I
103D CONGRESS
2D SESSION
H. R. 4858
To amend the Securities Act of 1933 and the Investment Company Act
of 1940 to promote capital formation for small businesses and others
through exempted offerings under the Securities Act and through invest-
ment pools that are excepted or exempted from regulation under the
Investment Company Act of 1940 and through business development
companies.
IN THE HOUSE OF REPRESENTATIVES
JULY 29, 1994
Mr. MARKEY (for himself and Mr. FIELDS of Texas) introduced the following
bill; which was referred to the Committee on Energy and Commerce
A BILL
To amend the Securities Act of 1933 and the Investment
Company Act of 1940 to promote capital formation for
small businesses and others through exempted offerings
under the Securities Act and through investment pools
that are excepted or exempted from regulation under
the Investment Company Act of 1940 and through busi-
ness development companies.
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 Incen-
tive Act of 1993’’.
SEC. 2. EXEMPTED SECURITIES.
Section 3(b) of the Securities Act of 1933 (15 U.S.C.
77c(b)) is amended by striking ‘‘$5,000,000’’ and insert-
ing ‘‘$10,000,000’’.
SEC. 3. EXCLUSIONS FROM THE DEFINITION OF INVEST-
MENT COMPANY.
Section 3(c) of the Investment Company Act of 1940
(15 U.S.C. 80a–3(c)) is amended—
(1) in paragraph (1), by inserting after the first
sentence the following new sentence: ‘‘Such issuer
shall be deemed to be an investment company for
purposes of the limitations set forth in subpara-
graphs (A)(i) and (B)(i) of section 12(d)(1) govern-
ing the purchase or other acquisition by such issuer
of any security issued by a registered investment
company and the sale of any security issued by a
registered open-end investment company to any such
issuer.’’;
(2) in paragraph (1)(A)—
(A) by inserting after ‘‘issuer’’ the first
place it appears ‘‘and the company is or (but
for the exceptions set forth in this paragraph
and paragraph (7)) would be an investment
company’’; and
(B) by striking ‘‘unless as of the date’’ and
all that follows through the end of subpara-
graph (A) and inserting a period; and
(3) by amending paragraph (7) to read as
follows:
‘‘(7) Any issuer whose outstanding securities
are owned exclusively by persons who, at the time of
acquisition of such securities, are qualified pur-
chasers, except that such issuer shall be deemed to
be an investment company for purposes of the limi-
tations set forth in subparagraphs (A)(i) and (B)(i)
of section 12(d)(1) governing the purchase or other
acquisition by such issuer of any security issued by
a registered investment company and the sale of any
security issued by a registered open-end investment
company to any such issuer.’’.
SEC. 4. DEFINITION OF QUALIFIED PURCHASER.
Section 2(a) of the Investment Company Act of 1940
(15 U.S.C. 80a–2(a)) is amended by adding at the end
the following new paragraph:
‘‘(51) ‘Qualified purchaser’ means—
‘‘(A) any natural person who owns at least
$10,000,000 in securities of issuers, each of
which is not an affiliated person, as defined in
section 2(a)(3)(C), of such person;
‘‘(B) any person, acting for its own ac-
count or the accounts of other qualified pur-
chasers, who in the aggregate owns and invests
on a discretionary basis, not less than
$100,000,000 in securities of issuers, each of
which is not an affiliated person, as defined in
section 2(a)(3)(C), of such person; or
‘‘(C) any person, who may own or invest a
lesser amount in securities than specified in
subparagraphs (A) and (B), that the Commis-
sion, by rule or regulation, has determined does
not need the protections of this title, after con-
sideration of factors such as—
‘‘(i) a high degree of financial sophis-
tication, including extensive knowledge of
and experience in financial matters;
‘‘(ii) sizable net worth;
‘‘(iii) a substantial amount of assets
owned or under management;
‘‘(iv) relationship with an issuer; or
‘‘(v) such other factors as the Com-
mission may determine to be consistent
with the purpose of this paragraph.
The Commission also may adopt such rules and reg-
ulations governing the persons specified in subpara-
graphs (A) and (B) as it determines are necessary
or appropriate in the public interest and for the pro-
tection of investors.’’.
SEC. 5. DEFINITION OF INVESTMENT SECURITIES.
Section 3(a) of the Investment Company Act of 1940
(15 U.S.C. 80a–3(a)) is amended in the last sentence by
striking subparagraph (C) and inserting the following:
‘‘(C) securities issued by any majority-owned subsidiary
of the owner, unless such subsidiary is an investment com-
pany or is excluded from the definition of an investment
company solely by virtue of paragraph (1) or (7) of sub-
section (c).’’.
SEC. 6. EXEMPTION FOR ECONOMIC, BUSINESS, AND IN-
DUSTRIAL DEVELOPMENT COMPANIES.
Section 6(a) of the Investment Company Act of 1940
(15 U.S.C. 80a–6(a)) is amended by adding at the end
the following new paragraph:
‘‘(5)(A) Any company that is not engaged in
the business of issuing redeemable securities, the op-
erations of which are subject to regulation by the
State in which the company is organized under a
statute governing entities that provide financial or
managerial assistance to enterprises doing business,
or proposing to do business, in that State if—
‘‘(C) Any company proposing to rely on the ex-
emption provided by this paragraph shall file with
the Commission a notification stating that the com-
pany intends to do so, in such form and manner as
the Commission may prescribe by rule.
‘‘(D) Any company meeting the requirements of
this paragraph may rely on the exemption provided
by this paragraph upon filing with the Commission
the notification required by subparagraph (C), until
such time as the Commission determines by order
that such reliance is not in the public interest or
consistent with the protection of investors.
‘‘(E) The exemption provided by this paragraph
may be subject to such additional terms and condi-
tions as the Commission may by rule, regulation, or
order determine are necessary or appropriate in the
public interest or for the protection of investors.’’.
SEC. 7. INTRASTATE CLOSED-END INVESTMENT COMPANY
EXEMPTION.
Section 6(d)(1) of the Investment Company Act of
1940 (15 U.S.C. 80a–6(d)(1)) is amended by striking
‘‘$100,000’’ and inserting ‘‘$10,000,000, or such other
amount as the Commission may set by rule, regulation,
or order’’.
SEC. 8. DEFINITION OF ELIGIBLE PORTFOLIO COMPANY.
Section 2(a)(46)(C) of the Investment Company Act
of 1940 (15 U.S.C. 80a–2(a)(46)(C)) is amended—
(1) in clause (ii), by striking ‘‘or’’ at the end;
(2) by redesignating clause (iii) as clause (iv);
and
(3) by inserting after clause (ii) the following:
‘‘(iii) it has total assets of not more
than $4,000,000, and capital and surplus
(shareholders’ equity less retained earn-
ings) of not more than $2,000,000, except
that the Commission may adjust such
amounts by rule, regulation, or order to re-
flect changes in 1 or more generally ac-
cepted indices or other indicators for small
businesses; or’’.
SEC. 9. DEFINITION OF BUSINESS DEVELOPMENT COM-
PANY.
Section 2(a)(48)(B) of the Investment Company Act
of 1940 (15 U.S.C. 80a–2(a)(48)(B)) is amended by in-
serting before the semicolon at the end the following: ‘‘,
and provided further that a business development com-
pany need not make available significant managerial as-
sistance with respect to any company described in section
2(a)(46)(C)(iii), or with respect to any other company that
meets such criteria as the Commission may by rule, regu-
lation, or order permit, as consistent with the public inter-
est, the protection of investors, and the purposes fairly in-
tended by the policy and provisions of this title’’.
SEC. 10. ACQUISITION OF ASSETS BY BUSINESS DEVELOP-
MENT COMPANIES.
Section 55(a)(1)(A) of the Investment Company Act
of 1940 (15 U.S.C. 80a–54(a)(1)(A)) is amended—
(1) by striking ‘‘or from any person’’ and in-
serting ‘‘from any person’’; and
(2) by inserting before the semicolon ‘‘, or from
any other person, subject to such rules and regula-
tions as the Commission may prescribe as necessary
or appropriate in the public interest or for the pro-
tection of investors’’.
SEC. 11. FILING OF WRITTEN STATEMENTS.
Section 64(b)(1) of the Investment Company Act of
1940 (15 U.S.C. 80a–63(b)(1)) is amended by inserting
‘‘and capital structure’’ after ‘‘portfolio’’.
Æ