I 
111TH CONGRESS 
1ST SESSION H. R. 3740 
To amend the Small Business Investment Act of 1958 with respect to small 
business investment companies, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 7, 2009 
Mr. LUETKEMEYER introduced the following bill; which was referred to the 
Committee on Small Business 
A BILL 
To amend the Small Business Investment Act of 1958 with 
respect to small business investment companies, and for 
other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Small Business Invest-
ment Company Modernization Act of 2009’’. 
SEC. 2. QUALIFIED NONPRIVATE FUNDS. 
Section 103(13)(C) of the Small Business Investment 
Act of 1958 (15 U.S.C. 662(13)(C)) is amended by strik-
ing ‘‘33 percent’’ and inserting ‘‘45 percent’’. 
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SEC. 3. LICENSES FOR EXPERIENCED APPLICANTS. 
Section 301 of the Small Business Investment Act 
of 1958 (15 U.S.C. 681) is amended by inserting after 
subsection (c) the following new subsection: 
‘‘(d) LICENSES FOR EXPERIENCED APPLICANTS.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of this section, not later than 60 days after 
the initial receipt by the Administrator of any re-
quest (which shall be deemed to be the application) 
for a license to operate as a small business invest-
ment company under this Act, the Administrator 
shall approve the request and issue such license if 
each of the following requirements is satisfied— 
‘‘(A) At least 50 percent of the principal 
managers of the applicant consist of at least 
two-thirds of the principal managers of a small 
business investment company that has been li-
censed under this Act. 
‘‘(B) The licensed small business invest-
ment company specified under subparagraph 
(A) has operated under such license for at least 
3 years prior to the receipt specified in para-
graph (1). 
‘‘(C) The licensed small business invest-
ment company specified under subparagraph 
(a)— 
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‘‘(i) either has invested at least 70 
percent of its private capital and drawn at 
least 50 percent of its projected leverage at 
time of its initial licensure or has invested 
and expensed or reserved for investment 
and expenses or some combination of both 
at least 70 percent of its private capital in 
the one-year period prior to the date on 
which the application referred to in para-
graph (1) was received by the Adminis-
trator; 
‘‘(ii) has maintained 6 consecutive 
quarters of profitable net investment in-
come; and 
‘‘(iii) has made at least 3 exits from 
investments in small businesses that have 
realized profits from those respective in-
vestments. 
‘‘(D) The applicant submits to the Admin-
istrator, in writing, an application consisting of 
all of the following: 
‘‘(i) A certification, in the form pre-
scribed by the Administrator, that such ap-
plicant satisfies the requirements of this 
subsection and that all information con-
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tained in the application is true and com-
plete. 
‘‘(ii) A copy of the organization docu-
ments of the applicant. 
‘‘(iii) A copy of the operating plan of 
the applicant demonstrating that at least 
50 percent of the amount of the planned 
investments of the applicant will be in the 
same or substantially similar investment 
stage and use the same or substantially 
similar type of investment instruments as 
the investments of the licensed small busi-
ness investment company specified under 
subparagraph (A). 
‘‘(iv) A certification, in a form pre-
scribed by the Administrator, that the ap-
plicant satisfies the requirements of sub-
sections (a) and (c) of section 302 of this 
Act. 
‘‘(E) The applicant is in good standing as 
set forth in paragraph (2). 
‘‘(F) The applicant pays all fees prescribed 
by the Administrator under subsection (e). 
‘‘(2) GOOD STANDING.—For purposes of this 
subsection, an applicant is in good standing if— 
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‘‘(A) the licensed debentured or non-lever-
aged small business investment company speci-
fied under paragraph (1)(A) is actively oper-
ating under this Act on the date of the initial 
receipt of the application by the Administrator 
to which this subsection applies; 
‘‘(B) no principal manager of the applicant 
has been found liable in a civil action for fraud 
if the Administrator makes a reasonable deter-
mination based on evidence in the agency 
record that such liability has a material adverse 
effect on the ability of the applicant to perform 
obligations required by a licensee issued pursu-
ant to this Act; and 
‘‘(C) no principal manager is under inves-
tigation by a governmental agency or authority 
for, is under indictment for, or has been con-
victed of a felony for a violation of Federal or 
State securities laws, fraud, or another criminal 
violation if such investigation, indictment, or 
conviction has a material adverse effect on the 
ability of the applicant to perform obligations 
under a license issued under this Act. 
‘‘(3) LIMITATION.— 
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‘‘(A) IN
GENERAL.—The Administrator 
may remove an application from the approval 
process under this subsection if the Adminis-
trator determines based on evidence in the 
agency record that the approval of the license 
would present an unacceptable risk to the gov-
ernment of United States. 
‘‘(B) IN
WRITING.—Such determination 
shall be made in writing and provided to the 
applicant no later than 10 calendar days after 
such determination is made. Failure to provide 
the applicant shall be deemed to be a perma-
nent waiver of the Administrator’s authority to 
remove an application pursuant to this sub-
section. 
‘‘(C) NON-DELEGABILITY.—The Adminis-
trator may rely on agency personnel to collect 
data or other material relevant to establishing 
a record, but the decision to remove the appli-
cation may not be delegated by the Adminis-
trator to any subordinate personnel in the agen-
cy. 
‘‘(4) NOTICE AND OPPORTUNITY TO CURE NON- 
CONFORMANCE.— 
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‘‘(A) NOTICE
OF
NON-CONFORMANCE.— 
Except for a determination made pursuant to 
paragraph (3), the Administrator shall provide 
an applicant described in paragraph (1) within 
30 days after receipt of the application a writ-
ten notice and description of any nonconform-
ance with any requirement of this subsection 
based on evidence in the agency record. 
‘‘(B) OPPORTUNITY TO CURE.—The appli-
cant shall have 30 days following the receipt of 
nonconformance or the receipt of removal as set 
forth in paragraph (3) to cure such non-
conformance. 
‘‘(C) FAILURE TO PROVIDE NOTICE.—Fail-
ure to provide the notice within the limit set 
forth in subparagraph (A) shall be deemed to 
be acceptance by the Administrator of the ap-
plicant’s conformance with the requirements of 
this subsection. 
‘‘(5) BACKGROUND
REVIEWS.—The Adminis-
trator shall ensure that a timely background check 
of the principal managers of each applicant is com-
pleted with respect to paragraphs (2)(B) and (2)(C). 
‘‘(6) FEES.—The Administrator may charge an 
applicant additional fees for carrying out the back-
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ground reviews mandated by paragraph (5). Such 
fees shall be limited to the cost of the review up to 
a limit of $10,000. 
‘‘(7) EFFECT
OF
NON-QUALIFICATION.—The 
failure of an applicant to qualify for expedited licen-
sure under this subsection shall have no effect on an 
existing license or the ability for the applicant or 
any of its individual managers to apply for or receive 
a license to operate a small business investment 
company under the procedures established elsewhere 
in this Act. 
‘‘(8) REGULATIONS.—The Administrator shall 
develop forms and promulgate regulations to imple-
ment this subsection after providing an opportunity 
for notice and comment. Regulations promulgated 
pursuant to this paragraph shall be published in the 
Code of Federal Regulations.’’. 
SEC. 4. MAXIMUM LEVERAGE. 
(a) MAXIMUM LEVERAGE.—Section 303(b)(2) of the 
Small Business Investment Act of 1958 (15 U.S.C. 
683(b)(2)) is amended by striking so much of paragraph 
(2) as precedes subparagraph (C) and inserting the fol-
lowing: 
‘‘(2) MAXIMUM LEVERAGE.— 
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‘‘(A) IN
GENERAL.—(i) The maximum 
amount of outstanding leverage made available 
to any one company licensed under section 
301(c) of this Act may not exceed the lesser 
of— 
‘‘(I) 300 percent of such com-
pany’s private capital; or 
‘‘(II) $150,000,000. 
‘‘(ii) In applying clause (i)(I) in the case of 
a debenture licensee who is in good standing 
without the imposition of additional regulatory 
standards whose financings are comprised of at 
least 50 percent of loans and debt securities, 
such licensee may be leveraged as follows: 
‘‘(I) the first one-third of private cap-
ital to 300 percent; 
‘‘(II) the second one-third of private 
capital to 200 percent; and 
‘‘(III) the last third of private capital 
to 100 percent. 
‘‘(iii) Notwithstanding clause (i), in the 
case of any company operating as a business 
development company (as such term is defined 
under section (2)(a)(48) of the Investment 
Company Act of 1940) or a majority-owned 
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