I

106TH CONGRESS

2D SESSION H. R. 5663

To provide for community renewal and new markets initiatives.

IN THE HOUSE OF REPRESENTATIVES

DECEMBER 14, 2000

Mr. TALENT (for himself and Ms. VELA ́

ZQUEZ) introduced the following bill;

which was referred to the Committee on Small Business

A BILL

To provide for community renewal and new markets

initiatives.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. NEW MARKETS VENTURE CAPITAL PROGRAM.

4 (a) SHORT TITLE.—This section may be cited as the

5 ‘‘New Markets Venture Capital Program Act of 2000’’.

6 (b) NEW MARKETS VENTURE CAPITAL PROGRAM.—

7 Title III of the Small Business Investment Act of 1958

8 (15 U.S.C. 681 et seq.) is amended—

9 (1) in the heading for the title, by striking

10 ‘‘SMALL BUSINESS INVESTMENT COMPA-
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1 NIES’’ and inserting ‘‘INVESTMENT DIVISION

2 PROGRAMS’’;

3 (2) by inserting before the heading for section

4 301 the following:

5 ‘‘PART A—SMALL BUSINESS INVESTMENT COMPANIES’’;

6 and

7 (3) by adding at the end the following:

8 ‘‘PART B—NEW MARKETS VENTURE CAPITAL PROGRAM

9 ‘‘SEC. 351. DEFINITIONS.

10 ‘‘In this part, the following definitions apply:

11 ‘‘(1) DEVELOPMENTAL VENTURE CAPITAL.—

12 The term ‘developmental venture capital’ means cap13 ital in the form of equity capital investments in busi14 nesses made with a primary objective of fostering

15 economic development in low-income geographic

16 areas. For the purposes of this paragraph, the term

17 ‘equity capital’ has the same meaning given such

18 term in section 303(g)(4).

19 ‘‘(2) LOW-INCOME INDIVIDUAL.—The term

20 ‘low-income individual’ means an individual whose

21 income (adjusted for family size) does not exceed—

22 ‘‘(A) for metropolitan areas, 80 percent of

23 the area median income; and

24 ‘‘(B) for nonmetropolitan areas, the great25 er of—
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1 ‘‘(i) 80 percent of the area median in2 come; or

3 ‘‘(ii) 80 percent of the statewide non4 metropolitan area median income.

5 ‘‘(3) LOW-INCOME GEOGRAPHIC AREA.—the

6 term ‘low-income geographic area’ means—

7 ‘‘(A) any population census tract (or in the

8 case of an area that is not tracted for popu9 lation census tracts, the equivalent county divi10 sion, as defined by the Bureau of the Census of

11 the Department of Commerce for purposes of

12 defining poverty areas), if—

13 ‘‘(i) the poverty rate for that census

14 tract is not less than 20 percent;

15 ‘‘(ii) in the case of a tract—

16 ‘‘(I) that is located within a met17 ropolitan area, 50 percent or more of

18 the households in that census tract

19 have an income equal to less than 60

20 percent of the area median gross in21 come; or

22 ‘‘(II) that is not located within a

23 metropolitan area, the median house24 hold income for such tract does not
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1 exceed 80 percent of the statewide

2 median household income; or

3 ‘‘(iii) as determined by the Adminis4 trator based on objective criteria, a sub5 stantial population of low-income individ6 uals reside, an inadequate access to invest7 ment capital exists, or other indications of

8 economic distress exist in that census

9 tract; or

10 ‘‘(B) any area located within—

11 ‘‘(i) a HUBZone (as defined in sec12 tion 3(p) of the Small Business Act and

13 the implementing regulations issued under

14 that section);

15 ‘‘(ii) an urban empowerment zone or

16 urban enterprise community (as designated

17 by the Secretary of Housing and Urban

18 Development); or

19 ‘‘(iii) a rural empowerment zone or

20 rural enterprise community (as designated

21 by the Secretary of Agriculture).

22 ‘‘(4) NEW MARKETS VENTURE CAPITAL COM23 PANY.—The term ‘New Markets Venture Capital

24 company’ means a company that—
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1 ‘‘(A) has been granted final approval by

2 the Administrator under section 354(e); and

3 ‘‘(B) has entered into a participation

4 agreement with the Administrator.

5 ‘‘(5) OPERATIONAL ASSISTANCE.—The term

6 ‘operational assistance’ means management, mar7 keting, and other technical assistance that assists a

8 small business concern with business development.

9 ‘‘(6) PARTICIPATION AGREEMENT.—The term

10 ‘participation agreement’ means an agreement, be11 tween the Administrator and a company granted

12 final approval under section 354(e), that—

13 ‘‘(A) details the company’s operating plan

14 and investment criteria; and

15 ‘‘(B) requires the company to make invest16 ments in smaller enterprises at least 80 percent

17 of which are located in low-income geographic

18 areas.

19 ‘‘(7) SPECIALIZED SMALL BUSINESS INVEST20 MENT COMPANY.—The term ‘specialized small busi21 ness investment company’ means any small business

22 investment company that—

23 ‘‘(A) invests solely in small business con24 cerns that contribute to a well-balanced na25 tional economy by facilitating ownership in such
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1 concerns by persons whose participation in the

2 free enterprise system is hampered because of

3 social or economic disadvantages;

4 ‘‘(B) is organized or chartered under State

5 business or nonprofit corporations statutes, or

6 formed as a limited partnership; and

7 ‘‘(C) was licensed under section 301(d), as

8 in effect before September 30, 1996.

9 ‘‘(8) STATE.—The term ‘State’ means such of

10 the several States, the District of Columbia, the

11 Commonwealth of Puerto Rico, the Virgin Islands,

12 Guam, American Samoa, the Commonwealth of the

13 Northern Mariana Islands, and any other common14 wealth, territory, or possession of the United States.

15 ‘‘SEC. 352. PURPOSES.

16 ‘‘The purposes of the New Markets Venture Capital

17 Program established under this part are—

18 ‘‘(1) to promote economic development and the

19 creation of wealth and job opportunities in low-in20 come geographic areas and among individuals living

21 in such areas by encouraging developmental venture

22 capital investments in smaller enterprises primarily

23 located in such areas; and

24 ‘‘(2) to establish a developmental venture cap25 ital program, with the mission of addressing the
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1 unmet equity investment needs of small enterprises

2 located in low-income geographic areas, to be admin3 istered by the Administrator—

4 ‘‘(A) to enter into participation agreements

5 with New Markets Venture Capital companies;

6 ‘‘(B) to guarantee debentures of New Mar7 kets Venture Capital companies to enable each

8 such company to make developmental venture

9 capital investments in smaller enterprises in

10 low-income geographic areas; and

11 ‘‘(C) to make grants to New Markets Ven12 ture Capital companies, and to other entities,

13 for the purpose of providing operational assist14 ance to smaller enterprises financed, or ex15 pected to be financed, by such companies.

16 ‘‘SEC. 353. ESTABLISHMENT.

17 ‘‘In accordance with this part, the Administrator

18 shall establish a New Markets Venture Capital Program,

19 under which the Administrator may—

20 ‘‘(1) enter into participation agreements with

21 companies granted final approval under section

22 354(e) for the purposes set forth in section 352;

23 ‘‘(2) guarantee the debentures issued by New

24 Markets Venture Capital companies as provided in

25 section 355; and
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1 ‘‘(3) make grants to New Markets Venture

2 Capital companies, and to other entities, under sec3 tion 358.

4 ‘‘SEC. 354. SELECTION OF NEW MARKETS VENTURE CAP5 ITAL COMPANIES.

6 ‘‘(a) ELIGIBILITY.—A company shall be eligible to

7 apply to participate, as a New Markets Venture Capital

8 company, in the program established under this part if—

9 ‘‘(1) the company is a newly formed for-profit

10 entity or a newly formed for-profit subsidiary of an

11 existing entity;

12 ‘‘(2) the company has a management team with

13 experience in community development financing or

14 relevant venture capital financing; and

15 ‘‘(3) the company has a primary objective of

16 economic development of low-income geographic

17 areas.

18 ‘‘(b) APPLICATION.—To participate, as a New Mar19 kets Venture Capital company, in the program established

20 under this part a company meeting the eligibility require21 ments set forth in subsection (a) shall submit an applica22 tion to the Administrator that includes—

23 ‘‘(1) a business plan describing how the com24 pany intends to make successful developmental ven-
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1 ture capital investments in identified low-income ge2 ographic areas;

3 ‘‘(2) information regarding the community de4 velopment finance or relevant venture capital quali5 fications and general reputation of the company’s

6 management;

7 ‘‘(3) a description of how the company intends

8 to work with community organizations and to seek

9 to address the unmet capital needs of the commu10 nities served;

11 ‘‘(4) a proposal describing how the company in12 tends to use the grant funds provided under this

13 part to provide operational assistance to smaller en14 terprises financed by the company, including infor15 mation regarding whether the company intends to

16 use licensed professionals, when necessary, on the

17 company’s staff or from an outside entity;

18 ‘‘(5) with respect to binding commitments to be

19 made to the company under this part, an estimate

20 of the ratio of cash to in-kind contributions;

21 ‘‘(6) a description of the criteria to be used to

22 evaluate whether and to what extent the company

23 meets the objectives of the program established

24 under this part;
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1 ‘‘(7) information regarding the management

2 and financial strength of any parent firm, affiliated

3 firm, or any other firm essential to the success of

4 the company’s business plan; and

5 ‘‘(8) such other information as the Adminis6 trator may require.

7 ‘‘(c) CONDITIONAL APPROVAL.—

8 ‘‘(1) IN GENERAL.—From among companies

9 submitting applications under subsection (b), the

10 Administrator shall, in accordance with this sub11 section, conditionally approval companies to partici12 pate in the New Markets Venture Capital Program.

13 ‘‘(2) SELECTION CRITERIA.—In selecting com14 panies under paragraph (1), the Administrator shall

15 consider the following:

16 ‘‘(A) The likelihood that the company will

17 meet the goal of its business plan.

18 ‘‘(B) The experience and background of

19 the company’s management team.

20 ‘‘(C) The need for developmental venture

21 capital investments in the geographic areas in

22 which the company intends to invest.

23 ‘‘(D) The extent to which the company will

24 concentrate its activities on serving the geo25 graphic areas in which it intends to invest.
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1 ‘‘(E) The likelihood that the company will

2 be able to satisfy the conditions under sub3 section (d).

4 ‘‘(F) The extent to which the activities

5 proposed by the company will expand economic

6 opportunities in the geographic areas in which

7 the company intends to invest.

8 ‘‘(G) The strength of the company’s pro9 posal to provide operational assistance under

10 this part as the proposal relates to the ability

11 of the applicant to meet applicable cash require12 ments and properly utilize in-kind contribu13 tions, including the use of resources for the

14 services of licensed professionals, when nec15 essary, whether provided by persons on the

16 company’s staff or by persons outside of the

17 company.

18 ‘‘(H) Any other factors deemed appro19 priate by the Administrator.

20 ‘‘(3) NATIONWIDE DISTRIBUTION.—The Admin21 istrator shall select companies under paragraph (1)

22 in such a way that promotes investment nationwide.

23 ‘‘(d) REQUIREMENTS TO BE MET FOR FINAL AP24 PROVAL.—The Administrator shall grant each condi-
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1 tionally approved company a period of time, not to exceed

2 2 years, to satisfy the following requirements:

3 ‘‘(1) CAPITAL REQUIREMENT.—Each condi4 tionally approved company shall raise not less than

5 $5,000,000 of private capital or binding capital com6 mitments from one or more investors (other than

7 agencies or departments of the Federal Government)

8 who met criteria established by the Administrator.

9 ‘‘(2) NONADMINISTRATION RESOURCES FOR

10 OPERATIONAL ASSISTANCE.—

11 ‘‘(A) IN GENERAL.—In order to provide

12 operational assistance to smaller enterprises ex13 pected to be financed by the company, each

14 conditionally approved company—

15 ‘‘(i) shall have binding commitments

16 (for contribution in cash or in kind)—

17 ‘‘(I) from any sources other than

18 the Small Business Administration

19 that meet criteria established by the

20 Administrator;

21 ‘‘(II) payable or available over a

22 multiyear period acceptable to the Ad23 ministrator (not to exceed 10 years);

24 and
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1 ‘‘(III) in an amount not less than

2 30 percent of the total amount of cap3 ital and commitments raised under

4 paragraph (1);

5 ‘‘(ii) shall have purchased an

6 annuity—

7 ‘‘(I) from an insurance company

8 acceptable to the Administrator;

9 ‘‘(II) using funds (other than the

10 funds raised under paragraph (1)),

11 from any source other than the Ad12 ministrator; and

13 ‘‘(III) that yields cash payments

14 over a multiyear period acceptable to

15 the Administrator (not to exceed 10

16 years) in an amount not less than 30

17 percent of the total amount of capital

18 and commitments raised under para19 graph (1); or

20 ‘‘(iii) shall have binding commitments

21 (for contributions in cash or in kind) of the

22 type described in clause (i) and shall have

23 purchased an annuity of the type described

24 in clause (ii), which in the aggregate make

25 available, over a multiyear period accept-
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1 able to the Administrator (not to exceed 10

2 years), an amount not less than 30 percent

3 of the total amount of capital and commit4 ments raised under paragraph (1).

5 ‘‘(B) EXCEPTION.—The Administrator

6 may, in the discretion of the Administrator and

7 based upon a showing of special circumstances

8 and good cause, consider an applicant to have

9 satisfied the requirements of subparagraph (A)

10 if the applicant has—

11 ‘‘(i) a viable plan that reasonably

12 projects the capacity of the applicant to

13 raise the amount (in cash or in-kind) re14 quired under subparagraph (A); and

15 ‘‘(ii) binding commitments in an

16 amount equal to not less than 20 percent

17 of the total amount required under para18 graph (A).

19 ‘‘(C) LIMITATION.—In order to comply

20 with the requirements of subparagraphs (A)

21 and (B), the total amount of a company’s in22 kind contributions may not exceed 50 percent

23 of the company’s total contributions.

24 ‘‘(e) FINAL APPROVAL; DESIGNATION.—The Admin25 istrator shall, with respect to each applicant conditionally
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1 approved to operate as a New Markets Venture Capital

2 company under subsection (c), either—

3 ‘‘(1) grant final approval to the applicant to op4 erate as a New Markets Venture Capital company

5 under this part and designate the applicant as such

6 a company, if the applicant—

7 ‘‘(A) satisfies the requirements of sub8 section (d) on or before the expiration of the

9 time period described in that subsection; and

10 ‘‘(B) enters into a participation agreement

11 with the Administrator; or

12 ‘‘(2) if the applicant fails to satisfy the require13 ments of subsection (d) on or before the expiration

14 of the time period described in that subsection, re15 voke the conditional approval granted under that

16 subsection.

17 ‘‘SEC. 355. DEBENTURES.

18 ‘‘(a) IN GENERAL.—The Administrator may guar19 antee the timely payment of principal and interest, as

20 scheduled, on debentures issued by any New Markets Ven21 ture Capital company.

22 ‘‘(b) TERMS AND CONDITIONS.—The Administrator

23 may make guarantees under this section on such terms

24 and conditions as it deems appropriate, except that the
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1 term of any debenture guaranteed under this section shall

2 not exceed 15 years.

3 ‘‘(c) FULL FAITH AND CREDIT OF THE UNITED

4 STATES.—The full faith and credit of the United States

5 is pledged to pay all amounts that may be required to be

6 paid under any guarantee under this part.

7 ‘‘(d) MAXIMUM GUARANTEE.—

8 ‘‘(1) IN GENERAL.—Under this section, the Ad9 ministrator may guarantee the debentures issued by

10 a New Markets Venture Capital company only to be

11 extent that the total face amount of outstanding

12 guaranteed debentures of such company does not ex13 ceed 150 percent of the private capital of the com14 pany, as determined by the Administrator.

15 ‘‘(2) TREATMENT OF CERTAIN FEDERAL

16 FUNDS.—For the purposes of paragraph (1), private

17 capital shall include capital that is considered to be

18 Federal funds, if such capital is contributed by an

19 investor other than an agency or department of the

20 Federal Government.

21 ‘‘SEC. 356. ISSUANCE AND GUARANTEE OF TRUST CERTIFI22 CATES.

23 ‘‘(a) ISSUANCE.—The Administrator may issue trust

24 certificates representing ownership of all or a fractional

25 part of debentures issued by a New Markets Venture Cap-
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1 ital company and guaranteed by the Administrator under

2 this part, if such certificates are based on and backed by

3 a trust or pool approved by the Administrator and com4 posed solely of guaranteed debentures.

5 ‘‘(b) GUARANTEE.—

6 ‘‘(1) IN GENERAL.—The Administrator may,

7 under such terms and conditions as it deems appro8 priate, guarantee the timely payment of the principal

9 of and interest on trust certificates issued by the

10 Administrator or its agents for purposes of this sec11 tion.

12 ‘‘(2) LIMITATION.—Each guarantee under this

13 subsection shall be limited to the extent of principal

14 and interest on the guaranteed debentures that com15 pose the trust or pool.

16 ‘‘(3) PREPAYMENT OR DEFAULT.—In the event

17 that a debenture in a trust or pool is prepaid, or in

18 the event of default of such a debenture, the guar19 antee of timely payment of principal and interest on

20 the trust certificates shall be reduced in proportion

21 to the amount of principal and interest such prepaid

22 debenture represents in the trust or pool. Interest on

23 prepaid or defaulted debentures shall accrue and be

24 guaranteed by the Administrator only through the

25 date of payment of the guarantee. At any time dur-
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1 ing its term, a trust certificate may be called for re2 demption due to prepayment or default of all deben3 tures.

4 ‘‘(c) FULL FAITH AND CREDIT OF THE UNITED

5 STATES.—The full faith and credit of the United States

6 is pledged to pay all amounts that may be required to be

7 paid under any guarantee of a trust certificate issued by

8 the Administrator or its agents under this section.

9 ‘‘(d) FEES.—The Administrator shall not collect a fee

10 for any guarantee of a trust certificate under this section,

11 but any agent of the Administrator may collect a fee ap12 proved by the Administrator for the functions described

13 in subsection (f )(2).

14 ‘‘(e) SUBROGATION AND OWNERSHIP RIGHTS.—

15 ‘‘(1) SUBROGATION.—In the event the Adminis16 trator pays a claim under a guarantee issued under

17 this section, it shall be subrogated fully to the rights

18 satisfied by such payment.

19 ‘‘(2) OWNERSHIP RIGHTS.—No Federal, State,

20 or local law shall preclude or limit the exercise by

21 the Administrator of its ownership rights in the de22 bentures residing in a trust or pool against which

23 trust certificates are issued under this section.

24 ‘‘(f ) MANAGEMENT AND ADMINISTRATION.—
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1 ‘‘(1) REGISTRATION.—The Administrator may

2 provide for a central registration of all trust certifi3 cates issued under this section.

4 ‘‘(2) CONTRACTING OF FUNCTIONS.—

5 ‘‘(A) IN GENERAL.—The Administrator

6 may contract with an agent or agents to carry

7 out on behalf of the Administrator the pooling

8 and the central registration functions provided

9 for in this section including, notwithstanding

10 any other provision of law—

11 ‘‘(i) maintenance, on behalf of and

12 under the direction of the Administrator,

13 of such commercial bank accounts or in14 vestments in obligations of the United

15 States as may be necessary to facilitate the

16 creation of trusts or pools backed by de17 bentures guaranteed under this part; and

18 ‘‘(ii) the issuance of trust certificates

19 to facilitate the creation of such trusts or

20 pools.

21 ‘‘(B) FIDELITY BOND OR INSURANCE RE22 QUIREMENT.—Any agent performing functions

23 on behalf of the Administrator under this para24 graph shall provide a fidelity bond or insurance

25 in such amounts as the Administrator deter-
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1 mines to be necessary to fully protect the inter2 ests of the United States.

3 ‘‘(3) REGULATION OF BROKERS AND DEAL4 ERS.—The Administrator may regulate brokers and

5 dealers in trust certificates issued under this section.

6 ‘‘(4) ELECTRONIC REGISTRATION.—Nothing in

7 this subsection may be construed to prohibit the use

8 of a book-entry or other electronic form of registra9 tion for trust certificates issued under this section.

10 ‘‘SEC. 357. FEES.

11 ‘‘Except as provided in section 356(d), the Adminis12 trator may charge such fees as it deems appropriate with

13 respect to any guarantee or grant issued under this part.

14 ‘‘SEC. 358. OPERATIONAL ASSISTANCE GRANTS.

15 ‘‘(a) IN GENERAL.—

16 ‘‘(1) AUTHORITY.—In accordance with this sec17 tion, the Administrator may make grants to New

18 Markets Venture Capital companies and to other en19 tities, as authorized by this part, to provide oper20 ational assistance to smaller enterprises financed, or

21 expected to be financed, by such companies or other

22 entities.

23 ‘‘(2) TERMS.—Grants made under this sub24 section shall be made over a multiyear period not to
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1 exceed 10 years, under such other terms as the Ad2 ministrator may require.

3 ‘‘(3) GRANTS TO SPECIALIZED SMALL BUSINESS

4 INVESTMENT COMPANIES.—

5 ‘‘(A) AUTHORITY.—In accordance with

6 this section, the Administrator may make

7 grants to specialized small business investment

8 companies to provide operational assistance to

9 smaller enterprises financed, or expected to be

10 financed, by such companies after the effective

11 date of the New Markets Venture Capital Pro12 gram Act of 2000.

13 ‘‘(B) USE OF FUNDS.—The proceeds of a

14 grant made under this paragraph may be used

15 by the company receiving such grant only to

16 provide operational assistance in connection

17 with an equity investment (made with capital

18 raised after the effective date of the New Mar19 kets Venture Capital Program Act of 2000) in

20 a business located in a low-income geographic

21 area.

22 ‘‘(C) SUBMISSION OF PLANS.—A special23 ized small business investment company shall

24 be eligible for a grant under this section only if

25 the company submits to the Administrator, in
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1 such form and manner as the Administrator

2 may require, a plan for use of the grant.

3 ‘‘(4) GRANT AMOUNT.—

4 ‘‘(A) NEW MARKETS VENTURE CAPITAL

5 COMPANIES.—The amount of a grant made

6 under this subsection to a New Markets Ven7 ture Capital company shall be equal to the re8 sources (in cash or in kind) raised by the com9 pany under section 354(d)(2).

10 ‘‘(B) OTHER ENTITIES.—The amount of a

11 grant made under this subsection to any entity

12 other than a New Markets Venture Capital

13 company shall be equal to the resources (in

14 cash or in kind) raised by the entity in accord15 ance with the requirements applicable to New

16 Market Venture Capital companies set forth in

17 section 354(d)(2).

18 ‘‘(5) PRO RATA REDUCTIONS.—If the amount

19 made available to carry out this section is insuffi20 cient for the Administrator to provide grants in the

21 amounts provided for in paragraph (4), the Adminis22 trator shall make pro rata reductions in the amounts

23 otherwise payable to each company and entity under

24 such paragraph.

25 ‘‘(b) SUPPLEMENTAL GRANTS.—
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1 ‘‘(1) IN GENERAL.—The Administrator may

2 make supplemental grants to New Markets Venture

3 Capital companies and to other entities, as author4 ized by this part under such terms as the Adminis5 trator may require, to provide additional operational

6 assistance to smaller enterprises financed, or ex7 pected to be financed, by the companies.

8 ‘‘(2) MATCHING REQUIREMENT.—The Adminis9 trator may require, as a condition of any supple10 mental grant made under this subsection, that the

11 company or entity receiving the grant provide from

12 resources (in a cash or in kind), other then those

13 provided by the Administrator, a matching contribu14 tion equal to the amount of the supplemental grant.

15 ‘‘(c) LIMITATION.—None of the assistance made

16 available under this section may be used for any overhead

17 or general and administrative expense of a New Markets

18 Venture Capital company or a specialized small business

19 investment company.

20 ‘‘SEC. 359. BANK PARTICIPATION.

21 ‘‘(a) IN GENERAL.—Except as provided in subsection

22 (b), any national bank, any member bank of the Federal

23 Reserve System, and (to the extent permitted under appli24 cable State law) any insured bank that is not a member

25 of such system, may invest in any New Markets Venture
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1 Capital company, or in any entity established to invest

2 solely in New Markets Venture Capital companies.

3 ‘‘(b) LIMITATION.—No bank described in subsection

4 (a) may make investments described in such subsection

5 that are greater than 5 percent of the capital and surplus

6 of the bank.

7 ‘‘SEC. 360. FEDERAL FINANCING BANK.

8 ‘‘Section 318 shall not apply to any debenture issued

9 by a New Markets Venture Capital company under this

10 part.

11 ‘‘SEC. 361. REPORTING REQUIREMENT.

12 ‘‘Each New Markets Venture Capital company that

13 participates in the program established under this part

14 shall provide to the Administrator such information as the

15 Administrator may require, including—

16 ‘‘(1) information related to the measurement

17 criteria that the company proposed in its program

18 application; and

19 ‘‘(2) in each case in which the company under

20 this part makes an investment in, or a loan or grant

21 to, a business that is not located in a low-income ge22 ographic area, a report on the number and percent23 age of employees of the business who reside in such

24 areas.
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1 ‘‘SEC. 362. EXAMINATIONS.

2 ‘‘(a) IN GENERAL.—Each New Markets Venture

3 Capital company that participates in the program estab4 lished under this part shall be subject to examinations

5 made at the direction of the Investment Division of the

6 Small Business Administration in accordance with this

7 section.

8 ‘‘(b) ASSISTANCE OF PRIVATE SECTOR ENTITIES.—

9 Examinations under this section may be conducted with

10 the assistance of a private sector entity that has both the

11 qualifications and the expertise necessary to conduct such

12 examinations.

13 ‘‘(c) COSTS.—

14 ‘‘(1) ASSESSMENT.—

15 ‘‘(A) IN GENERAL.—The Administrator

16 may assess the cost of examinations under this

17 section, including compensation of the exam18 iners, against the company examined.

19 ‘‘(B) PAYMENT.—Any company against

20 which the Administrator assesses costs under

21 this paragraph shall pay such costs.

22 ‘‘(d) DEPOSIT OF FUNDS.—Funds collected under

23 this section shall be deposited in the account for salaries

24 and expenses of the Small Business Administration.
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1 ‘‘SEC. 363. INJUNCTIONS AND OTHER ORDERS.

2 ‘‘(a) IN GENERAL.—Whenever, in the judgment of

3 the Administrator, a New Markets Venture Capital com4 pany or any other person has engaged or is about to en5 gage in any acts or practices which constitute or will con6 stitute a violation of any provision of this Act, or of any

7 rule or regulation under this Act, or of any order issued

8 under this Act, the Administrator may make application

9 to the proper district court of the United States or a

10 United States court of any place subject to the jurisdiction

11 of the United States for an order enjoining such acts or

12 practices, or for an order enforcing compliance with such

13 provision, rule, regulation, or order, and such courts shall

14 have jurisdiction of such actions and, upon a showing by

15 the Administrator that such New Markets Venture Capital

16 company or other person has engaged or is about to en17 gage in any such acts or practices, a permanent or tem18 porary injunction, restraining order, or other order, shall

19 be granted without bond.

20 ‘‘(b) JURISDICTION.—In any proceeding under sub21 section (a), the court as a court of equity may, to such

22 extent as it deems necessary, take exclusive jurisdiction

23 of the New Market Venture Capital company and the as24 sets thereof, wherever located, and the court shall have

25 jurisdiction in any such proceeding to appoint a trustee
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1 or receiver to hold or administer under the direction of

2 the court the assets so possessed.

3 ‘‘(c) ADMINISTRATOR AS TRUSTEE OR RECEIVER.—

4 ‘‘(1) AUTHORITY.—The Administrator may act

5 as trustee or receiver of a New Markets Venture

6 Capital company.

7 ‘‘(2) Appointment.—Upon request of the Ad8 ministrator, the court may appoint the Adminis9 trator to act as a trustee or receiver of a New Mar10 kets Venture Capital company unless the court

11 deems such appointment inequitable or otherwise in12 appropriate by reason of the special circumstances

13 involved.

14 ‘‘SEC. 364. ADDITIONAL PENALTIES FOR NONCOMPLIANCE.

15 ‘‘(a) IN GENERAL.—With respect to any New Mar16 kets Venture Capital company that violates or fails to

17 comply with any of the provisions of this Act, of any regu18 lation issued under this Act, or of any participation agree19 ment entered into under this Act, the Administrator may

20 in accordance with this section—

21 ‘‘(1) void the participation agreement between

22 the Administrator and the company; and

23 ‘‘(2) cause the company to forfeit all of the

24 rights and privileges derived by the company from

25 this Act.
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1 ‘‘(b) ADJUDICATION OF NONCOMPLIANCE.—

2 ‘‘(1) IN GENERAL.—Before the Administrator

3 may cause a New Markets Venture Capital company

4 to forfeit rights or privileges under subsection (a), a

5 court of the United States of competent jurisdiction

6 must find that the company committed a violation,

7 or failed to comply, in a cause of action brought for

8 that purpose in the district, territory, or other place

9 subject to the jurisdiction of the United States, in

10 which the principal office of the company is located.

11 ‘‘(2) PARTIES AUTHORIZED TO FILE CAUSES OF

12 ACTION.—Each cause of action brought by the

13 United States under this subsection shall be brought

14 by the Administrator or by the Attorney General.

15 ‘‘SEC. 365. UNLAWFUL ACTS AND OMISSIONS; BREACH OF

16 FIDUCIARY DUTY.

17 ‘‘(a) PARTIES DEEMED TO COMMIT A VIOLATION.—

18 Whenever any New Markets Venture Capital company vio19 lates any provision of this Act, of a regulation issued

20 under this Act, or of a participation agreement entered

21 into under this Act, by reason of its failure to comply with

22 its terms or by reason of its engaging in any act or prac23 tice that constitutes or will constitute a violation thereof,

24 such violation shall also be deemed to be a violation and

25 an unlawful act committed by any person who, directly
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1 or indirectly, authorizes, orders, participates in, causes,

2 brings about, counsels, aids, or abets in the commission

3 of any acts, practices, or transactions that constitute or

4 will constitute, in whole or in part, such violation.

5 ‘‘(b) FIDUCIARY DUTIES.—It shall be unlawful for

6 any officer, director, employee, agent, or other participant

7 in the management or conduct of the affairs of a New

8 Markets Venture Capital company to engage in any act

9 or practice, or to omit any act or practice, in breach of

10 the person’s fiduciary duty as such officer, director, em11 ployee, agent, or participant if, as a result thereof, the

12 company suffers or is in imminent danger of suffering fi13 nancial loss or other damage.

14 ‘‘(c) UNLAWFUL ACTS.—Except with the written con15 sent of the Administrator, it shall be unlawful—

16 ‘‘(1) for any person to take office as an officer,

17 director, or employee of any New Markets Venture

18 Capital company, or to become an agent or partici19 pant in the conduct of the affairs or management of

20 such a company, if the person—

21 ‘‘(A) has been convicted of a felony, or any

22 other criminal offense involving dishonesty or

23 breach of trust; or

24 ‘‘(B) has been found civilly liable in dam25 ages, or has been permanently or temporarily
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1 enjoined by an order, judgment, or decree of a

2 court of competent jurisdiction, by reason of

3 any act or practice involving fraud, or breach of

4 trust; and

5 ‘‘(2) for any person continue to serve in any of

6 the capacities described in paragraph (1), if—

7 ‘‘(A) the person is convicted of a felony, or

8 any other criminal offense involving dishonesty

9 or breach of trust; or

10 ‘‘(B) the person is found civilly liable in

11 damages, or is permanently or temporarily en12 joined by an order, judgment, or decree of a

13 court of competent jurisdiction, by reason of

14 any act or practice involving fraud or breach of

15 trust.

16 ‘‘SEC. 366. REMOVAL OR SUSPENSION OF DIRECTORS OR

17 OFFICERS.

18 ‘‘Using the procedures for removing or suspending a

19 director or an officer of a licensee set forth in section 313

20 (to the extent such procedures are not inconsistent with

21 the requirements of this part), the Administrator may re22 move or suspend any director or officer of any New Mar23 kets Venture Capital company.
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1 ‘‘SEC. 367. REGULATIONS.

2 ‘‘The Administrator may issue such regulations as it

3 deems necessary to carry out the provisions of this part

4 in accordance with its purposes.

5 ‘‘SEC. 368. AUTHORIZATIONS OF APPROPRIATIONS.

6 ‘‘(a) IN GENERAL.—There are authorized to be ap7 propriated for fiscal years 2001 through 2006, to remain

8 available until expended, the following sums:

9 ‘‘(1) Such subsidy budget authority as may be

10 necessary to guarantee $150,000,000 of debentures

11 under this part.

12 ‘‘(2) $30,000,000 to make grants under this

13 part.

14 ‘‘(b) FUNDS COLLECTED FOR EXAMINATIONS.—

15 Funds deposited under section 362(c)(2) are authorized

16 to be appropriated only for the costs of examinations

17 under section 362 and for the costs of other oversight ac18 tivities with respect to the program established under this

19 part.’’.

20 (c) CONFORMING AMENDMENT.—Section 20(e)(1)(C)

21 of the Small Business Act (15 U.S.C. 631 note) is amend22 ed by inserting ‘part A of’ before ‘‘title III’’.

23 (d) CALCULATION OF MAXIMUM AMOUNT OF SBIC

24 LEVERAGE.—
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1 (1) MAXIMUM LEVERAGE.—Section 303(b)(2)

2 of the Small Business Investment Act of 1958 (15

3 U.S.C. 683(b)(2)) is amended to read as follows:

4 ‘‘(2) MAXIMUM LEVERAGE.—

5 ‘‘(A) IN GENERAL.—After March 31,

6 1993, the maximum amount of outstanding le7 verage made available to a company licensed

8 under section 301(c) of this Act shall be deter9 mined by the amount of such company’s private

10 capital—

11 ‘‘(i) if the company has private capital

12 of not more than $15,000,000, the total

13 amount of leverage shall not exceed 300

14 percent of private capital;

15 ‘‘(ii) if the company has private cap16 ital of more than $15,000,000 but not

17 more than $30,000,000, the total amount

18 of leverage shall not exceed $45,000,000

19 plus 200 percent of the amount of private

20 capital over $15,000,000; and

21 ‘‘(iii) if the company has private cap22 ital of more than $30,000,000, the total

23 amount of leverage shall not exceed

24 $75,000,000 plus 100 percent of the

25 amount of private capital over $30,000,000
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1 but not to exceed an additional

2 $15,000,000.

3 ‘‘(B) ADJUSTMENTS.—

4 ‘‘(i) IN GENERAL.—The dollar

5 amounts in clauses (i), (ii), and (iii) of

6 subparagraph (A) shall be adjusted annu7 ally to reflect increases in the Consumer

8 Price Index established by the Bureau of

9 Labor Statistics of the Department of

10 Labor.

11 ‘‘(ii) INITIAL ADJUSTMENTS.—The

12 initial adjustments made under this sub13 paragraph after the date of the enactment

14 of the Small Business Reauthorization Act

15 of 1937 shall reflect only increases from

16 March 31, 1993.

17 ‘‘(C) INVESTMENTS IN LOW-INCOME GEO18 GRAPHIC AREAS.—In calculating the out19 standing leverage of a company for the pur20 poses of subparagraph (A), the Administrator

21 shall not include the amount of the cost basis

22 of any equity investment made by the company

23 in a smaller enterprise located in a low-income

24 geographic area (as defined in section 351), to

25 the extent that the total of such amounts does
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1 not exceed 50 percent of the company’s private

2 capital.’’.

3 (2) MAXIMUM AGGREGATE LEVERAGE.—Section

4 303(b)(4) of the Small Business Investment Act of

5 1958 (15 U.S.C. 683(b)(4)) is amended by adding

6 at the end the following new subparagraph:

7 ‘‘(D) INVESTMENTS IN LOW-INCOME GEO8 GRAPHIC AREAS.—In calculating the aggregate

9 outstanding leverage of a company for the pur10 poses of subparagraph (A), the Administrator

11 shall not include the amount of the cost basis

12 of any equity investment made by the company

13 in a smaller enterprise located in a low-income

14 geographic area (as defined in section 351), to

15 the extent that the total of such amounts does

16 not exceed 50 percent of the company’s private

17 capital.’’.

18 (e) BANKRUPTCY EXEMPTION FOR NEW MARKETS

19 VENTURE CAPITAL COMPANIES.—Section 109(b)(2) of

20 title 11, United States Code, is amended by inserting ‘‘a

21 New Markets Venture Capital company as defined in sec22 tion 351 of the Small Business Investment Act of 1958,’’

23 after ‘‘homestead association,’’.

24 (f ) FEDERAL SAVINGS ASSOCIATIONS.—Section

25 5(c)(4) of the Home Owners’ Loan Act (12 U.S.C.
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1 1464(c)(4)) is amended by adding at the end the fol2 lowing:

3 ‘‘(F) NEW MARKETS VENTURE CAPITAL

4 COMPANIES.—A Federal savings association

5 may invest in stock, obligations, or other securi6 ties of any New Markets Venture Capital com7 pany as defined in section 351 of the Small

8 Business Investment Act of 1958, except that a

9 Federal savings association may not make any

10 investment under this subparagraph if its ag11 gregate outstanding investment under this sub12 paragraph would exceed 5 percent of the capital

13 and surplus of such savings association.’’.

14 SEC. 2. BUSINESSLINC GRANTS AND COOPERATIVE AGREE15 MENTS.

16 Section 8 of the Small Business Act (15 U.S.C. 637)

17 is amended by adding at the end the following:

18 ‘‘(n) BUSINESS GRANTS AND COOPERATIVE AGREE19 MENTS.—

20 ‘‘(1) IN GENERAL.—In accordance with this

21 subsection, the Administrator may make grants to

22 and enter into cooperative agreements with any coa23 lition of private entities, public entities, or any com24 bination of private and public entities—
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1 ‘‘(A) to expand business-to-business rela2 tionships between large and small businesses;

3 and

4 ‘‘(B) to provide businesses, directly or indi5 rectly, with online information and a database

6 of companies that are interested in mentor-pro7 tege programs or community-based, statewide,

8 or local business development programs.

9 ‘‘(2) MATCHING REQUIREMENT.—Subject to

10 subparagraph (B), the Administrator may make a

11 grant to a coalition under paragraph (1) only if the

12 coalition provides for activities described in para13 graph (1)(A) or (1)(B) an amount, either in kind or

14 in cash, equal to the grant amount.

15 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS.—

16 There is authorized to be appropriated to carry out

17 this subsection $6,600,000, to remain available until

18 expended, for each of fiscal years 2001 through

19 2006.’’.

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