[Federal Register Volume 62, Number 28 (Tuesday, February 11, 1997)]
[Proposed Rules]
[Pages 6147-6149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3280]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 107
Small Business Investment Companies
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: In response to concerns expressed by a number of small
business investment companies (SBICs), SBA is proposing to modify the
examination fees charged to SBICs. SBA believes that the current fee
schedule places a disproportionate burden on certain classes of
licensees (particularly those with the largest amount of total assets)
and, in some cases, results in fee assessments that exceed reasonable
charges based on the level of effort and time associated with the
examination process.
DATES: Comments must be submitted on or before March 13, 1997.
ADDRESSES: Written comments should be addressed to Don A. Christensen,
Associate Administrator for Investment, U.S. Small Business
Administration, 409 3rd Street, SW., Suite 6300, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT: Leonard W. Fagan, Investment Division,
at (202) 205-7583.
SUPPLEMENTARY INFORMATION: On January 31, 1996 the Small Business
Administration (SBA) published final regulations which, among other
things, increased the examination fees charged to SBICs. See 61 FR
3177. Fees
[[Page 6148]]
continued to be assessed based on total assets of the licensee, but at
higher rates. The new fee schedule was designed to produce total
revenue sufficient to cover the current direct costs to SBA of
conducting examinations.
Since the effective date and implementation of this regulation
(March 1, 1996), SBA has received a number of comments regarding the
impact of the new fee schedule on licensees in certain asset size
groups. In particular, bank-owned SBICs argue that they are required to
bear an unfair portion of the overall fees. In this regard, they note
that they generally have no federal funds at risk. However, because
fees are based on total assets and they generally have the largest
amount of total assets, they are required to pay fees at levels which
far exceed the level of effort and risk associated with the examination
process. Similarly, larger SBICs which are not bank-owned and do rely
on federal funds to supplement private capital argue that the fees
greatly exceed the amount they pay for financial audits and are not
representative of the level of effort and time attributable to the
process.
Because of these comments, the SBA has re-assessed its examination
fee schedule and its impact on the various classes of licensees. Based
on its reassessment, the SBA has concluded that the current fee
schedule places a disproportionate burden on certain classes of
licensees and, in some cases, results in fee assessments that exceed
reasonable charges based on the level of effort and time associated
with the examination process.
To remedy this situation, the SBA is proposing revisions to
Sec. 107.692 to establish fees that are more reasonable in relation to
the level of effort and resources expended by the Agency. The proposed
fee schedule would establish ``base fees'' for examinations. The base
fee increases as a licensee's total assets increase, but is capped at
$14,000. The base fee would be adjusted upward in circumstances where
the Agency incurs additional cost or burdens in the process because of
circumstances solely related to the licensee to be examined. Similarly,
the base fee would be adjusted downward where circumstances solely
related to the licensee to be examined are such that the Agency's level
of effort and time are minimized. In SBA's view, these adjustments are
incentives for the licensees to adhere to program regulations and will
serve to further enhance the safety and soundness of the SBIC program.
The new fee schedule would apply to examinations beginning after the
effective date of a final rule.
Compliance With Executive Orders, 12612, 12778, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
SBA certifies that this proposed rule would not be a significant
regulatory action for purposes of Executive Order 12866 because it
would not have an annual effect on the economy of more than $100
million, and that it would not have a significant economic impact on a
substantial number of small entities within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The purpose of the
proposed rule is to modify the existing regulatory guidance related to
SBIC examination fees. The proposed regulations would provide for more
reasonable and equitable examination fees. The proposed fee structure
would more properly reflect the level of effort and Agency resources
expended to conduct an examination, would encourage continued
compliance with program regulations, and would continue to allow for
efficient and effective program administration.
The proposed regulations would have some economic effect. The base
fee for examinations would continue to be based on total assets of a
licensee and, for the most part, at the rates prescribed in current
regulations. However, no licensee would have a base fee greater than
$14,000. The proposed regulations would provide for discounts of the
base examination fee for (1) licensees that had no outstanding
regulatory violations at the time of the examination and there were no
violations noted as a result of the most recent prior examination; and
(2) licensees that are cooperative with SBA examination personnel by
being fully responsive to the letter of notification of examination.
Similarly, the proposed regulations would provide increases to the base
examination fee for a licensee that (1) is organized as a partnership
or limited liability company; (2) is authorized to issue Participating
Securities; and/or (3) maintains its records/files in multiple
locations.
The largest licensees, those with total assets exceeding $60
million, would realize substantial fee decreases. The examination base
fee of all licensees potentially could be increased or decreased.
Therefore, all licensees with total assets below $60 million may
experience a 5% to 25% increase or a 10% to 25% decrease in the cost of
an annual examination. The economic impact in either case is
inconsequential given the total number of licensees and the base fees
applicable to the majority of the licensees. Further, even assuming the
maximum increases provided for in the proposed regulations, most
licensees with total assets greater than $60 million would realize
significant examination fee reductions.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
certifies that this proposed rule, if adopted in final form, would
contain no new reporting or recordkeeping requirements that have not
already been approved by the Office of Management and Budget.
For purposes of Executive Order 12612, SBA certifies that this rule
would not have any federalism implications warranting the preparation
of a Federalism Assessment.
For purposes of Executive Order 12778, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in Section 2 of that Order.
List of Subjects in 13 CFR Part 107
Investment companies, Loan programs-business, Reporting and
recordkeeping requirements, Small businesses.
For the reasons set forth above, SBA hereby proposes to amend Part
107 of Title 13 of the Code of Federal Regulations as follows:
PART 107--SMALL BUSINESS INVESTMENT COMPANIES
1. The authority citation for part 107 is revised to read as
follows:
Authority: 15 U.S.C. 681 et seq., 683, 687(c), 687b, 687d, 687g
and 687m, Pub. L. 104-208.
2. Section 107.692 is revised to read as follows:
Sec. 107.692 Examination fees.
(a) General. SBA will assess fees for examinations in accordance
with this Sec. 107.692. Unless SBA determines otherwise on a case by
case basis, SBA will not assess fees for special examinations to obtain
specific information.
(b) Base fee. A base fee will be assessed based on your total
assets (at cost) as of the date of your latest certified financial
statement or a more recent interim statement requested by and submitted
to SBA in connection with the examination. The base fee table is as
follows:
[[Page 6149]]
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Total assets of licensee Base fee Plus, percent of assets
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$0 to $1,500,000.................... $3,500 +0%.
$1,500,001 to $5,000,000............ 3,700 +.065% of the amount over $1,500,000.
$5,000,001 to $10,000,000........... 6,000 +.02% of the amount over $5,000,000.
$10,000,001 to $15,000,000.......... 7,000 +.01% of the amount over $10,000,000.
$15,000,001 to $25,000,000.......... 7,700 +.015% of the amount over $15,000,000.
$25,000,001 to $50,000,000.......... 9,200 +.015% of the amount over $25,000,000.
$50,000,001 to $60,000,000.......... 13,000 +.01% of the amount over $50,000,000.
$60,000,001 and above............... 14,000 +0%.
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(c) Adjustments to base fee. Your base fee, as determined by the
table in paragraph (b) of this section, will be adjusted (increased or
decreased) based on the following criteria:
(1) If you have no outstanding regulatory violations at the time of
the commencement of the examination and SBA did not identify any
violations as a result of the most recent prior examination, you will
receive a 15% discount on your base fee;
(2) If you were fully responsive to the letter of notification of
examination (that is, you provided all requested documents and
information within the time period stipulated in the notification
letter in a complete and accurate manner, and you prepared and had
available all information requested by the examiner for on-site
review), you will receive a 10% discount on your base fee;
(3) If you are organized as a partnership or limited liability
company, you will pay an additional charge equal to 5% of your base
fee;
(4) If you are a Licensee authorized to issue Participating
Securities, you will pay an additional charge equal to 10% of your base
fee; and
(5) If you maintain your records/files in multiple locations (as
permitted under Sec. 107.600(b)), you will pay an additional charge
equal to 10% of your base fee.
(d) Fee discounts and additions table. The following table
summarizes the discounts and additions noted in paragraph (c) of this
section:
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Amount of Amount of
discount--% addition--%
Examination fee discounts of base Examination fee additions of base
examination examination
fee fee
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No prior violations...................... 15 Partnership or limited liability co........ 5
Responsiveness........................... 10 Participating Security Licensee............ 10
........... Financing Records at Multiple Locations.... 10
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(e) Delay fee. If, in the judgment of SBA, the time required to
complete your examination is delayed due to your lack of cooperation or
the condition of your records, SBA may assess an additional fee of up
to $500 per day.
Dated: February 4, 1997.
Philip Lader,
Administrator.
[FR Doc. 97-3280 Filed 2-10-97; 8:45 am]
BILLING CODE 8025-01-P