[Federal Register Volume 85, Number 110 (Monday, June 8, 2020)]
[Notices]
[Pages 35159-35160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12339]


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DEPARTMENT OF THE TREASURY


Community Development Financial Institutions Fund; Request for 
Information

Announcement Type:  Notice and request for information.

SUMMARY: The Community Development Financial Institutions Fund (CDFI 
Fund), Department of the Treasury, requests comments from the public to 
gain a better understanding of how Community Development Financial 
Institutions (CDFIs) treat equity investments in their organizations to 
help inform policy decisions regarding the CDFI Fund's management and 
oversight of its investment portfolio.

DATES: Written comments must be received on or before July 8, 2020 to 
be assured of consideration.

ADDRESSES: Submit your comments via email to Tanya McInnis, 
Certification, Compliance Monitoring and Evaluation (CCME) Program 
Manager, CDFI Fund, at [email protected].

FOR FURTHER INFORMATION CONTACT:  Tanya McInnis, CCME Program Manager, 
CDFI Fund, 1500 Pennsylvania Avenue NW, Washington, DC 20220 or email 
to [email protected].

SUPPLEMENTARY INFORMATION:  Through the Community Development Financial 
Institutions Program (CDFI Program) and Native American CDFI Assistance 
Program (NACA Program), the CDFI Fund provides Financial Assistance 
(FA) awards in variety of forms, including equity investments. The CDFI 
Fund is working to provide more context and clarity regarding policies 
and procedures related to equity investments it provides in two 
specific areas: Compliance remedies and cure periods for CDFIs 
noncompliant with the CDFI Fund's existing control restrictions and the 
adoption of an exit strategy for new equity investment awards.
    Control Restrictions: By statute, the CDFI Fund may not own more 
than fifty percent (50%) of a CDFI's equity, nor may it otherwise 
control a CDFI. Periodically, CDFIs have taken actions with respect to 
equity investments in their organization that have resulted in the CDFI 
Fund owning more than fifty

[[Page 35160]]

percent (50%) of a CDFI's equity, or otherwise controlling a CDFI. The 
CDFI Fund is interested in learning from the industry their perspective 
on methods CDFIs may be afforded to cure noncompliance with this 
requirement. Options under consideration include requiring a Recipient 
to repurchase or redeem the CDFI Fund's equity investment to decrease 
CDFI Fund ownership to fifty percent (50%) or below; permitting a 
Recipient to issue more shares to dilute the CDFI Fund's equity 
investment percentage to the fifty percent (50%) threshold or below; or 
a combination thereof.
    Equity Investment Exit Strategy: The CDFI Fund has an internal 
investment policy with language outlining a practice to conduct a 
yearly review of the existing investments in its portfolio and to 
provide recommendations to Senior Management of possible next steps, if 
any. The current policy does not provide specific plans of action or 
indicia for exiting equity investments.

I. General Questions on CDFI Equity and Related Policies

    1. How does your CDFI use equity investments from the CDFI Fund and 
other organizations as part of your lending and or business model?
    2. What are the risk/factors your organization takes into account 
when developing an equity strategy (e.g., increasing or decreasing the 
amount of equity)? The CDFI Fund is trying to understand the impact/
risks/benefits of mandating a CDFI repurchase or redeem CDFI Fund 
equity investments at a specific future date.
    3. How does your organization determine the value of equity shares 
on its balance sheet?
    4. What is your policy for redeeming or repurchasing equity from 
shareholders?
    5. What is your preferred schedule for redeeming or repurchasing 
equity from shareholders? Is your schedule to return equity to 
shareholders based on percentages of shares or specific deadlines?

II. CDFI Fund Control Restriction

    1. The Riegle Act requires that the CDFI Fund may not own more than 
fifty percent (50%) equity in a CDFI.
    a. How frequently does your organization assess the percent of 
equity controlled by all shareholders, including the CDFI Fund?
    b. Are there specific policies and procedures CDFIs should have in 
place for ensuring that the CDFI Fund does not own more than fifty 
percent (50%) of the organization's equity? If so, what are they?
    2. A possible solution for reducing the percentage of CDFI Fund 
ownership to below fifty percent (50%) would be for an organization to 
issue more equity. What other ways can CDFIs reduce the percentage of 
CDFI Fund ownership?
    3. What factors should the CDFI Fund consider if it were to require 
CDFIs to repurchase or redeem shares versus increasing the number of 
shares?
    4. Are there any other factors the CDFI Fund should consider when 
evaluating compliance with the CDFI Fund Control restriction?

III. CDFI Fund Investment Exit Strategy

    1. In general, what impact does repurchasing or redeeming CDFI Fund 
equity shares have on the mission and business model of a CDFI?
    2. What are the primary considerations the CDFI Fund should 
consider when developing an equity strategy including an exit strategy?
    3. What is a typical or reasonable exit strategy for equity 
investments in CDFIs? Is there a minimum amount of time the CDFI Fund 
should hold an equity investment in a CDFI?
    4. Are there any other factors the CDFI Fund should consider when 
developing an Investment Exit Strategy?

    Authority:  12 U.S.C. 4701 et seq.; 12 CFR 1805.

Jodie L. Harris,
Director, Community Development Financial Institutions Fund.
[FR Doc. 2020-12339 Filed 6-5-20; 8:45 am]
BILLING CODE 4810-70-P