II

Calendar No. 143

107TH CONGRESS

1ST SESSION S. 1196

[Report No. 107–55]

To amend the Small Business Investment Act of 1958, and for other

purposes.

IN THE SENATE OF THE UNITED STATES

JULY 18, 2001

Mr. BOND (for himself and Mr. KERRY) introduced the following bill; which

was read twice and referred to the Committee on Small Business and Entrepreneurship

AUGUST 28, 2001

Reported under authority of the order of the Senate of July 30, 2001, by Mr.

KERRY, without amendment

A BILL

To amend the Small Business Investment Act of 1958, and

for other purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Small Business Invest5 ment Company Amendments Act of 2001’’.
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1 SEC. 2. SUBSIDY FEES.

2 (a) IN GENERAL.—Section 303 of the Small Business

3 Investment Act of 1958 (15 U.S.C. 683) is amended—

4 (1) in subsection (b)—

5 (A) by striking ‘‘of not more than 1 per6 cent per year’’;

7 (B) by inserting ‘‘which amount may not

8 exceed 1.28 percent per year, and’’ before

9 ‘‘which shall be paid’’; and

10 (C) by striking ‘‘September 30, 2000’’ and

11 inserting ‘‘September 30, 2001’’; and

12 (2) in subsection (g)(2)—

13 (A) by striking ‘‘of not more than 1 per14 cent per year’’;

15 (B) by inserting ‘‘which amount may not

16 exceed 1.28 percent per year, and’’ before

17 ‘‘which shall be paid’’; and

18 (C) by striking ‘‘September 30, 2000’’ and

19 inserting ‘‘September 30, 2001’’.

20 (b) EFFECTIVE DATE.—The amendments made by

21 this section shall become effective on October 1, 2001.

22 SEC. 3. CONFLICTS OF INTEREST.

23 Section 312 of the Small Business Investment Act

24 of 1958 (15 U.S.C. 687d) is amended by striking ‘‘(includ25 ing disclosure in the locality most directly affected by the

26 transaction)’’.
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1 SEC. 4. PENALTIES FOR FALSE STATEMENTS.

2 (a) CRIMINAL PENALTIES.—Section 1014 of title 18,

3 United States Code, is amended by inserting ‘‘, as defined

4 in section 103 of the Small Business Investment Act of

5 1958 (15 U.S.C. 662), or the Small Business Administra6 tion in connection with any provision of that Act’’ after

7 ‘‘small business investment company’’.

8 (b) CIVIL PENALTIES.—Section 951 of the Financial

9 Institutions Reform, Recovery, and Enforcement Act of

10 1989 (12 U.S.C. 1833a) is amended—

11 (1) by redesignating subsections (d) through (g)

12 as subsections (e) through (h), respectively; and

13 (2) in subsection (c)—

14 (A) in paragraph (1), by striking ‘‘or’’ at

15 the end;

16 (B) in paragraph (2)—

17 (i) by striking ‘‘1341;’’ and inserting

18 ‘‘1341’’; and

19 (ii) by striking ‘‘institution.’’ and in20 serting ‘‘institution; or’’;

21 (C) by inserting immediately after para22 graph (2) the following:

23 ‘‘(3) section 16(a) of the Small Business Act

24 (15 U.S.C. 645(a)).’’; and

25 (D) by striking ‘‘This section shall’’ and

26 inserting the following:
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1 ‘‘(d) EFFECTIVE DATE.—This section shall’’.

2 SEC. 5. REMOVAL OR SUSPENSION OF MANAGEMENT OFFI3 CIALS.

4 Section 313 of the Small Business Investment Act

5 of 1958 (15 U.S.C. 687e) is amended to read as follows:

6 ‘‘SEC. 313. REMOVAL OR SUSPENSION OF MANAGEMENT OF7 FICIALS.

8 ‘‘(a) DEFINITION OF ‘MANAGEMENT OFFICIAL’.—In

9 this section, the term ‘management official’ means an offi10 cer, director, general partner, manager, employee, agent,

11 or other participant in the management or conduct of the

12 affairs of a licensee.

13 ‘‘(b) REMOVAL OF MANAGEMENT OFFICIALS.—

14 ‘‘(1) NOTICE OF REMOVAL.—The Administrator

15 may serve upon any management official a written

16 notice of its intention to remove that management

17 official whenever, in the opinion of the

18 Administrator—

19 ‘‘(A) such management official—

20 ‘‘(i) has willfully and knowingly com21 mitted any substantial violation of—

22 ‘‘(I) this Act;

23 ‘‘(II) any regulation issued under

24 this Act; or
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1 ‘‘(III) a cease-and-desist order

2 which has become final; or

3 ‘‘(ii) has willfully and knowingly com4 mitted or engaged in any act, omission, or

5 practice which constitutes a substantial

6 breach of a fiduciary duty of that person

7 as a management official; and

8 ‘‘(B) the violation or breach of fiduciary

9 duty is one involving personal dishonesty on the

10 part of such management official.

11 ‘‘(2) CONTENTS OF NOTICE.—A notice of inten12 tion to remove a management official, as provided in

13 paragraph (1), shall contain a statement of the facts

14 constituting grounds therefor, and shall fix a time

15 and place at which a hearing will be held thereon.

16 ‘‘(3) HEARINGS.—

17 ‘‘(A) TIMING.—A hearing described in

18 paragraph (2) shall be fixed for a date not ear19 lier than 30 days nor later than 60 days after

20 the date of service of notice of the hearing, un21 less an earlier or a later date is set by the Ad22 ministrator at the request of—

23 ‘‘(i) the management official, and for

24 good cause shown; or
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1 ‘‘(ii) the Attorney General of the

2 United States.

3 ‘‘(B) CONSENT.—Unless the management

4 official shall appear at a hearing described in

5 this paragraph in person or by a duly author6 ized representative, that management official

7 shall be deemed to have consented to the

8 issuance of an order of removal under para9 graph (1).

10 ‘‘(4) ISSUANCE OF ORDER OF REMOVAL.—

11 ‘‘(A) IN GENERAL.—In the event of con12 sent under paragraph (3)(B), or if upon the

13 record made at a hearing described in this sub14 section, the Administrator finds that any of the

15 grounds specified in the notice of removal has

16 been established, the Administrator may issue

17 such orders of removal from office as the Ad18 ministrator deems appropriate.

19 ‘‘(B) EFFECTIVENESS.—An order under

20 subparagraph (A) shall—

21 ‘‘(i) become effective at the expiration

22 of 30 days after the date of service upon

23 the subject licensee and the management

24 official concerned (except in the case of an

25 order issued upon consent as described in
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1 paragraph (3)(B), which shall become ef2 fective at the time specified in such order);

3 and

4 ‘‘(ii) remain effective and enforceable,

5 except to such extent as it is stayed, modi6 fied, terminated, or set aside by action of

7 the Administrator or a reviewing court in

8 accordance with this section.

9 ‘‘(c) AUTHORITY TO SUSPEND OR PROHIBIT PAR10 TICIPATION.—

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

12 the Administrator deems it necessary for the protec13 tion of the licensee or the interests of the Adminis14 tration, suspend from office or prohibit from further

15 participation in any manner in the management or

16 conduct of the affairs of the licensee, or both, any

17 management official referred to in subsection (b)(1),

18 by written notice to such effect served upon the

19 management official.

20 ‘‘(2) EFFECTIVENESS.—A suspension or prohi21 bition under paragraph (1)—

22 ‘‘(A) shall become effective upon service of

23 notice under paragraph (1); and
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1 ‘‘(B) unless stayed by a court in pro2 ceedings authorized by paragraph (3), shall re3 main in effect—

4 ‘‘(i) pending the completion of the ad5 ministrative proceedings pursuant to a no6 tice of intention to remove served under

7 subsection (b); and

8 ‘‘(ii) until such time as the Adminis9 trator shall dismiss the charges specified in

10 the notice, or, if an order of removal or

11 prohibition is issued against the manage12 ment official, until the effective date of any

13 such order.

14 ‘‘(3) JUDICIAL REVIEW.—Not later than 10

15 days after any management official has been sus16 pended from office or prohibited from participation

17 in the management or conduct of the affairs of a li18 censee, or both, under paragraph (1), that manage19 ment official may apply to the United States district

20 court for the judicial district in which the home of21 fice of the licensee is located, or the United States

22 District Court for the District of Columbia, for a

23 stay of the suspension or prohibition pending the

24 completion of the administrative proceedings pursu25 ant to a notice of intent to remove served upon the
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1 management official under subsection (b), and such

2 court shall have jurisdiction to stay such action.

3 ‘‘(d) AUTHORITY TO SUSPEND ON CRIMINAL

4 CHARGES.—

5 ‘‘(1) IN GENERAL.—Whenever a manage6 ment official is charged in any information, in7 dictment, or complaint authorized by a United

8 States attorney, with the commission of or par9 ticipation in a felony involving dishonesty or

10 breach of trust, the Administrator may, by writ11 ten notice served upon that management offi12 cial, suspend that management official from of13 fice or prohibit that management official from

14 further participation in any manner in the man15 agement or conduct of the affairs of the li16 censee, or both.

17 ‘‘(2) EFFECTIVENESS.—A suspension or

18 prohibition under paragraph (1) shall remain in

19 effect until the subject information, indictment,

20 or complaint is finally disposed of, or until ter21 minated by the Administrator.

22 ‘‘(3) AUTHORITY UPON CONVICTION.—If a

23 judgment of conviction with respect to an of24 fense described in paragraph (1) is entered

25 against a management official, then at such
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1 time as the judgment is not subject to further

2 appellate review, the Administrator may issue

3 and serve upon the management official an

4 order removing that management official, which

5 removal shall become effective upon service of a

6 copy of the order upon the licensee.

7 ‘‘(4) AUTHORITY UPON DISMISSAL OR

8 OTHER DISPOSITION.—A finding of not guilty

9 or other disposition of charges described in

10 paragraph (1) shall not preclude the Adminis11 trator from thereafter instituting proceedings to

12 suspend or remove the management official

13 from office, or to prohibit the management offi14 cial from participation in the management or

15 conduct of the affairs of the licensee, or both,

16 pursuant to subsection (b) or (c).

17 ‘‘(e) NOTIFICATION TO LICENSEES.—Copies of each

18 notice required to be served on a management official

19 under this section shall also be served upon the interested

20 licensee.

21 ‘‘(f) PROCEDURAL PROVISIONS; JUDICIAL RE22 VIEW.—

23 ‘‘(1) HEARING VENUE.—Any hearing provided

24 for in this section shall be—
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1 ‘‘(A) held in the Federal judicial district or

2 in the territory in which the principal office of

3 the licensee is located, unless the party afforded

4 the hearing consents to another place; and

5 ‘‘(B) conducted in accordance with the

6 provisions of chapter 5 of title 5, United States

7 Code.

8 ‘‘(2) ISSUANCE OF ORDERS.—After a hearing

9 provided for in this section, and not later than 90

10 days after the Administrator has notified the parties

11 that the case has been submitted for final decision,

12 the Administrator shall render a decision in the mat13 ter (which shall include findings of fact upon which

14 its decision is predicated), and shall issue and cause

15 to be served upon each party to the proceeding an

16 order or orders consistent with the provisions of this

17 section.

18 ‘‘(3) AUTHORITY TO MODIFY ORDERS.—The

19 Administrator may modify, terminate, or set aside

20 any order issued under this section—

21 ‘‘(A) at any time, upon such notice, and in

22 such manner as the Administrator deems prop23 er, unless a petition for review is timely filed in

24 a court of appeals of the United States, as pro25 vided in paragraph (4)(B), and thereafter until
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1 the record in the proceeding has been filed in

2 accordance with paragraph (4)(C); and

3 ‘‘(B) upon such filing of the record, with

4 permission of the court.

5 ‘‘(4) JUDICIAL REVIEW.—

6 ‘‘(A) IN GENERAL.—Judicial review of an

7 order issued under this section shall be exclu8 sively as provided in this subsection.

9 ‘‘(B) PETITION FOR REVIEW.—Any party

10 to a hearing provided for in this section may

11 obtain a review of any order issued pursuant to

12 paragraph (2) (other than an order issued with

13 the consent of the management official con14 cerned, or an order issued under subsection

15 (d)), by filing in the court of appeals of the

16 United States for the circuit in which the prin17 cipal office of the licensee is located, or in the

18 United States Court of Appeals for the District

19 of Columbia Circuit, not later than 30 days

20 after the date of service of such order, a written

21 petition praying that the order of the Adminis22 trator be modified, terminated, or set aside.

23 ‘‘(C) NOTIFICATION TO ADMINISTRA24 TION.—A copy of a petition filed under sub25 paragraph (B) shall be forthwith transmitted by
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1 the clerk of the court to the Administrator, and

2 thereupon the Administrator shall file in the

3 court the record in the proceeding, as provided

4 in section 2112 of title 28, United States Code.

5 ‘‘(D) COURT JURISDICTION.—Upon the fil6 ing of a petition under subparagraph (A)—

7 ‘‘(i) the court shall have jurisdiction,

8 which, upon the filing of the record under

9 subparagraph (C), shall be exclusive, to af10 firm, modify, terminate, or set aside, in

11 whole or in part, the order of the Adminis12 trator, except as provided in the last sen13 tence of paragraph (3)(B);

14 ‘‘(ii) review of such proceedings shall

15 be had as provided in chapter 7 of title 5,

16 United States Code; and

17 ‘‘(iii) the judgment and decree of the

18 court shall be final, except that the judg19 ment and decree shall be subject to review

20 by the Supreme Court of the United States

21 upon certiorari, as provided in section

22 1254 of title 28, United States Code.

23 ‘‘(E) JUDICIAL REVIEW NOT A STAY.—The

24 commencement of proceedings for judicial re25 view under this paragraph shall not, unless spe-
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1 cifically ordered by the court, operate as a stay

2 of any order issued by the Administrator under

3 this section.’’.
Calendar No. 143

107TH CONGRESS

1ST SESSION S. 1196

[Report No. 107–55]

A BILL

To amend the Small Business Investment Act of

1958, and for other purposes.

AUGUST 28, 2001

Reported without amendment