2023 Laws of Puerto Rico › TITLE SEVEN - Banking (§§ 1 — 3116) › PART VII - Other Financial Institutions (§§ 3001-3012 — 3116) › Chapter 142 - Capital Investment Funds Act of 1999 (§§ 3021 — 3047) › § 3022 - Operations

(a) Investment in ventures.— The operation of a fund shall consist in the investment of restricted use capital in ventures in the following sectors or activities:
(1) Manufacture;
(2) service;
(3) tourism;
(4) agriculture;
(5) agricultural and livestock industries;
(6) fish nurseries;
(7) commercial fishing;
(8) scientific and technical research businesses or enterprises and the development of industrial products and processes;
(9) other businesses or enterprises that promote the export of products manufactured in Puerto Rico or of services generated by their export or that allows the substitution of imports, or
(10) activities related to solid waste management.
The determination as to whether investing in a particular business qualifies as a venture investment shall be based on parameters to be established by the Bank, through regulations. The Bank shall give priority to ventures promoting the creation of jobs, economic activity with companies or professionals located in Puerto Rico, the transfer of knowledge, and any other criteria that can be established through regulations.
(b) Investments approved by the Bank.— The investment of use capital shall be allowed solely with approval of the Bank, in:
(1) Publicly-owned company stock;
(2) real estate enterprises;
(3) financial services;
(4) professional services, or
(5) insurance services.
The Bank shall authorize investments under this subsection when there is a petition to such effect and it determines, on the basis of the specific circumstances of each case, that the specific investment shall be made in a business that qualifies as a venture. Under no circumstances shall the use of restricted use capital be allowed for speculation in real estate or investment in entities that do not operate a business regularly and continuously.
(c) Investments in special circumstances.— Under special circumstances, the Bank shall have the power to classify a business or project as a venture even though it does not meet the requirements established in subsections (a) and (b) of this section, when the Bank determines that these businesses or projects are in the best interest of the economic development of Puerto Rico.
(d) Investments in risk-free businesses.— In addition to the above investments, a fund may invest its restricted use capital in those risk-free businesses provided jointly by the Bank and the Commissioner through regulations. It may also invest its restricted use capital in risk-free businesses not contemplated in said regulations, provided it obtains a determination from the Bank to the effect that said investment does not affect the interests of the investors in the fund. The income derived from the investment of restricted use capital in risk-free businesses shall be subject to the provisions of § 3029(e) of this title.
(e) Investments under special circumstances.— Investments by the fund in the businesses described in subsections (a), (b), (c) and (d) of this section must be made in Puerto Rico, except as provided in this section.
(f) Investments of unrestricted use capital in and outside of Puerto Rico.— Investments of an unrestricted use capital fund in activities comprised in subsections (a), (b) or (d) of this section, made in or outside of Puerto Rico, that meet the parameters established for those investments by the fund with restricted use capital, shall receive equal treatment as the latter, and shall not be subject to the tax penalties imposed in § 3029(e) of this title. Nevertheless, a fund may invest its unrestricted use capital in those activities not comprised in subsections (a), (b), or (d) of this section, located in or outside of Puerto Rico, determined by the Administrator of the fund, and shall not be subject to the tax penalties of § 3029(e) of this title, but shall be subject to the provisions of subsection (f) of said section.
(g) Investments of restricted use capital outside of Puerto Rico by funds that only have private sector capital.— Twenty-five percent (25%) of the capital from the sale of private proprietary interests of a fund whose capital is derived solely from the private sector, must be invested in ventures located in Puerto Rico.
(h) Investments of restricted use capital outside of Puerto Rico by funds that hold capital from the private sector and the public sector.— The capital of a fund derived from the sale of proprietary interests of the Bank and twenty-five percent (25%) of the capital derived from the sale of private proprietary interests, shall be invested exclusively in Puerto Rico. A fund whose capital is derived from the public and private sectors shall not invest its restricted use capital in a project or business if said project or business will use the above mentioned capital outside of Puerto Rico in an amount that exceeds the stated fraction. The numerator of this fraction shall be seventy-five percent (75%) of the capital received from the sale of private proprietary interests, and the denominator shall be the total restricted use capital held by the fund at the time the investment is made; Provided, That said fraction shall not, at any time, exceed seventy-five percent (75%) of the restricted use capital owned by the fund at the time said investment is made.
(i) Violations of the restricted use capital investment requirements outside of Puerto Rico.— In those cases in which a business or project uses restricted use capital in excess of the fraction determined according to the precepts of subsections (g) and (h) of this section, the income derived from said excess shall be subject to the tax penalty imposed by § 3029(e) of this title. In addition, at the discretion of the Commissioner of the fund could lose its license for violations of subsections (g) and (h) of this section. The circumstances that could give rise to the loss of the license shall be determined at the discretion of the Commissioner, through regulations.
(j) Diversity in the investments of a fund.— A fund shall operate as a diversified investment entity. A fund shall be deemed as a diversified entity which is created with the purpose of investing not more than twenty percent (20%) of its paid-in capital in a single venture; regardless of which, a fund which owns an amount equal to or larger than eight million dollars ($8,000,000) in paid-in capital shall not invest more than twelve point five percent (12.5%) of said capital in a single venture. Investors in a fund shall share in its profits, in proportion to their proprietary interest in the fund, according to the limitations and preferences established by this chapter, and the risks of all the investments in which said fund invests. A fund can not elude the requirement that each investor must share the risks and profits, according to the specific limitations and preferences established by this chapter, of all the investments of the fund, through the creation of separate classes of private proprietary interests, the profits or losses of which are derived from one or more of, but not from all, the investments in which the fund invests.
(k) Restrictions for a fund controlling a business.— A fund shall not operate a venture nor act as a parent company that has control over a venture. Therefore, a fund must invest an amount of less than fifty percent (50%) of the capital of a business. No fund nor its associates, in itself or jointly, shall have control over a venture through management agreements, voting trusts, majority representation on the Board of Directors, or otherwise. The Bank may exempt a fund from the restrictions provided in this section under special circumstances that shall be determined through regulations.
(l) Investments that constitute conflicts of interest.— A fund shall not make investments that represent a conflict of interest.
For the purposes of this section, it shall be understood that there is a conflict of interest in the following cases:
(1) Associates of the fund.— For the fund to invest in debt or capital instruments or to lend money to an entity in which an associate of said fund owns or holds, or has had an agreement, directly or indirectly, to own or hold a substantial debt of said entity, or at least ten percent (10%) of any type of proprietary interest of said entity, without the prior written authorization of the Bank.
(2) Investments in associates of other funds.— For the fund to invest in debt or capital instruments or to lend money to an associate of another fund, if one of the associates of the first fund is receiving money from investments in debt or capital instruments or loans from the second fund, without the prior written authorization of the Bank.
(3) Other funds.— For a fund to invest restricted use capital in private proprietary interests of other funds without the prior written authorization of the Bank.
(m) Requests.— The Bank is hereby authorized to collect those charges for the filing and processing of requests for determinations under subsections (a), (b), (c) and (d) of this section, which shall be established by regulations.
History —Jan. 28, 2000, No. 46, § 3; Nov. 17, 2015, No. 187, § 62.