. 755; amended Pub. L. 89-779, Sec. 6, Nov.

6, 1966, 80 Stat. 1360; Pub. L. 98-620, title IV, Sec. 402(15)(C),

Nov. 8, 1984, 98 Stat. 3358.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsec. (a),

see References in Text note set out under section 661 of this

title.

-MISC2-

AMENDMENTS

1984 - Subsec. (a). Pub. L. 98-620 struck out provision that the

proceedings in such a case had to be made a preferred cause and had

to be expedited in every way.

1966 - Subsec. (c). Pub. L. 89-779 added subsec. (c).

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-620 not applicable to cases pending on

Nov. 8, 1984, see section 403 of Pub. L. 98-620, set out as an

Effective Date note under section 1657 of Title 28, Judiciary and

Judicial Procedure.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 687h of this title.

-CITE-

15 USC Sec. 687d 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687d. Conflicts of interest

-STATUTE-

For the purpose of controlling conflicts of interest which may be

detrimental to small business concerns, to small business

investment companies, to the shareholders, partners, or members of

either, or to the purposes of this chapter, the Administration

shall adopt regulations to govern transactions with any officer,

director, shareholder, partner, or member of any small business

investment company, or with any person or concern, in which any

interest, direct or indirect, financial or otherwise, is held by

any officer, director, shareholder, partner, or member of (1) any

small business investment company, or (2) any person or concern

with an interest, direct or indirect, financial or otherwise, in

any small business investment company. Such regulations shall

include appropriate requirements for public disclosure necessary to

the purposes of this section.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 312, as added Pub. L. 88-273, Sec.

6(a), Feb. 28, 1964, 78 Stat. 147; amended Pub. L. 94-305, title I,

Sec. 106(f), June 4, 1976, 90 Stat. 666; Pub. L. 104-208, div. D,

title II, Sec. 208(h)(1)(D), Sept. 30, 1996, 110 Stat. 3009-747;

Pub. L. 107-100, Sec. 3, Dec. 21, 2001, 115 Stat. 966.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in text, see

References in Text note set out under section 661 of this title.

-MISC2-

AMENDMENTS

2001 - Pub. L. 107-100 struck out ''(including disclosure in the

locality most directly affected by the transaction)'' after

''public disclosure''.

1996 - Pub. L. 104-208, Sec. 208(h)(1)(D), substituted

''shareholders, partners, or members'' for ''shareholders or

partners'' and substituted ''shareholder, partner, or member'' for

''shareholder, or partner'' in two places.

1976 - Pub. L. 94-305, Sec. 106(f)(2), which directed the

substitution of ''shareholder, or partner'' for ''or shareholders''

wherever appearing, was executed by making the substitution for

''or shareholder'' in two places to reflect the probable intent of

Congress.

Pub. L. 94-305, Sec. 106(f)(1), inserted ''or partners'' after

''to the shareholders''.

-CITE-

15 USC Sec. 687e 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687e. Removal or suspension of management officials

-STATUTE-

(a) Definition of ''management official''

In this section, the term ''management official'' means an

officer, director, general partner, manager, employee, agent, or

other participant in the management or conduct of the affairs of a

licensee.

(b) Removal of management officials

(1) Notice of removal

The Administrator may serve upon any management official a

written notice of its intention to remove that management

official whenever, in the opinion of the Administrator -

(A) such management official -

(i) has willfully and knowingly committed any substantial

violation of -

(I) this chapter;

(II) any regulation issued under this chapter; or

(III) a cease-and-desist order which has become final; or

(ii) has willfully and knowingly committed or engaged in

any act, omission, or practice which constitutes a

substantial breach of a fiduciary duty of that person as a

management official; and

(B) the violation or breach of fiduciary duty is one

involving personal dishonesty on the part of such management

official.

(2) Contents of notice

A notice of intention to remove a management official, as

provided in paragraph (1), shall contain a statement of the facts

constituting grounds therefor, and shall fix a time and place at

which a hearing will be held thereon.

(3) Hearings

(A) Timing

A hearing described in paragraph (2) shall be fixed for a

date not earlier than 30 days nor later than 60 days after the

date of service of notice of the hearing, unless an earlier or

a later date is set by the Administrator at the request of -

(i) the management official, and for good cause shown; or

(ii) the Attorney General of the United States.

(B) Consent

Unless the management official shall appear at a hearing

described in this paragraph in person or by a duly authorized

representative, that management official shall be deemed to

have consented to the issuance of an order of removal under

paragraph (1).

(4) Issuance of order of removal

(A) In general

In the event of consent under paragraph (3)(B), or if upon

the record made at a hearing described in this subsection, the

Administrator finds that any of the grounds specified in the

notice of removal has been established, the Administrator may

issue such orders of removal from office as the Administrator

deems appropriate.

(B) Effectiveness

An order under subparagraph (A) shall -

(i) become effective at the expiration of 30 days after the

date of service upon the subject licensee and the management

official concerned (except in the case of an order issued

upon consent as described in paragraph (3)(B), which shall

become effective at the time specified in such order); and

(ii) remain effective and enforceable, except to such

extent as it is stayed, modified, terminated, or set aside by

action of the Administrator or a reviewing court in

accordance with this section.

(1) In general

The Administrator may, if the Administrator deems it necessary

for the protection of the licensee or the interests of the

Administration, suspend from office or prohibit from further

participation in any manner in the management or conduct of the

affairs of the licensee, or both, any management official

referred to in subsection (b)(1) of this section, by written

notice to such effect served upon the management official.

(2) Effectiveness

A suspension or prohibition under paragraph (1) -

(A) shall become effective upon service of notice under

paragraph (1); and

(B) unless stayed by a court in proceedings authorized by

paragraph (3), shall remain in effect -

(i) pending the completion of the administrative

proceedings pursuant to a notice of intention to remove

served under subsection (b) of this section; and

(ii) until such time as the Administrator shall dismiss the

charges specified in the notice, or, if an order of removal

or prohibition is issued against the management official,

until the effective date of any such order.

(3) Judicial review

Not later than 10 days after any management official has been

suspended from office or prohibited from participation in the

management or conduct of the affairs of a licensee, or both,

under paragraph (1), that management official may apply to the

United States district court for the judicial district in which

the home office of the licensee is located, or the United States

District Court for the District of Columbia, for a stay of the

suspension or prohibition pending the completion of the

administrative proceedings pursuant to a notice of intent to

remove served upon the management official under subsection (b)

of this section, and such court shall have jurisdiction to stay

such action.

(d) Authority to suspend on criminal charges

(1) In general

Whenever a management official is charged in any information,

indictment, or complaint authorized by a United States attorney,

with the commission of or participation in a felony involving

dishonesty or breach of trust, the Administrator may, by written

notice served upon that management official, suspend that

management official from office or prohibit that management

official from further participation in any manner in the

management or conduct of the affairs of the licensee, or both.

(2) Effectiveness

A suspension or prohibition under paragraph (1) shall remain in

effect until the subject information, indictment, or complaint is

finally disposed of, or until terminated by the Administrator.

(3) Authority upon conviction

If a judgment of conviction with respect to an offense

described in paragraph (1) is entered against a management

official, then at such time as the judgment is not subject to

further appellate review, the Administrator may issue and serve

upon the management official an order removing that management

official, which removal shall become effective upon service of a

copy of the order upon the licensee.

(4) Authority upon dismissal or other disposition

A finding of not guilty or other disposition of charges

described in paragraph (1) shall not preclude the Administrator

from thereafter instituting proceedings to suspend or remove the

management official from office, or to prohibit the management

official from participation in the management or conduct of the

affairs of the licensee, or both, pursuant to subsection (b) or

(e) Notification to licensees

Copies of each notice required to be served on a management

official under this section shall also be served upon the

interested licensee.

(f) Procedural provisions; judicial review

(1) Hearing venue

Any hearing provided for in this section shall be -

(A) held in the Federal judicial district or in the territory

in which the principal office of the licensee is located,

unless the party afforded the hearing consents to another

place; and

(B) conducted in accordance with the provisions of chapter 5

of title 5.

(2) Issuance of orders

After a hearing provided for in this section, and not later

than 90 days after the Administrator has notified the parties

that the case has been submitted for final decision, the

Administrator shall render a decision in the matter (which shall

include findings of fact upon which its decision is predicated),

and shall issue and cause to be served upon each party to the

proceeding an order or orders consistent with the provisions of

this section.

(3) Authority to modify orders

The Administrator may modify, terminate, or set aside any order

issued under this section -

(A) at any time, upon such notice, and in such manner as the

Administrator deems proper, unless a petition for review is

timely filed in a court of appeals of the United States, as

provided in paragraph (4)(B), and thereafter until the record

in the proceeding has been filed in accordance with paragraph

(4)(C); and

(B) upon such filing of the record, with permission of the

court.

(4) Judicial review

(A) In general

Judicial review of an order issued under this section shall

be exclusively as provided in this subsection.

(B) Petition for review

Any party to a hearing provided for in this section may

obtain a review of any order issued pursuant to paragraph (2)

(other than an order issued with the consent of the management

official concerned, or an order issued under subsection (d) of

this section), by filing in the court of appeals of the United

States for the circuit in which the principal office of the

licensee is located, or in the United States Court of Appeals

for the District of Columbia Circuit, not later than 30 days

after the date of service of such order, a written petition

praying that the order of the Administrator be modified,

terminated, or set aside.

A copy of a petition filed under subparagraph (B) shall be

forthwith transmitted by the clerk of the court to the

Administrator, and thereupon the Administrator shall file in

the court the record in the proceeding, as provided in section

2112 of title 28.

(D) Court jurisdiction

Upon the filing of a petition under subparagraph (A) -

(i) the court shall have jurisdiction, which, upon the

filing of the record under subparagraph (C), shall be

exclusive, to affirm, modify, terminate, or set aside, in

whole or in part, the order of the Administrator, except as

provided in the last sentence of paragraph (3)(B);

(ii) review of such proceedings shall be had as provided in

chapter 7 of title 5; and

(iii) the judgment and decree of the court shall be final,

except that the judgment and decree shall be subject to

review by the Supreme Court of the United States upon

certiorari, as provided in section 1254 of title 28.

(E) Judicial review not a stay

The commencement of proceedings for judicial review under

this paragraph shall not, unless specifically ordered by the

court, operate as a stay of any order issued by the

Administrator under this section.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 313, as added Pub. L. 89-779, Sec.

7, Nov. 6, 1966, 80 Stat. 1360; amended Pub. L. 107-100, Sec. 5,

Dec. 21, 2001, 115 Stat. 967.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsec.

(b)(1)(A)(i)(I), (II), see References in Text note set out under

section 661 of this title.

-MISC2-

AMENDMENTS

2001 - Pub. L. 107-100 amended section catchline and text

generally. Prior to amendment, text related to removal and

suspension of directors and officers of licensees, with regard to

written notice of intention to remove and grounds for removal;

suspension pending completion of administrative proceedings; a

hearing upon notice of intention to remove a director or officer

and issuance of an order of removal; a stay of suspension and/or

prohibition by a United States district court; suspension of

directors and officers charged with felonies involving dishonesty

or breach of trust; and procedural aspects of hearings provided for

in this section.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 687h, 689o of this title.

-CITE-

15 USC Sec. 687f 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687f. Unlawful acts and omissions by officers, directors,

employees, or agents

-STATUTE-

(a) Violation by licensee deemed violation by persons participating

Wherever a licensee violates any provision of this chapter or

regulation issued thereunder by reason of its failure to comply

with the terms thereof or by reason of its engaging in any act or

practice which constitutes or will constitute a violation thereof,

such violation shall be deemed to be also a violation and an

unlawful act on the part of any person who, directly or indirectly,

authorizes, orders, participates in, or causes, brings about,

counsels, aids, or abets in the commission of any acts, practices,

or transactions which constitute or will constitute, in whole or in

part, such violation.

(b) Breach of fiduciary duty

It shall be unlawful for any officer, director, employee, agent,

or other participant in the management or conduct of the affairs of

a licensee to engage in any act or practice, or to omit any act, in

breach of his fiduciary duty as such officer, director, employee,

agent, or participant, if, as a result thereof, the licensee has

suffered or is in imminent danger of suffering financial loss or

other damage.

fraud, or breach of trust

Except with the written consent of the Administration, it shall

be unlawful -

(1) for any person hereafter to take office as an officer,

director, or employee of a licensee, or to become an agent or

participant in the conduct of the affairs or management of a

licensee, if -

(A) he has been convicted of a felony, or any other criminal

offense involving dishonesty or breach of trust, or

(B) he has been found civilly liable in damages, or has been

permanently or temporarily enjoined by an order, judgment, or

decree of a court of competent jurisdiction, by reason of any

act or practice involving fraud or breach of trust; or

(2) for any person to continue to serve in any of the

above-described capacities, if -

(A) he is hereafter convicted of a felony, or any other

criminal offense involving dishonesty or breach of trust, or

(B) he is hereafter found civilly liable in damages, or is

permanently or temporarily enjoined by an order, judgment, or

decree of a court of competent jurisdiction, by reason of any

act or practice involving fraud or breach of trust.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 314, as added Pub. L. 89-779, Sec.

7, Nov. 6, 1966, 80 Stat. 1363.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsec. (a),

see References in Text note set out under section 661 of this

title.

-CITE-

15 USC Sec. 687g 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687g. Penalties and forfeitures

-STATUTE-

(a) Report violations

Except as provided in subsection (b) of this section, a licensee

which violates any regulation or written directive issued by the

Administrator, requiring the filing of any regular or special

report pursuant to section 687b(b) of this title, shall forfeit and

pay to the United States a civil penalty of not more than $100 for

each and every day of the continuance of the licensee's failure to

file such report, unless it is shown that such failure is due to

reasonable cause and not due to willful neglect. The civil

penalties provided for in this section shall accrue to the United

States and may be recovered in a civil action brought by the

Administration.

(b) Exemption from reporting requirements

The Administration may by rules and regulations, or upon

application of an interested party, at any time previous to such

failure, by order, after notice and opportunity for hearing, exempt

in whole or in part, any small business investment company from the

provisions of subsection (a) of this section, upon such terms and

conditions and for such period of time as it deems necessary and

appropriate, if the Administration finds that such action is not

inconsistent with the public interest or the protection of the

Administration. The Administration may for the purposes of this

section make any alternative requirements appropriate to the

situation.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 315, as added Pub. L. 89-779, Sec.

7, Nov. 6, 1966, 80 Stat. 1364.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 687h of this title.

-CITE-

15 USC Sec. 687h 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687h. Jurisdiction and service of process

-STATUTE-

Any suit or action brought under section 687, 687a, 687c, 687e,

or 687g of this title by the Administration at law or in equity to

enforce any liability or duty created by, or to enjoin any

violation of, this chapter, or any rule, regulation, or order

promulgated thereunder, shall be brought in the district wherein

the licensee maintains its principal office, and process in such

cases may be served in any district in which the defendant

maintains its principal office or transacts business, or wherever

the defendant may be found.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 316, as added Pub. L. 89-779, Sec.

7, Nov. 6, 1966, 80 Stat. 1364.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in text, see

References in Text note set out under section 661 of this title.

-CITE-

15 USC Sec. 687i, 687j 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687i, 687j. Repealed. Pub. L. 104-208, div. D, title II, Sec.

208(h)(1)(E), Sept. 30, 1996, 110 Stat. 3009-747

-MISC1-

Section 687i, Pub. L. 85-699, title III, Sec. 317, as added Pub.

L. 92-595, Sec. 2(g), Oct. 27, 1972, 86 Stat. 1316; amended Pub. L.

95-507, title I, Sec. 103, Oct. 24, 1978, 92 Stat. 1758,

established effective rate of interest of debentures purchased by

Administration from small business investment company under

authority of section 683(c) of this title.

Section 687j, Pub. L. 85-699, title III, Sec. 318, as added Pub.

L. 92-595, Sec. 2(g), Oct. 27, 1972, 86 Stat. 1316, authorized

Administration to extend benefits of sections 683(c) and 687i of

this title to any small business investment company operating under

authority of section 681(d) of this title, and which was owned, in

whole or in part, by one or more small business investment

companies, in accordance with regulations promulgated by

Administration.

-CITE-

15 USC Sec. 687k 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687k. Guaranteed obligations not eligible for purchase by

Federal Financing Bank

-STATUTE-

Nothing in any provision of law shall be construed to authorize

the Federal Financing Bank to acquire after September 30, 1985 -

(1) any obligation the payment of principal or interest on

which has at any time been guaranteed in whole or in part under

this subchapter,

(2) any obligation which is an interest in any obligation

described in paragraph (1), or

(3) any obligation which is secured by, or substantially all of

the value of which is attributable to, any obligation described

in paragraph (1) or (2).

-SOURCE-

(Pub. L. 85-699, title III, Sec. 318, formerly Sec. 320, as added

Pub. L. 99-272, title XVIII, Sec. 18004(a), Apr. 7, 1986, 100 Stat.

364; renumbered Sec. 318, Pub. L. 104-208, div. D, title II, Sec.

208(h)(1)(E), Sept. 30, 1996, 110 Stat. 3009-747.)

-MISC1-

PRIOR PROVISIONS

A prior section 318 of Pub. L. 85-699 was classified to section

687j of this title, prior to repeal by Pub. L. 104-208.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 689i of this title.

-CITE-

15 USC Sec. 687l 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687l. Issuance and guarantee of trust certificates

-STATUTE-

(a) Issuance; debentures or participating securities composing

trust or pool

The Administration is authorized to issue trust certificates

representing ownership of all or a fractional part of debentures

issued by small business investment companies and guaranteed by the

Administration under this chapter, or participating securities

which are issued by such companies and purchased and guaranteed

pursuant to section 683(g) of this title: Provided, That such trust

certificates shall be based on and backed by a trust or pool

approved by the Administration and composed solely of guaranteed

debentures or guaranteed participating securities.

(b) Terms and conditions of guarantee; payment of principal and

interest

The Administration is authorized, upon such terms and conditions

as are deemed appropriate, to guarantee the timely payment of the

principal of and interest on trust certificates issued by the

Administration or its agent for purposes of this section. Such

guarantee shall be limited to the extent of principal and interest

on the guaranteed debentures or the redemption price of and

priority payments on the participating securities, which compose

the trust or pool. In the event that a debenture in such trust or

pool is prepaid, or participating securities are redeemed, either

voluntarily or involuntarily, or in the event of default of a

debenture or voluntary or involuntary redemption of a participating

security, the guarantee of timely payment of principal and interest

on the trust certificates shall be reduced in proportion to the

amount of principal and interest such prepaid debenture or redeemed

participating security and priority payments represent in the trust

or pool. Interest on prepaid or defaulted debentures, or priority

payments on participating securities, shall accrue and be

guaranteed by the Administration only through the date of payment

on the guarantee. During the term of the trust certificate, it may

be called for redemption due to prepayment or default of all

debentures or redemption, whether voluntary or involuntary, of all

participating securities residing in the pool.

The full faith and credit of the United States is pledged to the

payment of all amounts which may be required to be paid under any

guarantee of such trust certificates issued by the Administration

or its agent pursuant to this section.

(d) Collection of fees

The Administration shall not collect a fee for any guarantee

under this section: Provided, That nothing herein shall preclude

any agent of the Administration from collecting a fee approved by

the Administration for the functions described in subsection (f)(2)

of this section.

(e) Subrogation rights; ownership rights in debentures or

participating securities

(1) In the event the Administration pays a claim under a

guarantee issued under this section, it shall be subrogated fully

to the rights satisfied by such payment.

(2) No State or local law, and no Federal law, shall preclude or

limit the exercise by the Administration of its ownership rights in

the debentures or participating securities residing in a trust or

pool against which trust certificates are issued.

(f) Central registration requirements; regulation of brokers and

dealers

(1) The Administration shall provide for a central registration

of all trust certificates sold pursuant to this section.

(2) The Administrator shall contract with an agent or agents to

carry out on behalf of the Administration the pooling and the

central registration functions of this section including,

notwithstanding any other provision of law, maintenance on behalf

of and under the direction of the Administration, such commercial

bank accounts or investments in obligations of the United States as

may be necessary to facilitate trusts or pools backed by debentures

or participating securities guaranteed under this chapter, and the

issuance of trust certificates to facilitate such poolings. Such

agent or agents shall provide a fidelity bond or insurance in such

amounts as the Administration determines to be necessary to fully

protect the interests of the Government.

(3) Prior to any sale, the Administrator shall require the seller

to disclose to a purchaser of a trust certificate issued pursuant

to this section, information on the terms, conditions, and yield of

such instrument.

(4) The Administrator is authorized to regulate brokers and

dealers in trust certificates sold pursuant to this section.

(5) Nothing in this subsection shall prohibit the use of a

book-entry or other electronic form of registration for trust

certificates.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 319, formerly Sec. 321, as added

Pub. L. 99-272, title XVIII, Sec. 18005(a), Apr. 7, 1986, 100 Stat.

364; amended Pub. L. 101-162, title V, (5), Nov. 21, 1989, 103

Stat. 1028; Pub. L. 102-366, title IV, Sec. 404, Sept. 4, 1992, 106

Stat. 1013; renumbered Sec. 319 and amended Pub. L. 104-208, div.

D, title II, Sec. 205(b), 208(h)(1)(E), (F), Sept. 30, 1996, 110

Stat. 3009-738, 3009-747.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsecs. (a)

and (f)(2), see References in Text note set out under section 661

of this title.

-MISC2-

PRIOR PROVISIONS

A prior section 319 of Pub. L. 85-699, which amended section

80a-18 of this title, was renumbered section 317.

AMENDMENTS

1996 - Subsec. (a). Pub. L. 104-208, Sec. 208(h)(1)(F)(i), struck

out '', including companies operating under the authority of

section 681(d) of this title,'' after ''investment companies''.

Subsec. (f)(1). Pub. L. 104-208, Sec. 205(b)(1), struck out at

end ''Such central registration shall include with respect to each

sale -

''(A) identification of each small business investment company;

''(B) the interest rate or prioritized payment rate paid by the

small business investment company;

''(C) commissions, fees, or discounts paid to brokers and

dealers in trust certificates;

''(D) identification of each purchaser of the trust

certificate;

''(E) the price paid by the purchaser for the trust

certificate;

''(F) the interest rate on the trust certificate;

''(G) the fee of any agent for carrying out the functions

described in paragraph (2); and

''(H) such other information as the Administration deems

appropriate.''

Subsec. (f)(2). Pub. L. 104-208, Sec. 208(h)(1)(F)(ii), inserted

''or investments in obligations of the United States'' after

''accounts''.

Subsec. (f)(5). Pub. L. 104-208, Sec. 205(b)(2), added par. (5).

1992 - Pub. L. 102-366 amended section generally, in subsec. (a)

authorizing issuance of trust certificates representing ownership

of participating securities, in subsec. (b) inserting provisions

authorizing Administration to guarantee payment of redemption price

of and priority payments on participating securities, in subsec.

(e)(2) including participating securities within prohibition

against preclusion or limitation of Administration's ownership

rights, and in subsec. (f) in par. (1) substituting provisions

relating to small business investment company for provisions

relating to development company and requiring prioritized payment

rate to be included in central registration requirements, and in

par. (2) inserting provisions relating to participating securities,

contracts to carry out pooling, and maintenance of commercial bank

accounts.

1989 - Subsec. (a). Pub. L. 101-162 inserted '', including

companies operating under the authority of section 681(d) of this

title,'' after ''investment companies''.

EFFECTIVE DATE OF 1996 AMENDMENT

Amendment by section 205 of Pub. L. 104-208 effective Oct. 1,

1996, see section 3 of Pub. L. 104-208, set out as a note under

section 633 of this title.

Amendment by section 208 of Pub. L. 104-208 effective Sept. 30,

1996, see section 208(j) of Pub. L. 104-208, set out as a note

under section 634 of this title.

REGULATIONS

Section 18005(b) of Pub. L. 99-272 provided that:

''(1) Notwithstanding any law, rule, or regulation, within 60

days after the date of the enactment of this Act (Apr. 7, 1986),

the Small Business Administration shall develop and promulgate

final rules and regulations to implement the central registration

provisions provided for in section 321(f)(1) of the Small Business

Investment Act (15 U.S.C. 687l(f)(1)), and shall contract with an

agent for an initial period of not to exceed two years to carry out

the functions provided for in sections 321(f)(2) and 321(f)(3) of

such Act.

''(2) Notwithstanding any law, rule, or regulation, within 60

days after the date of the enactment of this Act (Apr. 7, 1986),

the Small Business Administration also shall consult with

representatives of appropriate Federal and State agencies and

officials, the securities industry, financial institutions and

lenders, and small business persons, and shall develop and

promulgate final rules and regulations to implement sections 504

and 505 (section 321; 15 U.S.C. 687l) of the Small Business

Investment Act.''

EFFECT OF SMALL BUSINESS EQUITY ENHANCEMENT ACT OF 1992 ON

SECURITIES LAWS

Nothing in amendment by Pub. L. 102-366 to be construed to affect

applicability of securities laws or to otherwise supersede or limit

jurisdiction of Securities and Exchange Commission, see section 418

of Pub. L. 102-366, set out as a note under section 661 of this

title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 687m of this title.

-CITE-

15 USC Sec. 687m 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 687m. Periodic issuance of guarantees and trust certificates

-STATUTE-

The Administration shall issue guarantees under section 683 of

this title and trust certificates under section 687l of this title

at periodic intervals of not less than every 12 months and shall do

so at such shorter intervals as its (FOOTNOTE 1) deems appropriate,

taking into consideration the amount and number of such guarantees

or trust certificates.

(FOOTNOTE 1) So in original. Probably should be ''it''.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 320, formerly Sec. 322, as added

Pub. L. 100-590, title I, Sec. 106(a), Nov. 3, 1988, 102 Stat.

2993; renumbered Sec. 320 and amended Pub. L. 104-208, div. D,

title II, Sec. 208(h)(1)(E), (G), Sept. 30, 1996, 110 Stat.

3009-747; Pub. L. 105-135, title II, Sec. 215(e), Dec. 2, 1997, 111

Stat. 2603; Pub. L. 106-9, Sec. 2(d)(2), Apr. 5, 1999, 113 Stat.

18.)

-MISC1-

PRIOR PROVISIONS

A prior section 320 of Pub. L. 85-699 was renumbered section 318

and is classified to section 687k of this title.

AMENDMENTS

1999 - Pub. L. 106-9 substituted ''12 months'' for ''6 months''.

1997 - Pub. L. 105-135 substituted ''6 months'' for ''three

months''.

1996 - Pub. L. 104-208 made technical amendment to reference in

original act which appears in text as reference to section 687l of

this title.

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section

3 of Pub. L. 105-135, set out as a note under section 631 of this

title.

-CITE-

15 USC Sec. 688 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part A - Small Business Investment Companies

-HEAD-

Sec. 688. Repealed. Pub. L. 87-341, Sec. 11(e), Oct. 3, 1961, 75

Stat. 756

-MISC1-

Section, Pub. L. 85-699, title III, Sec. 309, Aug. 21, 1958, 72

Stat. 696, related to approval of State chartered investment

companies. See subsec. (a) of section 681 of this title.

-CITE-

15 USC Part B - New Markets Venture Capital Program 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Part B - New Markets Venture Capital Program

-CITE-

15 USC Sec. 689 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689. Definitions

-STATUTE-

In this part, the following definitions apply:

(1) Developmental venture capital

The term ''developmental venture capital'' means capital in the

form of equity capital investments in businesses made with a

primary objective of fostering economic development in low-income

geographic areas. For the purposes of this paragraph, the term

''equity capital'' has the same meaning given such term in

section 683(g)(4) of this title.

(2) Low-income individual

The term ''low-income individual'' means an individual whose

income (adjusted for family size) does not exceed -

(A) for metropolitan areas, 80 percent of the area median

income; and

(B) for nonmetropolitan areas, the greater of -

(i) 80 percent of the area median income; or

(ii) 80 percent of the statewide nonmetropolitan area

median income.

(3) Low-income geographic area

the (FOOTNOTE 1) term ''low-income geographic area'' means -

(FOOTNOTE 1) So in original. Probably should be capitalized.

(A) any population census tract (or in the case of an area

that is not tracted for population census tracts, the

equivalent county division, as defined by the Bureau of the

Census of the Department of Commerce for purposes of defining

poverty areas), if -

(i) the poverty rate for that census tract is not less than

20 percent;

(ii) in the case of a tract -

(I) that is located within a metropolitan area, 50

percent or more of the households in that census tract have

an income equal to less than 60 percent of the area median

gross income; or

(II) that is not located within a metropolitan area, the

median household income for such tract does not exceed 80

percent of the statewide median household income; or

(iii) as determined by the Administrator based on objective

criteria, a substantial population of low-income individuals

reside, an inadequate access to investment capital exists, or

other indications of economic distress exist in that census

tract; or

(B) any area located within -

(i) a HUBZone (as defined in section 632(p) of this title

and the implementing regulations issued under that section);

(ii) an urban empowerment zone or urban enterprise

community (as designated by the Secretary of Housing and

Urban Development); or

(iii) a rural empowerment zone or rural enterprise

community (as designated by the Secretary of Agriculture).

(4) New Markets Venture Capital company

The term ''New Markets Venture Capital company'' means a

company that -

(A) has been granted final approval by the Administrator

under section 689c(e) of this title; and

(B) has entered into a participation agreement with the

Administrator.

(5) Operational assistance

The term ''operational assistance'' means management,

marketing, and other technical assistance that assists a small

business concern with business development.

(6) Participation agreement

The term ''participation agreement'' means an agreement,

between the Administrator and a company granted final approval

under section 689c(e) of this title, that -

(A) details the company's operating plan and investment

criteria; and

(B) requires the company to make investments in smaller

enterprises at least 80 percent of which are located in

low-income geographic areas.

(7) Specialized small business investment company

The term ''specialized small business investment company''

means any small business investment company that -

(A) invests solely in small business concerns that contribute

to a well-balanced national economy by facilitating ownership

in such concerns by persons whose participation in the free

enterprise system is hampered because of social or economic

disadvantages;

(B) is organized or chartered under State business or

nonprofit corporations statutes, or formed as a limited

partnership; and

effect before September 30, 1996.

(8) State

The term ''State'' means such of the several States, the

District of Columbia, the Commonwealth of Puerto Rico, the Virgin

Islands, Guam, American Samoa, the Commonwealth of the Northern

Mariana Islands, and any other commonwealth, territory, or

possession of the United States.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 351, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-653.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 683 of this title; title

11 section 109; title 12 section 1464.

-CITE-

15 USC Sec. 689a 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689a. Purposes

-STATUTE-

The purposes of the New Markets Venture Capital Program

established under this part are -

(1) to promote economic development and the creation of wealth

and job opportunities in low-income geographic areas and among

individuals living in such areas by encouraging developmental

venture capital investments in smaller enterprises primarily

located in such areas; and

(2) to establish a developmental venture capital program, with

the mission of addressing the unmet equity investment needs of

small enterprises located in low-income geographic areas, to be

administered by the Administrator -

(A) to enter into participation agreements with New Markets

Venture Capital companies;

(B) to guarantee debentures of New Markets Venture Capital

companies to enable each such company to make developmental

venture capital investments in smaller enterprises in

low-income geographic areas; and

and to other entities, for the purpose of providing operational

assistance to smaller enterprises financed, or expected to be

financed, by such companies.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 352, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-655.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 689b of this title.

-CITE-

15 USC Sec. 689b 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689b. Establishment

-STATUTE-

In accordance with this part, the Administrator shall establish a

New Markets Venture Capital Program, under which the Administrator

may -

(1) enter into participation agreements with companies granted

final approval under section 689c(e) of this title for the

purposes set forth in section 689a of this title;

(2) guarantee the debentures issued by New Markets Venture

Capital companies as provided in section 689d of this title; and

(3) make grants to New Markets Venture Capital companies, and

to other entities, under section 689g of this title.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 353, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-655.)

-CITE-

15 USC Sec. 689c 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689c. Selection of New Markets Venture Capital companies

-STATUTE-

(a) Eligibility

A company shall be eligible to apply to participate, as a New

Markets Venture Capital company, in the program established under

this part if -

(1) the company is a newly formed for-profit entity or a newly

formed for-profit subsidiary of an existing entity;

(2) the company has a management team with experience in

community development financing or relevant venture capital

financing; and

(3) the company has a primary objective of economic development

of low-income geographic areas.

(b) Application

To participate, as a New Markets Venture Capital company, in the

program established under this part a company meeting the

eligibility requirements set forth in subsection (a) of this

section shall submit an application to the Administrator that

includes -

(1) a business plan describing how the company intends to make

successful developmental venture capital investments in

identified low-income geographic areas;

(2) information regarding the community development finance or

relevant venture capital qualifications and general reputation of

the company's management;

(3) a description of how the company intends to work with

community organizations and to seek to address the unmet capital

needs of the communities served;

(4) a proposal describing how the company intends to use the

grant funds provided under this part to provide operational

assistance to smaller enterprises financed by the company,

including information regarding whether the company intends to

use licensed professionals, when necessary, on the company's

staff or from an outside entity;

(5) with respect to binding commitments to be made to the

company under this part, an estimate of the ratio of cash to

in-kind contributions;

(6) a description of the criteria to be used to evaluate

whether and to what extent the company meets the objectives of

the program established under this part;

(7) information regarding the management and financial strength

of any parent firm, affiliated firm, or any other firm essential

to the success of the company's business plan; and

(8) such other information as the Administrator may require.

(1) In general

From among companies submitting applications under subsection

(b) of this section, the Administrator shall, in accordance with

this subsection, conditionally approval (FOOTNOTE 1) companies to

participate in the New Markets Venture Capital Program.

(FOOTNOTE 1) So in original. Probably should be ''approve''.

(2) Selection criteria

In selecting companies under paragraph (1), the Administrator

shall consider the following:

(A) The likelihood that the company will meet the goal of its

business plan.

(B) The experience and background of the company's management

team.

the geographic areas in which the company intends to invest.

(D) The extent to which the company will concentrate its

activities on serving the geographic areas in which it intends

to invest.

(E) The likelihood that the company will be able to satisfy

the conditions under subsection (d) of this section.

(F) The extent to which the activities proposed by the

company will expand economic opportunities in the geographic

areas in which the company intends to invest.

(G) The strength of the company's proposal to provide

operational assistance under this part as the proposal relates

to the ability of the applicant to meet applicable cash

requirements and properly utilize in-kind contributions,

including the use of resources for the services of licensed

professionals, when necessary, whether provided by persons on

the company's staff or by persons outside of the company.

(H) Any other factors deemed appropriate by the

Administrator.

(3) Nationwide distribution

The Administrator shall select companies under paragraph (1) in

such a way that promotes investment nationwide.

(d) Requirements to be met for final approval

The Administrator shall grant each conditionally approved company

a period of time, not to exceed 2 years, to satisfy the following

requirements:

(1) Capital requirement

Each conditionally approved company shall raise not less than

$5,000,000 of private capital or binding capital commitments from

one or more investors (other than agencies or departments of the

Federal Government) who met criteria established by the

Administrator.

(2) Nonadministration resources for operational assistance

(A) In general

In order to provide operational assistance to smaller

enterprises expected to be financed by the company, each

conditionally approved company -

(i) shall have binding commitments (for contribution in

cash or in kind) -

(I) from any sources other than the Small Business

Administration that meet criteria established by the

Administrator;

(II) payable or available over a multiyear period

acceptable to the Administrator (not to exceed 10 years);

and

(III) in an amount not less than 30 percent of the total

amount of capital and commitments raised under paragraph

(1);

(ii) shall have purchased an annuity -

(I) from an insurance company acceptable to the

Administrator;

(II) using funds (other than the funds raised under

paragraph (1)), from any source other than the

Administrator; and

(III) that yields cash payments over a multiyear period

acceptable to the Administrator (not to exceed 10 years) in

an amount not less than 30 percent of the total amount of

capital and commitments raised under paragraph (1); or

(iii) shall have binding commitments (for contributions in

cash or in kind) of the type described in clause (i) and

shall have purchased an annuity of the type described in

clause (ii), which in the aggregate make available, over a

multiyear period acceptable to the Administrator (not to

exceed 10 years), an amount not less than 30 percent of the

total amount of capital and commitments raised under

paragraph (1).

(B) Exception

The Administrator may, in the discretion of the Administrator

and based upon a showing of special circumstances and good

cause, consider an applicant to have satisfied the requirements

of subparagraph (A) if the applicant has -

(i) a viable plan that reasonably projects the capacity of

the applicant to raise the amount (in cash or in-kind)

required under subparagraph (A); and

(ii) binding commitments in an amount equal to not less

than 20 percent of the total amount required under paragraph

(A).

In order to comply with the requirements of subparagraphs (A)

and (B), the total amount of a company's in-kind contributions

may not exceed 50 percent of the company's total contributions.

(e) Final approval; designation

The Administrator shall, with respect to each applicant

conditionally approved to operate as a New Markets Venture Capital

company under subsection (c) of this section, either -

(1) grant final approval to the applicant to operate as a New

Markets Venture Capital company under this part and designate the

applicant as such a company, if the applicant -

(A) satisfies the requirements of subsection (d) of this

section on or before the expiration of the time period

described in that subsection; and

(B) enters into a participation agreement with the

Administrator; or

(2) if the applicant fails to satisfy the requirements of

subsection (d) of this section on or before the expiration of the

time period described in that subsection, revoke the conditional

approval granted under that subsection.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 354, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-655.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 689, 689b, 689g of this

title.

-CITE-

15 USC Sec. 689d 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689d. Debentures

-STATUTE-

(a) In general

The Administrator may guarantee the timely payment of principal

and interest, as scheduled, on debentures issued by any New Markets

Venture Capital company.

(b) Terms and conditions

The Administrator may make guarantees under this section on such

terms and conditions as it deems appropriate, except that the term

of any debenture guaranteed under this section shall not exceed 15

years.

The full faith and credit of the United States is pledged to pay

all amounts that may be required to be paid under any guarantee

under this part.

(d) Maximum guarantee

(1) In general

Under this section, the Administrator may guarantee the

debentures issued by a New Markets Venture Capital company only

to be (FOOTNOTE 1) extent that the total face amount of

outstanding guaranteed debentures of such company does not exceed

150 percent of the private capital of the company, as determined

by the Administrator.

(FOOTNOTE 1) So in original. Probably should be ''the''.

(2) Treatment of certain Federal funds

For the purposes of paragraph (1), private capital shall

include capital that is considered to be Federal funds, if such

capital is contributed by an investor other than an agency or

department of the Federal Government.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 355, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-658.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 689b of this title.

-CITE-

15 USC Sec. 689e 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689e. Issuance and guarantee of trust certificates

-STATUTE-

(a) Issuance

The Administrator may issue trust certificates representing

ownership of all or a fractional part of debentures issued by a New

Markets Venture Capital company and guaranteed by the Administrator

under this part, if such certificates are based on and backed by a

trust or pool approved by the Administrator and composed solely of

guaranteed debentures.

(b) Guarantee

(1) In general

The Administrator may, under such terms and conditions as it

deems appropriate, guarantee the timely payment of the principal

of and interest on trust certificates issued by the Administrator

or its agents for purposes of this section.

(2) Limitation

Each guarantee under this subsection shall be limited to the

extent of principal and interest on the guaranteed debentures

that compose the trust or pool.

(3) Prepayment or default

In the event that a debenture in a trust or pool is prepaid, or

in the event of default of such a debenture, the guarantee of

timely payment of principal and interest on the trust

certificates shall be reduced in proportion to the amount of

principal and interest such prepaid debenture represents in the

trust or pool. Interest on prepaid or defaulted debentures shall

accrue and be guaranteed by the Administrator only through the

date of payment of the guarantee. At any time during its term, a

trust certificate may be called for redemption due to prepayment

or default of all debentures.

The full faith and credit of the United States is pledged to pay

all amounts that may be required to be paid under any guarantee of

a trust certificate issued by the Administrator or its agents under

this section.

(d) Fees

The Administrator shall not collect a fee for any guarantee of a

trust certificate under this section, but any agent of the

Administrator may collect a fee approved by the Administrator for

the functions described in subsection (f)(2) of this section.

(e) Subrogation and ownership rights

(1) Subrogation

In the event the Administrator pays a claim under a guarantee

issued under this section, it shall be subrogated fully to the

rights satisfied by such payment.

(2) Ownership rights

No Federal, State, or local law shall preclude or limit the

exercise by the Administrator of its ownership rights in the

debentures residing in a trust or pool against which trust

certificates are issued under this section.

(f) Management and administration

(1) Registration

The Administrator may provide for a central registration of all

trust certificates issued under this section.

(2) Contracting of functions

(A) In general

The Administrator may contract with an agent or agents to

carry out on behalf of the Administrator the pooling and the

central registration functions provided for in this section

including, notwithstanding any other provision of law -

(i) maintenance, on behalf of and under the direction of

the Administrator, of such commercial bank accounts or

investments in obligations of the United States as may be

necessary to facilitate the creation of trusts or pools

backed by debentures guaranteed under this part; and

(ii) the issuance of trust certificates to facilitate the

creation of such trusts or pools.

(B) Fidelity bond or insurance requirement

Any agent performing functions on behalf of the Administrator

under this paragraph shall provide a fidelity bond or insurance

in such amounts as the Administrator determines to be necessary

to fully protect the interests of the United States.

(3) Regulation of brokers and dealers

The Administrator may regulate brokers and dealers in trust

certificates issued under this section.

(4) Electronic registration

Nothing in this subsection may be construed to prohibit the use

of a book-entry or other electronic form of registration for

trust certificates issued under this section.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 356, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-658.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 689f of this title.

-CITE-

15 USC Sec. 689f 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689f. Fees

-STATUTE-

Except as provided in section 689e(d) of this title, the

Administrator may charge such fees as it deems appropriate with

respect to any guarantee or grant issued under this part.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 357, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-660.)

-CITE-

15 USC Sec. 689g 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689g. Operational assistance grants

-STATUTE-

(a) In general

(1) Authority

In accordance with this section, the Administrator may make

grants to New Markets Venture Capital companies and to other

entities, as authorized by this part, to provide operational

assistance to smaller enterprises financed, or expected to be

financed, by such companies or other entities.

(2) Terms

Grants made under this subsection shall be made over a

multiyear period not to exceed 10 years, under such other terms

as the Administrator may require.

(3) Grants to specialized small business investment companies

(A) Authority

In accordance with this section, the Administrator may make

grants to specialized small business investment companies to

provide operational assistance to smaller enterprises financed,

or expected to be financed, by such companies after the

effective date of the New Markets Venture Capital Program Act

of 2000.

(B) Use of funds

The proceeds of a grant made under this paragraph may be used

by the company receiving such grant only to provide operational

assistance in connection with an equity investment (made with

capital raised after the effective date of the New Markets

Venture Capital Program Act of 2000) in a business located in a

low-income geographic area.

A specialized small business investment company shall be

eligible for a grant under this section only if the company

submits to the Administrator, in such form and manner as the

Administrator may require, a plan for use of the grant.

(4) Grant amount

(A) New Markets Venture Capital companies

The amount of a grant made under this subsection to a New

Markets Venture Capital company shall be equal to the resources

(in cash or in kind) raised by the company under section

689c(d)(2) of this title.

(B) Other entities

The amount of a grant made under this subsection to any

entity other than a New Markets Venture Capital company shall

be equal to the resources (in cash or in kind) raised by the

entity in accordance with the requirements applicable to New

Market Venture Capital companies set forth in section

689c(d)(2) of this title.

(5) Pro rata reductions

If the amount made available to carry out this section is

insufficient for the Administrator to provide grants in the

amounts provided for in paragraph (4), the Administrator shall

make pro rata reductions in the amounts otherwise payable to each

company and entity under such paragraph.

(b) Supplemental grants

(1) In general

The Administrator may make supplemental grants to New Markets

Venture Capital companies and to other entities, as authorized by

this part under such terms as the Administrator may require, to

provide additional operational assistance to smaller enterprises

financed, or expected to be financed, by the companies.

(2) Matching requirement

The Administrator may require, as a condition of any

supplemental grant made under this subsection, that the company

or entity receiving the grant provide from resources (in a

(FOOTNOTE 1) cash or in kind), other then those provided by the

Administrator, a matching contribution equal to the amount of the

supplemental grant.

(FOOTNOTE 1) So in original. The article probably should not

appear.

None of the assistance made available under this section may be

used for any overhead or general and administrative expense of a

New Markets Venture Capital company or a specialized small business

investment company.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 358, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-660.)

-REFTEXT-

REFERENCES IN TEXT

The effective date of the New Markets Venture Capital Program Act

of 2000, referred to in subsec. (a)(3)(A), (B), probably means the

date of enactment of section 1 of H.R. 5663, as enacted by Pub. L.

106-554, Sec. 1(a)(8), which was approved Dec. 21, 2000.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 689b of this title.

-CITE-

15 USC Sec. 689h 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689h. Bank participation

-STATUTE-

(a) In general

Except as provided in subsection (b) of this section, any

national bank, any member bank of the Federal Reserve System, and

(to the extent permitted under applicable State law) any insured

bank that is not a member of such system, may invest in any New

Markets Venture Capital company, or in any entity established to

invest solely in New Markets Venture Capital companies.

(b) Limitation

No bank described in subsection (a) of this section may make

investments described in such subsection that are greater than 5

percent of the capital and surplus of the bank.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 359, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-661.)

-CITE-

15 USC Sec. 689i 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689i. Federal Financing Bank

-STATUTE-

Section 687k of this title shall not apply to any debenture

issued by a New Markets Venture Capital company under this part.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 360, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-661.)

-CITE-

15 USC Sec. 689j 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689j. Reporting requirement

-STATUTE-

Each New Markets Venture Capital company that participates in the

program established under this part shall provide to the

Administrator such information as the Administrator may require,

including -

(1) information related to the measurement criteria that the

company proposed in its program application; and

(2) in each case in which the company under this part makes an

investment in, or a loan or grant to, a business that is not

located in a low-income geographic area, a report on the number

and percentage of employees of the business who reside in such

areas.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 361, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-661.)

-CITE-

15 USC Sec. 689k 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689k. Examinations

-STATUTE-

(a) In general

Each New Markets Venture Capital company that participates in the

program established under this part shall be subject to

examinations made at the direction of the Investment Division of

the Small Business Administration in accordance with this section.

(b) Assistance of private sector entities

Examinations under this section may be conducted with the

assistance of a private sector entity that has both the

qualifications and the expertise necessary to conduct such

examinations.

(1) (FOOTNOTE 1) Assessment

(FOOTNOTE 1) So in original. No par. (2) has been enacted.

(A) In general

The Administrator may assess the cost of examinations under

this section, including compensation of the examiners, against

the company examined.

(B) Payment

Any company against which the Administrator assesses costs

under this paragraph shall pay such costs.

(d) Deposit of funds

Funds collected under this section shall be deposited in the

account for salaries and expenses of the Small Business

Administration.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 362, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-662.)

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 689q of this title.

-CITE-

15 USC Sec. 689l 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689l. Injunctions and other orders

-STATUTE-

(a) In general

Whenever, in the judgment of the Administrator, a New Markets

Venture Capital company or any other person has engaged or is about

to engage in any acts or practices which constitute or will

constitute a violation of any provision of this chapter, or of any

rule or regulation under this chapter, or of any order issued under

this chapter, the Administrator may make application to the proper

district court of the United States or a United States court of any

place subject to the jurisdiction of the United States for an order

enjoining such acts or practices, or for an order enforcing

compliance with such provision, rule, regulation, or order, and

such courts shall have jurisdiction of such actions and, upon a

showing by the Administrator that such New Markets Venture Capital

company or other person has engaged or is about to engage in any

such acts or practices, a permanent or temporary injunction,

restraining order, or other order, shall be granted without bond.

(b) Jurisdiction

In any proceeding under subsection (a) of this section, the court

as a court of equity may, to such extent as it deems necessary,

take exclusive jurisdiction of the New Market Venture Capital

company and the assets thereof, wherever located, and the court

shall have jurisdiction in any such proceeding to appoint a trustee

or receiver to hold or administer under the direction of the court

the assets so possessed.

(1) Authority

The Administrator may act as trustee or receiver of a New

Markets Venture Capital company.

(2) Appointment

Upon request of the Administrator, the court may appoint the

Administrator to act as a trustee or receiver of a New Markets

Venture Capital company unless the court deems such appointment

inequitable or otherwise inappropriate by reason of the special

circumstances involved.

-SOURCE-

(Pub. L. 85-699, title III, Sec. 363, as added Pub. L. 106-554,

Sec. 1(a)(8) (Sec. 1(b)(3)), Dec. 21, 2000, 114 Stat. 2763,

2763A-662.)

-REFTEXT-

REFERENCES IN TEXT

For definition of ''this chapter'', referred to in subsec. (a),

see References in Text note set out under section 661 of this

title.

-CITE-

15 USC Sec. 689m 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 14B - SMALL BUSINESS INVESTMENT PROGRAM

SUBCHAPTER III - INVESTMENT DIVISION PROGRAMS

Part B - New Markets Venture Capital Program

-HEAD-

Sec. 689m. Additional penalties for noncompliance

-STATUTE-

(a) In general

With respect to any New Markets Venture Capital company that

violates or fails to comply with any of the provisions of this

chapter, of any regulation issued under this chapter, or of any

participation agreement entered into under this chapter, the

Administrator may in accordance with this section -

(1) void the participation agreement between the Administrator

and the company; and

(2) cause the company to forfeit all of the rights and

privileges derived by the company from this chapter.

(b) Adjudication of noncompliance

(1) In general

Before the Administrator may cause a New Markets Venture

Capital company to forfeit rights or privileges under subsection

(a) of this section, a court of the United States of competent

jurisdiction must find that the company committed a violation, or

failed to comply, in a cause of action brought for that purpose

in the district, territory,

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Idioma:	inglés
País:	Estados Unidos

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Codificación normativa de EEUU (Estados Unidos)Legislación federal estadounidense # Commerce and Trade

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