I

104TH CONGRESS

2D SESSION S. 1784

IN THE HOUSE OF REPRESENTATIVES

JULY 26, 1996

Referred to the Committee on Small Business

AN ACT

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 Improvement Act of 1996’’.
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1 SEC. 2. DEFINITIONS.

2 (a) SMALL BUSINESS CONCERN.—Section 103(5) of

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

4 662(5)) is amended by inserting before the semicolon the

5 following: ‘‘, except that, for purposes of this Act, an in6 vestment by a venture capital firm, investment company

7 (including a small business investment company) employee

8 welfare benefit plan or pension plan, or trust, foundation,

9 or endowment that is exempt from Federal income tax10 ation—

11 ‘‘(A) shall not cause a business concern to be

12 deemed not independently owned and operated;

13 ‘‘(B) shall be disregarded in determining wheth14 er a business concern satisfies size standards estab15 lished pursuant to section 3(a)(2) of the Small Busi16 ness Act; and

17 ‘‘(C) shall be disregarded in determining wheth18 er a small business concern is a smaller enterprise’’.

19 (b) PRIVATE CAPITAL.—Section 103(9) of the Small

20 Business Investment Act of 1958 (15 U.S.C. 662(9)) is

21 amended to read as follows:

22 ‘‘(9) the term ‘private capital’—

23 ‘‘(A) means the sum of—

24 ‘‘(i) the paid-in capital and paid-in

25 surplus of a corporate licensee, the contrib26 uted capital of the partners of a partner-
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1 ship licensee, or the equity investment of

2 the members of a limited liability company

3 licensee; and

4 ‘‘(ii) unfunded binding commitments,

5 from investors that meet criteria estab6 lished by the Administrator, to contribute

7 capital to the licensee: Provided, That such

8 unfunded commitments may be counted as

9 private capital for purposes of approval by

10 the Administrator of any request for lever11 age, but leverage shall not be funded based

12 on such commitments; and

13 ‘‘(B) does not include any—

14 ‘‘(i) funds borrowed by a licensee from

15 any source;

16 ‘‘(ii) funds obtained through the issu17 ance of leverage; or

18 ‘‘(iii) funds obtained directly or indi19 rectly from any Federal, State, or local

20 government, or any government agency or

21 instrumentality, except for—

22 ‘‘(I) funds invested by an em23 ployee welfare benefit plan or pension

24 plan; and
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1 ‘‘(II) any qualified nonprivate

2 funds (if the investors of the qualified

3 nonprivate funds do not control, di4 rectly or indirectly, the management,

5 board of directors, general partners,

6 or members of the licensee);’’.

7 (c) NEW DEFINITIONS.—Section 103 of the Small

8 Business Investment Act of 1958 (15 U.S.C. 662) is

9 amended by striking paragraph (10) and inserting the fol10 lowing:

11 ‘‘(10) the term ‘leverage’ includes—

12 ‘‘(A) debentures purchased or guaranteed

13 by the Administration;

14 ‘‘(B) participating securities purchased or

15 guaranteed by the Administration; and

16 ‘‘(C) preferred securities outstanding as of

17 October 1, 1995;

18 ‘‘(11) the term ‘third party debt’ means any in19 debtedness for borrowed money, other than indebt20 edness owed to the Administration;

21 ‘‘(12) the term ‘smaller enterprise’ means any

22 small business concern that, together with its affili23 ates—

24 ‘‘(A) has—
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1 ‘‘(i) a net financial worth of not more

2 than $6,000,000, as of the date on which

3 assistance is provided under this Act to

4 that business concern; and

5 ‘‘(ii) an average net income for the 2-

6 year period preceding the date on which

7 assistance is provided under this Act to

8 that business concern, of not more than

9 $2,000,000, after Federal income taxes

10 (excluding any carryover losses); or

11 ‘‘(B) satisfies the standard industrial clas12 sification size standards established by the Ad13 ministration for the industry in which the small

14 business concern is primarily engaged;

15 ‘‘(13) the term ‘qualified nonprivate funds’

16 means any—

17 ‘‘(A) funds directly or indirectly invested in

18 any applicant or licensee on or before August

19 16, 1982, by any Federal agency, other than

20 the Administration, under a provision of law ex21 plicitly mandating the inclusion of those funds

22 in the definition of the term ‘private capital’;

23 ‘‘(B) funds directly or indirectly invested

24 in any applicant or licensee by any Federal

25 agency under a provision of law enacted after
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1 September 4, 1992, explicitly mandating the in2 clusion of those funds in the definition of the

3 term ‘private capital’; and

4 ‘‘(C) funds invested in any applicant or li5 censee by one or more State or local govern6 ment entities (including any guarantee extended

7 by those entities) in an aggregate amount that

8 does not exceed—

9 ‘‘(i) 33 percent of the private capital

10 of the applicant or licensee, if such funds

11 were committed for investment before the

12 date of enactment of the Small Business

13 Investment Company Improvement Act of

14 1996; or

15 ‘‘(ii) 20 percent of the private capital

16 of the applicant or licensee, if such funds

17 were committed for investment on or after

18 the date of enactment of the Small Busi19 ness Investment Company Improvement

20 Act of 1996;

21 ‘‘(14) the terms ‘employee welfare benefit plan’

22 and ‘pension plan’ have the same meanings as in

23 section 3 of the Employee Retirement Income Secu24 rity Act of 1974, and are intended to include—
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1 ‘‘(A) public and private pension or retire2 ment plans subject to such Act; and

3 ‘‘(B) similar plans not covered by such Act

4 that have been established and that are main5 tained by the Federal Government or any State

6 or political subdivision, or any agency or instru7 mentality thereof, for the benefit of employees;

8 ‘‘(15) the term ‘member’ means, with respect to

9 a licensee that is a limited liability company, a hold10 er of an ownership interest or a person otherwise ad11 mitted to membership in the limited liability com12 pany; and

13 ‘‘(16) the term ‘limited liability company’

14 means a business entity that is organized and oper15 ating in accordance with a State limited liability

16 company statute approved by the Administration.’’.

17 SEC. 3. ORGANIZATION OF SMALL BUSINESS INVESTMENT

18 COMPANIES.

19 (a) LIMITED LIABILITY COMPANIES.—Section

20 301(a) of the Small Business Investment Act of 1958 (15

21 U.S.C. 681(a)) is amended in the first sentence, by strik22 ing ‘‘body or’’ and inserting ‘‘body, a limited liability com23 pany, or’’.
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1 (b) ISSUANCE OF LICENSE.—Section 301(c) of the

2 Small Business Investment Act of 1958 (15 U.S.C.

3 681(c)) is amended to read as follows:

4 ‘‘(c) ISSUANCE OF LICENSE.—

5 ‘‘(1) SUBMISSION OF APPLICATION.—Each ap6 plicant for a license to operate as a small business

7 investment company under this Act shall submit to

8 the Administrator an application, in a form and in9 cluding such documentation as may be prescribed by

10 the Administrator.

11 ‘‘(2) PROCEDURES.—

12 ‘‘(A) STATUS.—Not later than 90 days

13 after the initial receipt by the Administrator of

14 an application under this subsection, the Ad15 ministrator shall provide the applicant with a

16 written report detailing the status of the appli17 cation and any requirements remaining for

18 completion of the application.

19 ‘‘(B) APPROVAL OR DISAPPROVAL.—With20 in a reasonable time after receiving a completed

21 application submitted in accordance with this

22 subsection and in accordance with such require23 ments as the Administrator may prescribe by

24 regulation, the Administrator shall—
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1 ‘‘(i) approve the application and issue

2 a license for such operation to the appli3 cant if the requirements of this section are

4 satisfied; or

5 ‘‘(ii) disapprove the application and

6 notify the applicant in writing of the dis7 approval.

8 ‘‘(3) MATTERS CONSIDERED.—In reviewing and

9 processing any application under this subsection, the

10 Administrator—

11 ‘‘(A) shall determine whether—

12 ‘‘(i) the applicant meets the require13 ments of subsections (a) and (c) of section

14 302; and

15 ‘‘(ii) the management of the applicant

16 is qualified and has the knowledge, experi17 ence, and capability necessary to comply

18 with this Act;

19 ‘‘(B) shall take into consideration—

20 ‘‘(i) the need for and availability of fi21 nancing for small business concerns in the

22 geographic area in which the applicant is

23 to commence business;
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1 ‘‘(ii) the general business reputation

2 of the owners and management of the ap3 plicant; and

4 ‘‘(iii) the probability of successful op5 erations of the applicant, including ade6 quate profitability and financial soundness;

7 and

8 ‘‘(C) shall not take into consideration any

9 projected shortage or unavailability of leverage.

10 ‘‘(4) EXCEPTION.—

11 ‘‘(A) IN GENERAL.—Notwithstanding any

12 other provision of this Act, the Administrator

13 may, in the discretion of the Administrator and

14 based on a showing of special circumstances

15 and good cause, approve an application and

16 issue a license under this subsection with re17 spect to any applicant that—

18 ‘‘(i) has private capital of not less

19 than $3,000,000;

20 ‘‘(ii) would otherwise be issued a li21 cense under this subsection, except that

22 the applicant does not satisfy the require23 ments of section 302(a); and

24 ‘‘(iii) has a viable business plan rea25 sonably projecting profitable operations
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1 and a reasonable timetable for achieving a

2 level of private capital that satisfies the re3 quirements of section 302(a).

4 ‘‘(B) LEVERAGE.—An applicant licensed

5 pursuant to the exception provided in this para6 graph shall not be eligible to receive leverage as

7 a licensee until the applicant satisfies the re8 quirements of section 302(a).’’.

9 (c) SPECIALIZED SMALL BUSINESS INVESTMENT

10 COMPANIES.—Section 301(d) of the Small Business In11 vestment Act of 1958 (15 U.S.C. 681(d)) is repealed.

12 SEC. 4. CAPITAL REQUIREMENTS.

13 (a) INCREASED MINIMUM CAPITAL REQUIRE14 MENTS.—Section 302(a) of the Small Business Invest15 ment Act of 1958 (15 U.S.C. 682(a)) is amended by strik16 ing ‘‘(a)’’ and all that follows through ‘‘The Administra17 tion shall also determine the ability of the company,’’ and

18 inserting the following:

19 ‘‘(a) AMOUNT.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), the private capital of each licensee shall

22 be not less than—

23 ‘‘(A) $5,000,000; or

24 ‘‘(B) $10,000,000, with respect to each li25 censee authorized or seeking authority to issue
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1 participating securities to be purchased or guar2 anteed by the Administration under this Act.

3 ‘‘(2) EXCEPTION.—The Administrator may, in

4 the discretion of the Administrator and based on a

5 showing of special circumstances and good cause,

6 permit the private capital of a licensee authorized or

7 seeking authorization to issue participating securi8 ties to be purchased or guaranteed by the Adminis9 tration to be less than $10,000,000, but not less

10 than $5,000,000, if the Administrator determines

11 that such action would not create or otherwise con12 tribute to an unreasonable risk of default or loss to

13 the Federal Government.

14 ‘‘(3) ADEQUACY.—In addition to the require15 ments of paragraph (1), the Administrator shall—

16 ‘‘(A) determine whether the private capital

17 of each licensee is adequate to assure a reason18 able prospect that the licensee will be operated

19 soundly and profitably, and managed actively

20 and prudently in accordance with its articles;

21 and

22 ‘‘(B) determine that the licensee will be

23 able’’.

24 (b) EXEMPTION FOR CERTAIN LICENSEES.—Section

25 302(a) of the Small Business Investment Act of 1958 (15
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1 U.S.C. 682(a)) is amended by adding at the end the fol2 lowing new paragraph:

3 ‘‘(4) EXEMPTION FROM CAPITAL REQUIRE4 MENTS.—The Administrator may, in the discretion

5 of the Administrator, exempt from the capital re6 quirements in paragraph (1) any licensee licensed

7 under subsection (c) or (d) of section 301 before the

8 date of enactment of the Small Business Investment

9 Company Improvement Act of 1996, if—

10 ‘‘(A) the licensee certifies in writing that

11 not less than 50 percent of the aggregate dollar

12 amount of its financings after the date of enact13 ment of the Small Business Investment Com14 pany Improvement Act of 1996 will be provided

15 to smaller enterprises; and

16 ‘‘(B) the Administrator determines that—

17 ‘‘(i) the licensee has a record of prof18 itable operations;

19 ‘‘(ii) the licensee has not committed

20 any serious or continuing violation of any

21 applicable provision of Federal or State

22 law or regulation; and

23 ‘‘(iii) such action would not create or

24 otherwise contribute to an unreasonable
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1 risk of default or loss to the United States

2 Government.’’.

3 (c) DIVERSIFICATION OF OWNERSHIP.—Section

4 302(c) of the Small Business Investment Act of 1958 (15

5 U.S.C. 682(c)) is amended to read as follows:

6 ‘‘(c) DIVERSIFICATION OF OWNERSHIP.—The Ad7 ministrator shall ensure that the management of each li8 censee licensed after the date of enactment of the Small

9 Business Investment Company Improvement Act of 1996

10 is sufficiently diversified from and unaffiliated with the

11 ownership of the licensee in a manner that ensures inde12 pendence and objectivity in the financial management and

13 oversight of the investments and operations of the li14 censee.’’.

15 SEC. 5. BORROWING.

16 (a) DEBENTURES.—Section 303(b) of the Small

17 Business Investment Act of 1958 (15 U.S.C. 683(b)) is

18 amended in the first sentence, by striking ‘‘(but only’’ and

19 all that follows through ‘‘terms)’’.

20 (b) THIRD PARTY DEBT.—Section 303(c) of the

21 Small Business Investment Act of 1958 (15 U.S.C.

22 683(c)) is amended to read as follows:

23 ‘‘(c) THIRD PARTY DEBT.—The Administrator—

24 ‘‘(1) shall not permit a licensee having out25 standing leverage to incur third party debt that
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1 would create or contribute to an unreasonable risk

2 of default or loss to the Federal Government; and

3 ‘‘(2) shall permit such licensees to incur third

4 party debt only on such terms and subject to such

5 conditions as may be established by the Adminis6 trator, by regulation or otherwise.’’.

7 (c) REQUIREMENT TO FINANCE SMALLER ENTER8 PRISES.—Section 303(d) of the Small Business Invest9 ment Act of 1958 (15 U.S.C. 683(d)) is amended to read

10 as follows:

11 ‘‘(d) REQUIREMENT TO FINANCE SMALLER ENTER12 PRISES.—The Administrator shall require each licensee,

13 as a condition of approval of an application for leverage,

14 to certify in writing that not less than 20 percent of the

15 aggregate dollar amount of the financings of the licensee

16 will be provided to smaller enterprises.’’.

17 (d) CAPITAL IMPAIRMENT REQUIREMENTS.—Section

18 303(e) of the Small Business Investment Act of 1958 (15

19 U.S.C. 683(e)) is amended to read as follows:

20 ‘‘(e) CAPITAL IMPAIRMENT.—Before approving any

21 application for leverage submitted by a licensee under this

22 Act, the Administrator—

23 ‘‘(1) shall determine that the private capital of

24 the licensee meets the requirements of section

25 302(a); and
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1 ‘‘(2) shall determine, taking into account the

2 nature of the assets of the licensee, the amount and

3 terms of any third party debt owed by such licensee,

4 and any other factors determined to be relevant by

5 the Administrator, that the private capital of the li6 censee has not been impaired to such an extent that

7 the issuance of additional leverage would create or

8 otherwise contribute to an unreasonable risk of de9 fault or loss to the Federal Government.’’.

10 (e) EQUITY INVESTMENT REQUIREMENT.—Section

11 303(g)(4) of the Small Business Investment Act of 1958

12 (15 U.S.C. 683(g)(4)) is amended by striking ‘‘and main13 tain’’.

14 (f) FEES.—Section 303 of the Small Business Invest15 ment Act of 1958 (15 U.S.C. 683) is amended—

16 (1) in subsection (b), in the fifth sentence, by

17 striking ‘‘1 per centum’’, and all that follows before

18 the period at the end of the sentence and inserting

19 the following: ‘‘1 percent, plus an additional charge

20 of .50 percent per annum which shall be paid to and

21 retained by the Administration’’;

22 (2) in subsection (g)(2), by striking ‘‘1 per cen23 tum,’’ and all that follows before the period at the

24 end of the paragraph and inserting the following: ‘‘1

25 percent, plus an additional charge of .50 percent per
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1 annum which shall be paid to and retained by the

2 Administration’’; and

3 (3) by adding at the end the following new sub4 sections:

5 ‘‘(i) LEVERAGE FEE.—With respect to leverage

6 granted by the Administration to a licensee, the Adminis7 tration shall collect from the licensee a nonrefundable fee

8 in an amount equal to 3 percent of the face amount of

9 leverage granted to the licensee, payable upon the earlier

10 of the date of entry into any commitment for such leverage

11 or the date on which the leverage is drawn by the licensee.

12 ‘‘(j) CALCULATION OF SUBSIDY RATE.—All fees, in13 terest, and profits received and retained by the Adminis14 tration under this section shall be included in the calcula15 tions made by the Director of the Office of Management

16 and Budget to offset the cost (as that term is defined in

17 section 502 of the Federal Credit Reform Act of 1990)

18 to the Administration of purchasing and guaranteeing de19 bentures and participating securities under this Act.’’.

20 SEC. 6. LIABILITY OF THE UNITED STATES.

21 Section 308(e) of the Small Business Investment Act

22 of 1958 (15 U.S.C. 687(e)) is amended by striking ‘‘Noth23 ing’’ and inserting ‘‘Except as expressly provided other24 wise in this Act, nothing’’.
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1 SEC. 7. EXAMINATIONS; VALUATIONS.

2 (a) EXAMINATIONS.—Section 310(b) of the Small

3 Business Investment Act of 1958 (15 U.S.C. 687b(b)) is

4 amended in the first sentence by inserting ‘‘which may be

5 conducted with the assistance of a private sector entity

6 that has both the qualifications to conduct and expertise

7 in conducting such examinations,’’ after ‘‘Investment Divi8 sion of the Administration,’’.

9 (b) VALUATIONS.—Section 310(d) of the Small Busi10 ness Investment Act of 1958 (15 U.S.C. 687b(d)) is

11 amended to read as follows:

12 ‘‘(d) VALUATIONS.—

13 ‘‘(1) FREQUENCY OF VALUATIONS.—

14 ‘‘(A) IN GENERAL.—Each licensee shall

15 submit to the Administrator a written valuation

16 of the loans and investments of the licensee not

17 less often than semiannually or otherwise upon

18 the request of the Administrator, except that

19 any licensee with no leverage outstanding shall

20 submit such valuations annually, unless the Ad21 ministrator determines otherwise.

22 ‘‘(B) MATERIAL ADVERSE CHANGES.—Not

23 later than 30 days after the end of a fiscal

24 quarter of a licensee during which a material

25 adverse change in the aggregate valuation of

26 the loans and investments or operations of the
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1 licensee occurs, the licensee shall notify the Ad2 ministrator in writing of the nature and extent

3 of that change.

4 ‘‘(C) INDEPENDENT CERTIFICATION.—

5 ‘‘(i) IN GENERAL.—Not less than once

6 during each fiscal year, each licensee shall

7 submit to the Administrator the financial

8 statements of the licensee, audited by an

9 independent certified public accountant ap10 proved by the Administrator.

11 ‘‘(ii) AUDIT REQUIREMENTS.—Each

12 audit conducted under clause (i) shall in13 clude—

14 ‘‘(I) a review of the procedures

15 and documentation used by the li16 censee in preparing the valuations re17 quired by this section; and

18 ‘‘(II) a statement by the inde19 pendent certified public accountant

20 that such valuations were prepared in

21 conformity with the valuation criteria

22 applicable to the licensee established

23 in accordance with paragraph (2).

24 ‘‘(2) VALUATION CRITERIA.—Each valuation

25 submitted under this subsection shall be prepared by
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1 the licensee in accordance with valuation criteria,

2 which shall—

3 ‘‘(A) be established or approved by the Ad4 ministrator; and

5 ‘‘(B) include appropriate safeguards to en6 sure that the noncash assets of a licensee are

7 not overvalued.’’.

8 SEC. 8. TRUSTEE OR RECEIVERSHIP OVER LICENSEES.

9 (a) FINDING.—It is the finding of the Congress that

10 increased recoveries on assets in liquidation under the

11 Small Business Investment Act of 1958 are in the best

12 interests of the Federal Government.

13 (b) DEFINITIONS.—For purposes of this section—

14 (1) the term ‘‘Administrator’’ means the Ad15 ministrator of the Small Business Administration;

16 (2) the term ‘‘Administration’’ means the Small

17 Business Administration; and

18 (3) the term ‘‘licensee’’ has the same meaning

19 as in section 103 of the Small Business Investment

20 Act of 1958.

21 (c) LIQUIDATION PLAN.—

22 (1) IN GENERAL.—Not later than October 15,

23 1996, the Administrator shall submit to the Com24 mittees on Small Business of the Senate and the

25 House of Representatives a detailed plan to expedite
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1 the orderly liquidation of all licensee assets in liq2 uidation, including assets of licensees in receivership

3 or in trust held by or under the control of the Ad4 ministration or its agents.

5 (2) CONTENTS.—The plan submitted under

6 paragraph (1) shall include a timetable for liquidat7 ing the liquidation portfolio of small business invest8 ment company assets owned by the Administration,

9 and shall contain the Administrator’s findings and

10 recommendations on various options providing for

11 the fair and expeditious liquidation of such assets

12 within a reasonable period of time, giving due con13 sideration to the option of entering into one or more

14 contracts with private sector entities having the ca15 pability to carry out the orderly liquidation of simi16 lar assets.

17 SEC. 9. BOOK ENTRY REGISTRATION.

18 Subsection 321(f) of the Small Business Investment

19 Act of 1958 (15 U.S.C. 687l) is amended by adding at

20 the end the following new paragraph:

21 ‘‘(5) Nothing in this subsection shall prohibit the uti22 lization of a book entry or other electronic form of reg23 istration for trust certificates.’’.
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1 SEC. 10. TECHNICAL AND CONFORMING AMENDMENTS.

2 (a) SMALL BUSINESS INVESTMENT ACT OF 1958.—

3 The Small Business Investment Act of 1958 (15 U.S.C.

4 661 et seq.) is amended—

5 (1) in section 303—

6 (A) in subsection (a), by striking ‘‘deben7 ture bonds,’’ and inserting ‘‘securities,’’;

8 (B) by striking subsection (f) and inserting

9 the following:

10 ‘‘(f) REDEMPTION OR REPURCHASE OF PREFERRED

11 STOCK.—Notwithstanding any other provision of law—

12 ‘‘(1) the Administrator may allow the issuer of

13 any preferred stock sold to the Administration be14 fore November 1, 1989 to redeem or repurchase

15 such stock, upon the payment to the Administration

16 of an amount less than the par value of such stock,

17 for a repurchase price determined by the Adminis18 trator after consideration of all relevant factors, in19 cluding—

20 ‘‘(A) the market value of the stock;

21 ‘‘(B) the value of benefits provided and an22 ticipated to accrue to the issuer;

23 ‘‘(C) the amount of dividends paid, ac24 crued, and anticipated; and

25 ‘‘(D) the Administrator’s estimate of any

26 anticipated redemption; and
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1 ‘‘(2) any moneys received by the Administration

2 from the repurchase of preferred stock shall be

3 available solely to provide debenture leverage to li4 censees having 50 percent or more in aggregate dol5 lar amount of their financings invested in smaller

6 enterprises.’’; and

7 (C) in subsection (g)(8)—

8 (i) by striking ‘‘partners or sharehold9 ers’’ and inserting ‘‘partners, shareholders,

10 or members’’;

11 (ii) by striking ‘‘partner’s or share12 holder’s’’ and inserting ‘‘partner’s, share13 holder’s, or member’s’’; and

14 (iii) by striking ‘‘partner or share15 holder’’ and inserting ‘‘partner, share16 holder, or member’’;

17 (2) in section 308(h), by striking ‘‘subsection

18 (c) or (d) of section 301’’ each place that term ap19 pears and inserting ‘‘section 301’’;

20 (3) in section 310(c)(4), by striking ‘‘not less

21 than four years in the case of section 301(d) licens22 ees and in all other cases,’’;

23 (4) in section 312—
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1 (A) by striking ‘‘shareholders or partners’’

2 and inserting ‘‘shareholders, partners, or mem3 bers’’; and

4 (B) by striking ‘‘shareholder, or partner’’

5 each place that term appears and inserting

6 ‘‘shareholder, partner, or member’’;

7 (5) by striking sections 317 and 318, and re8 designating sections 319 through 322 as sections

9 317 through 320, respectively;

10 (6) in section 319, as redesignated—

11 (A) in subsection (a), by striking ‘‘, includ12 ing companies operating under the authority of

13 section 301(d),’’; and

14 (B) in subsection (f)(2), by inserting ‘‘or

15 investments in obligations of the United States’’

16 after ‘‘accounts’’;

17 (7) in section 320, as redesignated, by striking

18 ‘‘section 321’’ and inserting ‘‘section 319’’; and

19 (8) in section 509—

20 (A) in subsection (a)(1), by striking the

21 second sentence; and

22 (B) in subsection (e)(1)(B), by striking

23 ‘‘subsection (c) or (d) of section 301’’ and in24 serting ‘‘section 301’’.
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1 (b) AMENDMENT IN OTHER LAW.—Section 11(h) of

2 the Federal Home Loan Bank Act (12 U.S.C. 1431(h))

3 is amended by striking ‘‘301(d)’’ and inserting ‘‘301’’.

4 SEC. 11. AMENDMENTS TO THE SMALL BUSINESS ACT.

5 (a) POWERS OF THE ADMINISTRATOR.—Section

6 5(b)(7) of the Small Business Act (15 U.S.C. 634(b)(7))

7 is amended by striking the colon and all that follows before

8 the semicolon at the end of the paragraph and inserting

9 the following: ‘‘: Provided, That with respect to deferred

10 participation loans, the Administrator may, in the discre11 tion of and pursuant to regulations promulgated by the

12 Administrator, authorize participating lending institutions

13 to take actions relating to loan servicing on behalf of the

14 Administrator, including determining eligibility and credit15 worthiness and loan monitoring, collection, and liquida16 tion’’.

17 (b) AUTHORIZATION OF APPROPRIATIONS.—Section

18 20(p)(3) of the Small Business Act (15 U.S.C. 631 note)

19 is amended by striking subparagraph (B) and inserting

20 the following:

21 ‘‘(B) $300,000,000 in guarantees of de22 bentures; and’’.
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1 SEC. 12. EXTENSION OF SMALL BUSINESS COMPETITIVE2 NESS DEMONSTRATION PROGRAM.

3 Section 711(c) of the Small Business Competitiveness

4 Demonstration Program Act of 1988 (15 U.S.C. 644 note)

5 is amended by striking ‘‘September 30, 1996’’ and insert6 ing ‘‘September 30, 1997’’.

7 SEC. 13. EFFECTIVE DATE.

8 This Act and the amendments made by this Act shall

9 become effective on the date of enactment of this Act.

Passed the Senate July 25, 1996.

Attest: KELLY D. JOHNSTON,

Secretary.