335 
(A) all interest that the loan carries with it; or 
(B) all interest that has been agreed to be paid on the loan. 
(2) DOUBLE RECOVERY.—In the case of a loan with respect to which 
there is a forfeiture of interest under paragraph (1), the person that 
paid the interest may recover from the licensee that made the loan, in 
a civil action commenced in a court of appropriate jurisdiction not later 
than 2 years after the most recent payment of interest, an amount 
equal to twice the amount of the interest paid on the loan. 
§ 30313. Conflicts of interest 
(a) IN GENERAL.—For the purpose of controlling conflicts of interest 
that may be detrimental to small business concerns, to licensees, to the 
shareholders, partners, or members of small business concerns or licensees, 
or to the purposes of this subtitle, the Administrator shall adopt regulations 
to govern transactions with— 
(1) any officer, director, shareholder, partner, or member of a li-
censee; or 
(2) any person or concern in which any interest, direct or indirect, 
financial or otherwise, is held by any officer, director, shareholder, 
partner, or member of— 
(A) a licensee; or 
(B) any person or concern with an interest, direct or indirect, 
financial or otherwise, in a licensee. 
(b) CONTENTS.—The regulations under subsection (a) shall include ap-
propriate requirements for public disclosure necessary to the purposes of 
this section. 
§ 30314. Ineligibility of guaranteed obligations for purchase 
by Federal Financing Bank 
No provision of law authorizes the Federal Financing Bank to acquire— 
(1) any obligation the payment of principal or interest on which has 
at any time been guaranteed in whole or in part under this chapter; 
(2) any obligation that is an interest in an obligation described in 
paragraph (1); or 
(3) any obligation that is secured by, or substantially all of the value 
of which is attributable to, an obligation described in paragraph (1) or 
(2). 
§ 30315. Trust certificates 
(a) ISSUANCE.— 
(1) IN GENERAL.—The Administrator may issue trust certificates 
representing ownership of all or a fractional part of— 
(A) debentures issued by a licensee and guaranteed by the Ad-
ministrator under this chapter; or 
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(B) participating securities issued by a licensee and purchased 
and guaranteed under section 30304 of this title. 
(2) TRUST OR POOL.—A trust certificate issued under paragraph (1) 
shall be based on and backed by a trust or pool approved by the Ad-
ministrator and composed solely of guaranteed debentures or guaran-
teed participating securities. 
(b) GUARANTEE.— 
(1) IN GENERAL.—The Administrator may, on such terms and con-
ditions as the Administrator considers appropriate, guarantee the time-
ly payment of the principal of and interest on trust certificates issued 
by the Administrator (or an agent of the Administrator) for purposes 
of this section. 
(2) LIMITATION.—A guarantee shall be limited to the extent of prin-
cipal and interest on the guaranteed debentures or the redemption 
price of and priority payments on the participating securities that com-
pose the trust or pool. 
(3) PREPAYMENT OR REDEMPTION.— 
(A) REDUCTION OF GUARANTEE.—If a debenture in a trust or 
pool is prepaid or a participating security is redeemed, voluntarily 
or involuntarily, or in the event of default of a debenture or vol-
untary or involuntary redemption of a participating security, the 
guarantee of timely payment of principal and interest on the re-
lated trust certificates shall be reduced in proportion to the 
amount of principal and interest that the prepaid debenture or re-
deemed participating security and priority payments represent in 
the trust or pool. 
(B) LIMITATION ON GUARANTEE OF INTEREST.—Interest on a 
prepaid or defaulted debenture or a priority payment on a partici-
pating security shall accrue and be guaranteed by the Adminis-
trator only through the date of payment on the guarantee. 
(C) CALL OF TRUST CERTIFICATE.—During the term of a trust 
certificate, the trust certificate may be called for redemption due 
to prepayment or default of all debentures or redemption, vol-
untary or involuntary, of all participating securities residing in the 
trust or pool. 
(c) FULL FAITH AND CREDIT OF THE UNITED STATES.—The full faith 
and credit of the United States is pledged to the payment of all amounts 
that may be required to be paid under any guarantee of a trust certificate 
issued by the Administrator (or an agent of the Administrator) under this 
section. 
(d) FEES.— 
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(1) ADMINISTRATOR.—The Administrator shall not collect a fee for 
a guarantee under this section. 
(2) AGENT OF THE ADMINISTRATOR.—This subsection does not pre-
clude an agent of the Administrator from collecting a fee approved by 
the Administrator for performing the functions described in subsection 
(f)(2). 
(e) SUBROGATION; OWNERSHIP RIGHTS IN DEBENTURES AND PARTICI-
PATING SECURITIES.— 
(1) SUBROGATION.—If the Administrator pays a claim under a guar-
antee issued under this section, the Administrator shall be subrogated 
fully to the rights satisfied by the payment. 
(2) OWNERSHIP RIGHTS IN DEBENTURES AND PARTICIPATING SECU-
RITIES.—No Federal, State or local law shall preclude or limit the ex-
ercise by the Administrator of the Administrator’s ownership rights in 
the debentures or participating securities residing in a trust or pool 
against which trust certificates are issued. 
(f) CENTRAL REGISTRATION; REGULATION
OF BROKERS
AND DEAL-
ERS.— 
(1) CENTRAL REGISTRATION.—The Administrator shall provide for 
a central registration of all trust certificates sold under this section. 
(2) AGENT.— 
(A) IN GENERAL.—The Administrator shall contract with one or 
more agents to carry out on behalf of the Administrator the pool-
ing and the central registration functions of this section including, 
notwithstanding any other provision of law— 
(i) maintenance on behalf of and under the direction of the 
Administrator, such commercial bank accounts or investments 
in obligations of the United States as may be necessary to fa-
cilitate trusts or pools backed by debentures or participating 
securities guaranteed under this chapter; and 
(ii) the issuance of trust certificates to facilitate such 
poolings. 
(B) BOND OR INSURANCE.—An agent under subparagraph (A) 
shall provide a fidelity bond or insurance in such amounts as the 
Administrator determines to be necessary to fully protect the in-
terests of the Government. 
(3) DISCLOSURE.—The Administrator shall require a seller of a trust 
certificate issued under this section to disclose to the purchaser, before 
the sale, information on the terms, conditions, and yield of the trust 
certificate. 
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338 
(4) REGULATION OF BROKERS AND DEALERS.—The Administrator 
may regulate brokers and dealers in trust certificates sold under this 
section. 
(5) EFFECT OF SUBSECTION.—This subsection does not preclude the 
use of a book-entry or other electronic form of registration for trust 
certificates. 
(g) PERIODIC ISSUANCE OF TRUST CERTIFICATES.—The Administrator 
shall issue trust certificates under this section— 
(1) at periodic intervals of not less than every 12 months; and 
(2) at such shorter intervals as the Administrator considers appro-
priate, taking into consideration the amount and number of trust cer-
tificates. 
§ 30316. Regulations 
The Administrator may prescribe regulations governing the operations of 
licensees, and regulations to carry out this subtitle, in accordance with the 
purposes of this subtitle. 
§ 30317. Unlawful acts and omissions 
(a) VIOLATION BY LICENSEE DEEMED VIOLATION BY PERSON PARTICI-
PATING.—If a licensee violates any provision of this subtitle (including a 
regulation issued under this subtitle) by reason of its failure to comply with 
the terms of the provision (or regulation) or by reason of its engaging in 
any act or practice that constitutes or will constitute a violation of the pro-
vision (or regulation), the violation shall also be a violation and an unlawful 
act on the part of any person who, directly or indirectly, authorizes, orders, 
participates in, or causes, brings about, counsels, aids, or abets in the com-
mission of any act, practice, or transaction that constitutes or will con-
stitute, in whole or in part, the violation. 
(b) BREACH OF FIDUCIARY DUTY.—It shall be unlawful for an officer, 
director, employee, agent, or other participant in the management or con-
duct of the affairs of a licensee to engage in any act or practice, or to omit 
any act, in breach of the fiduciary duty of the officer, director, employee, 
agent, or participant if, as a result of engaging in the act or practice or 
of the omission to act, the licensee suffers or is in imminent danger of suf-
fering financial loss or other damage. 
(c) DISQUALIFICATION OF OFFICERS AND EMPLOYEES FOR DISHONESTY, 
FRAUD, OR BREACH OF TRUST.—Except with the written consent of the 
Administrator, it shall be unlawful— 
(1) for any person to take office as an officer, director, or employee 
of a licensee, or to become an agent or participant in the conduct of 
the affairs or management of a licensee, if the person— 
(A) has been convicted of— 
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(i) a felony; or 
(ii) any other criminal offense involving dishonesty or 
breach of trust; or 
(B) has been found civilly liable in damages, or is permanently 
or temporarily enjoined by an order, judgment, or decree of a 
court of competent jurisdiction, by reason of any act or practice 
involving fraud or breach of trust; or 
(2) for any person to continue to serve in any of the above-described 
capacities, if the person, after November 6, 1966— 
(A) is convicted of— 
(i) a felony; or 
(ii) any other criminal offense involving dishonesty or 
breach of trust; or 
(B) is found civilly liable in damages, or is permanently or tem-
porarily enjoined by an order, judgment, or decree of a court of 
competent jurisdiction, by reason of any act or practice involving 
fraud or breach of trust. 
§ 30318. Investigations; examinations; valuations 
(a) INVESTIGATION OF VIOLATIONS.— 
(1) IN GENERAL.—The Administrator may make such investigations 
as the Administrator considers necessary to determine whether a li-
censee or any other person has engaged or is about to engage in an 
act or practice that constitutes or will constitute a violation of any pro-
vision of this subtitle (including a regulation under this subtitle) or of 
an order issued under this subtitle. 
(2) STATEMENTS.—The Administrator shall permit any person to 
file with the Administrator a statement in writing, under oath or other-
wise as the Administrator shall determine, as to all the facts and cir-
cumstances concerning the matter to be investigated. 
(3) POWERS.—For the purpose of any investigation, the Adminis-
trator may administer oaths and affirmations, subpoena witnesses, 
compel the attendance of witnesses, take evidence, and require the pro-
duction of any records that are relevant to the inquiry. The attendance 
of witnesses and the production of any such records may be required 
from any place in the United States. 
(4) CONTUMACY OR REFUSAL TO OBEY ORDER OF THE ADMINIS-
TRATOR.— 
(A) IN GENERAL.—In case of contumacy by, or refusal to obey 
a subpoena issued to, any person (including a licensee), the Ad-
ministrator may invoke the aid of any court of the United States 
within the jurisdiction of which the investigation or proceeding is 
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carried on, or in which the person resides or carries on business, 
in requiring the attendance and testimony of witnesses and the 
production of records, and the court may issue an order requiring 
the person to appear before the Administrator, to produce records, 
or to give testimony touching the matter under investigation. 
(B) FAILURE TO OBEY COURT ORDER.—A failure to obey an 
order of the court may be punished by the court as a contempt 
of court. 
(C) PROCESS.—Process in a case under this paragraph may be 
served in the judicial district of which the person is an inhabitant 
or wherever the person may be found. 
(b) EXAMINATIONS OF AND REPORTS BY LICENSEES.— 
(1) IN GENERAL.—A licensee shall be subject to examinations made 
by direction of the Investment Division of the Administration, which 
may be conducted with the assistance of a private sector entity that 
has the qualifications to conduct and expertise in conducting such ex-
aminations. 
(2) EXAMINATION FEE.—The Administrator may assess against a li-
censee that is examined, as an examination fee, the cost of the exam-
ination (including compensation of the examiners), and the licensee 
shall pay the examination fee. 
(3) USE OF EXAMINATION FEES.—Examination fees collected under 
this subsection shall be deposited in the account for salaries and ex-
penses of the Administration, and are authorized to be appropriated 
solely to cover the costs of examinations and other program oversight 
activities. 
(4) REPORTS.— 
(A) IN GENERAL.—A licensee shall make such reports to the 
Administrator at such times and in such form as the Adminis-
trator may require. 
(B) EXEMPTION.—The Administrator may exempt from a re-
quirement to make a report a licensee that is registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) to the 
extent necessary to avoid duplication in reporting requirements. 
(C) VIOLATION.— 
(i) IN GENERAL.—Except as provided in clause (ii), a li-
censee that violates any regulation or written directive issued 
by the Administrator requiring the filing of any regular or 
special report under subparagraph (A) shall pay to the 
United States a civil penalty of not more than $100 for each 
day of the continuance of the licensee’s failure to file the re-
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port, unless it is shown that the failure is due to reasonable 
cause and not due to willful neglect. 
(ii) EXEMPTION FROM REPORTING REQUIREMENTS.— 
(I) IN
GENERAL.—If the Administrator determines 
that granting an exemption would not be inconsistent 
with the public interest or the protection of the Adminis-
tration, the Administrator may exempt a licensee from 
clause (i)— 
(aa) in whole or in part; and 
(bb) on such terms and conditions and for such 
period of time as the Administrator considers nec-
essary and appropriate. 
(II) PROCEDURE.—The Administrator may grant an 
exemption under subclause (I)— 
(aa) by regulation; or 
(bb) on application of an interested party, at any 
time previous to a violation described in clause (i), 
by order, after notice and opportunity for hearing. 
(iii) ALTERNATIVE
REQUIREMENTS.—The Administrator 
may for purposes of this subparagraph make any alternative 
requirement that the Administrator considers to be appro-
priate to a situation. 
(iv) CIVIL ACTION.—The civil penalty provided for in this 
subparagraph may be recovered in a civil action brought by 
the Administrator. 
(5) SCOPE OF EXAMINATION.—An examination shall be conducted in 
such detail as to determine whether the licensee— 
(A) has engaged solely in lawful activities and those con-
templated by this chapter; 
(B) has engaged in prohibited conflicts of interest; 
(C) has acquired or exercised illegal control of an assisted small 
business; 
(D) has made investments in small business concerns for not 
less than one year; 
(E) has invested more than 20 percent of its capital in any indi-
vidual small business, if that restriction is applicable; 
(F) has engaged in relending, foreign investments, or passive in-
vestments; or 
(G) has charged an interest rate in excess of the maximum per-
mitted by law. 
(6) FREQUENCY OF EXAMINATION.— 
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(A) IN GENERAL.—A licensee shall be examined at least every 
2 years. 
(B) WAIVER.—The Administrator may waive an examination of 
a licensee— 
(i) for up to one additional year if, the Administrator de-
termines that such a delay would be appropriate, based on 
the amount of debentures being issued by the licensee and the 
repayment record of the licensee, the prior operating experi-
ence of the licensee, the contents and results of the last exam-
ination of the licensee, and the management expertise of the 
licensee; or 
(ii) if the licensee’s operations have been suspended while 
the licensee is involved in litigation or is in receivership. 
(c) VALUATIONS.— 
(1) FREQUENCY OF VALUATIONS.— 
(A) IN GENERAL.—A licensee shall submit to the Administrator 
a written valuation of the loans and investments of the licensee 
not less often than semiannually, or otherwise on the request of 
the Administrator, except that a licensee with no leverage out-
standing shall submit a valuation annually unless the Adminis-
trator determines otherwise. 
(B) MATERIAL ADVERSE CHANGES.—Not later than 30 days 
after the end of a fiscal quarter of a licensee during which a mate-
rial adverse change in the aggregate valuation of the loans and in-
vestments or operations of the licensee occurs, the licensee shall 
notify the Administrator in writing of the nature and extent of 
that change. 
(C) INDEPENDENT CERTIFICATION.— 
(i) IN GENERAL.—Not less than once during each fiscal 
year, a licensee shall submit to the Administrator the finan-
cial statements of the licensee, audited by an independent cer-
tified public accountant approved by the Administrator. 
(ii) AUDIT
REQUIREMENTS.—An audit conducted under 
clause (i) shall include— 
(I) a review of the procedures and documentation used 
by the licensee in preparing the valuations required by 
this section; and 
(II) a statement by the independent certified public 
accountant that the valuations were prepared in con-
formity with the valuation criteria applicable to the li-
censee established in accordance with paragraph (2). 
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(2) VALUATION CRITERIA.—A valuation submitted under this sub-
section shall be prepared by the licensee in accordance with valuation 
criteria that— 
(A) shall be established or approved by the Administrator; and 
(B) shall include appropriate safeguards to ensure that the 
noncash assets of a licensee are not overvalued. 
§ 30319. Revocation and suspension of licenses; cease and 
desist orders 
(a) GROUNDS FOR REVOCATION OR SUSPENSION.—The Administrator 
may revoke or suspend a license— 
(1) for a false statement knowingly made in a written statement re-
quired under this chapter (including a regulation under this chapter); 
(2) for failure, in a written statement required under this chapter 
(including a regulation under this chapter), to state a material fact 
necessary to make the statement not misleading in the light of the cir-
cumstances under which the statement is made; 
(3) for willful or repeated violation of, or willful or repeated failure 
to observe, any provision of this chapter (including a regulation under 
this chapter); or 
(4) for violation of, or failure to observe, a cease and desist order 
issued by the Administrator under this section. 
(b) GROUNDS FOR CEASE AND DESIST ORDER.—If a licensee or any 
other person has not complied with any provision of this subtitle (including 
a regulation issued under this subtitle) or is engaging or is about to engage 
in any act or practice that constitutes or will constitute a violation of this 
subtitle (including a regulation), the Administrator may— 
(1) order such licensee or other person— 
(A) to cease and desist from the action or failure to act; and 
(B) to take such action or to refrain from such action as the 
Administrator considers necessary to ensure compliance with this 
subtitle (including regulations); and 
(2) suspend the license of a licensee against which an order has been 
issued until the licensee complies with the order. 
(c) PROCEDURE.— 
(1) ORDER TO SHOW CAUSE.— 
(A) IN
GENERAL.—Before revoking or suspending a license 
under subsection (a) or issuing a cease and desist order under 
subsection (b), the Administrator shall serve on the licensee and 
any other person involved an order to show cause why an order 
revoking or suspending the license or a cease and desist order 
should not be issued. 
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