S. 1196

One Hundred Seventh Congress

of the

United States of America

AT THE FIRST SESSION

Begun and held at the City of Washington on Wednesday,

the third day of January, two thousand and one

An Act

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

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Small Business Investment

Company Amendments Act of 2001’’.

SEC. 2. SUBSIDY FEES.

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

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

(1) in subsection (b)—

(A) by striking ‘‘of not more than 1 percent per year’’;

(B) by inserting ‘‘which amount may not exceed 1.38

percent per year, and’’ before ‘‘which shall be paid’’; and

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

‘‘September 30, 2001’’; and

(2) in subsection (g)(2)—

(A) by striking ‘‘of not more than 1 percent per year’’;

(B) by inserting ‘‘which amount may not exceed 1.38

percent per year, and’’ before ‘‘which shall be paid’’; and

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

‘‘September 30, 2001’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall become effective on October 1, 2001.

SEC. 3. CONFLICTS OF INTEREST.

Section 312 of the Small Business Investment Act of 1958

(15 U.S.C. 687d) is amended by striking ‘‘(including disclosure in

the locality most directly affected by the transaction)’’.

SEC. 4. PENALTIES FOR FALSE STATEMENTS.

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

States Code, is amended by inserting ‘‘, as defined in section 103

of the Small Business Investment Act of 1958 (15 U.S.C. 662),

or the Small Business Administration in connection with any provision of that Act’’ after ‘‘small business investment company’’.

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

Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1833a)

is amended—

(1) by redesignating subsections (d) through (g) as subsections (e) through (h), respectively; and

(2) in subsection (c)—

(A) in paragraph (1), by striking ‘‘or’’ at the end;
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(B) in paragraph (2)—

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

(ii) by striking ‘‘institution.’’ and inserting ‘‘institution; or’’;

(C) by inserting immediately after paragraph (2) the

following:

‘‘(3) section 16(a) of the Small Business Act (15 U.S.C.

645(a)).’’; and

(D) by striking ‘‘This section shall’’ and inserting the

following:

‘‘(d) EFFECTIVE DATE.—This section shall’’.

SEC. 5. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.

Section 313 of the Small Business Investment Act of 1958

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

‘‘SEC. 313. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.

‘‘(a) DEFINITION OF ‘MANAGEMENT OFFICIAL’.—In this section,

the term ‘management official’ means an officer, director, general

partner, manager, employee, agent, or other participant in the

management or conduct of the affairs of a licensee.

‘‘(b) REMOVAL OF MANAGEMENT OFFICIALS.—

‘‘(1) NOTICE OF REMOVAL.—The Administrator may serve

upon any management official a written notice of its intention

to remove that management official whenever, in the opinion

of the Administrator—

‘‘(A) such management official—

‘‘(i) has willfully and knowingly committed any

substantial violation of—

‘‘(I) this Act;

‘‘(II) any regulation issued under this Act; or

‘‘(III) a cease-and-desist order which has

become final; or

‘‘(ii) has willfully and knowingly committed or

engaged in any act, omission, or practice which constitutes a substantial breach of a fiduciary duty of

that person as a management official; and

‘‘(B) the violation or breach of fiduciary duty is one

involving personal dishonesty on the part of such management official.

‘‘(2) CONTENTS OF NOTICE.—A notice of intention to remove

a management official, as provided in paragraph (1), shall

contain a statement of the facts constituting grounds therefor,

and shall fix a time and place at which a hearing will be

held thereon.

‘‘(3) HEARINGS.—

‘‘(A) TIMING.—A hearing described in paragraph (2)

shall be fixed for a date not earlier than 30 days nor

later than 60 days after the date of service of notice of

the hearing, unless an earlier or a later date is set by

the Administrator at the request of—

‘‘(i) the management official, and for good cause

shown; or

‘‘(ii) the Attorney General of the United States.

‘‘(B) CONSENT.—Unless the management official shall

appear at a hearing described in this paragraph in person

or by a duly authorized representative, that management
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official shall be deemed to have consented to the issuance

of an order of removal under paragraph (1).

‘‘(4) ISSUANCE OF ORDER OF REMOVAL.—

‘‘(A) IN GENERAL.—In the event of consent under paragraph (3)(B), or if upon the record made at a hearing

described in this subsection, the Administrator finds that

any of the grounds specified in the notice of removal has

been established, the Administrator may issue such orders

of removal from office as the Administrator deems appropriate.

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

(A) shall—

‘‘(i) become effective at the expiration of 30 days

after the date of service upon the subject licensee and

the management official concerned (except in the case

of an order issued upon consent as described in paragraph (3)(B), which shall become effective at the time

specified in such order); and

‘‘(ii) remain effective and enforceable, except to

such extent as it is stayed, modified, terminated, or

set aside by action of the Administrator or a reviewing

court in accordance with this section.

‘‘(c) AUTHORITY TO SUSPEND OR PROHIBIT PARTICIPATION.—

‘‘(1) IN GENERAL.—The Administrator may, if the Administrator deems it necessary for the protection of the licensee

or the interests of the Administration, suspend from office

or prohibit from further participation in any manner in the

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

any management official referred to in subsection (b)(1), by

written notice to such effect served upon the management

official.

‘‘(2) EFFECTIVENESS.—A suspension or prohibition under

paragraph (1)—

‘‘(A) shall become effective upon service of notice under

paragraph (1); and

‘‘(B) unless stayed by a court in proceedings authorized

by paragraph (3), shall remain in effect—

‘‘(i) pending the completion of the administrative

proceedings pursuant to a notice of intention to remove

served under subsection (b); and

‘‘(ii) until such time as the Administrator shall

dismiss the charges specified in the notice, or, if an

order of removal or prohibition is issued against the

management official, until the effective date of any

such order.

‘‘(3) JUDICIAL REVIEW.—Not later than 10 days after any

management official has been suspended from office or prohibited from participation in the management or conduct of the

affairs of a licensee, or both, under paragraph (1), that management official may apply to the United States district court

for the judicial district in which the home office of the licensee

is located, or the United States District Court for the District

of Columbia, for a stay of the suspension or prohibition pending

the completion of the administrative proceedings pursuant to

a notice of intent to remove served upon the management

official under subsection (b), and such court shall have jurisdiction to stay such action.
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‘‘(d) AUTHORITY TO SUSPEND ON CRIMINAL CHARGES.—

‘‘(1) IN GENERAL.—Whenever a management official is

charged in any information, indictment, or complaint

authorized by a United States attorney, with the commission of or participation in a felony involving dishonesty

or breach of trust, the Administrator may, by written notice

served upon that management official, suspend that

management official from office or prohibit that management official from further participation in any manner

in the management or conduct of the affairs of the licensee,

or both.

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

under paragraph (1) shall remain in effect until the subject

information, indictment, or complaint is finally disposed

of, or until terminated by the Administrator.

‘‘(3) AUTHORITY UPON CONVICTION.—If a judgment of

conviction with respect to an offense described in paragraph

(1) is entered against a management official, then at such

time as the judgment is not subject to further appellate

review, the Administrator may issue and serve upon the

management official an order removing that management

official, which removal shall become effective upon service

of a copy of the order upon the licensee.

‘‘(4) AUTHORITY UPON DISMISSAL OR OTHER DISPOSITION.—A finding of not guilty or other disposition of charges

described in paragraph (1) shall not preclude the Administrator from thereafter instituting proceedings to suspend

or remove the management official from office, or to prohibit the management official from participation in the

management or conduct of the affairs of the licensee, or

both, pursuant to subsection (b) or (c).

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

required to be served on a management official under this section

shall also be served upon the interested licensee.

‘‘(f) PROCEDURAL PROVISIONS; JUDICIAL REVIEW.—

‘‘(1) HEARING VENUE.—Any hearing provided for in this

section shall be—

‘‘(A) held in the Federal judicial district or in the

territory in which the principal office of the licensee is

located, unless the party afforded the hearing consents

to another place; and

‘‘(B) conducted in accordance with the provisions of

chapter 5 of title 5, United States Code.

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

in this section, and not later than 90 days after the Administrator has notified the parties that the case has been submitted

for final decision, the Administrator shall render a decision

in the matter (which shall include findings of fact upon which

its decision is predicated), and shall issue and cause to be

served upon each party to the proceeding an order or orders

consistent with the provisions of this section.

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

may modify, terminate, or set aside any order issued under

this section— ‘‘(A) at any time, upon such notice, and in such manner

as the Administrator deems proper, unless a petition for

review is timely filed in a court of appeals of the United
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States, as provided in paragraph (4)(B), and thereafter

until the record in the proceeding has been filed in accordance with paragraph (4)(C); and

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

of the court.

‘‘(4) JUDICIAL REVIEW.—

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

under this section shall be exclusively as provided in this

subsection.

‘‘(B) PETITION FOR REVIEW.—Any party to a hearing

provided for in this section may obtain a review of any

order issued pursuant to paragraph (2) (other than an

order issued with the consent of the management official

concerned, or an order issued under subsection (d)), by

filing in the court of appeals of the United States for

the circuit in which the principal office of the licensee

is located, or in the United States Court of Appeals for

the District of Columbia Circuit, not later than 30 days

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

praying that the order of the Administrator be modified,

terminated, or set aside.

‘‘(C) NOTIFICATION TO ADMINISTRATION.—A copy of a

petition filed under subparagraph (B) shall be forthwith

transmitted by the clerk of the court to the Administrator,

and thereupon the Administrator shall file in the court

the record in the proceeding, as provided in section 2112

of title 28, United States Code.

‘‘(D) COURT JURISDICTION.—Upon the filing of a petition

under subparagraph (A)—

‘‘(i) the court shall have jurisdiction, which, upon

the filing of the record under subparagraph (C), shall

be exclusive, to affirm, modify, terminate, or set aside,

in whole or in part, the order of the Administrator,

except as provided in the last sentence of paragraph

(3)(B);

‘‘(ii) review of such proceedings shall be had as

provided in chapter 7 of title 5, United States Code;

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, United States Code.

‘‘(E) JUDICIAL REVIEW NOT A STAY.—The commencement of proceedings for judicial review under this paragraph shall not, unless specifically ordered by the court,

operate as a stay of any order issued by the Administrator

under this section.’’.

SEC. 6. REDUCTION OF FEES.

(a) TWO-YEAR REDUCTION OF SECTION 7(a) FEES.—

(1) GUARANTEE FEES.—Section 7(a)(18) of the Small Business Act (15 U.S.C. 636(a)(18)) is amended by adding at the

end the following:
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‘‘(C) TWO-YEAR REDUCTION IN FEES.—With respect to

loans approved during the 2-year period beginning on

October 1, 2002, the guarantee fee under subparagraph

(A) shall be as follows:

‘‘(i) A guarantee fee equal to 1 percent of the

deferred participation share of a total loan amount

that is not more than $150,000.

‘‘(ii) A guarantee fee equal to 2.5 percent of the

deferred participation share of a total loan amount

that is more than $150,000, but not more than

$700,000.

‘‘(iii) A guarantee fee equal to 3.5 percent of the

deferred participation share of a total loan amount

that is more than $700,000.’’.

(2) ANNUAL FEES.—Section 7(a)(23)(A) of the Small Business Act (15 U.S.C. 636(a)(23)(A)) is amended by adding at

the end the following: ‘‘With respect to loans approved during

the 2-year period beginning on October 1, 2002, the annual

fee assessed and collected under the preceding sentence shall

be in an amount equal to 0.25 percent of the outstanding

balance of the deferred participation share of the loan.’’.

(b) REDUCTION OF SECTION 504 FEES.—Section 503 of the Small

Business Investment Act of 1958 (15 U.S.C. 697) is amended—

(1) in subsection (b)(7)(A)—

(A) by redesignating clauses (i) and (ii) as subclauses

(I) and (II), respectively, and moving the margins 2 ems

to the right;

(B) by striking ‘‘not exceed the lesser’’ and inserting

‘‘not exceed—

‘‘(i) the lesser’’; and

(C) by adding at the end the following:

‘‘(ii) 50 percent of the amount established under

clause (i) in the case of a loan made during the 2-

year period beginning on October 1, 2002, for the life

of the loan; and’’; and

(2) by adding at the end the following:

‘‘(i) TWO-YEAR WAIVER OF FEES.—The Administration may not

assess or collect any up front guarantee fee with respect to loans

made under this title during the 2-year period beginning on October

1, 2002.’’.

(c) BUDGETARY TREATMENT OF LOANS AND FINANCINGS.—Assistance made available under any loan made or approved by the

Small Business Administration under section 7(a) of the Small

Business Act (15 U.S.C. 636(a)) or financings made under title

V of the Small Business Investment Act of 1958 (15 U.S.C. 695

et seq.), during the 2-year period beginning on October 1, 2002,

shall be treated as separate programs of the Small Business

Administration for purposes of the Federal Credit Reform Act of

1990 only.
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(d) USE OF FUNDS.—The amendments made by this section

to section 503 of the Small Business Investment Act of 1958, shall

be effective only to the extent that funds are made available under

appropriations Acts, which funds shall be utilized by the Administrator to offset the cost (as such term is defined in section 502

of the Federal Credit Reform Act of 1990) of such amendments.

(e) EFFECTIVE DATE.—The amendments made by this section

shall become effective on October 1, 2002.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.