Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Rules and Regulations 2679

receipt, unless the Administrator

determines that unusual circumstances

exist, in which case the PA Officer will

notify you of the presence of these

unusual circumstances within 30

working days of the date upon which he

or she received your appeal, and will

respond to your appeal within 60

working days of the date of receipt.

§ 102.53 How will SBA respond to my

appeal?

The PA Officer will:

(a) Make the amendment you request,

sending all individuals who had

previously received a copy of that

record a copy of the amended record; or

(b) Amend the record in a different

manner; or decline to amend it at all:

(1) Sending all individuals who had

previously received a copy of that

record a copy of the amended record;

(2) Telling you why your request was

not granted in full and that you can seek

judicial review; and

(3) Marking the areas of dispute,

including your statement of

disagreement in the file, and, if

appropriate, a concise statement of why

SBA refused to amend the record as you

requested, sending this material to all

individuals who had previously

received a copy of that record.

§ 102.54 How can I obtain judicial review

of an SBA Privacy Act decision?

You may bring a civil action against

SBA in a United States district court if

the SBA:

(a) Makes a final determination not to

provide you with access to or to amend

your record in accordance with your

request;

(b) Fails to maintain your records

with such accuracy, relevance,

timeliness and completeness as is

necessary to assure fairness in any

determination relating to the

qualifications, character, rights,

opportunities of, or benefits to you that

may be made on the basis of such

records, and consequently a

determination is made which harms

you; or

(c) Fails to comply with any other

provisions of the PA (5 U.S.C. 552a) or

the implementing regulations in this

subpart, in such a way as to cause harm

to you.

§ 102.55 What must SBA tell the

individuals from whom it collects

information?

When SBA collects information from

an individual, it must, either on the

form which collects the information or

on a separate form which the individual

may keep, state:

(a) Whether disclosure of the

information is voluntary or mandatory;

(b) By what authority SBA is

collecting the information;

(c) For what principal purpose or

purposes SBA is collecting the

information;

(d) What routine uses might be made

of that information; and

(e) What will happen if the

information isn’t supplied.

§ 102.56 Will SBA release my name or

address?

No, unless compelled to by law.

§ 102.57 Do I have to give SBA my SSN?

(a) No. You need not give SBA your

SSN, even if SBA asks for it.

(b) If SBA asks you for your SSN, it

must tell you under what authority it

seeks your SSN, and for what purpose.

(c) SBA cannot withhold a benefit

solely because you refuse to tell it your

SSN.

§ 102.58 When will SBA show personnel

records to a representative?

(a) If you go to where the records are

kept, SBA will permit one person of

your choosing to inspect the records

with you.

(b) If you want your representative to

inspect the records without you, you

must give SBA a written authorization.

(c) SBA will mail a copy of the record

to your representative if you direct SBA

to do so in writing.

(d) You may inspect the records of a

minor if you present evidence that you

are the custodial parent (including joint

custodial parent) or legal guardian of

that minor. An affidavit or declaration,

signed by you under penalty of perjury,

is normally sufficient evidence unless

SBA has information to the contrary.

(e) You may inspect the records of an

adult incompetent if you present

evidence that you are the legal guardian

of that person. A guardianship order is

sufficient evidence of your

guardianship. Other evidence may be

considered.

§ 102.59 What fees will SBA charge me for

my records?

SBA will charge you only for

photocopying at the rate of 10 cents per

page. SBA will not charge you for

finding or reviewing your records. Fees

less than $25 will be waived.

§ 102.60 May I be informed of disclosures

made of my records?

SBA will tell you what disclosures it

made of your records if you ask, except

that SBA will not tell you about

disclosures it made to another federal

agency or government entity for law

enforcement purposes.

§ 102.61 Are there Matching Program

procedures?

(a) SBA will comply with the

Computer Matching and Privacy

Protection Act of 1988 (5 U.S.C. 552a,

552a notes). This Act establishes

procedures federal agencies must use if

they want to match their computer lists.

(b) If SBA adopts any procedures to

supplement its compliance with the

Computer Matching and Privacy

Protection Act of 1988 which are not

mandated in that Act, SBA will publish

those procedures in Standard Operating

Procedure (SOP) 40 04. You can get a

copy of SOP 40 04 at any SBA Office.

(c) If SBA enters into an agreement

with any federal agency, contractor of

any federal agency, state or local

government, or agency of any state or

local government to disclose records for

purposes of a computer matching

program, SBA will make a copy of that

agreement available to the general

public. You can get a copy of any such

agreement by writing to the Privacy Act

Officer.

PART 137—[REMOVED]

2. Part 137 is removed.

Dated: January 19, 1996.

Philip Lader,

Administrator.

[FR Doc. 96–1159 Filed 1–26–96; 8:45 am]

BILLING CODE 8025–01–P

13 CFR Part 103

Standards for Conducting Business

With SBA

AGENCY: Small Business Administration.

ACTION: Final rule.

SUMMARY: In response to President

Clinton’s regulatory review directive,

the Small Business Administration has

completed a page-by-page and line-byline review of its regulations. As a

result, SBA is streamlining its

regulations by eliminating many rules

and simplifying and improving those

that remain. This final rule reorganizes

and streamlines the entire Part 103,

which covers the standards one must

meet to conduct business with SBA. It

makes the standards clearer and more

understandable to those who are

regulated, and easier for SBA to enforce.

EFFECTIVE DATE: This rule is effective

February 28, 1996.

FOR FURTHER INFORMATION CONTACT:

Michael Dowd, Director, Office of Loan

Programs, at (202) 205–6490.

SUPPLEMENTARY INFORMATION: Title 13

CFR Part 103 contains SBA’s policies

governing the standards for suspending
2680 Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Rules and Regulations

or revoking the privileges of persons

who conduct business with SBA on

behalf of applicants or lenders. This

final rule reorganizes and streamlines

Part 103, making it easier to understand

and enforce. It changes the title of the

Part to ‘‘Standards for Conducting

Business with SBA’’ to describe more

clearly the scope of the regulations. The

sections stating the statutory provisions

underlying the Part and its purpose—

103.13 and 103.13–1—are eliminated as

unnecessary. The rule renumbers the

sections that remain: present §§ 103.13–

2 through 103.13–6 would become

§§ 103.1–103.5. The final rule clarifies

the existing definition of agents who

appear before SBA on behalf of

applicants for assistance, adds

definitions for ‘‘packagers’’, ‘‘lender

service providers,’’ and ‘‘referral

agents’’, and provides that these

categories of agents are specifically

covered by SBA’s requirements

governing conduct of business. It also

amends, in certain respects, and adds

greater specificity to the definition of

‘‘good cause’’ for which the

Administrator may revoke or suspend

the privilege for conducting business

with SBA. It adds provisions prescribing

the use and form of lender service

provider agreements which must

contain certain provisions regarding

services to be provided and

compensation, including a prohibition

on secondary market premium sharing.

In addition to these substantive changes,

the final rule is written in clearer, more

straightforward language than the

present Part.

The proposed rule was published on

November 24, 1995 at 60 FR 57980. A

total of 26 commenters, virtually all

Certified Development Companies,

contacted SBA during the comment

period with suggestions and

observations about the proposed rule.

All commenters expressed at least some

level of concern about the proposal. In

general, these concerns were based on

the breadth of the proposed rule.

A majority of the commenters offered

negative observations about the scope of

the definitions in section 103.1. Most of

these comments focused on subsections

(a) and (b) and criticized the definitions

of the terms ‘‘agent’’ and ‘‘conduct

business with SBA.’’ Many of these

commenters were particularly

concerned about the definitions in light

of SBA’s expressed intention (in the

preamble to the proposed rule) to

register and train agents, and to require

under section 103.5 that all agents

execute and provide to SBA a

compensation agreement.

The final rule addresses this concern

by clarifying that only those persons or

entities conducting business with

SBA—those who actually prepare or

submit on behalf of an applicant an

application for assistance and those

contractors who provide services to

participants in SBA’s business loan

program pursuant to written agreements

with those participants—will be

considered ‘‘agents’’. SBA does not

intend to regulate persons or entities,

such as real estate appraisers and

environmental specialists, who simply

supply information that is used in the

preparation of an application.

Fourteen commenters criticized

section 103.4, which defines ‘‘good

cause’’ for suspension or revocation of

the privilege to conduct business with

SBA. In general, the comments about

section 103.4 criticized terms such as

‘‘unethical activity’’ and ‘‘reasonable

fees’’ as too broad and vague. More

specifically, three commenters

complained that persons and entities

should be allowed under subsection

103.4(d) to use the words ‘‘Small

Business Administration’’ or ‘‘SBA’’ in

advertising. Four commenters felt that

the ‘‘two master’’ prohibition in

subsection 103.4(g) should be clarified.

SBA intends to provide guidelines in

its Standard Operating Procedures

(SOP) for what will constitute

‘‘unethical activity’’ and ‘‘reasonable

fees.’’ The final rule states that persons

may use the words ‘‘Small Business

Administration’’ or ‘‘SBA’’ in

advertisements if the advertisement

does not imply endorsement or

sponsorship by SBA. The final rule

continues to prohibit the use of the SBA

seal or symbol in advertisements. The

‘‘two master’’ rule and the exceptions to

it have been substantially altered in the

final rule. The two master rule will now

only apply when a person or entity acts

as both a lender service provider or

referral agent and packager for an

applicant on the same business loan and

receives compensation for such activity

from both the lender and applicant. The

two exceptions stated in the proposed

rule have therefore been deleted and

replaced by only one: cases in which a

referral agent also acts as a packager and

is compensated by both the lender for

referral agent activities and the

applicant for packaging activities.

Finally, 14 commenters noted

problems with section 103.5, which

governs the regulation of an agent’s fees

and provision of services. These

complaints related directly to many of

the same commenters’ concerns about

the scope of the definition of ‘‘agent’’ in

section 103.1. The changes in the

definition of ‘‘agent’’ discussed above

address this problem. Several

commenters questioned SBA’s ability to

review all compensation agreements for

reasonableness. Section 103.5 does not

require such a review and SBA does not

intend to evaluate each compensation

agreement for reasonableness; it will

only undertake a review if an applicant

requests that it do so. Two commenters

also noted that use of the terms

‘‘compensation agreement’’ and ‘‘lender

service provider agreement’’ should be

made consistent in subsections 103.5 (a)

and (b). The final rule has been

amended to make clear the distinction

between the terms and the intended

treatment of each type of agreement.

As noted above and in the preamble

to the proposed rule, SBA intends to

require all packagers and lender service

providers to register with SBA for

purposes of keeping track of who is

performing such activities on behalf of

applicants for assistance or lenders.

SBA will provide training for anyone or

any entity that wishes to represent

applicants for SBA assistance or provide

services to lenders. The development of

these initiatives will take place over the

next fiscal year, in consultation with

representatives of the affected

industries. To the extent that they

require modifications of this final rule,

such modifications will be made in later

rulemakings.

Compliance With Executive Orders

12612, 12778, and 12866, the

Regulatory Flexibility Act (5 U.S.C. 601,

et seq.), and the Paperwork Reduction

Act (44 U.S.C. Ch. 35)

SBA certifies that this rule involves

internal administrative procedures and

is not a significant rule within the

meaning of Executive Order 12866 and

will not have a significant economic

impact on a substantial number of small

entities within the meaning of the

Regulatory Flexibility Act, 5 U.S.C. 601,

et seq. It is not likely to have an annual

economic effect of $100 million or more,

result in a major increase in costs or

prices, or have a significant adverse

effect on competition or the United

States economy.

For purposes of the Paperwork

Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this rule contains no new

reporting or recordkeeping

requirements.

For purposes of Executive Order

12612, SBA certifies that this rule does

not have any federalism implications

warranting the preparation of a

Federalism Assessment.

For purposes of Executive Order

12778, SBA certifies that this rule is

drafted, to the extent practicable, in

accordance with the standards set forth

in Section 2 of that Order.
Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Rules and Regulations 2681

List of Subjects in 13 CFR Part 103

Administrative practice and

procedure.

Accordingly, pursuant to the

authority set forth in sections 5 and 13

of the Small Business Act, 15 U.S.C. 634

and 642, SBA hereby revises part 103 of

Title 13, Code of Federal Regulations

(CFR), to read as follows:

PART 103—STANDARDS FOR

CONDUCTING BUSINESS WITH SBA

103.1 Key definitions.

103.2 Who may conduct business with

SBA?

103.3 May SBA suspend or revoke an

Agent’s privilege?

103.4 What is ‘‘good cause’’ for suspension

or revocation?

103.5 How does SBA regulate an Agent’s

fees and provision of service?

Authority: Secs. 5, 13, 72 Stat. 385, 394 (15

U.S.C. 634, 642).

§ 103.1 Key definitions.

(a) Agent means an authorized

representative, including an attorney,

accountant, consultant, packager, lender

service provider, or any other person

representing an applicant or participant

by conducting business with SBA.

(b) The term conduct business with

SBA means:

(1) Preparing or submitting on behalf

of an applicant an application for

financial assistance of any kind,

assistance from the Investment Division

of SBA, or assistance in procurement

and technical matters;

(2) Preparing or processing on behalf

of a lender or a participant in any of

SBA’s programs an application for

federal financial assistance;

(3) Participating with or

communicating in any way with officers

or employees of SBA on an applicant’s,

participant’s, or lender’s behalf;

(4) Acting as a lender service

provider; and

(5) Such other activity as SBA

reasonably shall determine.

(c) Applicant means any person, firm,

concern, corporation, partnership,

cooperative or other business enterprise

applying for any type of assistance from

SBA.

(d) Lender Service Provider means an

Agent who carries out lender functions

in originating, disbursing, servicing, or

liquidating a specific SBA business loan

or loan portfolio for compensation from

the lender. SBA determines whether or

not one is a ‘‘Lender Service Provider’’

on a loan-by-loan basis.

(e) Packager means an Agent who is

employed and compensated by an

Applicant or lender to prepare the

Applicant’s application for financial

assistance from SBA. SBA determines

whether or not one is a ‘‘Packager’’ on

a loan-by-loan basis.

(f) Referral Agent means a person or

entity who identifies and refers an

Applicant to a lender or a lender to an

Applicant. The Referral Agent may be

employed and compensated by either an

Applicant or a lender.

(g) Participant means a person or

entity that is participating in any of the

financial, investment, or business

development programs authorized by

the Small Business Act or Small

Business Investment Act of 1958.

§ 103.2 Who may conduct business with

SBA?

(a) If you are an Applicant, a

Participant, a partner of an Applicant or

Participant partnership, or serve as an

officer of an Applicant, Participant

corporation, or limited liability

company, you may conduct business

with SBA without a representative.

(b) If you are an Agent, you may

conduct business with SBA on behalf of

an Applicant, Participant or lender,

unless representation is otherwise

prohibited by law or the regulations in

this part or any other part in this

chapter. For example, persons debarred

under the SBA or Government-wide

debarment regulations may not conduct

business with SBA. SBA may request

that any Agent supply written evidence

of his or her authority to act on behalf

of an Applicant, Participant, or lender

as a condition of revealing any

information about the Applicant’s,

Participant’s, or lender’s current or prior

dealings with SBA.

§ 103.3 May SBA suspend or revoke an

Agent’s privilege?

The Administrator of SBA or designee

may, for good cause, suspend or revoke

the privilege of any Agent to conduct

business with SBA. Part 134 of this

chapter states the procedures for

appealing the decision to suspend or

revoke the privilege. The suspension or

revocation remains in effect during the

pendency of any administrative

proceedings under Part 134 of this

chapter.

§ 103.4 What is ‘‘good cause’’ for

suspension or revocation?

Any unlawful or unethical activity is

good cause for suspension or revocation

of the privilege to conduct business.

This includes:

(a) Attempting to influence any

employee of SBA or a lender, by gifts,

bribes or other unlawful or unethical

activity, with respect to any matter

involving SBA assistance.

(b) Soliciting for the provision of

services to an Applicant by another

entity when there is an undisclosed

business relationship between the two

parties.

(c) Violating ethical guidelines which

govern the profession or business of the

Agent or which are published at any

time by SBA.

(d) Implying or stating that the work

to be performed for an Applicant will

include use of political or other special

influence with SBA. Examples include

indicating that the entity is affiliated

with or paid, endorsed or employed by

SBA, advertising using the words Small

Business Administration or SBA in a

manner that implies SBA’s endorsement

or sponsorship, use of SBA’s seal or

symbol, and giving a ‘‘guaranty’’ to an

Applicant that the application will be

approved.

(e) Charging or proposing to charge

any fee that does not bear a necessary

and reasonable relationship to the

services actually rendered or expenses

actually incurred in connection with a

matter before SBA or which is

materially inconsistent with the

provisions of an applicable

compensation agreement or Lender

Service Provider agreement. A fee based

solely on a percentage of a loan or

guarantee amount can be reasonable,

depending on the circumstances of a

case and the services actually rendered.

(f) Engaging in any conduct indicating

a lack of business integrity or business

honesty, including debarment, criminal

conviction, or civil judgment within the

last seven years for fraud,

embezzlement, theft, forgery, bribery,

falsification or destruction of records,

false statements, conspiracy, receiving

stolen property, false claims, or

obstruction of justice.

(g) Acting as both a Lender Service

Provider or Referral Agent and a

Packager for an Applicant on the same

SBA business loan and receiving

compensation for such activity from

both the Applicant and lender. A

limited exception to this ‘‘two master’’

prohibition exists when an Agent acts as

a Packager and is compensated by the

Applicant for packaging services; also

acts as a Referral Agent and is

compensated by the lender for those

activities; discloses the referral activities

to the Applicant; and discloses the

packaging activities to the lender.

(h) Violating materially the terms of

any compensation agreement or Lender

Service Provider agreement provided for

in § 103.5.

(i) Violating or assisting in the

violation of any SBA regulations,

policies, or procedures of which the

Applicant has been made aware.
2682 Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Rules and Regulations

§ 103.5 How does SBA regulate an Agent’s

fees and provision of service?

(a) Any Applicant, Agent, or Packager

must execute and provide to SBA a

compensation agreement, and any

Lender Service Provider must execute

and provide to SBA a Lender Service

Provider agreement. Each agreement

governs the compensation charged for

services rendered or to be rendered to

the Applicant or lender in any matter

involving SBA assistance. SBA provides

the form of compensation agreement

and a suggested form of Lender Service

Provider agreement to be used by

Agents.

(b) Compensation agreements must

provide that in cases where SBA deems

the compensation unreasonable, the

Agent or Packager must: reduce the

charge to an amount SBA deems

reasonable, refund any sum in excess of

the amount SBA deems reasonable to

the Applicant, and refrain from charging

or collecting, directly or indirectly, from

the Applicant an amount in excess of

the amount SBA deems reasonable.

(c) Each Lender Service Provider must

enter into a written agreement with each

lender for whom it acts in that capacity.

SBA will review all such agreements.

Such agreements need not contain each

and every provision found in the SBA’s

suggested form of agreement. However,

each agreement must indicate that both

parties agree not to engage in any

sharing of secondary market premiums,

that the services to be provided are

accurately described, and that the

agreement is otherwise consistent with

SBA requirements. Subject to the

prohibition on splitting premiums,

lenders have reasonable discretion in

setting compensation for Lender Service

Providers. However, such compensation

may not be directly charged to an

Applicant or borrower.

Dated: January 22, 1996.

John T. Spotila,

Acting Administrator.

[FR Doc. 96–1350 Filed 1–26–96; 8:45 am]

BILLING CODE 8025–01–P

13 CFR Parts 112, 113, 124, 132, 134,

and 136

Rules of Procedure Governing Cases

Before the Office of Hearings and

Appeals

AGENCY: Small Business Administration.

ACTION: Final rule.

SUMMARY: In response to President

Clinton’s government-wide regulatory

reform initiative, the Small Business

Administration (SBA) has completed a

page-by-page, line-by-line review of all

of its existing regulations to determine

which might be revised or eliminated.

This final rule essentially reorganizes all

but two of the regulations pertaining to

procedures before the Office of Hearings

and Appeals (OHA) and consolidates

them into one part. In addition, the rule

clarifies, simplifies, and significantly

shortens those regulations. A number of

substantive changes are also made.

DATES: This rule is effective February

28, 1996. This rule applies with respect

to all cases filed with OHA on or after

February 28, 1996.

FOR FURTHER INFORMATION CONTACT: Gary

Fox, Chief Counsel for Special

Litigation, Office of General Counsel,

Small Business Administration, 409

Third Street SW., Washington, D.C.

20416, at (202) 205–6643.

SUPPLEMENTARY INFORMATION: On March

4, 1995, President Clinton issued a

memorandum to Federal agencies,

directing them to simplify their

regulations. In response to this

directive, SBA has completed a page-bypage, line-by-line review of all of its

existing regulations to determine which

might be revised or eliminated. This

rule consolidates most existing

regulations governing proceedings

before OHA into part 134 with the

exception of those solely relating to 8(a)

program proceedings, which are set

forth in part 124 of this chapter, and

those solely pertaining to proceedings

under the Program Fraud Civil

Remedies Act, which are contained in

part 142 of this chapter. This rule also

clarifies, simplifies, and revises the

current rules, reorganizes sections for

ease of use, and eliminates unnecessary

provisions.

The rule is divided into four subparts.

Subpart A contains general rules.

Subpart B contains rules of practice

generally applicable to all cases before

OHA except size and SIC code appeals.

However, as set forth in § 134.201, in

the case of a conflict between a

particular rule in part 134, and a rule of

procedure pertaining to OHA appearing

in another part of this title, the latter

rule shall govern. Subpart C contains

the rules applicable to size and SIC code

appeals. Subpart D contains the rules for

implementation of the Equal Access to

Justice Act, currently contained in part

132.

Proposed changes to parts 132 and

134 were published in the Federal

Register on November 27, 1995 (60 FR

58282). The public was invited to

comment during a thirty-day comment

period. SBA received no comments

concerning these parts during that time

period. Accordingly, the following final

rule contains no changes, other than

minor clarifications, technical

corrections, and deletions of

unnecessary language.

The proposed rule consolidated into

part 134 rules of practice only

applicable to 8(a) program appeals.

However, part 124 of chapter 13 is not

being amended at this time and, thus,

certain of the provisions in the proposed

rule which solely related to the 8(a)

program have been deleted as

unnecessary in light of the existing part

124. Specifically, proposed §§ 134.104,

134.203(a)(2), 134.213, 134.222 (a) and

(b), 134.223 (c) and (d), 134.224,

134.226(b), and 134.227(a) have been

deleted, in whole or in part, so as to

eliminate references to 8(a) program

appeals.

For a detailed description of the other

changes made to this rule, please refer

to SBA’s proposed rule, published at 60

FR 58282 (November 27, 1995).

Finally, parts 112, 113, 124, and 136

are amended so that the citations,

within those parts, to specific sections

of part 134 will correspond to the

section numbers set forth in this rule.

Compliance With Executive Orders

12612, 12778, and 12866, the

Regulatory Flexibility Act (5 U.S.C. 601

et seq.), and the Paperwork Reduction

Act (44 U.S.C. Ch. 35)

SBA certifies that this rule does not

have a significant economic impact on

a substantial number of small entities

within the meaning of Executive Order

12866 or the Regulatory Flexibility Act,

5 U.S.C. 601 et seq. This rule would

reorganize and simplify the rules

governing procedures before SBA’s

Office of Hearings and Appeals.

Contracting opportunities and financial

assistance for small business are not

affected by this rule. Therefore, it is not

likely to have an annual economic effect

of $100 million or more, result in a

major increase in costs or prices, or have

a significant adverse effect on

competition or the United States

economy.

For purposes of the Paperwork

Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this rule contains no new

reporting or recordkeeping

requirements.

For purposes of Executive Order

12612, SBA certifies that this rule does

not have any federalism implications

warranting the preparation of a

Federalism Assessment.

For purposes of Executive Order

12778, SBA certifies that this rule is

drafted, to the extent practicable, in

accordance with the standards set forth

in section 2 of that Order.