Small Business Investment Company Program-Impact SBICs, 26874-26875 [2018-12031]

Download as PDF 26874 Federal Register / Vol. 83, No. 112 / Monday, June 11, 2018 / Proposed Rules Transactional Billing Rate Schedule established by NARA. (e) Other statutes specifically providing for fees. The fee schedule of this section does not apply to fees charged under any statute that specifically requires a component to set and collect fees for particular types of records. In instances where records responsive to a request are subject to a statutorily-based fee schedule program, the component will inform the requester of the contact information for that program. (f) Social Security Numbers and Tax Identification Numbers. Components may not require requesters to provide Social Security Numbers or Tax Identification Numbers in order to pay FOIA fees due. TABLE 1 OF APPENDIX TO SUBPART A—FOIA FEE SCHEDULE Type of request Type of charge Price Commercial Requesters ...... Duplication charges ............ $0.05 per page. When the component has to copy fragile records, the charge is $0.05 per page plus the copying time involved, which includes the actual hourly salary rate of the employee involved, plus 16% of the hourly salary rate. Actual hourly salary rate of employee involved, plus 16% of the hourly salary rate. Actual hourly salary rate of employee involved, plus 16% of the hourly salary rate. No charge for first 100 pages, then $0.05 per page. When the component has to copy fragile records, the charge is $0.05 per page plus the copying time involved, which includes the actual hourly salary rate of the employee involved, plus 16% of the hourly salary rate. Free. Free. No charge for first 100 pages, then $0.05 per page. When the component has to copy fragile records, the charge is $0.05 per page plus the copying time involved, which includes the actual hourly salary rate of the employee involved, plus 16% of the hourly salary rate. Free. Free. No charge for first 100 pages, then $0.05 per page. When the component has to copy fragile records, the charge is $0.05 per page plus the copying time involved, which includes the actual hourly salary rate of the employee involved, plus 16% of the hourly salary rate. No charge for first two (2) hours of search time, then actual hourly salary rate of employee involved, plus 16% of the hourly salary rate. Free. Educational or Non-Commercial Scientific Requesters. Representatives of the News Media. All Other Requesters ........... Search charges .................. Review charges .................. Duplication charges ............ Search charges .................. Review charges .................. Duplication charges ............ Search charges .................. Review charges .................. Duplication charges ............ Search charges .................. Review charges .................. Dated: May 25, 2018. Stephen L. Censky, Deputy Secretary. [FR Doc. 2018–11868 Filed 6–8–18; 8:45 am] BILLING CODE 3410–P SMALL BUSINESS ADMINISTRATION 13 CFR Part 107 RIN 3245–AG66 Small Business Investment Company Program—Impact SBICs U.S. Small Business Administration. ACTION: Proposed rule; withdrawal. AGENCY: The Small Business Administration (SBA) is withdrawing its proposed rule published on February 3, 2016. In the proposed rule, SBA would have defined a new class of small business investment companies (SBICs) that would seek to generate positive and measurable social impact in addition to financial return. With the creation of this class of ‘‘Impact SBICs,’’ SBA sought to expand the pool of investment capital available primarily to underserved communities and innovative sectors as well as support the development of America’s growing daltland on DSKBBV9HB2PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 17:25 Jun 08, 2018 Jkt 244001 impact investing industry. SBA is withdrawing the proposed rule because SBA has determined that the cost is not commensurate with the benefits. DATES: SBA is withdrawing the proposed rule published on February 3, 2016 (81 FR 5666) as of June 11, 2018. FOR FURTHER INFORMATION CONTACT: Theresa Jamerson, Office of Investment and Innovation, (202) 205–7563, theresa.jamerson@sba.gov. SUPPLEMENTARY INFORMATION: I. Background Information SBA’s efforts in the impact investing space began on April 7, 2011 through a policy letter (‘‘Impact Policy’’), which was subsequently updated on September 26, 2012 and September 25, 2014. The purpose of the Impact Policy was to license small business investment companies (‘‘SBICs’’) focused on generating both a positive and measurable social impact in addition to a financial return as ‘‘Impact SBICs.’’ Licensed Impact SBICs were expected to provide at least 50% of their financings in ‘‘impact investments’’ as defined by the Impact Policy. SBA published a Proposed Rule on February 3, 2016 (81 FR 5666) (the ‘‘Proposed Rule’’) to permanently define Impact SBICS and set forth regulations PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 applicable to Impact SBICs with respect to licensing, leverage eligibility, fees, reporting and compliance requirements. The intent of the rule was to encourage qualified private equity fund managers with a focus on social impact to apply to the SBIC program. As part of the Proposed Rule, SBA would have provided the following three key benefits: (1) Impact SBIC applicants would have received a 60% discount on the licensing fee; (2) Impact SBICs would have received a 10% discount on the examination base fee; and (3) Impact SBICs could have simultaneously applied as an Early Stage SBIC not subject to the call and timing provisions identified under 13 CFR 107.300. Given these benefits, the proposed rule also imposed certain penalties if an Impact SBIC did not adhere to its impact strategy or the Impact SBIC rules. II. Reason for Withdrawal In determining whether to publish a final rule, SBA evaluated the results of the Impact Policy and the comments received in response to the Proposed Rule. In six years under the Impact Policy, few qualified funds applied to be licensed as Impact SBICs, and SBA licensed only nine Impact SBICs. SBA believes that many of these SBICs would have applied to the SBIC program E:\FR\FM\11JNP1.SGM 11JNP1 daltland on DSKBBV9HB2PROD with PROPOSALS Federal Register / Vol. 83, No. 112 / Monday, June 11, 2018 / Proposed Rules regardless of the existence of the Impact Policy. SBA determined that the cost of the Impact Policy was not commensurate with the benefits. On September 28, 2017, SBA provided notice to program stakeholders that SBA was cancelling the Impact Policy and would no longer accept applications to be licensed as an Impact SBIC on or after November 1, 2017. Although SBA proposed licensing and examination fee discounts to provide further incentives for Impact SBICs as part of the Proposed Rule, SBA received one comment that all SBICs should be treated similarly in fee structure and no discounts should be offered. Three comments stated that the discounts are too small to provide an incentive sufficient to result in the formation of Impact SBICs, although two of these commenters stated that they nonetheless appreciated the discount. Because Impact SBICs would have received certain benefits under the Proposed Rule, the Proposed Rule also identified penalties if an Impact SBIC failed to meet the requirements set forth in the rule, including failing to invest at least 50% of its financing dollars in impact investments and, for Impact SBICs using a Fund-Identified Impact Investment Strategy, failing to comply with certain specific measurement and reporting obligations. SBA received four comments stating that the Proposed Rule should not apply to Impact SBICs licensed prior to the effective date of any final rule, two comments stating that SBA should adjust the rules to reflect the policies under which the Impact SBICs were licensed, and one comment that suggested that existing Impact SBICs should be allowed the option to either complete their license under the relevant Impact Policy under which they were licensed or opt in to these new regulations. In reviewing these comments, SBA determined that finalizing the rule would not likely result in an increase in the number of Impact SBICs in the program and would likely result in fewer Impact SBIC applications than SBA received under the Impact Policy. Although SBA licensed two Impact SBICs in each of FY 2015 and FY 2016, after publication of the proposed rule, SBA did not license any Impact SBICs in FY 2017. SBA also considered costs in determining whether to withdraw the Proposed Rule. As noted in the Proposed Rule, due to the risk associated with this class of SBICs, and based on the amount of leverage SBA expected to allocate to the Impact SBIC program, the Proposed Rule was expected to increase the cost to all SBICs issuing SBA-guaranteed VerDate Sep<11>2014 17:25 Jun 08, 2018 Jkt 244001 debentures by increasing the annual fee payable by all such SBICs by approximately 6.1 basis points. For an SBIC issuing $100 million in SBAguaranteed debentures, this would equate to $61,000 per year. SBICs typically issue Debentures over a 4 to 6year period (using multiple commitments) and begin paying back leverage as the fund harvests its investments. As a result, based on Debenture pools since 1992 that have been fully repaid, the average hold period is approximately 6 years, this would equate to $366,000 in total additional fees for the SBIC. If the SBIC held the leverage outstanding for its full ten-year term, this would equate to $610,000 for a single SBIC. Between FYs 2012 and 2017, SBA approved, on average, $2.28 billion aggregate debenture commitments per year. If an additional 6.1 basis point charge were in effect, SBICs would incur over $1.4 million per year in additional fees, or approximately $8.3 million over the average 6-year average holding period for SBIC debentures. This is capital that SBICs could otherwise deploy to small businesses. The withdrawal of the Proposed Rule has no effect on currently licensed Impact SBICs. Currently licensed Impact SBICs must continue to operate under the Impact Policy under which they were licensed (i.e., the Impact Policy issued in 2011, 2012 or 2014, as applicable). SBA will continue to follow SBA regulations and credit policies applicable to all SBICs with respect to approving leverage commitments and draws for Impact SBICs licensed with the intent of issuing SBA-guaranteed debentures. It should be noted that SBA allocated debentures for Impact SBICs in both FY 2018 and FY 2019 to accommodate existing Impact SBICs. SBA will determine the allocations of leverage for Impact SBICs for subsequent Fiscal Years after taking into account projected need by Impact SBICs in existence at that time. Executive Order 13771 The withdrawal of the NPRM qualifies as a deregulatory action under Executive Order 13771. See OMB’s Memorandum titled ‘‘Guidance Implementing Executive Order 13771, Titled ‘Reducing Regulation and Controlling Regulatory Costs’ ’’ (April 5, 2017). Accordingly, for the reasons stated in the preamble, the Proposed Rule published at 81 FR 5666 on February 3, 2016, is withdrawn. Authority: 15 U.S.C. 634(b)(6). PO 00000 Frm 00011 Fmt 4702 Sfmt 4702 26875 Dated: May 12, 2018. Linda E. McMahon, Administrator. [FR Doc. 2018–12031 Filed 6–8–18; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION 13 CFR Part 107 RIN 3245–AG68 Small Business Investment Companies (SBIC); Early Stage Initiative U.S. Small Business Administration. ACTION: Proposed rule; withdrawal. AGENCY: The Small Business Administration (SBA) is withdrawing its proposed rule published on September 19, 2016. SBA proposed making changes to its Early Stage Small Business Investment Company (SBIC) initiative, which was launched in 2012. SBA is withdrawing the proposed rule because very few qualified funds applied to the Early Stage SBIC initiative, the costs were not commensurate with the results and the comments to the proposed rule did not demonstrate broad support for a permanent Early Stage SBIC program. DATES: SBA is withdrawing the proposed rule published on September 19, 2016 (81 FR 64075) as of June 11, 2018. SUMMARY: FOR FURTHER INFORMATION CONTACT: Theresa Jamerson, Office of Investment and Innovation, (202) 205–7563, theresa.jamerson@sba.gov. SUPPLEMENTARY INFORMATION: I. Background Information In the Small Business Investment Act of 1958 (Act), Congress created the Small Business Investment Company (SBIC) program to ‘‘stimulate and supplement the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply . . . .’’ 15 U.S.C. 661. Congress intended that the program ‘‘be carried out in such manner as to insure the maximum participation of private financing sources.’’ Id. In accordance with that policy, the U.S. Small Business Administration (SBA) does not invest directly in small businesses. Rather, through the SBIC program, SBA licenses and provides debenture leverage to SBICs. SBICs are privatelyowned and professionally managed forprofit investment funds that make loans E:\FR\FM\11JNP1.SGM 11JNP1

Agencies

[Federal Register Volume 83, Number 112 (Monday, June 11, 2018)]
[Proposed Rules]
[Pages 26874-26875]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12031]


=======================================================================
-----------------------------------------------------------------------

SMALL BUSINESS ADMINISTRATION

13 CFR Part 107

RIN 3245-AG66


Small Business Investment Company Program--Impact SBICs

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule; withdrawal.

-----------------------------------------------------------------------

SUMMARY: The Small Business Administration (SBA) is withdrawing its 
proposed rule published on February 3, 2016. In the proposed rule, SBA 
would have defined a new class of small business investment companies 
(SBICs) that would seek to generate positive and measurable social 
impact in addition to financial return. With the creation of this class 
of ``Impact SBICs,'' SBA sought to expand the pool of investment 
capital available primarily to underserved communities and innovative 
sectors as well as support the development of America's growing impact 
investing industry. SBA is withdrawing the proposed rule because SBA 
has determined that the cost is not commensurate with the benefits.

DATES: SBA is withdrawing the proposed rule published on February 3, 
2016 (81 FR 5666) as of June 11, 2018.

FOR FURTHER INFORMATION CONTACT: Theresa Jamerson, Office of Investment 
and Innovation, (202) 205-7563, [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background Information

    SBA's efforts in the impact investing space began on April 7, 2011 
through a policy letter (``Impact Policy''), which was subsequently 
updated on September 26, 2012 and September 25, 2014. The purpose of 
the Impact Policy was to license small business investment companies 
(``SBICs'') focused on generating both a positive and measurable social 
impact in addition to a financial return as ``Impact SBICs.'' Licensed 
Impact SBICs were expected to provide at least 50% of their financings 
in ``impact investments'' as defined by the Impact Policy.
    SBA published a Proposed Rule on February 3, 2016 (81 FR 5666) (the 
``Proposed Rule'') to permanently define Impact SBICS and set forth 
regulations applicable to Impact SBICs with respect to licensing, 
leverage eligibility, fees, reporting and compliance requirements. The 
intent of the rule was to encourage qualified private equity fund 
managers with a focus on social impact to apply to the SBIC program. As 
part of the Proposed Rule, SBA would have provided the following three 
key benefits: (1) Impact SBIC applicants would have received a 60% 
discount on the licensing fee; (2) Impact SBICs would have received a 
10% discount on the examination base fee; and (3) Impact SBICs could 
have simultaneously applied as an Early Stage SBIC not subject to the 
call and timing provisions identified under 13 CFR 107.300. Given these 
benefits, the proposed rule also imposed certain penalties if an Impact 
SBIC did not adhere to its impact strategy or the Impact SBIC rules.

II. Reason for Withdrawal

    In determining whether to publish a final rule, SBA evaluated the 
results of the Impact Policy and the comments received in response to 
the Proposed Rule. In six years under the Impact Policy, few qualified 
funds applied to be licensed as Impact SBICs, and SBA licensed only 
nine Impact SBICs. SBA believes that many of these SBICs would have 
applied to the SBIC program

[[Page 26875]]

regardless of the existence of the Impact Policy. SBA determined that 
the cost of the Impact Policy was not commensurate with the benefits. 
On September 28, 2017, SBA provided notice to program stakeholders that 
SBA was cancelling the Impact Policy and would no longer accept 
applications to be licensed as an Impact SBIC on or after November 1, 
2017.
    Although SBA proposed licensing and examination fee discounts to 
provide further incentives for Impact SBICs as part of the Proposed 
Rule, SBA received one comment that all SBICs should be treated 
similarly in fee structure and no discounts should be offered. Three 
comments stated that the discounts are too small to provide an 
incentive sufficient to result in the formation of Impact SBICs, 
although two of these commenters stated that they nonetheless 
appreciated the discount.
    Because Impact SBICs would have received certain benefits under the 
Proposed Rule, the Proposed Rule also identified penalties if an Impact 
SBIC failed to meet the requirements set forth in the rule, including 
failing to invest at least 50% of its financing dollars in impact 
investments and, for Impact SBICs using a Fund-Identified Impact 
Investment Strategy, failing to comply with certain specific 
measurement and reporting obligations. SBA received four comments 
stating that the Proposed Rule should not apply to Impact SBICs 
licensed prior to the effective date of any final rule, two comments 
stating that SBA should adjust the rules to reflect the policies under 
which the Impact SBICs were licensed, and one comment that suggested 
that existing Impact SBICs should be allowed the option to either 
complete their license under the relevant Impact Policy under which 
they were licensed or opt in to these new regulations. In reviewing 
these comments, SBA determined that finalizing the rule would not 
likely result in an increase in the number of Impact SBICs in the 
program and would likely result in fewer Impact SBIC applications than 
SBA received under the Impact Policy. Although SBA licensed two Impact 
SBICs in each of FY 2015 and FY 2016, after publication of the proposed 
rule, SBA did not license any Impact SBICs in FY 2017.
    SBA also considered costs in determining whether to withdraw the 
Proposed Rule. As noted in the Proposed Rule, due to the risk 
associated with this class of SBICs, and based on the amount of 
leverage SBA expected to allocate to the Impact SBIC program, the 
Proposed Rule was expected to increase the cost to all SBICs issuing 
SBA-guaranteed debentures by increasing the annual fee payable by all 
such SBICs by approximately 6.1 basis points. For an SBIC issuing $100 
million in SBA-guaranteed debentures, this would equate to $61,000 per 
year. SBICs typically issue Debentures over a 4 to 6-year period (using 
multiple commitments) and begin paying back leverage as the fund 
harvests its investments. As a result, based on Debenture pools since 
1992 that have been fully repaid, the average hold period is 
approximately 6 years, this would equate to $366,000 in total 
additional fees for the SBIC. If the SBIC held the leverage outstanding 
for its full ten-year term, this would equate to $610,000 for a single 
SBIC. Between FYs 2012 and 2017, SBA approved, on average, $2.28 
billion aggregate debenture commitments per year. If an additional 6.1 
basis point charge were in effect, SBICs would incur over $1.4 million 
per year in additional fees, or approximately $8.3 million over the 
average 6-year average holding period for SBIC debentures. This is 
capital that SBICs could otherwise deploy to small businesses.
    The withdrawal of the Proposed Rule has no effect on currently 
licensed Impact SBICs. Currently licensed Impact SBICs must continue to 
operate under the Impact Policy under which they were licensed (i.e., 
the Impact Policy issued in 2011, 2012 or 2014, as applicable). SBA 
will continue to follow SBA regulations and credit policies applicable 
to all SBICs with respect to approving leverage commitments and draws 
for Impact SBICs licensed with the intent of issuing SBA-guaranteed 
debentures. It should be noted that SBA allocated debentures for Impact 
SBICs in both FY 2018 and FY 2019 to accommodate existing Impact SBICs. 
SBA will determine the allocations of leverage for Impact SBICs for 
subsequent Fiscal Years after taking into account projected need by 
Impact SBICs in existence at that time.

Executive Order 13771

    The withdrawal of the NPRM qualifies as a deregulatory action under 
Executive Order 13771. See OMB's Memorandum titled ``Guidance 
Implementing Executive Order 13771, Titled `Reducing Regulation and 
Controlling Regulatory Costs' '' (April 5, 2017).
    Accordingly, for the reasons stated in the preamble, the Proposed 
Rule published at 81 FR 5666 on February 3, 2016, is withdrawn.

    Authority:  15 U.S.C. 634(b)(6).

    Dated: May 12, 2018.
Linda E. McMahon,
Administrator.
[FR Doc. 2018-12031 Filed 6-8-18; 8:45 am]
 BILLING CODE 8025-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.