(The bill and reports referred to follow :)

87TH CONGRESS

18T SESSION

S. 902

IN THE SENATE OF THE UNITED STATES

FEBRUARY 9, 1961

Mr. SPARKMAN (for himself, Mr. LONG of Louisiana, Mr. HUMPHREY, Mr. MORSE, Mr. BIBLE, Mr. RANDOLPH, Mr. ENGLE, Mr. BARTLETT, Mr. WILLIAMS of New Jersey, Mr. Moss, Mr. SALTONSTALL, Mr. JAVITS, Mr. COOPER, and Mr. SMATHERS) introduced the following bill; which was read twice and referred to the Committee on Banking and Currency

A BILL

To amend the Small Business Investment Act of 1958, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the "Small Business Invest4 ment Act Amendments of 1961".

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SEC. 2. As used in this Act, unless otherwise indicated, 6 references to "the Act" are to the Small Business Investment

7 Act of 1958, as amended.

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SEC. 3. Section 302 (a) of the Act is amended by de

9 leting the second sentence and inserting in lieu thereof:

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1 "In order to facilitate the formation and growth of small 2 business investment companies, the Administration is hereby 3 authorized, notwithstanding any other provisions of law,

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to purchase the debentures of any such company in an

amount not to exceed the lesser of $1,000,000 or the amount 6 of the capital and surplus of the small business investment

8 SEC. 4. Section 303 (b) of the Act is amended by 9 deleting the words "50 per centum" and inserting, in lieu 10 thereof, the words "100 per centum.'

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SEC. 5. Section 304 of the Act is amended by adding

the following subsection:

"(d) Equity capital provided to incorporated small 14 business concerns under this section may be provided di

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rectly or in cooperation with other investors, public or private, incorporated or unincorporated, through agreements to participate on an immediate or deferred basis."

SEC. 6. Section 305 (b) is amended by deleting the

phrase "other lending institutions" and inserting in lieu

thereof, "other lenders, public or private, incorporated or unincorporated, including the Small Business Administra

tion."

SEC. 7. Section 308 (a) of the Act is amended to read, 24 "Wherever practicable the operations of a small business 25 investment company, including the generation of business,

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may be undertaken in cooperation with banks or other in2 vestors or lenders, public or private, incorporated or unin3 corporated, and any servicing or initial investigation required 4 for loans or acquisitions of securities by the company under 5 the provisions of this Act may be handled through such 6 banks or other investors or lenders on a fee basis. Any 7 small business investment company may receive fees for 8 services rendered to such banks or other investors or 9 lenders."

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SEC. 8. The last sentence of section 308 (b) of the Act 11 is amended by striking "guaranteed as to principal and in12 terest by," and inserting in lieu thereof "insured by in

14 SEC. 9. Nothing contained in this Act, the Investment 15 Company Act of 1940, or any other Act shall be construed

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as preventing any small business investment company from 17 issuing "restricted stock options" qualifying under Internal 18 Revenue Code (1954) section 421 (26 U.S.C. 421), as 19 amended, and such "restricted stock options" are hereby 20 specifically authorized.

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SEC. 10. Section 502 of the Act is amended by striking 22 subsection 6 thereof.

A BILL To amend the Small Business Investment Act of 1958, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Small Business Investment Act Amendments of 1961."

SEC. 2. As used in this Act, unless otherwise indicated, references to "the Act" are to the Small Business Investment Act of 1958, as amended.

SEC. 3. Section 103 of the Act is amended

(1) by striking out paragraph (3) and inserting in lieu thereof the following:

"(3) The terms 'small business investment company', 'company' and 'licensee' mean a small business investment company organized and chartered under State law for the sole purpose of performing the functions and conducting the activities contemplated under Title III and which has the approval of the Administrator, pursuant to section 309 of this Act, to operate under the provisions of this Act.”; and

(2) by adding the following paragraph:

"(7) The term ‘license' means a permit granted by the Administrator to operate under the provisions of this Act.'

SEC. 4. Section 202 (b) of the Act is amended to read, "There are hereby authorized to be appropriated such sums as may be necessary and appropriate for the carrying out of the provisions and purposes of this Act."

SEC. 5. Section 302(a) of the Act is amended by deleting the second sentence and inserting in lieu thereof: "In order to facilitate the formation and growth of small business investment companies, the Administration is hereby authorized, notwithstanding any other provisions of law, to purchase the debentures of any such company in an amount not to exceed the lesser of $500,000 or the amount of the capital and surplus of the small business investment company from other sources."

SEC. 6. Section 303 (b) of the Act is amended by adding the following: "No loan under this subsection shall be made if the total amount outstanding and committed to the borrower under this subsection would exceed $5,000,000."

SEC. 7. Section 304 of the Act is amended by adding the following subsection: "(d) Equity capital provided to incorporated small business concerns under this section may be provided directly or in cooperation with other investors, incorporated or unincorporated, through agreements to participate on an immediate basis."

SEC. 8. Section 305(b) is amended by deleting the phrase "other lending institutions" and inserting in lieu thereof, "other lenders, incorporated or unincorporated."

SEC. 9. Section 308 of the Act is amended

(1) by amending subsection (a) to read, "Wherever practicable, the operations of a small business investment company, including the generation of business, may be undertaken in cooperation with banks or other investors or lenders, incorporated or unincorporated, and any servicing or initial investigation required for loans or acquisitions of securities by the company under the provisions of this Act may be handled through such banks or other investors or lenders on a fee basis. Any small business investment company may receive fees for services rendered to such banks or other investors and lenders."; and

(2) by striking out subsections (d) and (e) and by redesignating subsections (f) and (g) as (d) and (e), respectively.

SEC. 10. Title III of the Act is amended by adding the following:

"ENFORCEMENT PROCEDURES

"SEC. 310. (a) A license may be revoked by the Administration—

"(1) for false statements knowingly made in any written statement required under this Title, or under any regulation issued thereunder by the Administration, for the purpose of obtaining the license;

"(2) because of facts coming to the attention of the Administration which existed prior to the time the license was issued and, if known at that time, would have justified the Administration in refusing to issue the license;

“(3) for willful or repeated violation of, or willful or repeated failure to observe, any provision of this Act;

"(4) for willful or repeated violation of, or willful or repeated failure to observe, any rule or regulation of the Administration authorized by this Act; or

"(5) for violation of, or failure to observe, any cease and desist order issued by the Administration under this section.

"(b) Where a licensee has not complied with any one or more of the provisions of this Act, or of the regulations issued thereunder by the Administration, the Administration may order such licensee to cease and desist from such action or failure to act; and the Administration may further order such licensee to take such action or to refrain from such action as the Administration deems necessary to ensure compliance with the Act and the regulations. The Administration may also suspend the license of such licensee until the licensee has complied with such order.

"(c) Before revoking a license pursuant to subsection (a) of this section, or issuing a cease and desist order or suspending a license pursuant to subsection (b) of this section, the Administration shall serve upon the licensee involved an order to show cause why an order revoking the license or a cease and desist order or an order suspending the license should not be issued. Any such order to show cause shall contain a statement of the matters of fact and law asserted by the Administration, the legal authority and jurisdiction under which a hearing is to be held and shall inform the licensee that a hearing will be held before the Administration at a time and place stated in the order. If after hearing, or a waiver thereof, the Administration determines that an order revoking the license or a cease and desist order or an order suspending the license should issue, it shall issue such order, which must include a statement of the findings of the Administration and the grounds and reasons therefor and specify the effective date of the order, and shall cause the same to be served on said licensee.

"(d) The Administration shall have the power to require by subpoena the attendance and testimony of witnesses and the production of all books, papers, and documents relating to the hearing from any place in the United States. Witnesses summoned before the Administration shall be paid by the party at whose instance they were called the same fees and mileage that are paid witnesses in the courts of the United States. In case of disobedience to a subpoena, the Administration, or any party to the proceeding before the Administration, may invoke the aid of any court of the United States in requiring attendance and testimony of witnesses and the production of books, papers, and documents.

"(e) An order issued by the Administration under this section shall be final and conclusive unless within 30 days after the service thereof the licensee appeals to the United States Court of Appeals for the circuit in which such licensee has its principal place of business by filing with the clerk of such court a petition praying that the Administration's order be set aside or modified in the manner stated in the petition. After the expiration of said 30 days, a petition may be filed only by leave of court on a showing of reasonable grounds for failure to file the petition theretofor. The clerk of the court shall immediately cause a copy of the petition to be delivered to the Administration, and the Administration shall thereupon certify and file in the court a transcript of the record, if any, upon which the order complained of was entered. If before such record is filed, the Administration amends or sets aside its order, in whole or in part, the petitioner may amend the petition within such time as the court may determine, on notice to the Administration. The filing of a petition for review shall not of itself stay or suspend the operation of the order of the Administration, but the court of appeals in its discretion may restrain or suspend, in whole or in part, the operation of the order pending the final hearing and determination of the petition. The proceedings in such cases in the court of appeals shall be made a preferred cause and shall be expedited in every way. The court may affirm, modify, or set aside the order of the Administration. If the court determines that the just and proper disposition of the case requires the taking of additional evidence, the court shall order the Administration to reopen the hearing for the taking of such evidence, in such manner and upon such terms and conditions as the court may deem proper. The Administration may modify its findings as to the facts, or make new findings, by reason of the additional evidence so taken, and it shall file its modified or new findings and amendments, if