II

107TH CONGRESS

1ST SESSION S. 1196

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

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’’.

6 SEC. 2. SUBSIDY FEES.

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

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

9 (1) in subsection (b)—
2

•S 1196 IS

1 (A) by striking ‘‘of not more than 1 per2 cent per year’’;

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

4 exceed 1.28 percent per year, and’’ before

5 ‘‘which shall be paid’’; and

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

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

8 (2) in subsection (g)(2)—

9 (A) by striking ‘‘of not more than 1 per10 cent per year’’;

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

12 exceed 1.28 percent per year, and’’ before

13 ‘‘which shall be paid’’; and

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

15 inserting ‘‘September 30, 2001’’.

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

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

18 SEC. 3. CONFLICTS OF INTEREST.

19 Section 312 of the Small Business Investment Act

20 of 1958 (15 U.S.C. 687d) is amended by striking ‘‘(includ21 ing disclosure in the locality most directly affected by the

22 transaction)’’.

23 SEC. 4. PENALTIES FOR FALSE STATEMENTS.

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

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

•S 1196 IS

1 in section 103 of the Small Business Investment Act of

2 1958 (15 U.S.C. 662), or the Small Business Administra3 tion in connection with any provision of that Act’’ after

4 ‘‘small business investment company’’.

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

6 Institutions Reform, Recovery, and Enforcement Act of

7 1989 (12 U.S.C. 1833a) is amended—

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

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

10 (2) in subsection (c)—

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

12 the end;

13 (B) in paragraph (2)—

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

15 ‘‘1341’’; and

16 (ii) by striking ‘‘institution.’’ and in17 serting ‘‘institution; or’’;

18 (C) by inserting immediately after para19 graph (2) the following:

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

21 (15 U.S.C. 645(a)).’’; and

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

23 inserting the following:

24 ‘‘(d) EFFECTIVE DATE.—This section shall’’.
4

•S 1196 IS

1 SEC. 5. REMOVAL OR SUSPENSION OF MANAGEMENT OFFI2 CIALS.

3 Section 313 of the Small Business Investment Act

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

5 ‘‘SEC. 313. REMOVAL OR SUSPENSION OF MANAGEMENT OF6 FICIALS.

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

8 this section, the term ‘management official’ means an offi9 cer, director, general partner, manager, employee, agent,

10 or other participant in the management or conduct of the

11 affairs of a licensee.

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

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

14 may serve upon any management official a written

15 notice of its intention to remove that management

16 official whenever, in the opinion of the

17 Administrator—

18 ‘‘(A) such management official—

19 ‘‘(i) has willfully and knowingly com20 mitted any substantial violation of—

21 ‘‘(I) this Act;

22 ‘‘(II) any regulation issued under

23 this Act; or

24 ‘‘(III) a cease-and-desist order

25 which has become final; or
5

•S 1196 IS

1 ‘‘(ii) has willfully and knowingly com2 mitted or engaged in any act, omission, or

3 practice which constitutes a substantial

4 breach of a fiduciary duty of that person

5 as a management official; and

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

7 duty is one involving personal dishonesty on the

8 part of such management official.

9 ‘‘(2) CONTENTS OF NOTICE.—A notice of inten10 tion to remove a management official, as provided in

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

12 constituting grounds therefor, and shall fix a time

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

14 ‘‘(3) HEARINGS.—

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

16 paragraph (2) shall be fixed for a date not ear17 lier than 30 days nor later than 60 days after

18 the date of service of notice of the hearing, un19 less an earlier or a later date is set by the Ad20 ministrator at the request of—

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

22 good cause shown; or

23 ‘‘(ii) the Attorney General of the

24 United States.
6

•S 1196 IS

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

2 official shall appear at a hearing described in

3 this paragraph in person or by a duly author4 ized representative, that management official

5 shall be deemed to have consented to the

6 issuance of an order of removal under para7 graph (1).

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

9 ‘‘(A) IN GENERAL.—In the event of con10 sent under paragraph (3)(B), or if upon the

11 record made at a hearing described in this sub12 section, the Administrator finds that any of the

13 grounds specified in the notice of removal has

14 been established, the Administrator may issue

15 such orders of removal from office as the Ad16 ministrator deems appropriate.

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

18 subparagraph (A) shall—

19 ‘‘(i) become effective at the expiration

20 of 30 days after the date of service upon

21 the subject licensee and the management

22 official concerned (except in the case of an

23 order issued upon consent as described in

24 paragraph (3)(B), which shall become ef-
7

•S 1196 IS

1 fective at the time specified in such order);

2 and

3 ‘‘(ii) remain effective and enforceable,

4 except to such extent as it is stayed, modi5 fied, terminated, or set aside by action of

6 the Administrator or a reviewing court in

7 accordance with this section.

8 ‘‘(c) AUTHORITY TO SUSPEND OR PROHIBIT PAR9 TICIPATION.—

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

11 the Administrator deems it necessary for the protec12 tion of the licensee or the interests of the Adminis13 tration, suspend from office or prohibit from further

14 participation in any manner in the management or

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

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

17 by written notice to such effect served upon the

18 management official.

19 ‘‘(2) EFFECTIVENESS.—A suspension or prohi20 bition under paragraph (1)—

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

22 notice under paragraph (1); and

23 ‘‘(B) unless stayed by a court in pro24 ceedings authorized by paragraph (3), shall re25 main in effect—
8

•S 1196 IS

1 ‘‘(i) pending the completion of the ad2 ministrative proceedings pursuant to a no3 tice of intention to remove served under

4 subsection (b); and

5 ‘‘(ii) until such time as the Adminis6 trator shall dismiss the charges specified in

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

8 prohibition is issued against the manage9 ment official, until the effective date of any

10 such order.

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

12 days after any management official has been sus13 pended from office or prohibited from participation

14 in the management or conduct of the affairs of a li15 censee, or both, under paragraph (1), that manage16 ment official may apply to the United States district

17 court for the judicial district in which the home of18 fice of the licensee is located, or the United States

19 District Court for the District of Columbia, for a

20 stay of the suspension or prohibition pending the

21 completion of the administrative proceedings pursu22 ant to a notice of intent to remove served upon the

23 management official under subsection (b), and such

24 court shall have jurisdiction to stay such action.
9

•S 1196 IS

1 ‘‘(d) AUTHORITY TO SUSPEND ON CRIMINAL

2 CHARGES.—

3 ‘‘(1) IN GENERAL.—Whenever a manage4 ment official is charged in any information, in5 dictment, or complaint authorized by a United

6 States attorney, with the commission of or par7 ticipation in a felony involving dishonesty or

8 breach of trust, the Administrator may, by writ9 ten notice served upon that management offi10 cial, suspend that management official from of11 fice or prohibit that management official from

12 further participation in any manner in the man13 agement or conduct of the affairs of the li14 censee, or both.

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

16 prohibition under paragraph (1) shall remain in

17 effect until the subject information, indictment,

18 or complaint is finally disposed of, or until ter19 minated by the Administrator.

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

21 judgment of conviction with respect to an of22 fense described in paragraph (1) is entered

23 against a management official, then at such

24 time as the judgment is not subject to further

25 appellate review, the Administrator may issue
10

•S 1196 IS

1 and serve upon the management official an

2 order removing that management official, which

3 removal shall become effective upon service of a

4 copy of the order upon the licensee.

5 ‘‘(4) AUTHORITY UPON DISMISSAL OR

6 OTHER DISPOSITION.—A finding of not guilty

7 or other disposition of charges described in

8 paragraph (1) shall not preclude the Adminis9 trator from thereafter instituting proceedings to

10 suspend or remove the management official

11 from office, or to prohibit the management offi12 cial from participation in the management or

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

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

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

16 notice required to be served on a management official

17 under this section shall also be served upon the interested

18 licensee.

19 ‘‘(f) PROCEDURAL PROVISIONS; JUDICIAL RE20 VIEW.—

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

22 for in this section shall be—

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

24 in the territory in which the principal office of
11

•S 1196 IS

1 the licensee is located, unless the party afforded

2 the hearing consents to another place; and

3 ‘‘(B) conducted in accordance with the

4 provisions of chapter 5 of title 5, United States

5 Code.

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

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

8 days after the Administrator has notified the parties

9 that the case has been submitted for final decision,

10 the Administrator shall render a decision in the mat11 ter (which shall include findings of fact upon which

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

13 to be served upon each party to the proceeding an

14 order or orders consistent with the provisions of this

15 section.

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

17 Administrator may modify, terminate, or set aside

18 any order issued under this section—

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

20 such manner as the Administrator deems prop21 er, unless a petition for review is timely filed in

22 a court of appeals of the United States, as pro23 vided in paragraph (4)(B), and thereafter until

24 the record in the proceeding has been filed in

25 accordance with paragraph (4)(C); and
12

•S 1196 IS

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

2 permission of the court.

3 ‘‘(4) JUDICIAL REVIEW.—

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

5 order issued under this section shall be exclu6 sively as provided in this subsection.

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

8 to a hearing provided for in this section may

9 obtain a review of any order issued pursuant to

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

11 the consent of the management official con12 cerned, or an order issued under subsection

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

14 United States for the circuit in which the prin15 cipal office of the licensee is located, or in the

16 United States Court of Appeals for the District

17 of Columbia Circuit, not later than 30 days

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

19 petition praying that the order of the Adminis20 trator be modified, terminated, or set aside.

21 ‘‘(C) NOTIFICATION TO ADMINISTRA22 TION.—A copy of a petition filed under sub23 paragraph (B) shall be forthwith transmitted by

24 the clerk of the court to the Administrator, and

25 thereupon the Administrator shall file in the
13

•S 1196 IS

1 court the record in the proceeding, as provided

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

3 ‘‘(D) COURT JURISDICTION.—Upon the fil4 ing of a petition under subparagraph (A)—

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

6 which, upon the filing of the record under

7 subparagraph (C), shall be exclusive, to af8 firm, modify, terminate, or set aside, in

9 whole or in part, the order of the Adminis10 trator, except as provided in the last sen11 tence of paragraph (3)(B);

12 ‘‘(ii) review of such proceedings shall

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

14 United States Code; and

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

16 court shall be final, except that the judg17 ment and decree shall be subject to review

18 by the Supreme Court of the United States

19 upon certiorari, as provided in section

20 1254 of title 28, United States Code.

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

22 commencement of proceedings for judicial re23 view under this paragraph shall not, unless spe24 cifically ordered by the court, operate as a stay
14

•S 1196 IS

1 of any order issued by the Administrator under

2 this section.’’.

Æ