Collapse to view only § 681. Organization
- § 681. Organization
- § 682. Capital requirements
- § 683. Borrowing operations
- § 684. Equity capital for small-business concerns
- § 685. Long-term loans to small-business concerns
- § 686. Aggregate limitations on amount of assistance to any single enterprise
- § 687. Operation and regulation of companies
- § 687a. Revocation and suspension of licenses; cease and desist orders
- § 687b. Investigations and examinations; power to subpena and take oaths and affirmations; aid of courts; examiners; reports
- § 687c. Injunctions and other orders
- § 687d. Conflicts of interest
- § 687e. Removal or suspension of management officials
- § 687f. Unlawful acts and omissions by officers, directors, employees, or agents
- § 687g. Penalties and forfeitures
- § 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 Repealed.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
- § 687m. Periodic issuance of guarantees and trust certificates
- § 688. Repealed.
§ 681. Organization
(a) Incorporation and charter under State law, period of succession; area of operations
(b) Articles of incorporation; approval
(c) Issuance of license
(1) Submission of application
(2) Procedures
(A) Status
(B) Approval or disapprovalWithin 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 consideredIn 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;
(C) shall not take into consideration any projected shortage or unavailability of leverage; and
(D) shall give first priority to an applicant that is located in an underlicensed State with below median financing, as determined by the Administrator.
(4) Exception
(A) In generalNotwithstanding 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) LeverageAn 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) is located in a State that—(I) is not served by a licensee; or(II) is an underlicensed State; and
(ii) 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.
(d) Repealed. Pub. L. 104–208, div. D, title II, § 208(b)(3)(A), Sept. 30, 1996, 110 Stat. 3009–742
(e) Fees
(1) In general
(2) Use of amountsFees 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.
(Pub. L. 85–699, title III, § 301, Aug. 21, 1958, 72 Stat. 691; Pub. L. 86–502, § 4, June 11, 1960, 74 Stat. 196; Pub. L. 87–341, § 11(a), (b), Oct. 3, 1961, 75 Stat. 756; Pub. L. 90–104, title II, § 202, Oct. 11, 1967, 81 Stat. 269; Pub. L. 92–595, § 2(b), Oct. 27, 1972, 86 Stat. 1314; Pub. L. 94–305, title I, § 106(b)–(d), June 4, 1976, 90 Stat. 666; Pub. L. 95–507, title I, § 104, Oct. 24, 1978, 92 Stat. 1758; Pub. L. 100–590, title I, § 105, Nov. 3, 1988, 102 Stat. 2993; Pub. L. 104–208, div. D, title II, § 208(b)(1)–(3)(A), Sept. 30, 1996, 110 Stat. 3009–741, 3009–742; Pub. L. 105–135, title II, §§ 212, 214, Dec. 2, 1997, 111 Stat. 2601; Pub. L. 115–333, § 2(2), Dec. 19, 2018, 132 Stat. 4488.)
§ 682. Capital requirements
(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
(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 1
1 So in original. Probably should be followed by a comma.
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.(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
(2) Certain savings associations
(c) Diversification of ownership
(Pub. L. 85–699, title III, § 302, Aug. 21, 1958, 72 Stat. 692; Pub. L. 86–502, § 5, June 11, 1960, 74 Stat. 196; Pub. L. 87–341, § 3, Oct. 3, 1961, 75 Stat. 752; Pub. L. 88–273, § 2, Feb. 28, 1964, 78 Stat. 146; Pub. L. 90–104, title II, §§ 203(a), 204, Oct. 11, 1967, 81 Stat. 269, 270; Pub. L. 94–305, title I, §§ 106(e), 107, June 4, 1976, 90 Stat. 666; Pub. L. 95–89, title II, § 210, Aug. 4, 1977, 91 Stat. 558; Pub. L. 95–507, title I, § 105, Oct. 24, 1978, 92 Stat. 1758; Pub. L. 102–366, title IV, §§ 406(a), 409, Sept. 4, 1992, 106 Stat. 1015, 1017; Pub. L. 104–208, div. D, title II, § 208(c), Sept. 30, 1996, 110 Stat. 3009–742; Pub. L. 105–135, title II, § 215(a), Dec. 2, 1997, 111 Stat. 2601; Pub. L. 106–554, § 1(a)(9) [title IV, § 403], Dec. 21, 2000, 114 Stat. 2763, 2763A–690.)
§ 683. Borrowing operations
(a) Authority to issue obligations
(b) Debentures and participating securitiesTo 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.—The maximum amount of outstanding leverage made available to any one company licensed under section 681(c) of this title may not exceed the lesser of—
(i) 300 percent of such company’s private capital; or
(ii) $175,000,000.
(B)Multiple licenses under common control.—The maximum amount of outstanding leverage made available to two or more companies licensed under section 681(c) of this title that are commonly controlled (as determined by the Administrator) and not under capital impairment may not exceed $350,000,000.
(C)Investments in low-income geographic areas.—
(i) In 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.
(ii) The maximum amount of outstanding leverage made available to—(I) any 1 company described in clause (iii) may not exceed the lesser of 300 percent of private capital of the company, or $175,000,000; and(II) 2 or more companies described in clause (iii) that are under common control (as determined by the Administrator) may not exceed $250,000,000.
(iii) A company described in this clause is a company licensed under section 681(c) of this title in the first fiscal year after February 17, 2009, or any fiscal year thereafter that certifies in writing that not less than 50 percent of the dollar amount of investments of that company shall be made in companies that are located in a low-income geographic area (as that term is defined in section 689 of this title).
(D)Investments in energy saving small businesses.—
(i)In general.—Subject to clause (ii), in calculating the outstanding leverage of a company for purposes of subparagraph (A), the Administrator shall exclude the amount of the cost basis of any Energy Saving qualified investment in a smaller enterprise made in the first fiscal year after December 19, 2007, or any fiscal year thereafter by a company licensed in the applicable fiscal year.
(ii)Limitations.—(I)Amount of exclusion.—The amount excluded under clause (i) for a company shall not exceed 33 percent of the private capital of that company.(II)Maximum investment.—A company shall not make an Energy Saving qualified investment in any one entity in an amount equal to more than 20 percent of the private capital of that company.(III)Other terms.—The exclusion of amounts under clause (i) shall be subject to such terms as the Administrator may impose to ensure that there is no cost (as that term is defined in section 661a of title 2) with respect to purchasing or guaranteeing any debenture involved.
(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.
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.
(c) Third party debtThe 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) Investments in smaller enterprises
(e) Capital impairmentBefore 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 stockNotwithstanding 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;
(C) the amount of dividends paid, accrued, and anticipated; 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 securitiesIn 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 1.46 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 chapter 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 from appropriate sources, as determined by the Administration.
(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.
(C) If the amount of leverage outstanding is 100 per centum, 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 securitiesThe 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) 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), it may not elect to exclude profits on existing investments under this paragraph.
(i) Leverage fee
(j) Calculation of subsidy rate
(k) Energy saving debentures
(Pub. L. 85–699, title III, § 303, Aug. 21, 1958, 72 Stat. 692; Pub. L. 87–341, § 4, Oct. 3, 1961, 75 Stat. 752; Pub. L. 88–273, § 3, Feb. 28, 1964, 78 Stat. 146; Pub. L. 90–104, title II, § 205, Oct. 11, 1967, 81 Stat. 270; Pub. L. 92–213, § 10, Dec. 22, 1971, 85 Stat. 776; Pub. L. 92–595, § 2(c), (d), Oct. 27, 1972, 86 Stat. 1314; Pub. L. 94–305, title I, § 104, June 4, 1976, 90 Stat. 665; Pub. L. 95–507, title I, § 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, § 215(a)(1), (b), Nov. 15, 1990, 104 Stat. 2822; Pub. L. 102–366, title IV, §§ 402, 403, 412, 413, Sept. 4, 1992, 106 Stat. 1008, 1009, 1018; Pub. L. 103–403, title II, § 215, Oct. 22, 1994, 108 Stat. 4184; Pub. L. 104–208, div. D, title II, § 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, § 215(b)–(d), Dec. 2, 1997, 111 Stat. 2602, 2603; Pub. L. 106–9, § 2(d)(1), Apr. 5, 1999, 113 Stat. 18; Pub. L. 106–554, § 1(a)(8) [§ 1(d)], § 1(a)(9) [title IV, §§ 404, 405], Dec. 21, 2000, 114 Stat. 2763, 2763A–664, 2763A–690, 2763A–691; Pub. L. 107–100, § 2(a), Dec. 21, 2001, 115 Stat. 966; Pub. L. 108–84, § 117, Sept. 30, 2003, 117 Stat. 1044; Pub. L. 108–172, § 1(b), Dec. 6, 2003, 117 Stat. 2065; Pub. L. 108–447, div. K, title II, § 201, Dec. 8, 2004, 118 Stat. 3465; Pub. L. 110–140, title XII, §§ 1205(a), 1206, Dec. 19, 2007, 121 Stat. 1773; Pub. L. 111–5, div. A, title V, § 505(a), (c), Feb. 17, 2009, 123 Stat. 156, 157; Pub. L. 114–113, div. E, title V, § 521(b), Dec. 18, 2015, 129 Stat. 2464; Pub. L. 115–187, § 2, June 21, 2018, 132 Stat. 1489.)
§ 684. Equity capital for small-business concerns
(a) Function of investment companies
(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.
(c) Repealed. Pub. L. 90–104, title II, § 206, Oct. 11, 1967, 81 Stat. 271
(d) Direct or cooperative provision of capital
(Pub. L. 85–699, title III, § 304, Aug. 21, 1958, 72 Stat. 693; Pub. L. 86–502, § 6, June 11, 1960, 74 Stat. 196; Pub. L. 87–341, § 5, Oct. 3, 1961, 75 Stat. 752; Pub. L. 90–104, title II, § 206, Oct. 11, 1967, 81 Stat. 271; Pub. L. 92–595, § 2(e), Oct. 27, 1972, 86 Stat. 1316.)
§ 685. Long-term loans to small-business concerns
(a) Authorization
(b) Direct loans; loans on participation basis
(c) Maximum rate of interest
(d) Maturity
(e) Soundness of loan; security
(f) Extension or renewal
(Pub. L. 85–699, title III, § 305, Aug. 21, 1958, 72 Stat. 693; Pub. L. 87–341, § 6, Oct. 3, 1961, 75 Stat. 753; Pub. L. 94–305, title I, § 105, June 4, 1976, 90 Stat. 666; Pub. L. 102–366, title IV, § 411, Sept. 4, 1992, 106 Stat. 1018.)
§ 686. Aggregate limitations on amount of assistance to any single enterprise
(a) Percentage limitation on private capital
If any small business investment company has obtained financing from the Administrator and such financing remains outstanding, the aggregate amount of securities acquired and for which commitments may be issued by such company under the provisions of this subchapter for any single enterprise shall not, without the approval of the Administrator, exceed 10 percent of the sum of—
(1) the private capital of such company; and
(2) the total amount of leverage projected by the company in the company’s business plan that was approved by the Administrator at the time of the grant of the company’s license.
(b) Repealed. Pub. L. 92–595, § 2(f), Oct. 27, 1972, 86 Stat. 1316
(c) Application of provisions to commitments incurred prior to effective date of section
(Pub. L. 85–699, title III, § 306, Aug. 21, 1958,
§ 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 fundsEach 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. Any such company that is licensed before October 1, 2004 and has outstanding financings is authorized to invest funds not needed for its operations—
(1) in direct obligations of, or obligations guaranteed as to principal and interest by, the United States;
(2) in certificates of deposit or other accounts of federally insured banks or other federally insured depository institutions, if the certificates or other accounts mature or are otherwise fully available not more than 1 year after the date of the investment; or
(3) in mutual funds, securities, or other instruments that consist of, or represent pooled assets of, investments described in paragraphs (1) or (2).
(c) Rules and regulations
(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
(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 and licensing to all areas of the country and to all eligible small business concerns including steps taken to accomplish same.
(C) Steps taken by the Administration to improve the number of licensees in underlicensed States.
(D) The Administration’s plans to support States that seek to increase the number of licensees in the State.
(E) Steps taken by the Administration to maximize recoupment of 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.
(F) 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.
(G) 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.
(H) 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.
(I) 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.
(J) 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.
(K) 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.
(L) 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;
(C) for each type of financing instrument, the sizes, 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;
(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; and
(E) the geographic dispersion of licensees in each State compared to the population of the State, identifying underlicensed States.
(h) Certifications of eligibility
(1) Certification by small business concern
(2) Certification by company
(3) Retention of certifications
(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.
(Pub. L. 85–699, title III, § 308, Aug. 21, 1958, 72 Stat. 694; Pub. L. 87–341, §§ 8, 11(c)(d), Oct. 3, 1961, 75 Stat. 753, 756; Pub. L. 88–273, § 5, Feb. 28, 1964, 78 Stat. 147; Pub. L. 89–779, § 3, Nov. 6, 1966, 80 Stat. 1359; Pub. L. 90–104, title II, § 210, Oct. 11, 1967, 81 Stat. 271; 1970 Reorg. Plan No. 2, § 102, eff. July 1, 1970, 35 F.R. 7959, 84 Stat. 2085; Pub. L. 93–501, title II, § 204, Oct. 29, 1974, 88 Stat. 1559; Pub. L. 95–507, title I, § 102, Oct. 24, 1978, 92 Stat. 1757; Pub. L. 96–104, title I, § 104, Nov. 5, 1979, 93 Stat. 790; Pub. L. 96–161, title II, § 204, Dec. 28, 1979, 93 Stat. 1236; Pub. L. 96–221, title V, §§ 524, 529, Mar. 31, 1980, 94 Stat. 166, 168; Pub. L. 99–226, § 1, Dec. 28, 1985, 99 Stat. 1744; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 102–366, title IV, §§ 408(c), 417(a), Sept. 4, 1992, 106 Stat. 1016, 1019; Pub. L. 103–403, title II, § 214, Oct. 22, 1994, 108 Stat. 4184; Pub. L. 104–208, div. D, title II, § 208(e), (h)(1)(B), Sept. 30, 1996, 110 Stat. 3009–745, 3009–747; Pub. L. 106–9, § 2(a), Apr. 5, 1999, 113 Stat. 17; Pub. L. 108–447, div. K, title II, § 202, Dec. 8, 2004, 118 Stat. 3465; Pub. L. 115–333, § 2(3), Dec. 19, 2018, 132 Stat. 4488.)
§ 687a. Revocation and suspension of licenses; cease and desist orders
(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
(c) Order to show cause; contents; hearing; issuance 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
(Pub. L. 85–699, title III, § 309, as added Pub. L. 87–341, § 9, Oct. 3, 1961, 75 Stat. 753; amended Pub. L. 89–779, § 4, Nov. 6, 1966, 80 Stat. 1359; Pub. L. 98–620, title IV, § 402(15)(A), (B), Nov. 8, 1984, 98 Stat. 3358.)
§ 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
(c) Examinations of small business investment companies
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:
(d) Valuations
(1) Frequency of valuations
(A) In general
(B) Material adverse changes
(C) Independent certification
(i) In general
(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.
(Pub. L. 85–699, title III, § 310, as added Pub. L. 87–341, § 9, Oct. 3, 1961, 75 Stat. 755; amended Pub. L. 89–779, § 5, Nov. 6, 1966, 80 Stat. 1360; Pub. L. 90–104, title II, § 208, Oct. 11, 1967, 81 Stat. 271; Pub. L. 100–590, title I, § 104, Nov. 3, 1988, 102 Stat. 2992; Pub. L. 102–366, title IV, §§ 406(b), 407(a), 408(b), Sept. 4, 1992, 106 Stat. 1016; Pub. L. 104–208, div. D, title II, § 208(f), (h)(1)(C), Sept. 30, 1996, 110 Stat. 3009–745, 3009–747; Pub. L. 105–135, title II, § 216, Dec. 2, 1997, 111 Stat. 2603; Pub. L. 106–554, § 1(a)(9) [title IV, § 406], Dec. 21, 2000, 114 Stat. 2763, 2763A–691.)
§ 687c. Injunctions and other orders
(a) Grounds; jurisdiction of court
(b) Equity jurisdiction of licensee and assets thereof
(c) Trusteeship or receivership over licensee
(Pub. L. 85–699, title III, § 311, as added Pub. L. 87–341, § 9, Oct. 3, 1961, 75 Stat. 755; amended Pub. L. 89–779, § 6, Nov. 6, 1966, 80 Stat. 1360; Pub. L. 98–620, title IV, § 402(15)(C), Nov. 8, 1984, 98 Stat. 3358.)
§ 687d. Conflicts of interest
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.
(Pub. L. 85–699, title III, § 312, as added Pub. L. 88–273, § 6(a), Feb. 28, 1964, 78 Stat. 147; amended
§ 687e. Removal or suspension of management officials
(a) Definition of “management official”
(b) Removal of management officials
(1) Notice of removalThe 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
(3) Hearings
(A) TimingA 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
(4) Issuance of order of removal
(A) In general
(B) EffectivenessAn 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.
(c) Authority to suspend or prohibit participation
(1) In general
(2) EffectivenessA 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); 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
(d) Authority to suspend on criminal charges
(1) In general
(2) Effectiveness
(3) Authority upon conviction
(4) Authority upon dismissal or other disposition
(e) Notification to licensees
(f) Procedural provisions; judicial review
(1) Hearing venueAny 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
(3) Authority to modify ordersThe 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
(B) Petition for review
(C) Notification to administration
(D) Court jurisdictionUpon 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
(Pub. L. 85–699, title III, § 313, as added Pub. L. 89–779, § 7, Nov. 6, 1966, 80 Stat. 1360; amended Pub. L. 107–100, § 5, Dec. 21, 2001, 115 Stat. 967.)
§ 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
(c) Disqualification of officers and employees for dishonesty, fraud, or breach of trustExcept 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.
(Pub. L. 85–699, title III, § 314, as added Pub. L. 89–779, § 7, Nov. 6, 1966, 80 Stat. 1363.)
§ 687g. Penalties and forfeitures
(a) Report violations
(b) Exemption from reporting requirements
(Pub. L. 85–699, title III, § 315, as added Pub. L. 89–779, § 7, Nov. 6, 1966, 80 Stat. 1364.)
§ 687h. Jurisdiction and service of process
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.
(Pub. L. 85–699, title III, § 316, as added Pub. L. 89–779, § 7, Nov. 6, 1966, 80 Stat. 1364.)
§§ 687i, 687j. Repealed. Pub. L. 104–208, div. D, title II, § 208(h)(1)(E), Sept. 30, 1996, 110 Stat. 3009–747
§ 687k. Guaranteed obligations not eligible for purchase by Federal Financing Bank
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).
(Pub. L. 85–699, title III, § 318, formerly § 320, as added Pub. L. 99–272, title XVIII, § 18004(a), Apr. 7, 1986, 100 Stat. 364; renumbered § 318, Pub. L. 104–208, div. D, title II, § 208(h)(1)(E), Sept. 30, 1996, 110 Stat. 3009–747.)
§ 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
(c) Full faith and credit of United States
(d) Collection of fees
(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.
(Pub. L. 85–699, title III, § 319, formerly § 321, as added Pub. L. 99–272, title XVIII, § 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, § 404, Sept. 4, 1992, 106 Stat. 1013; renumbered § 319 and amended Pub. L. 104–208, div. D, title II, §§ 205(b), 208(h)(1)(E), (F), Sept. 30, 1996, 110 Stat. 3009–738, 3009–747.)
§ 687m. Periodic issuance of guarantees and trust certificates
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 1
1 So in original. Probably should be “it”.
deems appropriate, taking into consideration the amount and number of such guarantees or trust certificates.(Pub. L. 85–699, title III, § 320, formerly § 322, as added Pub. L. 100–590, title I, § 106(a), Nov. 3, 1988, 102 Stat. 2993; renumbered § 320 and amended Pub. L. 104–208, div. D, title II, § 208(h)(1)(E), (G), Sept. 30, 1996, 110 Stat. 3009–747; Pub. L. 105–135, title II, § 215(e), Dec. 2, 1997, 111 Stat. 2603; Pub. L. 106–9, § 2(d)(2), Apr. 5, 1999, 113 Stat. 18.)
§ 688. Repealed. Pub. L. 87–341, § 11(e), Oct. 3, 1961, 75 Stat. 756