Small Business Secondary Market Improvements Act of 1984
PL 98-352 (S.2375), enacted 07/10/1984

PUBLIC LAW 98-352—JULY 10, 1984 
98 STAT. 329 
Public Law 98-352 
98th Congress 
An Act 
To amend the Small Business Act to improve the operation of the secondary market 
for loans guaranteed by the Small Business Administration. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 
SECTION 1. This Act may be cited as the "Small Business Second-
ary Market Improvements Act of 1984". 
SEC. 2. Section 5 of the Small Business Act is amended by adding 
at the end thereof the following new subsections: 
"(f)(1) The guaranteed portion of any loan made pursuant to this 
Act may be sold by the lender, and by any subsequent holder, 
consistent with regulations on such sales as the Administration 
shall establish, subject to the following limitations: 
"(A) prior to the Administration's approval of the sale, or 
upon any subsequent resale, of any loan guaranteed by the 
Administration, if the lender certifies that such loan has been 
properly closed and that the lender has substantially complied 
with the provisions of the guarantee agreement and the regula-
tions of the Administration, the Administration shall review 
and approve only materials not previously approved; 
"(B) all fees due the Administration on a guaranteed loan 
shall have been paid in full prior to any sale; and 
"(C) each loan shall have been fully disbursed to the borrower 
prior to any sale. 
"(2) After a loan is sold in the secondary market, the lender shall 
remain obligated under its guarantee agreement with the Adminis-
tration, and shall continue to service the loan in a manner consist-
ent with the terms and conditions of such agreement. 
"(3) The Administration shall develop such procedures as are 
necessary for the facilitation, administration, and promotion of 
secondary market operations, and for assessing the increase of small 
business access to capital at reasonable rates and terms as a result 
of secondary market operations. 
"(4) Nothing in this subsection or subsection (g) of this section 
shall be interpreted to impede or extinguish the right of the bor-
rower or the successor in interest to such borrower to prepay (in 
whole or in part) any loan made pursuant to section 7(a) of this Act, 
the guaranteed portion of which may be included in such trust or 
pool, or to impede or extinguish the rights of any party pursuant to 
section 5(e), 7(aX6), or 7(aX8). 
"(gXD The Administration is authorized to issue trust certificates 
representing ownership of all or a fractional part of the guaranteed 
portion of one or more loans which have been guaranteed by the 
Administration under this Act, except those under section 7(aX13): 
Provided, That such trust certificates shall be based on and backed 
by a trust or pool approved by the Administration and composed 
solely of the entire guaranteed portion of such loans. 
July 10, 1984 
[S. 2375] 
Small Business 
Secondary 
Market 
Improvements 
Act of 1984. 
15 u s e 631 note. 
15 u s e 634. 
Regulations. 
15 u s e 636. 
15 u s e 634, 636. 
15 u s e 636. 
98 STAT. 330 
PUBLIC LAW 98-352—JULY 10, 1984 
"(2) The Administration is authorized, upon such terms and condi-
tions as are deemed appropriate, to guarantee the timely payment of 
the principal of and interest on trust certificates issued by the 
Administration or its agent for purposes of this subsection. Such 
guarantee shall be limited to the extent of principal and interest on 
the guaranteed portions of loans which compose the trust or pool. In 
the event that a loan in such trust or pool is prepaid, either 
voluntarily or in the event of default, the guarantee of timely 
payment of principal and interest on the trust certificates shall be 
reduced in proportion to the amount of principal and interest such 
prepaid loan represents in the trust or pool. Interest on prepaid or 
defaulted loans shall accrue and be guaranteed by the Administra-
tion only through the date of payment on the guarantee. During the 
term of the trust certificate, it may be called for redemption due to 
prepa5mient or default of all loans constituting the pool. 
"(3) The full faith and credit of the United States is pledged to the 
payment of all amounts which may be required to be paid under any 
guarantee of such trust certificates issued by the Administration or 
its agent pursuant to this subsection. 
Prohibition. 
"(4) The Administration shall not collect any fee for any guaran-
tee under this subsection: Provided, That nothing herein shall pre-
clude any agent of the Administration from collecting a fee ap-
proved by the Administration for the functions described in subsec-
tion (h)(2). 
"(5)(A) In the event the Administration pays a claim under a 
guarantee issued under this subsection, it shall be subrogated fully 
to the rights satisfied by such payment. 
"(B) No State or local law, and no Federal law, shall preclude or 
limit the exercise by the Administration of its ownership rights in 
the portions of loans constituting the trust or pool against which the 
trust certificates are issued. 
"(h) Upon the adoption of final rules and regulations, the Admin-
istration shall— 
"(1) provide for a central registration of all loans and trust 
certificates sold pursuant to subsections (f) and (g) of this sec-
tion. Such central registration shall include, with respect to 
each sale, an identification of each lender who has sold the loan; 
the interest rate paid by the borrower to the lender; the lender's 
servicing fee; whether the loan is for a fixed rate or variable 
rate; an identification of each purchaser of the loan or trust 
certificate; the price paid by the purchaser for the loan or trust 
certificate; the interest rate paid on the loan or trust certificate; 
the fees of an agent for carrying out the functions described in 
paragraph (2) below; and such other information as the Admin-
istration deems appropriate; 
"(2) contract with an agent to carry out on behalf of the 
Administration the central registration functions of this section 
and the issuance of trust certificates to facilitate pooling. Such 
agent shall provide a fidelity bond or insurance in such amounts 
as the Administration determines to be necessary to fully pro-
tect the interest of the Government; 
"(3) prior to any sale, require the seller to disclose to a 
purchaser of the guaranteed portion of a loan guaranteed under 
this Act and to the purchaser of a trust certificate issued 
pursuant to subsection (g), information on the terms, conditions, 
and yield of such instrument. As used in this paragraph, if the 
instrument being sold is a loan, the term 'seller' does not 
PUBLIC LAW 98-352—JULY 10, 1984 
98 STAT. 331 
include (A) an entity which made the loan or (B) any individual 
or entity which sells three or fewer guaranteed loans per year; 
and 
"(4) have the authority to regulate brokers and dealers in 
guaranteed loans and trust certificates sold pursuant to subsec-
tions (f) and (g) of this section.". 
SEC. 3. (a) Within ninety days after the date of enactment of this 
Act, the Small Business Administration shall develop and promul-
gate final rules and regulations to implement the central registra-
tion provisions provided for in section 5(h)(1) of the Small Business 
Act, and shall contract with an agent for an initial period of not to 
exceed two years to carry out the functions provided for in section 
5(h)(2) of such Act. 
(b) Within nine months after the date of enactment of this Act, the 
Small Business Administration shall consult with representatives of 
appropriate Federal and State agencies and officials, the securities 
industry, financial institutions and lenders, and small business 
persons, and shall develop and promulgate final rules and regula-
tions to implement this Act other than as provided for in subsection 
(a). 
(c) The Small Business Administration shall not implement any of 
the provisions under section 5(g) of the Small Business Act, as 
amended, until final rules and regulations become effective. 
SEC. 4. Section 10 of the Small Business Act is amended by adding 
at the end thereof the following new subsection: 
"(h) The Administration shall transmit, not later than March 31 
of each year, to the Committees on Small Business of the Senate and 
House of Representatives a report on the secondary market oper-
ations during the preceding calendar year. This report shall include, 
but not be limited to, (1) the number and the total dollar amount of 
loans sold into the secondary market and the distribution of such 
loans by size of loan, size of lender, geographic location of lender, 
interest rate, maturity, lender servicing fees, whether the rate is 
fixed or variable, and premium paid; (2) the number and dollar 
amount of loans resold in the secondary market with a distribution 
by size of loan, interest rate, and premiums; (3) the number and 
total dollar amount of pools formed; (4) the number and total dollar 
amount of loans in each pool; (5) the dollar amount, interest rate, 
and terms on each loan in each pool and whether the rate is fixed or 
variable; (6) the number, face value, interest rate, and terms of the 
trust certificates issued for each pool; (7) to the maximum extent 
possible, the use by the lender of the proceeds of sales of loans in the 
secondary market for additional lending to small business concerns; 
and (8) an analysis of the information reported in (1) through (7) to 
assess small businesses' access to capital at reasonable rates and 
terms as a result of secondary market operations.". 
SEC. 5. Section 4(cXlXB) and section 4(c)(2XB) of the Small Business 
Act are each amended by inserting "5(g)," immediately after the 
word "sections". 
Regulations. 
15 u s e 634 note. 
Ante, p. 329. 
Regulations. 
Ante, p. 329. 
Report. 
15 u s e 639. 
15 u s e 633. 
feyoisiifl it 
0.O .rtrmoj; 
98 STAT. 332 
PUBLIC LAW 98-352—JULY 10, 1984 
15 use 634 note. 
SEC. 6. This Act does not authorize the appropriation of any funds. 
Approved July 10, 1984. 
LEGISLATIVE HISTORY—S. 2375 (H.R. 4773): 
HOUSE REPORT No. 98-853 accompanying H.R. 4773 (Comm. on Small Business). 
CONGRESSIONAL RECORD, Vol. 130 (1984): 
June 21, considered and passed Senate. 
June 25, considered and passed House.