In this task, you are given text for US Congressional and California state bills, your task is to generate a summary for this bill.
Q: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Small Business Incentive 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 inserting ''$10,000,000''.

SEC. 3. EXCLUSIONS FROM THE DEFINITION OF INVESTMENT 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 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.'';
(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 subparagraph (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 purchasers, except that such issuer
shall be deemed to be an investment company for purposes of the
limitations 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 account or the
accounts of other qualified purchasers, 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 Commission, by rule or
regulation, has determined does not need the
protections of this title, after consideration of
factors such as--
''(i) a high degree of financial
sophistication, 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 Commission
may determine to be consistent with the purpose
of this paragraph.
The Commission also may adopt such rules and regulations
governing the persons specified in subparagraphs (A) and (B) as
it determines are necessary or appropriate in the public
interest and for the protection 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
company or is excluded from the definition of an investment company
solely by virtue of paragraph (1) or (7) of subsection (c).''.

SEC. 6. EXEMPTION FOR ECONOMIC, BUSINESS, AND INDUSTRIAL 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 operations 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--
''(i) the organizational documents of the company
state that the activities of the company are limited to
the promotion of economic, business, or industrial
development in the State through the provision of
financial or managerial assistance to enterprises doing
business, or proposing to do business, in that State,
and such other activities that are incidental or
necessary to carry out that purpose;
''(ii) immediately following each sale of the
securities of the company by the company or any
underwriter for the company, not less than 80 percent
of the securities of the company being offered in such
sale, on a class-by-class basis, are held by persons
who reside or have a substantial business presence in
that State;
''(iii) the securities of the company are sold, or
proposed to be sold, by the company or any underwriter
for the company, solely to accredited investors, as
defined in section 2(15) of the Securities Act of 1933,
or to such other persons that the Commission, as
necessary or appropriate in the public interest and
consistent with the protection of investors, may permit
by rule, regulation, or order; and
''(iv) the company does not purchase any security
issued by an investment company, as defined in section
3, or by any company that would be an investment
company except for the exclusions from the definition
of investment company in section 3(c), other than--
''(I) any security that is rated investment
grade by at least 1 nationally recognized
statistical rating organization; or
''(II) any security issued by a registered
open-end investment company that is required by
its investment policies to invest not less than
65 percent of its total assets in securities
described in subclause (I) or securities that
are determined by such registered open-end
investment company to be comparable in quality
to securities described in subclause (I).
''(B) Notwithstanding the exemption provided by this
paragraph, the provisions of section 9 (and, to the extent
necessary to enforce such provisions, sections 38 through 51)
of this title shall apply to a company described in this
paragraph as if the company were an investment company
registered under this title.
''(C) Any company proposing to rely on the exemption
provided by this paragraph shall file with the Commission a
notification stating that the company 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 conditions 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 earnings)
of not more than $2,000,000, except that the
Commission may adjust such amounts by rule,
regulation, or order to reflect changes in 1 or
more generally accepted indices or other
indicators for small businesses; or''.

SEC. 9. DEFINITION OF BUSINESS DEVELOPMENT COMPANY.

Section 2(a)(48)(B) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(48)(B)) is amended by inserting before the semicolon at
the end the following: '', and provided further that a business
development company need not make available significant managerial
assistance 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, regulation, or order permit, as
consistent with the public interest, the protection of investors, and
the purposes fairly intended by the policy and provisions of this
title''.

SEC. 10. ACQUISITION OF ASSETS BY BUSINESS DEVELOPMENT 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 inserting ''from
any person''; and
(2) by inserting before the semicolon '', or from any other
person, subject to such rules and regulations as the Commission
may prescribe as necessary or appropriate in the public
interest or for the protection of investors''.

SEC. 11. CAPITAL STRUCTURE AMENDMENTS.

Section 61(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
60(a)) is amended--
(1) by striking paragraph (1) and inserting the following:
''(1)(A) The asset coverage requirements of subparagraphs
(A) and (B) of section 18(a)(1) applicable to business
development companies shall be 200 percent.
''(B) Notwithstanding subparagraph (A) of this section or
subparagraphs (A) and (B) of section 18(a)(2), a business
development company may have an asset coverage of not less than
110 percent, if, immediately before the issuance or sale of
senior securities, the business development company has--
''(i) total interest and dividend income for the 12
months preceding such issuance or sale that exceeds 120
percent of the sum of its total expenses (including
taxes and interest expenses accrued) and dividends
declared on senior securities for that 12-month period;
and
''(ii) either--
''(I) an average of not less than 50
percent of its assets invested in securities
described in paragraphs (1) through (5) of
section 55(a) throughout the preceding 12-month
period; or
''(II) not less than 50 percent of its
assets invested in securities described in
paragraphs (1) through (5) of section 55(a)
throughout 10 months of the preceding 12-month
period.
''(C) It shall be unlawful for any business development
company to issue any class of senior security representing
indebtedness, or to sell any such security pursuant to
subparagraph (B), unless provision is made to prohibit the
declaration of any dividend (except a dividend payable in stock
of the issuer), or the declaration of any other distribution
upon any class of the capital stock of such business
development company, or the purchase of any such capital stock,
unless, in every such case--
''(i) the class of senior securities has, at the
time of the declaration of any such dividend or
distribution or at the time of any such purchase, an
asset coverage of not less than 110 percent after
deducting the amount of such dividend, distribution, or
purchase price, as the case may be; and
''(ii) the business development company complies
with subparagraph (B)(i), except with respect to any
amounts that are required to be distributed to maintain
the status of the company as a regulated investment
company under the Internal Revenue Code of 1986.
''(D) It shall be unlawful for any business development
company to issue any class of senior security representing
stock, or to sell any such security pursuant to subparagraph
(B), unless provision is made to prohibit the declaration of
any dividend (except a dividend payable in common stock of the
issuer), or the declaration of any other distribution, upon the
common stock of such business development company, or the
purchase of any such common stock, unless, in every such case--
''(i) the class of senior securities has, at the
time of the declaration of any such dividend or
distribution or at the time of any such purchase an
asset coverage of not less than 110 percent after
deducting the amount of such dividend, distribution, or
purchase price, as the case may be; and
''(ii) the business development company complies
with subparagraph (B)(i), except with respect to any
amounts that are required to be distributed to maintain
the status of the company as a regulated investment
company under the Internal Revenue Code of 1986.'';
(2) in paragraph (2), by striking ''if such business
development company'' and all that follows through the end of
paragraph (2) and inserting a period;
(3) in paragraph (3)(A)--
(A) by striking ''senior securities representing
indebtedness accompanied by'';
(B) inserting ''accompanied by securities,'' after
''of such company,''; and
(C) in clause (ii), by striking ''senior''; and
(4) in paragraph (3)--
(A) in subparagraph (A), by striking ''and'' at the
end;
(B) in subparagraph (B), by striking the period at
the end of clause (iv) and inserting ''; and''; and
(C) by inserting after subparagraph (B) the
following new subparagraph:
''(C) a business development company may issue
warrants, options, or rights to subscribe to, convert
to, or purchase voting securities not accompanied by
securities, if--
''(i) such warrants, options, or rights
satisfy the conditions in clauses (i) and (iii)
of subparagraph (A); and
''(ii) the proposal to issue such warrants,
options, or rights is authorized by the
shareholders or partners of such business
development company, and such issuance is
approved by the required majority (as defined
in section 57(o)) of the directors of or
general partners in such company on the basis
that such issuance is in the best interests of
the company and its shareholders or
partners.''.

SEC. 12. 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''.
Passed the Senate November 2, 1993.
Attest:
WALTER J. STEWART,
Secretary.
S 479 ES----2
S 479 ES----3
S 479 ES----4
S 479 ES----5
A:
Small Business Incentive Act of 1993 - Amends the Securities Act of 1933 to increase from $5 million to $10 million the size of small business offerings that are exempt from the registration requirements of the Act.
Amends the Investment Company Act of 1940 to exclude from its definition of "investment company" any issuer all of whose securities are held by certain investors whom the Securities and Exchange Commission (SEC) has determined are "qualified purchasers" who possess such financial sophistication, net worth, and other specified factors as not to need the protections of such Act. Empowers the SEC to define such "qualified purchasers."
Sets forth conditions under which certain economic, business, and industrial development companies that are already subject to regulation by the State in which they are organized are exempt from the regulatory constraints of such Act.
Increases to $10 million the maximum aggregate amount of proceeds that certain interstate closed-end investment companies may receive from the sale of their outstanding securities and still retain their exempt status under such Act.
Expands the definition of "eligible portfolio company" to include any company which does not have total assets in excess of $4 million and capital and surpluses in excess of $2 million.
Declares that a "business development company" is not required to make available significant managerial assistance with respect to any eligible portfolio company or any other company that meets certain SEC criteria.
Permits a business development company to: (1) acquire the securities of an eligible portfolio company from persons other than such portfolio company itself; (2) issue multiple classes of debt without restriction; and (3) issue warrants, options, or rights to subscribe or convert to or purchase voting securities either alone or accompanied by debt or equity securities.
Provides conditions under which a business development company may:
(1) have a minimum asset coverage of 110 percent; and (2) issue or sell any class of senior security representing indebtedness.
Requires a business development company to file with the SEC a written evaluation of the risk factors involved in investment due to the nature of the company's capital structure.