Investigations and examinations; power to subpena and take oaths and affirmations; aid of courts; examiners; reports

15 U.S.C. § 687b

• Title: 15 — Commerce and Trade
• Chapter: SUBCHAPTER III—INVESTMENT DIVISION PROGRAMS
• Part: A

Text

(a) Investigation of violations
The Administration may make such investigations as it deems necessary to determine whether a licensee 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 chapter, or of any rule or regulation under this chapter, or of any order issued under this chapter. The Administration shall permit any person to file with it a statement in writing, under oath or otherwise as the Administration shall determine, as to all the facts and circumstances concerning the matter to be investigated. For the purpose of any investigation, the Administration is empowered to administer oaths and affirmations, subpena witnesses, compel their attendance, take evidence, and require the production of any books, papers, and documents which are relevant to the inquiry. Such attendance of witnesses and the production of any such records may be required from any place in the United States. In case of contumacy by, or refusal to obey a subpena issued to, any person, including a licensee, the Administration may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, papers, and documents; and such court may issue an order requiring such person to appear before the Administration, there to produce records, if so ordered, or to give testimony touching the matter under investigation. Any failure to obey such order of the court may be punished by such court as a contempt thereof. All process in any such case may be served in the judicial district whereof such person is an inhabitant or wherever he may be found.
(b) Examinations and reports
Each small business investment company shall be subject to examinations made by direction of the Investment Division of the Administration, which may be conducted with the assistance of a private sector entity that has both the qualifications to conduct and expertise in conducting such examinations, and the cost of such examinations, including the compensation of the examiners, may in the discretion of the Administration be assessed against the company examined and when so assessed shall be paid by such company. Fees collected under this subsection shall be deposited in the account for salaries and expenses of the Administration, and are authorized to be appropriated solely to cover the costs of examinations and other program oversight activities. Every such company shall make such reports to the Administration at such times and in such form as the Administration may require; except that the Administration is authorized to exempt from making such reports any such company which is registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.] to the extent necessary to avoid duplication in reporting requirements.
(c) Examinations of small business investment companies
Each small business investment company shall be examined at least every two years in such detail so as to determine whether or not—
(1) it has engaged solely in lawful activities and those contemplated by this subchapter;
(2) it has engaged in prohibited conflicts of interest;
(3) it has acquired or exercised illegal control of an assisted small business;
(4) it has made investments in small businesses for not less than 1 year;
(5) it has invested more than 20 per centum of its capital in any individual small business, if such restriction is applicable;
(6) it has engaged in relending, foreign investments, or passive investments; or
(7) it has charged an interest rate in excess of the maximum permitted by law:
Provided, That the Administration may waive the examination (A) for up to one additional year if, in its discretion, it determines such a delay would be appropriate, based upon the amount of debentures being issued by the company and its repayment record, the prior operating experience of the company, the contents and results of the last examination and the management expertise of the company, or (B) if it is a company whose operations have been suspended while the company is involved in litigation or is in receivership.
(d) Valuations
Each licensee shall submit to the Administrator a written valuation of the loans and investments of the licensee not less often than semiannually or otherwise upon the request of the Administrator, except that any licensee with no leverage outstanding shall submit such valuations annually, unless the Administrator determines otherwise.
Not later than 30 days after the end of a fiscal quarter of a licensee during which a material adverse change in the aggregate valuation of the loans and investments or operations of the licensee occurs, the licensee shall notify the Administrator in writing of the nature and extent of that change.
Not less than once during each fiscal year, each licensee shall submit to the Administrator the financial statements of the licensee, audited by an independent certified public accountant approved by the Administrator.
Each audit conducted under clause (i) shall include—
(I) a review of the procedures and documentation used by the licensee in preparing the valuations required by this section; and
(II) a statement by the independent certified public accountant that such valuations were prepared in conformity with the valuation criteria applicable to the licensee established in accordance with paragraph (2).
Each valuation submitted under this subsection shall be prepared by the licensee in accordance with valuation criteria, which shall—
(A) be established or approved by the Administrator; and
(B) include appropriate safeguards to ensure that the noncash assets of a licensee are not overvalued.

History

(Pub. L. 85–699, title III, §310, as added Pub. L. 87–341, §9, Oct. 3, 1961, 75 Stat. 755; amended Pub. L. 89–779, §5, Nov. 6, 1966, 80 Stat. 1360; Pub. L. 90–104, title II, §208, Oct. 11, 1967, 81 Stat. 271; Pub. L. 100–590, title I, §104, Nov. 3, 1988, 102 Stat. 2992; Pub. L. 102–366, title IV, §§406(b), 407(a), 408(b), Sept. 4, 1992, 106 Stat. 1016; Pub. L. 104–208, div. D, title II, §208(f), (h)(1)(C), Sept. 30, 1996, 110 Stat. 3009–745, 3009–747; Pub. L. 105–135, title II, §216, Dec. 2, 1997, 111 Stat. 2603; Pub. L. 106–554, §1(a)(9) [title IV, §406], Dec. 21, 2000, 114 Stat. 2763, 2763A–691.)

Editorial Notes

Editorial Notes

References in Text
For definition of "this chapter", referred to in subsec. (a), see References in Text note set out under section 661 of this title.
The Investment Company Act of 1940, referred to in subsec. (b), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, which is classified generally to subchapter I (§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.

Amendments
2000—Subsec. (c)(4). Pub. L. 106–554 substituted "1 year" for "five years".
1997—Subsec. (b). Pub. L. 105–135 inserted after first sentence "Fees collected under this subsection shall be deposited in the account for salaries and expenses of the Administration, and are authorized to be appropriated solely to cover the costs of examinations and other program oversight activities."
1996—Subsec. (b). Pub. L. 104–208, §208(f)(1), inserted "which may be conducted with the assistance of a private sector entity that has both the qualifications to conduct and expertise in conducting such examinations," after "Investment Division of the Administration," in first sentence.
Subsec. (c)(4). Pub. L. 104–208, §208(h)(1)(C), struck out "not less than four years in the case of section 301(d) licensees and in all other cases," after "small businesses for".
Subsec. (d). Pub. L. 104–208, §208(f)(2), inserted heading and amended text of subsec. (d) generally. Prior to amendment, text read as follows: "Each small business investment company shall adopt written guidelines for determination of the value of investments made by such company. The board of directors of corporations and the general partners of partnerships shall have the sole responsibility for making a good faith determination of the fair market value of the investments made by such company. Determinations shall be made and reported to the Administration not less than semiannually or at more frequent intervals as the Administration determines appropriate: Provided, That any company which does not have outstanding financial assistance under the provisions of this subchapter shall be required to make such determinations and reports to the Administration annually, unless the Administration, in its discretion, determines otherwise."
1992—Subsec. (b). Pub. L. 102–366, §407(a), substituted "Investment Division of" for "Administration by examiners selected or approved by".
Subsec. (c)(5). Pub. L. 102–366, §408(b), inserted before semicolon at end ", if such restriction is applicable".
Subsec. (d). Pub. L. 102–366, §406(b), added subsec. (d).
1988—Subsec. (b). Pub. L. 100–590 struck out second sentence, which read as follows: "Each such company shall be examined at least once each year, except that the Administrator may waive examination in the case of a company whose operations have been suspended by reason of the fact that the company is involved in litigation or is in receivership."
Subsec. (c). Pub. L. 100–590 added subsec. (c).
1967—Subsec. (b). Pub. L. 90–104 required at least annual examination of small business investment companies but provided for waiver of examination of a company whose operations have been suspended because the company is involved in litigation or is in receivership.
1966—Pub. L. 89–779 designated existing provisions as subsec. (a) and added subsec. (b).

Statutory Notes and Related Subsidiaries

Effective Date of 1997 Amendment
Amendment by Pub. L. 105–135 effective Oct. 1, 1997, see section 3 of Pub. L. 105–135, set out as a note under section 631 of this title.

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.

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 Resources
Pub. L. 102–366, title IV, §407(b), Sept. 4, 1992, 106 Stat. 1016, provided that: "Effective October 1, 1992, the personnel, assets, liabilities, contracts, property, records, and unexpended balances of appropriations, authorizations, and other funds employed, held, used, arising from, available or to be made available, which are related to the examination function provided by section 310 of the Small Business Investment Act of 1958 [15 U.S.C. 687b] shall be transferred by the Inspector General of the Small Business Administration to the Investment Division of the Small Business Administration."