[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4530 Introduced in House (IH)]







106th CONGRESS
  2d Session
                                H. R. 4530

   To amend the Small Business Investment Act of 1958 to direct the 
 Administrator of the Small Business Administration to establish a New 
        Markets Venture Capital Program, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 24, 2000

    Ms. Velazquez (for herself, Mr. Talent, Mr. King, Ms. Millender-
McDonald, Mrs. Kelly, Mr. Davis of Illinois, Mr. English, Mrs. McCarthy 
 of New York, Mrs. Bono, Mr. Pascrell, Mr. Sweeney, Mr. Hinojosa, Mrs. 
 Christensen, Mr. Brady of Pennsylvania, Mr. Udall of New Mexico, Mr. 
 Moore, Mrs. Jones of Ohio, Mr. Gonzalez, Mr. Phelps, Mrs. Napolitano, 
   Mr. Baird, Ms. Berkley, Mr. Udall of Colorado, Ms. Stabenow, Mr. 
Kanjorski, and Mr. Barrett of Wisconsin) introduced the following bill; 
         which was referred to the Committee on Small Business

_______________________________________________________________________

                                 A BILL


 
   To amend the Small Business Investment Act of 1958 to direct the 
 Administrator of the Small Business Administration to establish a New 
        Markets Venture Capital Program, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``New Markets Venture Capital Program 
Act of 2000''.

SEC. 2. NEW MARKETS VENTURE CAPITAL PROGRAM.

    Title III of the Small Business Investment Act of 1958 (15 U.S.C. 
681 et seq.) is amended--
            (1) in the heading for the title, by striking ``SMALL 
        BUSINESS INVESTMENT COMPANIES'' and inserting ``INVESTMENT 
        DIVISION PROGRAMS'';
            (2) by inserting before the heading for section 301 the 
        following:

            ``Part A--Small Business Investment Companies''

        ; and
            (3) by adding at the end the following:

             ``Part B--New Markets Venture Capital Program

``SEC. 351. DEFINITIONS.

    ``In this part, the following definitions apply:
            ``(1) Developmental venture capital.--The term 
        `developmental venture capital' means capital in the form of 
        equity investments in businesses made with a primary objective 
        of fostering economic development in low- or moderate-income 
        geographic areas.
            ``(2) Low- or moderate-income geographic area.--The term 
        `low- or moderate-income geographic area' means--
                    ``(A) a census tract, or the equivalent county 
                division as defined by the Bureau of the Census for 
                purposes of defining poverty areas, in which--
                            ``(i) the poverty rate is not less than 20 
                        percent;
                            ``(ii) in the case of a census tract or 
                        division located within a metropolitan area, 
                        the median family income for such tract or 
                        division does not exceed the greater of 80 
                        percent of the statewide median family income 
                        or 80 percent of the metropolitan area median 
                        family income; or
                            ``(iii) in the case of a census tract or 
                        division not located within a metropolitan 
                        area, the median family income for such tract 
                        or division does not exceed 80 percent of the 
                        statewide median family income; or
                    ``(B) any area located within--
                            ``(i) a historically underutilized business 
                        zone (HUBZone), as defined in section 3(p) of 
                        the Small Business Act (15 U.S.C. 632(p));
                            ``(ii) an urban empowerment zone or an 
                        urban enterprise community, as designated by 
                        the Secretary of the Department of Housing and 
                        Urban Development; or
                            ``(iii) a rural empowerment zone or a rural 
                        enterprise community, as designated by the 
                        Secretary of the Department of Agriculture.
            ``(3) New markets venture capital company.--The term `New 
        Markets Venture Capital company' means a company that--
                    ``(A) has been granted final approval by the 
                Administration under section 354(e); and
                    ``(B) has entered into a participation agreement 
                with the Administration.
            ``(4) Operational assistance.--The term `operational 
        assistance' means management, marketing, and other technical 
        assistance that assists a small business concern with business 
        development.
            ``(5) Participation agreement.--The term `participation 
        agreement' means an agreement, between the Administration and a 
        company granted final approval under section 354(e), that--
                    ``(A) details the company's operating plan and 
                investment criteria; and
                    ``(B) requires the company to make investments in 
                smaller enterprises at least 80 percent of which are 
located in low- or moderate-income geographic areas.
            ``(6) Specialized small business investment company.--The 
        term `specialized small business investment company' means any 
        small business investment company that--
                    ``(A) invests solely in small business concerns 
                that contribute to a well-balanced national economy by 
                facilitating ownership in such concerns by persons 
                whose participation in the free enterprise system is 
                hampered because of social or economic disadvantages;
                    ``(B) is organized or chartered under State 
                business or nonprofit corporations statutes, or formed 
                as a limited partnership; and
                    ``(C) was licensed under section 301(d), as in 
                effect before September 30, 1996.

``SEC. 352. PURPOSES.

    ``The purposes of the New Markets Venture Capital Program 
established under this part are--
            ``(1) to promote economic development and the creation of 
        wealth and job opportunities in low- or moderate-income 
        geographic areas and among individuals living in such areas by 
        encouraging developmental venture capital investments in 
        smaller enterprises primarily located in such areas; and
            ``(2) to establish a developmental venture capital program, 
        with the mission of addressing the unmet equity investment 
        needs of small enterprises located in low- and moderate-income 
        geographic areas, to be administered by the Administration--
                    ``(A) to enter into participation agreements with 
                New Markets Venture Capital companies;
                    ``(B) to guarantee debentures of New Markets 
                Venture Capital companies to enable each such company 
                to make developmental venture capital investments in 
                smaller enterprises in low- or moderate-income 
                geographic areas; and
                    ``(C) to make grants to New Markets Venture Capital 
                companies, and to other entities, for the purpose of 
                providing operational assistance to smaller enterprises 
                financed, or expected to be financed, by such 
                companies.

``SEC. 353. ESTABLISHMENT.

    ``In accordance with this part, the Administration shall establish 
a New Markets Venture Capital Program, under which the Administration 
may--
            ``(1) enter into participation agreements with companies 
        granted final approval under section 354(e) for the purposes 
        set forth in section 352;
            ``(2) guarantee the debentures issued by New Markets 
        Venture Capital companies as provided in section 355; and
            ``(3) make grants to New Markets Venture Capital companies, 
        and to other entities, under section 358.

``SEC. 354. SELECTION OF NEW MARKETS VENTURE CAPITAL COMPANIES.

    ``(a) Eligibility.--A company shall be eligible to apply to 
participate, as a New Markets Venture Capital company, in the program 
established under this part if--
            ``(1) the company is a newly formed for-profit entity or a 
        newly formed for-profit subsidiary of an existing entity;
            ``(2) the company has a management team with experience in 
        community development financing or relevant venture capital 
        financing; and
            ``(3) the company has a primary objective of economic 
        development of low- or moderate-income geographic areas.
    ``(b) Application.--To participate, as a New Markets Venture 
Capital company, in the program established under this part a company 
meeting the eligibility requirements set forth in subsection (a) shall 
submit an application to the Administration that includes--
            ``(1) a business plan describing how the company intends to 
        make successful developmental venture capital investments in 
        identified low- or moderate-income geographic areas;
            ``(2) information regarding the community development 
        finance or relevant venture capital qualifications and general 
        reputation of the company's management;
            ``(3) a description of how the company intends to work with 
        community organizations and to seek to address the unmet 
        capital needs of the communities served;
            ``(4) a proposal describing how the company will use the 
        grant funds provided under this part to provide operational 
        assistance to smaller enterprises financed by the company, 
        including information regarding whether the company will use 
        licensed professionals, where applicable, on the company's 
        staff or from an outside entity;
            ``(5) with respect to binding commitments to be made to the 
        company under this part, an estimate of the ratio of cash to 
        in-kind contributions;
            ``(6) a description of the criteria to be used to evaluate 
        whether and to what extent the company meets the objectives of 
        the program established under this part;
            ``(7) information regarding the management and financial 
        strength of any parent firm, affiliated firm, or any other firm 
        essential to the success of the company's business plan; and
            ``(8) such other information as the Administration may 
        require.
    ``(c) Conditional Approval.--
            ``(1) In general.--From among companies submitting 
        applications under subsection (b), the Administration shall, in 
        accordance with this subsection, conditionally approve 
        companies to participate in the New Markets Venture Capital 
        Program.
            ``(2) Selection criteria.--In selecting companies under 
        paragraph (1), the Administration shall consider the following:
                    ``(A) The likelihood that the company will meet the 
                goals of its business plan.
                    ``(B) The experience and background of the 
                company's management team.
                    ``(C) The need for developmental venture capital 
                investments in the geographic areas in which the 
                company intends to invest.
                    ``(D) The extent to which the company will 
                concentrate its activities on serving the geographic 
                areas in which it intends to invest.
                    ``(E) The likelihood that the company will be able 
                to satisfy the conditions under subsection (d).
                    ``(F) The extent to which the activities proposed 
                by the company will expand economic opportunities in 
                the geographic areas in which the company intends to 
                invest.
                    ``(G) The strength of the company's proposal to 
                provide operational assistance under this part as the 
                proposal relates to the ability of the applicant to 
                meet applicable cash requirements and properly utilize 
                in-kind contributions, including the use of resources 
                for the services of licensed professionals whether 
                provided by persons on the company's staff or by 
                persons outside of the company.
                    ``(H) Any other factors deemed appropriate by the 
                Administration.
            ``(3) Nationwide distribution.--The Administration shall 
        select companies under paragraph (1) in such a way that 
        promotes investment nationwide.
    ``(d) Requirements To Be Met for Final Approval.--The 
Administration shall grant each conditionally approved company a period 
of time, not to exceed 2 years, to satisfy the following requirements:
            ``(1) Capital requirement.--Each conditionally approved 
        company must raise not less than $5,000,000 of private capital 
        or binding capital commitments from 1 or more investors (other 
        than agencies or departments of the Federal Government) who 
        meet criteria established by the Administration.
            ``(2) Nonadministration resources for operational 
        assistance.--In order to provide operational assistance to 
        smaller enterprises expected to be financed by the company, 
        each conditionally approved company--
                    ``(A) must have binding commitments (for 
                contribution in cash or in kind)--
                            ``(i) from any sources other than the 
                        Administration that meet criteria established 
                        by the Administration;
                            ``(ii) payable or available over a 
                        multiyear period acceptable to the 
                        Administration (not to exceed 10 years); and
                            ``(iii) in an amount not less than 30 
                        percent of the total amount of capital and 
                        commitments raised under paragraph (1);
                    ``(B) must have purchased an annuity--
                            ``(i) from an insurance company acceptable 
                        to the Administration;
                            ``(ii) using funds (other than the funds 
                        raised under paragraph (1)) from any source 
                        other than the Administration; and
                            ``(iii) that yields cash payments over a 
                        multiyear period acceptable to the 
                        Administration (not to exceed 10 years) in an 
                        amount not less than 30 percent of the total 
                        amount of capital and commitments raised under 
                        paragraph (1); or
                    ``(C) must have binding commitments (for 
                contributions in cash or in kind) of the type described 
                in subparagraph (A) and must have purchased an annuity 
                of the type described in subparagraph (B), which in the 
                aggregate make available, over a multiyear period 
                acceptable to the Administration (not to exceed 10 
                years), an amount not less than 30 percent of the total 
                amount of capital and commitments raised under 
                paragraph (1).
    ``(e) Final Approval.--The Administration shall grant to a company 
conditionally approved under subsection (c) final approval to 
participate in the program established under this part after the 
company has met the requirements set forth in subsection (d).

``SEC. 355. DEBENTURES.

    ``(a) In General.--The Administration may guarantee the timely 
payment of principal and interest, as scheduled, on debentures issued 
by any New Markets Venture Capital company.
    ``(b) Terms and Conditions.--The Administration may make guarantees 
under this section on such terms and conditions as it deems 
appropriate, except that the term of any debenture guaranteed under 
this section shall not exceed 15 years.
    ``(c) Full Faith and Credit of the United States.--The full faith 
and credit of the United States is pledged to pay all amounts that may 
be required to be paid under any guarantee under this part.
    ``(d) Maximum Guarantee.--
            ``(1) In general.--Under this section, the Administration 
        may guarantee the debentures issued by a New Markets Venture 
        Capital company only to the extent that the total face amount 
        of outstanding guaranteed debentures of such company does not 
        exceed 150 percent of the private capital of the company, as 
        determined by the Administration.
            ``(2) Treatment of certain federal funds.--For the purposes 
        of paragraph (1), private capital shall include capital that is 
        considered to be Federal funds, if such capital is contributed 
        by an investor other than an agency or department of the 
        Federal Government.

``SEC. 356. ISSUANCE AND GUARANTEE OF TRUST CERTIFICATES.

    ``(a) Issuance.--The Administration may issue trust certificates 
representing ownership of all or a fractional part of debentures issued 
by a New Markets Venture Capital company and guaranteed by the 
Administration under this part, if such certificates are based on and 
backed by a trust or pool approved by the Administration and composed 
solely of guaranteed debentures.
    ``(b) Guarantee.--
            ``(1) In general.--The Administration may, under such terms 
        and conditions as it deems appropriate, guarantee the timely 
        payment of the principal of and interest on trust certificates 
        issued by the Administration or its agents for purposes of this 
        section.
            ``(2) Limitation.--Each guarantee under this subsection 
        shall be limited to the extent of principal and interest on the 
        guaranteed debentures that compose the trust or pool.
            ``(3) Prepayment or default.--In the event that a debenture 
        in a trust or pool is prepaid, or in the event of default of 
        such a debenture, 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 
        debenture represents in the trust or pool. Interest on prepaid 
        or defaulted debentures shall accrue and be guaranteed by the 
        Administration only through the date of payment of the 
        guarantee. At any time during its term, a trust certificate may 
        be called for redemption due to prepayment or default of all 
        debentures.
    ``(c) Full Faith and Credit of the United States.--The full faith 
and credit of the United States is pledged to pay all amounts that may 
be required to be paid under any guarantee of a trust certificate 
issued by the Administration or its agents under this section.
    ``(d) Fees.--The Administration shall not collect a fee for any 
guarantee of a trust certificate under this section, but any agent of 
the Administration may collect a fee approved by the Administration for 
the functions described in subsection (f)(2).
    ``(e) Subrogation and Ownership Rights.--
            ``(1) Subrogation.--In the event the Administration pays a 
        claim under a guarantee issued under this section, it shall be 
        subrogated fully to the rights satisfied by such payment.
            ``(2) Ownership rights.--No Federal, State, or local law 
        shall preclude or limit the exercise by the Administration of 
        its ownership rights in the debentures residing in a trust or 
        pool against which trust certificates are issued under this 
        section.
    ``(f) Management and Administration.--
            ``(1) Registration.--
                    ``(A) In general.--The Administration may provide 
                for a central registration of all trust certificates 
                issued under this section.
                    ``(B) Forms of registration.--Nothing in this 
                subsection shall prohibit the use of a book entry or 
                other electronic form of registration for trust 
                certificates.
            ``(2) Contracting of functions.--
                    ``(A) In general.--The Administration may contract 
                with an agent or agents to carry out on behalf of the 
                Administration the pooling and the central registration 
                functions provided for in this section including, 
                notwithstanding any other provision of law--
                            ``(i) maintenance, on behalf of and under 
                        the direction of the Administration, of such 
                        commercial bank accounts or investments in 
                        obligations of the United States as may be 
                        necessary to facilitate the creation of trusts 
                        or pools backed by debentures guaranteed under 
                        this part; and
                            ``(ii) the issuance of trust certificates 
                        to facilitate the creation of such trusts or 
                        pools.
                    ``(B) Fidelity bond or insurance requirement.--Any 
                agent performing functions on behalf of the 
                Administration under this paragraph shall provide a 
                fidelity bond or insurance in such amounts as the 
                Administration determines to be necessary to fully 
                protect the interests of the United States.
            ``(3) Applicability of the securities exchange act of 
        1934.--Notwithstanding section 3(a)(42) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78c(a)(42)), trust certificates 
        issued under this section shall not be treated as government 
        securities for the purposes of that Act.

``SEC. 357. FEES.

    ``Except as provided in section 356(d), the Administration may 
charge such fees as it deems appropriate with respect to any guarantee 
or grant issued under this part.

``SEC. 358. OPERATIONAL ASSISTANCE GRANTS.

    ``(a) In General.--
            ``(1) Authority.--In accordance with this section, the 
        Administration may make grants to New Markets Venture Capital 
        companies and to other entities, as authorized by this part, to 
        provide operational assistance to smaller enterprises financed, 
        or expected to be financed, by such companies or other 
        entities.
            ``(2) Terms.--Grants made under this subsection shall be 
        made over a multiyear period not to exceed 10 years, under such 
        other terms as the Administration may require.
            ``(3) Grants to specialized small business investment 
        companies.--
                    ``(A) Authority.--In accordance with this section, 
                the Administration may make grants to specialized small 
                business investment companies to provide operational 
                assistance to smaller enterprises financed, or expected 
                to be financed, by such companies after the effective 
                date of the New Markets Venture Capital Program Act of 
                2000.
                    ``(B) Use of funds.--
                            ``(i) In general.--The proceeds of a grant 
                        made under this paragraph may be used by the 
                        company receiving such grant only to provide 
                        operational assistance in connection with an 
                        equity investment (made with capital raised 
                        after the effective date of the New Markets 
                        Venture Capital Program Act of 2000) in a 
                        business located in a low- or moderate-income 
                        geographic area.
                            ``(ii) Additional limitation.--Operational 
                        assistance referred to in clause (i) may not be 
                        provided in connection with more than 1 equity 
                        investment.
                    ``(C) Submission of plans.--A specialized small 
                business investment company shall be eligible for a 
                grant under this section only if the company submits to 
                the Administrator, in such form and manner as the 
                Administrator may require, a plan for use of the grant.
            ``(4) Grant amount.--
                    ``(A) New markets venture capital companies.--The 
                amount of a grant made under this subsection to a New 
                Markets Venture Capital company shall be equal to the 
                resources (in cash or in kind) raised by the company 
                under with section 354(d)(2).
                    ``(B) Other entities.--The amount of a grant made 
                under this subsection to any entity other than a New 
                Markets Venture capital company shall be equal to the 
                resources (in cash or in kind) raised by the entity in 
                accordance with the requirements applicable to New 
                Markets Venture Capital companies set forth in section 
                354(d)(2).
            ``(5) Pro rata reductions.--If the amount made available to 
        carry out this section is insufficient for the Administration 
        to provide grants in the amounts provided for in paragraph (4), 
        the Administration shall make pro rata reductions in the 
        amounts otherwise payable to each company and entity under such 
        paragraph.
    ``(b) Supplemental Grants.--
            ``(1) In general.--The Administration may make supplemental 
        grants to New Markets Venture Capital companies and to other 
        entities, as authorized by this part, under such terms as the 
        Administration may require, to provide additional operational 
        assistance to smaller enterprises financed, or expected to be 
        financed, by the companies.
            ``(2) Matching requirement.--The Administration may 
        require, as a condition of any supplemental grant made under 
        this subsection, that the company or entity receiving the grant 
        provide from resources (in cash or in kind), other than those 
        provided by the Administration, a matching contribution equal 
        to the amount of the supplemental grant.
    ``(c) Limitation.--None of the assistance made available under this 
section may be used for any operating expense of a New Markets Venture 
Capital company or a specialized small business investment company.

``SEC. 359. BANK PARTICIPATION.

    ``(a) In General.--Except as provided in subsection (b), any 
national bank, any member bank of the Federal Reserve System, and (to 
the extent permitted under applicable State law) any insured bank that 
is not a member of such system, may invest in any New Markets Venture 
Capital company, or in any entity established to invest solely in New 
Markets Venture Capital companies.
    ``(b) Limitation.--No bank described in subsection (a) may make 
investments described in such subsection that are greater than 5 
percent of the capital and surplus of the bank.

``SEC. 360. FEDERAL FINANCING BANK.

    ``Section 318 shall not apply to any debenture issued by a New 
Markets Venture Capital company under this part.

``SEC. 361. REPORTING REQUIREMENTS.

    ``Each New Markets Venture Capital company that participates in the 
program established under this part shall provide to the Administration 
such information as the Administration may require, including--
            ``(1) information related to the measurement criteria that 
        the company proposed in its program application; and
            ``(2) in each case in which the company under this part 
        makes an investment in, or a loan or grant to, a business that 
        is not located in a low- or moderate-income geographic area, a 
        report on the number and percentage of employees of the 
        business who reside in such areas.

``SEC. 362. EXAMINATIONS.

    ``(a) In General.--Each New Markets Venture Capital company that 
participates in the program established under this part shall be 
subject to examinations made at the direction of the Investment 
Division of the Administration in accordance with this section.
    ``(b) Assistance of Private Sector Entities.--Examinations under 
this section may be conducted with the assistance of a private sector 
entity that has both the qualifications and the expertise necessary to 
conduct such examinations.
    ``(c) Costs.--
            ``(1) Assessment.--
                    ``(A) In general.--The Administration may assess 
                the cost of examinations under this section, including 
                compensation of the examiners, against the company 
                examined.
                    ``(B) Payment.--Any company against which the 
                Administration assesses costs under this paragraph 
                shall pay such costs.
            ``(2) Deposit of funds.--Funds collected under this section 
        shall be deposited in the account for salaries and expenses of 
        the Administration.

``SEC. 363. INJUNCTIONS AND OTHER ORDERS.

    ``(a) In General.--Whenever, in the judgment of the Administration, 
a New Markets Venture Capital company or any other person has engaged 
or is about to engage in any acts or practices which constitute or will 
constitute a violation of any provision of this Act, or of any rule or 
regulation under this Act, or of any order issued under this Act, the 
Administration may make application to the proper district court of the 
United States or a United States court of any place subject to the 
jurisdiction of the United States for an order enjoining such acts or 
practices, or for an order enforcing compliance with such provision, 
rule, regulation, or order, and such courts shall have jurisdiction of 
such actions and, upon a showing by the Administration that such New 
Markets Venture Capital company or other person has engaged or is about 
to engage in any such acts or practices, a permanent or temporary 
injunction, restraining order, or other order, shall be granted without 
bond.
    ``(b) Jurisdiction.--In any proceeding under subsection (a), the 
court as a court of equity may, to such extent as it deems necessary, 
take exclusive jurisdiction of the New Market Venture Capital company 
and the assets thereof, wherever located, and the court shall have 
jurisdiction in any such proceeding to appoint a trustee or receiver to 
hold or administer under the direction of the court the assets so 
possessed.
    ``(c) Administration as Trustee or Receiver.--
            ``(1) Authority.--The Administration may act as trustee or 
        receiver of a New Markets Venture Capital company.
            ``(2) Appointment.--Upon request of the Administration, the 
        court may appoint the Administration to act as a trustee or 
        receiver of a New Markets Venture Capital company unless the 
        court deems such appointment inequitable or otherwise 
        inappropriate by reason of the special circumstances involved.

``SEC. 364. ADDITIONAL PENALTIES FOR NONCOMPLIANCE.

    ``(a) In General.--With respect to any New Markets Venture Capital 
company that violates or fails to comply with any of the provisions of 
this Act, of any regulation issued under this Act, or of any 
participation agreement entered into under this Act, the Administration 
may in accordance with this section--
            ``(1) void the participation agreement between the 
        Administration and the company; and
            ``(2) cause the company to forfeit all of the rights and 
        privileges derived by the company from this Act.
    ``(b) Adjudication of Noncompliance.--
            ``(1) In general.--Before the Administration may cause a 
        New Markets Venture Capital company to forfeit rights or 
        privileges under subsection (a), a court of the United States 
        of competent jurisdiction must find that the company committed 
        a violation, or failed to comply, in a cause of action brought 
        for that purpose in the district, territory, or other place 
        subject to the jurisdiction of the United States, in which the 
        principal office of the company is located.
            ``(2) Parties authorized to file causes of action.--Each 
        cause of action brought by the United States under this 
        subsection shall be brought by the Administration or by the 
        Attorney General.

``SEC. 365. UNLAWFUL ACTS AND OMISSIONS; BREACH OF FIDUCIARY DUTY.

    ``(a) Parties Deemed To Commit a Violation.--Whenever any New 
Markets Venture Capital company violates any provision of this Act, of 
a regulation issued under this Act, or of a participation agreement 
entered into under this Act, by reason of its failure to comply with 
its terms or by reason of its engaging in any act or practice that 
constitutes or will constitute a violation thereof, such violation 
shall also be deemed to be a violation and an unlawful act committed by 
any person who, directly or indirectly, authorizes, orders, 
participates in, causes, brings about, counsels, aids, or abets in the 
commission of any acts, practices, or transactions that constitute or 
will constitute, in whole or in part, such violation.
    ``(b) Fiduciary Duties.--It shall be unlawful for any officer, 
director, employee, agent, or other participant in the management or 
conduct of the affairs of a New Markets Venture Capital company to 
engage in any act or practice, or to omit any act or practice, in 
breach of the person's fiduciary duty as such officer, director, 
employee, agent, or participant if, as a result thereof, the company 
suffers or is in imminent danger of suffering financial loss or other 
damage.
    ``(c) Unlawful Acts.--Except with the written consent of the 
Administration, it shall be unlawful--
            ``(1) for any person to take office as an officer, 
        director, or employee of any New Markets Venture Capital 
        company, or to become an agent or participant in the conduct of 
        the affairs or management of such a company, if the person--
                    ``(A) has been convicted of a felony, or any other 
                criminal offense involving dishonesty or breach of 
                trust, or
                    ``(B) has been found civilly liable in damages, or 
                has been 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; and
            ``(2) for any person continue to serve in any of the 
        capacities described in paragraph (1), if--
                    ``(A) the person is convicted of a felony, or any 
                other criminal offense involving dishonesty or breach 
                of trust, or
                    ``(B) the person is 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.

``SEC. 366. REMOVAL OR SUSPENSION OF DIRECTORS OR OFFICERS.

    ``Using the procedures for removing or suspending a director or an 
officer of a licensee set forth in section 313 (to the extent such 
procedures are not inconsistent with the requirements of this part), 
the Administration may remove or suspend any director or officer of any 
New Markets Venture Capital company.

``SEC. 367. REGULATIONS.

    ``The Administration may issue such regulations as it deems 
necessary to carry out the provisions of this part in accordance with 
its purposes.

``SEC. 368. AUTHORIZATIONS OF APPROPRIATIONS.

    ``(a) In General.--For fiscal years 2000 through 2005, the 
Administration is authorized to be appropriated, to remain available 
until expended--
            ``(1) such subsidy budget authority as may be necessary to 
        guarantee $150,000,000 of debentures under this part; and
            ``(2) $30,000,000 to make grants under this part.
    ``(b) Funds Collected for Examinations.--Funds deposited under 
section 362(c)(2) are authorized to be appropriated only for the costs 
of examinations under section 362 and for the costs of other oversight 
activities with respect to the program established under this part.''.

SEC. 3. CONFORMING AMENDMENT.

    Section 20(e)(1)(C) of the Small Business Act (15 U.S.C 631 note) 
is amended by inserting ``part A of'' before ``title III''.

SEC. 4. CALCULATION OF MAXIMUM AMOUNT OF SBIC LEVERAGE.

    (a) Maximum Leverage.--Section 303(b)(2) of the Small Business 
Investment Act of 1958 (15 U.S.C. 683(b)(2)) is amended to read as 
follows:
            ``(2) Maximum leverage.--
                    ``(A) In general.--After March 31, 1993, the 
                maximum amount of outstanding leverage made available 
                to a company licensed under section 301(c) of this Act 
                shall be determined by the amount of such company's 
                private capital--
                            ``(i) if the company has private capital of 
                        not more than $15,000,000, the total amount of 
                        leverage shall not exceed 300 percent of 
                        private capital;
                            ``(ii) if the company has private capital 
                        of more than $15,000,000 but not more than 
                        $30,000,000, the total amount of leverage shall 
                        not exceed $45,000,000 plus 200 percent of the 
                        amount of private capital over $15,000,000; and
                            ``(iii) if the company has private capital 
                        of more than $30,000,000, the total amount of 
                        leverage shall not exceed $75,000,000 plus 100 
                        percent of the amount of private capital over 
                        $30,000,000 but not to exceed an additional 
                        $15,000,000.
                    ``(B) Adjustments.--
                            ``(i) In general.--The dollar amounts in 
                        clauses (i), (ii), and (iii) of subparagraph 
                        (A) shall be adjusted annually to reflect 
                        increases in the Consumer Price Index 
                        established by the Bureau of Labor Statistics 
                        of the Department of Labor.
                            (ii) Initial adjustments.--The initial 
                        adjustments made under this subparagraph after 
                        the date of enactment of the Small Business 
                        Reauthorization Act of 1997 shall reflect only 
                        increases from March 31, 1993.
                    ``(C) Investments in low- or moderate income 
                areas.--In calculating the outstanding leverage of a 
                company for the purposes of subparagraph (A), the 
                Administrator shall not include the amount of the cost 
                basis of any equity investment made by the company in a 
                smaller enterprise located in a low- or moderate-income 
                geographic area (as defined in section 351), to the 
                extent that the total of such amounts does not exceed 
                50 percent of the company's private capital.''.
    (b) Maximum Aggregate Leverage.--Section 303(b)(4) of the Small 
Business Investment Act of 1958 (15 U.S.C. 683(b)(4)) is amended by 
adding at the end the following new subparagraph:
                    ``(D) Investments in low- or moderate income 
                areas.--In calculating the aggregate outstanding 
                leverage of a company for the purposes of subparagraph 
                (A), the Administrator shall not include the amount of 
                the cost basis of any equity investment made by the 
                company in a smaller enterprise located in a low- or 
                moderate-income geographic area (as defined in section 
                351), to the extent that the total of such amounts does 
                not exceed 50 percent of the company's private 
                capital.''.

SEC. 5. BANKRUPTCY EXEMPTION FOR NEW MARKETS VENTURE CAPITAL COMPANIES.

    Section 109(b)(2) of title 11, United States Code, is amended by 
inserting ``a New Markets Venture Capital company as defined in section 
351 of the Small Business Investment Act of 1958,'' after ``homestead 
association,''.

SEC. 6. FEDERAL SAVINGS ASSOCIATIONS.

    Section 5(c)(4) of the Home Owners' Loan Act (12 U.S.C. 1464(c)(4)) 
is amended by adding at the end the following:
                    ``(F) New markets venture capital companies.--A 
                Federal savings association may invest in stock, 
                obligations, or other securities of any New Markets 
                Venture Capital company as defined in section 351 of 
                the Small Business investment Act of 1958, except that 
                a Federal savings association may not make any 
                investment under this subparagraph if its aggregate 
                outstanding investment under this subparagraph would 
                exceed 5 percent of the capital and surplus of such 
                savings association.''.
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