II

106TH CONGRESS

1ST SESSION S. 1594

To amend the Small Business Act and Small Business Investment Act of

1958.

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 16, 1999

Mr. KERRY (for himself, Mr. WELLSTONE, Mr. BINGAMAN, Mr. SARBANES,

Mr. LEVIN, and Mr. CLELAND) introduced the following bill; which was

read twice and referred to the Committee on Small Business

A BILL

To amend the Small Business Act and Small Business

Investment Act of 1958.

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; TABLE OF CONTENTS.

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

5 ‘‘Community Development and Venture Capital Act of

6 1999’’.

7 (b) TABLE OF CONTENTS.—The table of contents for

8 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—NEW MARKETS VENTURE CAPITAL PROGRAM
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Sec. 101. New Markets Venture Capital Program.

Sec. 102. Bankruptcy exemption for NMVC companies.

Sec. 103. Federal savings associations.

TITLE II—COMMUNITY DEVELOPMENT VENTURE CAPITAL

ASSISTANCE

Sec. 201. Short title.

Sec. 202. Findings and purposes.

Sec. 203. Community development venture capital activities.

TITLE III—BUSINESS LINC

Sec. 301. Grants authorized.

Sec. 302. Regulations.

1 TITLE I—NEW MARKETS

2 VENTURE CAPITAL PROGRAM

3 SEC. 101. NEW MARKETS VENTURE CAPITAL PROGRAM.

4 (a) IN GENERAL.—Title III of the Small Business

5 Investment Act of 1958 (15 U.S.C. 661 et seq.) is

6 amended—

7 (1) by striking the title designation and heading

8 and inserting the following:

9 ‘‘TITLE III—INVESTMENT

10 DIVISION PROGRAMS

11 ‘‘PART A—SMALL BUSINESS INVESTMENT

12 COMPANIES’’;

13 and

14 (2) by adding at the end the following:

15 ‘‘PART B—NEW MARKETS VENTURE CAPITAL

16 PROGRAM

17 ‘‘SEC. 351. DEFINITIONS.

18 ‘‘In this part—
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1 ‘‘(1) the term ‘eligible company’ means a com2 pany that—

3 ‘‘(A) is a newly formed for-profit entity,

4 which may be a newly formed for-profit sub5 sidiary of an existing entity; and

6 ‘‘(B) has a management team with experi7 ence in community development financing or

8 relevant venture capital financing;

9 ‘‘(2) the term ‘low-income individual’ means an

10 individual whose income (adjusted for family size)

11 does not exceed—

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

13 the area median income; and

14 ‘‘(B) for nonmetropolitan areas, the great15 er of—

16 ‘‘(i) 80 percent of the area median in17 come; or

18 ‘‘(ii) 80 percent of the statewide non19 metropolitan area median income;

20 ‘‘(3) the term ‘low- or moderate-income geog21 raphy’ means—

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

23 case of an area that is not tracted for popu24 lation census tracts, the equivalent county divi25 sion, as defined by the Bureau of the Census of
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1 the Department of Commerce for purposes of

2 defining poverty areas) if—

3 ‘‘(i) the poverty rate for such census

4 tract is not less than 20 percent; or

5 ‘‘(ii)(I) in the case of a tract located

6 within a metropolitan area, the median

7 family income for such tract does not ex8 ceed the greater of 80 percent of the state9 wide median family income or 80 percent

10 of the metropolitan area median family in11 come; or

12 ‘‘(II) in the case of a tract not located

13 within a metropolitan area, the median

14 family income for such tract does not ex15 ceed 80 percent of the statewide median

16 family income; or

17 ‘‘(B) any area located within—

18 ‘‘(i) a HUBZone (as defined in sec19 tion 3(p) of the Small Business Act and

20 the implementing regulations issued under

21 that section);

22 ‘‘(ii) an urban empowerment zone or

23 urban enterprise community (as designated

24 by the Secretary of Housing and Urban

25 Development); or
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1 ‘‘(iii) a rural empowerment zone or

2 rural enterprise community (as designated

3 by the Secretary of Agriculture);

4 ‘‘(4) the terms ‘new markets venture capital

5 company’ and ‘NMVC company’ mean a company

6 that has been designated as a new markets venture

7 capital company by the Administrator under section

8 354(d);

9 ‘‘(5) the term ‘participation agreement’ means

10 an agreement between the Administrator and an

11 NMVC company that furthers the purposes set forth

12 in section 352, detailing the operating plan and in13 vestment criteria of the company and requiring that

14 not less than 80 percent of the investments of the

15 company be made in smaller enterprises—

16 ‘‘(A) that are located in 1 or more low- or

17 moderate-income geographies or 1 or more tar18 geted population areas; or

19 ‘‘(B) not less than 35 percent of the em20 ployees of which—

21 ‘‘(i) reside or will reside in a low- or

22 moderate-income geography or a targeted

23 population area; or

24 ‘‘(ii) are or will be low-income individ25 uals;
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1 ‘‘(6) the term ‘targeted population’ means an

2 identifiable group of individuals, including an Indian

3 tribe, as determined by the Administrator, who are

4 low-income individuals; and

5 ‘‘(7) the term ‘targeted population area’ means

6 an identifiable geographic area, as determined by the

7 Administrator, containing a concentration of 1 or

8 more targeted populations.

9 ‘‘SEC. 352. PURPOSES.

10 ‘‘The purposes of this part are—

11 ‘‘(1) to encourage venture capital investment in

12 smaller enterprises located within urban and rural

13 areas;

14 ‘‘(2) to promote the creation of wealth, eco15 nomic development, and job opportunities in low16 and moderate-income geographies and for targeted

17 populations; and

18 ‘‘(3) to establish a venture capital program,

19 which shall be administered by the Administrator—

20 ‘‘(A) to make grants to NMVC companies

21 for the purpose of providing marketing, man22 agement, and technical assistance to smaller en23 terprises financed, or expected to be financed,

24 by such companies; and
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1 ‘‘(B) to guarantee debentures issued by

2 NMVC companies to enable such companies to

3 make venture capital investments in smaller en4 terprises within urban and rural areas.

5 ‘‘SEC. 353. PROGRAM ESTABLISHMENT.

6 ‘‘There is established a New Markets Venture Capital

7 Program, under which the Administrator is authorized

8 to—

9 ‘‘(1) make grants to NMVC companies, as pro10 vided in section 355; and

11 ‘‘(2) guarantee debentures issued by NMVC

12 companies, as provided in section 356.

13 ‘‘SEC. 354. APPROVAL OF NMVC COMPANIES.

14 ‘‘(a) APPLICATIONS.—In order to be eligible to par15 ticipate in the program under this part as an NMVC com16 pany, an eligible company shall submit to the Adminis17 trator an application, within such period of time as the

18 Administrator shall establish, which shall include—

19 ‘‘(1) a business plan that describes the manner

20 and geographic areas in which the applicant will

21 make successful venture capital investments in

22 smaller enterprises described in subparagraphs (A)

23 and (B) of section 351(5) and provide marketing,

24 management, and technical assistance to those en25 terprises;
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1 ‘‘(2) the qualifications and general business

2 reputation of the management of the applicant, spe3 cifically addressing—

4 ‘‘(A) the experience of the management in

5 making venture capital investments in smaller

6 enterprises described in subparagraphs (A) and

7 (B) of section 351(5); and

8 ‘‘(B) the success of those investments in

9 terms of business growth, jobs created, and

10 such other factors as the Administrator may re11 quire; and

12 ‘‘(3) a description of the manner in which the

13 applicant will interface with community organiza14 tions;

15 ‘‘(4) a proposal describing the manner in which

16 grant amounts made available under this part would

17 provide marketing, management, and technical as18 sistance to smaller enterprises expected to be fi19 nanced by the applicant;

20 ‘‘(5) proposed criteria by which to evaluate the

21 performance of the applicant in meeting program ob22 jectives;

23 ‘‘(6) the management and financial strength of

24 any parent or affiliated firm, or any firm essential
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1 to the success of the business plan of the applicant;

2 and

3 ‘‘(7) such other information as the Adminis4 trator may require.

5 ‘‘(b) CRITERIA FOR CONDITIONAL APPROVAL.—

6 Upon receipt of an application submitted under subsection

7 (a), the Administrator shall review the application and

8 make a determination regarding whether to grant condi9 tional approval to the applicant to operate as an NMVC

10 company during the time period described in subsection

11 (c), based on—

12 ‘‘(1) the geographic area and employment char13 acteristics of the smaller enterprises in which the

14 proposed investments of the NMVC company will be

15 made (in order to promote investment nationwide);

16 ‘‘(2) the likelihood that the applicant will meet

17 the goals of the business plan of the applicant;

18 ‘‘(3) the experience and background of the com19 pany’s management team;

20 ‘‘(4) the need for equity investments within the

21 proposed investment areas;

22 ‘‘(5) the extent to which the applicant will con23 centrate its activities on serving its investment

24 areas;
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1 ‘‘(6) the likelihood that the applicant will be

2 able to satisfy the requirements of subsection (c);

3 ‘‘(7) the extent to which the proposed activities

4 will expand economic opportunities within the invest5 ment areas; and

6 ‘‘(8) such other factors as the Administrator

7 determines to be appropriate.

8 ‘‘(c) REQUIREMENTS FOR FINAL APPROVAL.—

9 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

10 each applicant that is granted conditional approval

11 by the Administrator to operate as an NMVC com12 pany under subsection (b), shall, before the expira13 tion of a time period established by the Adminis14 trator not to exceed 24 months, beginning on the

15 date on which such conditional approval is

16 granted—

17 ‘‘(A) raise not less than $5,000,000 of con18 tributed capital or binding capital commitments

19 from 1 or more investors (other than an agency

20 of the Federal Government) that meet criteria

21 established by the Administrator; and

22 ‘‘(B) in order to provide marketing, man23 agement, and technical assistance, have—

24 ‘‘(i) cash or binding commitments for

25 contributions (in cash or in-kind) from 1
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1 or more sources other than the Adminis2 tration that meet criteria established by

3 the Administrator, payable or available

4 over a multiyear period acceptable to the

5 Administrator (not to exceed 10 years), in

6 an amount equal to 30 percent of the cap7 ital and commitments raised under sub8 paragraph (A);

9 ‘‘(ii) purchased an annuity from an

10 insurance company acceptable to the Ad11 ministrator, using amounts (other than the

12 amounts raised to satisfy the requirements

13 of subparagraph (A)) from any source

14 other than the Administration, that would

15 yield cash payments over a multiyear pe16 riod acceptable to the Administrator (not

17 to exceed 10 years), in an amount equal to

18 30 percent of the capital and commitments

19 raised under subparagraph (A); or

20 ‘‘(iii) cash or binding commitments

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

22 type described in clause (i) and have pur23 chased an annuity of the type described in

24 clause (ii), that 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 equal to 30 percent of

3 the capital and commitments raised under

4 subparagraph (A).

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

6 the discretion of the Administrator and based upon

7 a showing of special circumstances and good cause,

8 consider an applicant to have satisfied the require9 ments of paragraph (1)(B) if the applicant has a

10 viable plan that reasonably projects the capacity of

11 the applicant to raise the amount (in cash or in12 kind) required under paragraph (1)(B).

13 ‘‘(d) GRANT OF FINAL APPROVAL; DESIGNATION.—

14 The Administrator shall, with respect to each applicant

15 conditionally approved to operate as an NMVC company

16 under subsection (b), either—

17 ‘‘(1) grant final approval to the applicant to op18 erate as an NMVC company under this part and

19 designate the applicant as an NMVC company, if

20 the applicant—

21 ‘‘(A) satisfies the requirements of sub22 section (c) on or before the expiration of the

23 time period described in that subsection; and

24 ‘‘(B) enters into a participation agreement

25 with the Administrator; or
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1 ‘‘(2) if the applicant fails to satisfy the require2 ments of subsection (c) on or before the expiration

3 of the time period described in that subsection, re4 voke the conditional approval granted under that

5 subsection.

6 ‘‘SEC. 355. TECHNICAL ASSISTANCE GRANTS.

7 ‘‘(a) GRANTS.—

8 ‘‘(1) IN GENERAL.—The Administrator, in ac9 cordance with such terms and conditions as the Ad10 ministrator may require, is authorized to award 1 or

11 more grants to each NMVC company in accordance

12 with this subsection, which shall be used to provide

13 marketing, management, and technical assistance for

14 the benefit of smaller enterprises financed, or ex15 pected to be financed, by the NMVC company.

16 ‘‘(2) MULTIYEAR GRANTS.—Amounts from a

17 grant awarded under this section shall be paid upon

18 the direction of the Administrator over a multiyear

19 period of not to exceed 10 years.

20 ‘‘(3) GRANT AMOUNT.—

21 ‘‘(A) IN GENERAL.—Subject to subpara22 graph (B), the amount of a grant awarded to

23 an NMVC company under this subsection shall

24 be equal to 30 percent of the amount of capital
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1 and commitments raised under section

2 354(c)(1)(A).

3 ‘‘(B) MATCHING REQUIREMENT.—

4 ‘‘(i) IN GENERAL.—Except as pro5 vided in clause (ii), in order to receive

6 funds under a grant awarded under this

7 subsection, an NMVC company shall pro8 vide a matching contribution (in cash or

9 in-kind) from sources other than the Ad10 ministration, in an amount equal to the

11 funds to received.

12 ‘‘(ii) EXCEPTION.—The Administrator

13 may waive in whole or in part the match14 ing requirement of clause (i), if the Admin15 istrator determines that such action is con16 sistent with the purposes set forth in sec17 tion 352 and with protecting the creditor

18 status of the Federal Government as a

19 guarantor of debentures issued by an

20 NMVC company.

21 ‘‘(4) PRO RATA REDUCTIONS.—If the amount

22 made available to carry out this section for a fiscal

23 year is insufficient for the Administrator to award

24 grants in the amounts required under paragraph

25 (3), the Administrator shall make pro rata reduc-
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1 tions in the amounts otherwise payable to each

2 NMVC company under that paragraph.

3 ‘‘(b) SUPPLEMENTAL GRANTS.—

4 ‘‘(1) IN GENERAL.—In addition to any grant

5 under subsection (a), the Administrator, in accord6 ance with such terms and conditions as the Adminis7 trator may require, may make 1 or more supple8 mental grants to an NMVC company, which shall be

9 used to provide additional marketing, management,

10 and technical assistance for the benefit of smaller

11 enterprises financed, or expected to be financed, by

12 the NMVC company.

13 ‘‘(2) MATCHING REQUIREMENT.—The Adminis14 trator may require, as a condition of any supple15 mental grant made under this subsection, that the

16 NMVC company provide a matching contribution (in

17 cash or in-kind) from 1 or more sources other than

18 the Administrator in an amount equal to the amount

19 of the supplemental grant.

20 ‘‘SEC. 356. DEBENTURES.

21 ‘‘(a) IN GENERAL.—The Administrator is authorized

22 to guarantee the timely payment of principal and interest

23 as scheduled on debentures issued by NMVC companies,

24 in accordance with such terms and conditions the Admin25 istrator determines to be appropriate.
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1 ‘‘(b) FULL FAITH AND CREDIT.—The full faith and

2 credit of the United States is pledged to the payment of

3 all amounts that may be required to be paid under any

4 guarantee under this section.

5 ‘‘(c) DEBENTURE REQUIREMENTS.—A debenture

6 guaranteed under this section—

7 ‘‘(1) may be issued for a term of not to exceed

8 15 years;

9 ‘‘(2) shall bear interest at a rate approved by

10 the Administrator; and

11 ‘‘(3) shall contain such other terms and condi12 tions as the Administrator may require.

13 ‘‘(d) TOTAL FACE VALUE.—The total face amount

14 of debentures issued by an NMVC company and guaran15 teed under this section that may be outstanding at any

16 1 time shall not exceed 150 percent of the contributed cap17 ital of the NMVC company, as determined by the Adminis18 trator. For purposes of this subsection, the contributed

19 capital of an NMVC company includes capital that is

20 deemed to be Federal funds contributed by an investor

21 other than an agency of the Federal Government.

22 ‘‘SEC. 357. ISSUANCE AND GUARANTEE OF TRUST CERTIFI23 CATES.

24 ‘‘(a) IN GENERAL.—The Administrator (or an agent

25 of the Administrator) is authorized to issue trust certifi-
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1 cates representing ownership of all or a fractional part of

2 debentures guaranteed by the Administrator under section

3 356, if such trust certificates are based on and backed

4 by a trust or pool approved by the Administrator and com5 posed solely of debentures guaranteed under section 356.

6 ‘‘(b) GUARANTEE AUTHORITY.—

7 ‘‘(1) IN GENERAL.—The Administrator is au8 thorized to, upon such terms and conditions as the

9 Administrator determines to be appropriate, guar10 antee the timely payment of the principal of and in11 terest on any trust certificate issued under this sec12 tion.

13 ‘‘(2) LIMITATION.—A guarantee under this sub14 section shall be limited to the extent of the principal

15 of and interest on the guaranteed debentures that

16 compose the trust or pool described in subsection

17 (a).

18 ‘‘(3) REDUCTION.—If a debenture in a trust or

19 pool described in subsection (a) is prepaid, or in the

20 event of default of a debenture, the guarantee of

21 timely payment of principal and interest on the re22 lated trust certificate issued under this section shall

23 be reduced in proportion to the amount of principal

24 and interest that such prepaid debenture represents

25 in that trust or pool.
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1 ‘‘(4) ACCRUAL OF INTEREST.—Interest on pre2 paid or defaulted debentures shall accrue and be

3 guaranteed by the Administrator only through the

4 date of payment of the guarantee.

5 ‘‘(5) REDEMPTION OF TRUST CERTIFICATES.—

6 During the term of any trust certificate issued under

7 this subsection, the trust certificate may be called

8 for redemption due to prepayment or default of all

9 debentures in the trust or pool.

10 ‘‘(c) FULL FAITH AND CREDIT.—The full faith and

11 credit of the United States is pledged to the payment of

12 all amounts that may be required to be paid under any

13 guarantee of a trust certificate issued under this section.

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

15 for any guarantee of a trust certificate issued under this

16 section, except that nothing in this subsection may be con17 strued to preclude an agent of the Administrator from col18 lecting a fee approved by the Administrator for the func19 tions described in subsection (f)(2).

20 ‘‘(e) SUBROGATION.—

21 ‘‘(1) IN GENERAL.—If the Administrator pays a

22 claim under a guarantee issued under this section,

23 the Administration shall be subrogated fully to the

24 rights satisfied by such payment.
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1 ‘‘(2) OWNERSHIP RIGHTS.—No Federal, State,

2 or local law shall preclude or limit the exercise by

3 the Administrator of the ownership rights of the Ad4 ministrator in the debentures residing in a trust or

5 pool against which trust certificates are issued under

6 this section.

7 ‘‘(f) CENTRAL REGISTRATION.—

8 ‘‘(1) IN GENERAL.—The Administrator may

9 provide for a central registration of all trust certifi10 cates issued under this section.

11 ‘‘(2) CONTRACTING OUT.—

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

13 may contract with an agent or agents to carry

14 out on behalf of the Administrator the pooling

15 and the central registration functions of this

16 section including, notwithstanding any other

17 provision of law—

18 ‘‘(i) maintenance on behalf of and

19 under the direction of the Administrator of

20 such commercial bank accounts or invest21 ments in obligations of the United States

22 as may be necessary to facilitate trusts or

23 pools backed by debentures guaranteed

24 under this part; and
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1 ‘‘(ii) the issuance of trust certificates

2 to facilitate such poolings.

3 ‘‘(B) FIDELITY BOND OR INSURANCE RE4 QUIRED.—An agent contracting with the Ad5 ministrator under this paragraph shall be re6 quired to provide a fidelity bond or insurance in

7 such amounts as the Administrator determines

8 to be necessary to fully protect the interests of

9 the Government.

10 ‘‘(3) REGULATION OF BROKERS AND DEAL11 ERS.—The Administrator may regulate brokers and

12 dealers in trust certificates issued under this section.

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

14 this subsection may be construed to prohibit the use

15 of a book-entry or other electronic form of registra16 tion for trust certificates issued under this section.

17 ‘‘SEC. 358. FEES.

18 ‘‘Except as provided under section 357(d), the Ad19 ministrator may charge such fees as the Administrator de20 termines to be appropriate with respect to any guarantee

21 issued or grant awarded under this part.

22 ‘‘SEC. 359. BANK PARTICIPATION.

23 ‘‘Any national bank, or any member bank of the Fed24 eral Reserve System or nonmember insured bank to the

25 extent permitted under applicable State law, may invest
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1 in any 1 or more NMVC companies, or in any entity estab2 lished to invest solely in NMVC companies, except that

3 in no event shall the total amount of such investments of

4 any such bank exceed 5 percent of the total capital and

5 surplus of the bank.

6 ‘‘SEC. 360. REPORTING REQUIREMENTS.

7 ‘‘Each NMVC company shall provide to the Adminis8 trator such information as the Administrator may request,

9 including reporting on the measurement criteria that the

10 NMVC company proposed in the application submitted

11 under section 354(a).

12 ‘‘SEC. 361. EXAMINATIONS.

13 ‘‘(a) IN GENERAL.—Each NMVC company shall be

14 subject to examinations made at the direction of the In15 vestment Division of the Administration, which may be

16 conducted with the assistance of a private sector entity

17 that has both the qualifications to conduct and the exper18 tise in conducting such examinations.

19 ‘‘(b) ASSESSMENT OF COSTS.—The cost of such ex20 aminations, including the compensation of the examiners,

21 may in the discretion of the Administrator be assessed

22 against the company examined and when so assessed shall

23 be paid by such company.

24 ‘‘(c) USE OF FEES.—Fees collected under this sec25 tion shall be deposited in the account for salaries and ex-
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1 penses of the Administration and may be used solely to

2 cover the costs of examinations and other program over3 sight activities.

4 ‘‘SEC. 362. INJUNCTIONS AND OTHER ORDERS.

5 ‘‘(a) IN GENERAL.—If, in the judgment of the Ad6 ministrator, an NMVC company or any other person has

7 engaged or is about to engage in any act or practice that

8 constitutes or will constitute a violation of any provision

9 of this Act (or any rule, regulation, or order issued under

10 this Act) or of a participation agreement entered into

11 under this part—

12 ‘‘(1) the Administrator may make application to

13 the proper district court of the United States or a

14 United States court of any place subject to the juris15 diction of the United States for an order enjoining

16 such act or practice, or for an order enforcing com17 pliance with such provision; and

18 ‘‘(2) such court shall—

19 ‘‘(A) have jurisdiction over such applica20 tion and any ensuing proceedings; and

21 ‘‘(B) upon a showing by the Administrator

22 that such NMVC company or other person has

23 engaged or is about to engage in any such act

24 or practice, grant without bond a permanent or
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1 temporary injunction, restraining order, or

2 other appropriate order.

3 ‘‘(b) POWERS OF COURT.—In any proceeding under

4 subsection (a)—

5 ‘‘(1) the court as a court of equity may, to such

6 extent as the court determines to be necessary, take

7 exclusive jurisdiction of the NMVC company and the

8 assets thereof, wherever located; and

9 ‘‘(2) the court shall have jurisdiction in any

10 such proceeding to appoint a trustee or receiver to

11 hold or administer under the direction of the court

12 the assets so possessed.

13 ‘‘(c) TRUSTEE OR RECEIVER.—The Administrator is

14 authorized to act as trustee or receiver of the NMVC com15 pany. Upon request by the Administrator, the court may

16 appoint the Administrator to act in such capacity unless

17 the court determines such appointment to be inequitable

18 or otherwise inappropriate based on the special cir19 cumstances at issue.

20 ‘‘SEC. 363. UNLAWFUL ACTS AND OMISSIONS BY OFFICERS,

21 DIRECTORS, EMPLOYEES, OR AGENTS;

22 BREACH OF FIDUCIARY DUTY.

23 ‘‘(a) IN GENERAL.—If an NMVC company violates

24 any provision of this Act (or any rule or regulation issued

25 under this Act), or of a participation agreement entered
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1 into under this part, by failing to comply with the terms

2 thereof or by engaging in any act or practice that con3 stitutes or will constitute a violation thereof, such violation

4 shall be deemed to be also a violation and an unlawful

5 act on the part of any person who, directly or indirectly,

6 authorizes, orders, participates in, or causes, brings about,

7 counsels, aids, or abets in the commission of any act, prac8 tice, or transaction that constitutes or will constitute, in

9 whole or in part, such violation.

10 ‘‘(b) BREACH OF FIDUCIARY DUTY.—It shall be un11 lawful for any officer, director, employee, agent, or other

12 participant in the management or conduct of the affairs

13 of an NMVC company to engage in any act or practice,

14 or to omit any act, in breach of the fiduciary duty of such

15 officer, director, employee, agent, or participant, if, as a

16 result thereof, the NMVC company has suffered or is in

17 imminent danger of suffering financial loss or other dam18 age.

19 ‘‘(c) OTHER PROHIBITIONS.—Except with the writ20 ten consent of the Administrator, it shall be unlawful—

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

22 director, or employee of an NMVC company, or to

23 become an agent or participant in the conduct of the

24 affairs or management of an NMVC company, if

25 that person—
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1 ‘‘(A) has been convicted of a felony, or any

2 other criminal offense involving dishonesty or

3 breach of trust; or

4 ‘‘(B) has been found civilly liable in dam5 ages, or has been permanently or temporarily

6 enjoined by order, judgment, or decree of a

7 court of competent jurisdiction, by reason of

8 any act or practice involving fraud or breach of

9 trust; or

10 ‘‘(2) for any person to continue to serve in any

11 of the above-described capacities, if that person is

12 subsequently—

13 ‘‘(A) convicted of a felony, or any other

14 criminal offense involving dishonesty or breach

15 of trust; or

16 ‘‘(B) found civilly liable in damages, or is

17 permanently or temporarily enjoined by an

18 order, judgment, or decree of a court of com19 petent jurisdiction, by reason of any act or

20 practice involving fraud or breach of trust.

21 ‘‘(d) NOTICE.—The Administrator may serve upon

22 any officer, director, employee, or other participant in the

23 conduct of the management or other affairs of an NMVC

24 company a written notice of the intention of the Adminis25 trator to remove that person from his or her position
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1 whenever, in the opinion of the Administrator, that

2 person—

3 ‘‘(1) has willfully committed any substantial

4 violation of—

5 ‘‘(A) this Act (or any rule, regulation, or

6 order issued under this Act); or

7 ‘‘(B) a participation agreement entered

8 into under this part; or

9 ‘‘(C) a cease-and-desist order that has be10 come final; or

11 ‘‘(2) has willfully committed or engaged in any

12 act, omission, or practice that constitutes a substan13 tial breach of fiduciary duty, and that such violation

14 or such breach of fiduciary duty is one involving per15 sonal dishonesty on the part of such person.

16 ‘‘(e) SUSPENSION OR REMOVAL.—The Administrator

17 may suspend or remove from office any person upon whom

18 the Administrator has served a notice under subsection

19 (d), in accordance with the procedures set forth in section

20 313.

21 ‘‘SEC. 364. REGULATIONS.

22 ‘‘The Administrator may promulgate such regula23 tions as the Administrator determines to be necessary to

24 carry out this part.
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1 ‘‘SEC. 365. AUTHORIZATIONS.

2 ‘‘(a) IN GENERAL.—There is authorized to be appro3 priated to the Administration to carry out this part, to

4 remain available until expended—

5 ‘‘(1) such subsidy budget authority as may be

6 necessary to guarantee not more than $100,000,000

7 of debentures; and

8 ‘‘(2) not more than $30,000,000 for technical

9 assistance grants.

10 ‘‘(b) PERIOD OF EFFECTIVENESS.—The authority

11 under subsection (a) shall be in effect during the period

12 beginning on October 1, 2000, and ending on September

13 30, 2005.’’.

14 (b) CONFORMING AMENDMENT.—Section

15 20(e)(1)(C) of the Small Business Act (15 U.S.C. 631

16 note) is amended by inserting ‘‘part A of’’ before ‘‘title

17 III’’.

18 SEC. 102. BANKRUPTCY EXEMPTION FOR NMVC COMPA19 NIES.

20 Section 109(b)(2) of title 11, United States Code, is

21 amended by inserting after ‘‘homestead association,’’ the

22 following: ‘‘a new markets venture capital company (as de23 fined in section 351 of the Small Business Investment Act

24 of 1958),’’.
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1 SEC. 103. FEDERAL SAVINGS ASSOCIATIONS.

2 Section 5(c)(4) of the Home Owners’ Loan Act (12

3 U.S.C. 1464(c)(4)) is amended by adding at the end the

4 following:

5 ‘‘(F) NEW MARKETS VENTURE CAPITAL

6 COMPANIES.—A Federal savings association

7 may invest in stock, obligations, or other securi8 ties of any new markets venture capital com9 pany (as defined in section 351 of the Small

10 Business Investment Act of 1958). A Federal

11 savings association may not make any invest12 ment under this subparagraph if its aggregate

13 outstanding investment under this subpara14 graph would exceed 5 percent of the capital and

15 surplus of such savings association.’’.

16 TITLE II—COMMUNITY DEVEL17 OPMENT VENTURE CAPITAL

18 ASSISTANCE

19 SEC. 201. SHORT TITLE.

20 This title may be cited as the ‘‘Community Develop21 ment Venture Capital Capacity Building and Professional

22 Development Act of 1999’’.

23 SEC. 202. FINDINGS.

24 Congress finds that—

25 (1) there is a need for the development and ex26 pansion of organizations that provide private equity
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1 capital to smaller businesses in areas in which eq2 uity-type capital is scarce, such as inner cities and

3 rural areas, in order to create and retain jobs for

4 low-income residents of those areas;

5 (2) to invest successfully in smaller businesses,

6 particularly in inner cities and rural areas, requires

7 highly specialized investment and management skills;

8 (3) there is a shortage of professionals who pos9 sess such skills and there are few training grounds

10 for individuals to obtain those skills;

11 (4) providing assistance to organizations that

12 provide specialized technical assistance and training

13 to individuals and organizations seeking to enter or

14 expand in this segment of the market would stimu15 late small business development and entrepreneur16 ship in economically distressed communities; and

17 (5) assistance from the Federal Government

18 could act as a catalyst to attract investment from

19 the private sector and would help to develop a spe20 cialized venture capital industry focused on creating

21 jobs, increasing business ownership, and generating

22 wealth in low-income communities.
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1 SEC. 203. COMMUNITY DEVELOPMENT VENTURE CAPITAL

2 ACTIVITIES.

3 (a) IN GENERAL.—The Small Business Act (15

4 U.S.C. 631 et seq.) is amended—

5 (1) by redesignating section 34 as section 35;

6 and

7 (2) by inserting after section 33 the following:

8 ‘‘SEC. 34. COMMUNITY DEVELOPMENT VENTURE CAPITAL

9 ACTIVITIES.

10 ‘‘(a) DEFINITIONS.—In this section:

11 ‘‘(1) COMMUNITY DEVELOPMENT VENTURE

12 CAPITAL ORGANIZATION.—The term ‘community de13 velopment venture capital organization’ means a pri14 vately-controlled organization that—

15 ‘‘(A) has a primary mission of promoting

16 community development in low-income commu17 nities, as defined by the Administrator, through

18 investment in private business enterprises; or

19 ‘‘(B) administers or is in the process of es20 tablishing a community development venture

21 capital fund for the purpose of making equity

22 investments in private business enterprises in

23 such communities.

24 ‘‘(2) DEVELOPMENTAL ORGANIZATION.—The

25 term ‘developmental organization’—
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1 ‘‘(A) means a public or private entity, in2 cluding a college or university, that provides

3 technical assistance to community development

4 venture capital organizations or that conducts

5 research or training in community development

6 venture capital investment; and

7 ‘‘(B) may include an intermediary organi8 zation.

9 ‘‘(3) INTERMEDIARY ORGANIZATION.—The term

10 ‘intermediary organization’—

11 ‘‘(A) means a private, nonprofit entity that

12 has—

13 ‘‘(i) a primary mission of promoting

14 community development through invest15 ment in private businesses in low-income

16 communities; and

17 ‘‘(ii) significant prior experience in

18 providing technical assistance or financial

19 assistance to community development ven20 ture capital organizations;

21 ‘‘(B) may include community development

22 venture capital organizations.

23 ‘‘(b) AUTHORITY.—In order to promote the develop24 ment of community development venture capital organiza25 tions, the Administrator, may—
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1 ‘‘(1) enter into contracts with 1 or more devel2 opmental organizations to carry out training and re3 search activities under subsection (c); and

4 ‘‘(2) make grants in accordance with this

5 section—

6 ‘‘(A) to developmental organizations to

7 carry out training and research activities under

8 subsection (c); and

9 ‘‘(B) to intermediary organizations to pro10 vide intensive marketing, management, and

11 technical assistance and training to community

12 development venture capital organizations

13 under subsection (d).

14 ‘‘(c) TRAINING AND RESEARCH ACTIVITIES.—

15 ‘‘(1) IN GENERAL.—Subject to paragraph (2), a

16 developmental organization that receives a grant

17 under subsection (b) shall use the funds made avail18 able through the grant for 1 or more of the following

19 training and research activities:

20 ‘‘(A) STRENGTHENING PROFESSIONAL

21 SKILLS.—Creating and operating training pro22 grams to enhance the professional skills for in23 dividuals in community development venture

24 capital organizations or operating private com25 munity development venture capital funds.
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1 ‘‘(B) INCREASING INTEREST IN COMMU2 NITY DEVELOPMENT VENTURE CAPITAL.—Cre3 ating and operating a program to select and

4 place students and recent graduates from busi5 ness and related professional schools as interns

6 with community development venture capital or7 ganizations and intermediary organizations for

8 a period of up to 1 year, and to provide sti9 pends for such interns during the internship pe10 riod.

11 ‘‘(C) PROMOTING ‘BEST PRACTICES’.—Or12 ganizing an annual national conference for com13 munity development venture capital organiza14 tions to discuss and share information on the

15 best practices regarding issues relevant to the

16 creation and operation of community develop17 ment venture capital organizations.

18 ‘‘(D) MOBILIZING ACADEMIC RE19 SOURCES.—Encouraging the formation of 1 or

20 more centers for the study of community devel21 opment venture capital at graduate schools of

22 business and management, providing funding

23 for the development of materials for courses on

24 topics in this area, and providing funding for

25 research on economic, operational, and policy
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1 issues relating to community development ven2 ture capital.

3 ‘‘(2) LIMITATION.—The Administrator shall en4 sure that not more than 25 percent of the amount

5 made available to carry out this section is used for

6 activities described in paragraph (1).

7 ‘‘(d) INTENSIVE MARKETING, MANAGEMENT, AND

8 TECHNICAL ASSISTANCE AND TRAINING.—An inter9 mediary organization that receives a grant under sub10 section (b) shall use the funds made available through the

11 grant to provide intensive marketing, management, and

12 technical assistance and training to promote the develop13 ment of community development venture capital organiza14 tions, which assistance may include grants to community

15 development venture capital organizations for the start up

16 costs and operating support of those organizations.

17 ‘‘(e) MATCHING CONTRIBUTION REQUIREMENT.—

18 The Administrator shall require, as a condition of any

19 grant made to an intermediary organization under this

20 section, that a matching contribution equal to the amount

21 of such grant be provided from sources other than the

22 Federal Government.

23 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There

24 is authorized to be appropriated to carry out this section
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1 $20,000,000 for fiscal years 2000 through 2003, to re2 main available until expended.’’.

3 (b) REQUIREMENTS.—The Administrator of the

4 Small Business Administration may promulgate such reg5 ulations as may be necessary to carry out section 34 of

6 the Small Business Act, as amended by this section, which

7 regulations may take effect upon issuance.

8 TITLE III—BUSINESS LINC

9 SEC. 301. GRANTS AUTHORIZED.

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

11 is amended by adding at the end the following:

12 ‘‘(m) BUSINESS LINC GRANTS.—

13 ‘‘(1) IN GENERAL.—The Administrator may

14 make grants to and enter into cooperative agree15 ments with any coalition of private or public sector

16 participants that—

17 ‘‘(A) expand business-to-business relation18 ships between large and small businesses; and

19 ‘‘(B) provide businesses, directly or indi20 rectly, with online information and a database

21 of companies that are interested in mentorprote ́

ge

 ́ 22 programs or community-based, state23 wide, or local business development programs.

24 ‘‘(2) MATCHING REQUIREMENTS.—
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), the Administrator may make grants

3 to and enter into cooperative agreements with

4 any coalition of private or public sector partici5 pants if the coalition provides a matching

6 amount, either in-kind or in cash, equal to the

7 grant amount.

8 ‘‘(B) WAIVER.—In the best interests of the

9 program, the Administrator may waive the re10 quirements for matching funds to be provided

11 by the coalition.

12 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS.—

13 There is authorized to be appropriated to carry out

14 this subsection $3,000,000 for each of fiscal years

15 2000 through 2003, to remain available until ex16 pended.’’.

17 SEC. 302. REGULATIONS.

18 The Administrator of the Small Business Administra19 tion may promulgate such regulations as the Administra20 tion determines to be necessary to carry out this title and

21 the amendment made by this title.

Æ