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[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 15USC687]

 
                      TITLE 15--COMMERCE AND TRADE
 
             CHAPTER 14B--SMALL BUSINESS INVESTMENT PROGRAM
 
              SUBCHAPTER III--INVESTMENT DIVISION PROGRAMS
 
               Part A--Small Business Investment Companies
 
Sec. 687. Operation and regulation of companies


(a) Cooperation with banks and other financial institutions

    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 chapter 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 and other investors and 
lenders.

(b) Use of advisory services; depository or fiscal agents; investment of 
        funds

    Each small business investment company may make use, wherever 
practicable, of the advisory services of the Federal Reserve System and 
of the Department of Commerce which are available for and useful to 
industrial and commercial businesses, and may provide consulting and 
advisory services on a fee basis and have on its staff persons competent 
to provide such services. Any Federal Reserve bank is authorized to act 
as a depository or fiscal agent for any company operating under 
provisions of this chapter. Such companies with outstanding financings 
are authorized to invest funds not reasonably needed for their 
operations in direct obligations of, or obligations guaranteed as to 
principal and interest by, the United States, or in certificates of 
deposit maturing within one year or less, issued by any institution the 
accounts of which are insured by the Federal Deposit Insurance 
Corporation or the Federal Savings and Loan Insurance Corporation, or in 
savings accounts of such institutions.

(c) Rules and regulations

    The Administration is authorized to prescribe regulations governing 
the operations of small business investment companies, and to carry out 
the provisions of this chapter, in accordance with the purposes of this 
chapter.

(d) Forfeiture of rights, privileges, and franchises; jurisdiction

    Should any small business investment company violate or fail to 
comply with any of the provisions of this chapter or of regulations 
prescribed hereunder, all of its rights, privileges, and franchises 
derived therefrom may thereby be forfeited. Before any such company 
shall be declared dissolved, or its rights, privileges, and franchises 
forfeited, any noncompliance with or violation of this chapter shall be 
determined and adjudged by a court of the United States of competent 
jurisdiction in a suit 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 such company is located. Any 
such suit shall be brought by the United States at the instance of the 
Administration or the Attorney General.

(e) Liability of United States

    Except as expressly provided otherwise in this chapter, nothing in 
this chapter or in any other provision of law shall be deemed to impose 
any liability on the United States with respect to any obligation 
entered into, or stocks issued, or commitments made, by any company 
operating under the provisions of this chapter.

(f) Performance of functions, powers, and duties by Administration and 
        Administrator

    In the performance of, and with respect to the functions, powers, 
and duties vested by this chapter, the Administrator and the 
Administration shall (in addition to any authority otherwise vested by 
this chapter) have the functions, powers, and duties set forth in the 
Small Business Act [15 U.S.C. 631 et seq.], and the provisions of 
sections 13 and 16 of that Act [15 U.S.C. 642, 645], insofar as 
applicable, are extended to the functions of the Administrator and the 
Administration under this chapter.

(g) Annual report on Small Business Investment activities

    (1) The Administration shall include in its annual report, made 
pursuant to section 10(a) of the Small Business Act [15 U.S.C. 639(a)], 
a full and detailed account of its operations under this chapter. Such 
report shall set forth the amount of losses sustained by the Government 
as a result of such operations during the preceding fiscal year, 
together with an estimate of the total losses which the Government can 
reasonably expect to incur as a result of such operations during the 
then current fiscal year.
    (2) In its annual report for the year ending December 31, 1967, and 
in each succeeding annual report made pursuant to section 10(a) of the 
Small Business Act [15 U.S.C. 639(a)], the Administration shall include 
full and detailed accounts relative to the following matters:
        (A) The Administration's recommendations with respect to the 
    feasibility and organization of a small business capital bank to 
    encourage private financing of small business investment companies 
    to replace Government financing of such companies.
        (B) The Administration's plans to insure the provision of small 
    business investment company financing to all areas of the country 
    and to all eligible small business concerns including steps taken to 
    accomplish same.
        (C) Steps taken by the Administration to maximize recoupment of 
    Government funds incident to the inauguration and administration of 
    the small business investment company program and to insure 
    compliance with statutory and regulatory standards relating thereto.
        (D) An accounting by the Office of Management and Budget with 
    respect to Federal expenditures to business by executive agencies, 
    specifying the proportion of said expenditures going to business 
    concerns falling above and below small business size standards 
    applicable to small business investment companies.
        (E) An accounting by the Treasury Department with respect to tax 
    revenues accruing to the Government from business concerns, 
    incorporated and unincorporated, specifying the source of such 
    revenues by concerns falling above and below the small business size 
    standards applicable to small business investment companies.
        (F) An accounting by the Treasury Department with respect to 
    both tax losses and increased tax revenues related to small business 
    investment company financing of both individual and corporate 
    business taxpayers.
        (G) Recommendations of the Treasury Department with respect to 
    additional tax incentives to improve and facilitate the operations 
    of small business investment companies and to encourage the use of 
    their financing facilities by eligible small business concerns.
        (H) A report from the Securities and Exchange Commission 
    enumerating actions undertaken by that agency to simplify and 
    minimize the regulatory requirements governing small business 
    investment companies under the Federal securities laws and to 
    eliminate overlapping regulation and jurisdiction as between the 
    Securities and Exchange Commission, the Administration, and other 
    agencies of the executive branch.
        (I) A report from the Securities and Exchange Commission with 
    respect to actions taken to facilitate and stabilize the access of 
    small business concerns to the securities markets.
        (J) Actions undertaken by the Securities and Exchange Commission 
    to simplify compliance by small business investment companies with 
    the requirements of the Investment Company Act of 1940 [15 U.S.C. 
    80a-1 et seq.] and to facilitate the election to be taxed as 
    regulated investment companies pursuant to section 851 of title 26.

    (3) In its annual report for the year ending on December 31, 1993, 
and in each succeeding annual report made pursuant to section 10(a) of 
the Small Business Act [15 U.S.C. 639(a)], the Administration shall 
include a full and detailed description or account relating to--
        (A) the number of small business investment companies the 
    Administration licensed, the number of licensees that have been 
    placed in liquidation, and the number of licensees that have 
    surrendered their licenses in the previous year, identifying the 
    amount of government leverage each has received and the type of 
    leverage instruments each has used;
        (B) the amount of government leverage that each licensee 
    received in the previous year and the types of leverage instruments 
    each licensee used;
        (C) for each type of financing instrument, the sizes, geographic 
    locations, and other characteristics of the small business 
    investment companies using them, including the extent to which the 
    investment companies have used the leverage from each instrument to 
    make small business loans, equity investments, or both; and
        (D) the frequency with which each type of investment instrument 
    has been used in the current year and a comparison of the current 
    year with previous years.

(h) Certifications of eligibility

             (1) Certification by small business concern

        Prior to receiving financial assistance from a company licensed 
    pursuant to section 681 of this title, a small business concern 
    shall certify in writing that it meets the eligibility requirements 
    of the Small Business Investment Company Program or the Specialized 
    Small Business Investment Company Program, as applicable.

                    (2) Certification by company

        Prior to providing financial assistance to a small business 
    concern under this chapter, a company licensed pursuant to section 
    681 of this title shall certify in writing that it has reviewed the 
    application for assistance of the small business concern and that 
    all documentation and other information supports the eligibility of 
    the applicant.

                   (3) Retention of certifications

        Certificates made pursuant to paragraphs (1) and (2) shall be 
    retained by the company licensed pursuant to section 681 of this 
    title for the duration of the financial assistance.

(i) Interest rates

    (1) The purpose of this subsection is to facilitate the orderly and 
necessary flow of long-term loans and equity funds from small business 
investment companies to small business concerns.
    (2) In the case of a business loan, the small business investment 
company making such loan may charge interest on such loan at a rate 
which does not exceed the maximum rate prescribed by regulation by the 
Administration for loans made by any licensee (determined without regard 
to any State rate incorporated by such regulation). In this paragraph, 
the term ``interest'' includes only the maximum mandatory sum, expressed 
in dollars or as a percentage rate, that is payable with respect to the 
business loan amount received by the small business concern, and does 
not include the value, if any, of contingent obligations, including 
warrants, royalty, or conversion rights, granting the small business 
investment company an ownership interest in the equity or increased 
future revenue of the small business concern receiving the business 
loan.
    (3) A State law or constitutional provision shall be preempted for 
purposes of paragraph (2) with respect to any loan if such loan is made 
before the date, on or after April 1, 1980, on which such State adopts a 
law or certifies that the voters of such State have voted in favor of 
any provision, constitutional or otherwise, which states explicitly and 
by its terms that such State does not want the provisions of this 
subsection to apply with respect to loans made in such State, except 
that such State law or constitutional or other provision shall be 
preempted in the case of a loan made, on or after the date on which such 
law is adopted or such certification is made, pursuant to a commitment 
to make such loan which was entered into on or after April 1, 1980, and 
prior to the date on which such law is adopted or such certification is 
made.
    (4)(A) If the maximum rate of interest authorized under paragraph 
(2) on any loan made by a small business investment company exceeds the 
rate which would be authorized by applicable State law if such State law 
were not preempted for purposes of this subsection, the charging of 
interest at any rate in excess of the rate authorized by paragraph (2) 
shall be deemed a forfeiture of the greater of (i) all interest which 
the loan carries with it, or (ii) all interest which has been agreed to 
be paid thereon.
    (B) In the case of any loan with respect to which there is a 
forfeiture of interest under subparagraph (A), the person who paid the 
interest may recover from a small business investment company making 
such loan an amount equal to twice the amount of the interest paid on 
such loan. Such interest may be recovered in a civil action commenced in 
a court of appropriate jurisdiction not later than two years after the 
most recent payment of interest.

(Pub. L. 85-699, title III, Sec. 308, Aug. 21, 1958, 72 Stat. 694; Pub. 
L. 87-341, Secs. 8, 11(c)(d), Oct. 3, 1961, 75 Stat. 753, 756; Pub. L. 
88-273, Sec. 5, Feb. 28, 1964, 78 Stat. 147; Pub. L. 89-779, Sec. 3, 
Nov. 6, 1966, 80 Stat. 1359; Pub. L. 90-104, title II, Sec. 210, Oct. 
11, 1967, 81 Stat. 271; 1970 Reorg. Plan No. 2, Sec. 102, eff. July 1, 
1970, 35 F.R. 7959, 84 Stat. 2085; Pub. L. 93-501, title II, Sec. 204, 
Oct. 29, 1974, 88 Stat. 1559; Pub. L. 95-507, title I, Sec. 102, Oct. 
24, 1978, 92 Stat. 1757; Pub. L. 96-104, title I, Sec. 104, Nov. 5, 
1979, 93 Stat. 790; Pub. L. 96-161, title II, Sec. 204, Dec. 28, 1979, 
93 Stat. 1236; Pub. L. 96-221, title V, Secs. 524, 529, Mar. 31, 1980, 
94 Stat. 166, 168; Pub. L. 99-226, Sec. 1, Dec. 28, 1985, 99 Stat. 1744; 
Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 102-366, 
title IV, Secs. 408(c), 417(a), Sept. 4, 1992, 106 Stat. 1016, 1019; 
Pub. L. 103-403, title II, Sec. 214, Oct. 22, 1994, 108 Stat. 4184; Pub. 
L. 104-208, div. D, title II, Sec. 208(e), (h)(1)(B), Sept. 30, 1996, 
110 Stat. 3009-745, 3009-747; Pub. L. 106-9, Sec. 2(a), Apr. 5, 1999, 
113 Stat. 17.)

                       References in Text

    For definition of ``this chapter'', referred to in subsecs. (a) to 
(h), see References in Text note set out under section 661 of this 
title.
    The Small Business Act, referred to in subsec. (f), is Pub. L. 85-
536, July 18, 1958, 72 Stat. 384, as amended, which is classified 
generally to chapter 14A (Sec. 631 et seq.) of this title. For complete 
classification of this Act to the Code, see Short Title note set out 
under section 631 of this title and Tables.
    The Investment Company Act of 1940, referred to in subsec. 
(g)(2)(J), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as 
amended, which is classified generally to subchapter I (Sec. 80a-1 et 
seq.) of chapter 2D of this title. For complete classification of this 
Act to the Code, see section 80a-51 of this title and Tables.

                          Codification

    Section 204 of Pub. L. 96-161, cited as a credit to this section, 
was repealed by section 529 of Pub. L. 96-221 effective at the close of 
Mar. 31, 1980. The amendment of this section by that repealed provision, 
described in the 1979 Amendment note set out under this section, shall 
continue to apply to any loan made, any deposit made, or any obligation 
issued in any State during any period when the amendment was in effect 
in such State.
    Section 104 of Pub. L. 96-104, cited as a credit to this section, 
was repealed by section 212 of Pub. L. 96-161, effective at the close of 
Dec. 27, 1979. The amendment of this section by that repealed provision, 
described in the 1979 Amendment note set out under this section, shall 
continue in effect for limited purposes pursuant to section 212 of Pub. 
L. 96-161. See Saving Provisions note, describing the provisions of 
section 212 of Pub. L. 96-161, set out under section 85 of Title 12, 
Banks and Banking.
    Section 204 of Pub. L. 93-501, cited as a credit to this section, 
was repealed by Pub. L. 96-104, Sec. 1, Nov. 5, 1979, 93 Stat. 789. The 
amendment of this section by that repealed provision, described in the 
1974 Amendment note, shall continue in effect for limited purposes 
pursuant to section 1 of Pub. L. 96-104. See Savings Provisions note, 
describing the provisions of section 1 of Pub. L. 96-104, set out under 
section 85 of Title 12, Banks and Banking.


                               Amendments

    1999--Subsec. (i)(2). Pub. L. 106-9 inserted at end: ``In this 
paragraph, the term `interest' includes only the maximum mandatory sum, 
expressed in dollars or as a percentage rate, that is payable with 
respect to the business loan amount received by the small business 
concern, and does not include the value, if any, of contingent 
obligations, including warrants, royalty, or conversion rights, granting 
the small business investment company an ownership interest in the 
equity or increased future revenue of the small business concern 
receiving the business loan.''
    1996--Subsec. (e). Pub. L. 104-208, Sec. 208(e), substituted 
``Except as expressly provided otherwise in this chapter, nothing'' for 
``Nothing''.
    Subsec. (h). Pub. L. 104-208, Sec. 208(h)(1)(B), substituted 
``section 681 of this title'' for ``subsection (c) or (d) of section 681 
of this title'' in pars. (1) to (3).
    1994--Subsec. (h). Pub. L. 103-403 added subsec. (h).
    1992--Subsec. (b). Pub. L. 102-366, Sec. 408(c), inserted ``with 
outstanding financings'' after ``Such companies'' in third sentence.
    Subsec. (g)(3). Pub. L. 102-366, Sec. 417(a), added par. (3).
    1986--Subsec. (g)(2)(J). Pub. L. 99-514 substituted ``Internal 
Revenue Code of 1986'' for ``Internal Revenue Code of 1954'', which for 
purposes of codification was translated as ``title 26'' thus requiring 
no change in text.
    1985--Subsec. (i)(2). Pub. L. 99-226, Sec. 1(a), substituted ``the 
maximum rate prescribed by regulation by the Administration for loans 
made by any licensee (determined without regard to any State rate 
incorporated by such regulation).'' for ``the lowest of the rates 
described in subparagraphs (A), (B), and (C)'' and struck out subpars. 
(A), (B), and (C) which described the rates.
    Subsec. (i)(3). Pub. L. 99-226, Sec. 1(b), substituted ``paragraph 
(2)'' for ``paragraph (2)(B)''.
    1980--Subsec. (h). Pub. L. 96-221, Sec. 529, repealed Pub. L. 96-104 
and title II of Pub. L. 96-161, resulting in the striking out of subsec. 
(h) which related to the limitation on interest rates, overcharges, 
forfeitures, and the recovery of interest payments. See subsec. (i) of 
this section for successor provisions. See also Codification and 1979 
Amendment notes under this section.
    Subsec. (i). Pub. L. 96-221, Sec. 524, added subsec. (i).
    1979--Subsec. (h). Pub. L. 96-161 reenacted subsec. (h) [as added by 
Pub. L. 96-104] with three substitutions of dates: in par. (3)(A) ``in 
the case of a State statute, July 1, 1980'' was substituted for ``July 
1, 1981'', in par. (3)(B) ``December 28, 1979'' was substituted for 
``November 5, 1979'', and in par. (3)(C) ``December 28, 1979'' was 
substituted for ``November 5, 1979''.
    Pub. L. 96-104 added subsec. (h). A prior subsec. (h), also relating 
to limitation on interest rates, overcharges, forfeitures, and the 
recovery of interest payments, was repealed by section 1 of Pub. L. 96-
104.
    1978--Subsec. (b). Pub. L. 95-507 inserted provisions authorizing 
small business investment companies to invest funds not reasonably 
needed for their operations in certificates of deposit maturing within 
one year or less issued by particular insured institutions and savings 
accounts of institutions insured by the Federal Deposit Insurance 
Corporation.
    1974--Subsec. (h). Pub. L. 93-501 added subsec. (h).
    1967--Subsec. (g). Pub. L. 90-104 designated existing provisions as 
par. (1) and added par. (2).
    1966--Subsec. (c). Pub. L. 89-779, Sec. 3(1), struck out provisions 
subjecting each small business investment company to examinations by 
examiners approved by the Administration and requiring the submission of 
reports by the companies. See section 687b(b) of this title.
    Subsecs. (f), (g). Pub. L. 89-799, Sec. 3(2), added subsecs. (f) and 
(g).
    1964--Subsec. (b). Pub. L. 88-273 authorized investment of funds in 
insured savings accounts (up to the amount of insurance) in institutions 
insured by the Federal Savings and Loan Insurance Corporation.
    1961--Subsec. (a). Pub. L. 87-341, Sec. 8, substituted ``investors 
or lenders'' for ``financial institutions'' wherever appearing, and 
provided that these investors or lenders can be either incorporated or 
unincorporated.
    Subsec. (b). Pub. L. 87-341, Sec. 11(c), substituted ``operating 
under the provisions of this chapter'' for ``organized under this 
chapter''.
    Subsec. (e). Pub. L. 87-341, Sec. 11(d), redesignated subsec. (g) as 
(e), substituted ``operating under the provisions of this chapter'' for 
``organized under this chapter'', and repealed former subsec. (e) which 
related to obtaining restraining orders against violators of this 
chapter.
    Subsec. (f). Pub. L. 87-341, Sec. 11(d), repealed subsec. (f) which 
permitted small business investment companies to extend their corporate 
existence for a term of not more than 30 years. See subsec. (a) of 
section 681 of this title.
    Subsec. (g). Pub. L. 87-341, Sec. 11(d), redesignated subsec. (g) as 
(e).


                    Effective Date of 1985 Amendment

    Section 2 of Pub. L. 99-226 provided that: ``This Act [amending this 
section] shall apply to maximum interest rates prescribed by the 
Administration on or after April 1, 1980.''


                    Effective Date of 1980 Amendment

    Section 529 of Pub. L. 96-221 provided that the amendment made by 
that section is effective at the close of Mar. 31, 1980.


                    Effective Date of 1979 Amendments

    Section 207 of Pub. L. 96-161, which provided that amendment by Pub. 
L. 96-161 was applicable to loans made in any State during the period 
beginning on Dec. 28, 1979, and ending on the earliest of (1) in the 
case of a State statute, July 1, 1980; (2) the date, after Dec. 28, 
1979, on which such State adopts a law stating in substance that such 
State does not want the amendment of this section made by Pub. L. 96-161 
to apply with respect to loans made in such State; or (3) the date on 
which such State certifies that the voters of such State, after Dec. 28, 
1979, have voted in favor of, or to retain, any law, provision of the 
constitution of such State, or amendment to the constitution of such 
State which prohibits the charging of interest at the rates provided in 
the amendment of this section by Pub. L. 96-161, was repealed by Pub. L. 
96-221, title V, Sec. 529, Mar. 31, 1980, 94 Stat. 168.
    Section 107 of Pub. L. 96-104, which provided that amendment by Pub. 
L. 96-104 was applicable to loans made by any State during the period 
beginning on Nov. 5, 1979, and ending on the earlier of July 1, 1981, or 
the date after Nov. 5, 1979, on which such State adopts a law stating in 
substance that such State does not want the amendment of this section to 
apply with respect to loans made in such State, or the date on which 
such State certifies that the voters of such State have voted in favor 
of, or to retain, any law, provision of the constitution of such State, 
or amendment of the constitution of such State, which prohibits the 
charging of interest at the rates provided in the amendment of this 
section, was repealed by Pub. L. 96-161, title II, Sec. 212, Dec. 28, 
1979, 93 Stat. 1239.


                    Effective Date of 1974 Amendment

    Section 206 of Pub. L. 93-501, which provided that amendment by Pub. 
L. 93-501 was applicable to loans made in any state after Oct. 29, 1974, 
but prior to the earlier of July 1, 1977 or the date of enactment by the 
state of a law prohibiting the charging of interest at the rates 
provided in the amendment of this section, was repealed by Pub. L. 96-
104, Sec. 1, Nov. 5, 1979, 93 Stat. 789.


                    Effective Date of 1967 Amendment

    Amendment by Pub. L. 90-104 effective 90 days after Oct. 11, 1967, 
see section 211 of Pub. L. 90-104, set out as a note under section 681 
of this title.


                            Savings Provision

    Section 529 of Pub. L. 96-221 provided in part that, notwithstanding 
the repeal of Pub. L. 96-104 and title II of Pub. L. 96-161, the 
provisions of subsec. (h) of this section [which had been added to this 
section by those repealed laws] shall continue to apply to any loan 
made, any deposit made, or any obligation issued to any State during any 
period when those provisions were in effect in such State.


 Effect of Small Business Equity Enhancement Act of 1992 on Securities 
                                  Laws

    Nothing in amendment by Pub. L. 102-366 to be construed to affect 
applicability of securities laws or to otherwise supersede or limit 
jurisdiction of Securities and Exchange Commission, see section 418 of 
Pub. L. 102-366, set out as a note under section 661 of this title.

                          Transfer of Functions

    Federal Savings and Loan Insurance Corporation abolished and 
functions transferred, see sections 401 to 406 of Pub. L. 101-73, set 
out as a note under section 1437 of Title 12, Banks and Banking.
    Bureau of the Budget designated as Office of Management and Budget 
and Offices of Director, Deputy Director, and Assistant Directors of 
Bureau of the Budget designated Director, Deputy Director, and Assistant 
Directors of Office of Management and Budget, respectively. Records, 
property, personnel, and funds of Bureau of the Budget transferred to 
Office of Management and Budget. See Part I of Reorganization Plan 2 of 
1970, set out in the Appendix to Title 5, Government Organization and 
Employees.


               Choice of Highest Applicable Interest Rate

    In any case in which one or more provisions of, or amendments made 
by, title V of Pub. L. 96-221, section 1735f-7a of Title 12, Banks and 
Banking, or any other provisions of law, including section 85 of Title 
12, apply with respect to the same loan, mortgage, credit sale, or 
advance, such loan, mortgage, credit sale, or advance may be made at the 
highest applicable rate, see section 528 of Pub. L. 96-221, set out as a 
note under section 1735f-7a of Title 12.


States Having Constitutional Provisions Regarding Maximum Interest Rates

    Section 213 of Pub. L. 96-161 provided that the provisions of title 
II of Pub. L. 96-161, which amended this section and repealed provisions 
which had formerly amended this section, to continue to apply until July 
1, 1981, in the case of any State having a constitutional provision 
regarding maximum interest rates.


                         Definition of ``State''

    For purposes of subsec. (i) of this section, the term ``State'' to 
include the several States, the Commonwealth of Puerto Rico, the 
District of Columbia, Guam, the Trust Territories of the Pacific 
Islands, the Northern Mariana Islands, and the Virgin Islands, see 
section 527 of Pub. L. 96-221, set out as a note under section 1735f-7a 
of Title 12, Banks and Banking.

                  Section Referred to in Other Sections

    This section is referred to in section 687h of this title.