owners, partners, or officers of such business enterprise (1) certify to the Administration the names of any attorneys, agents, or other persons engaged by or on behalf of such business enterprise for the purpose of expediting applications made to the Administration for assistance of any sort, and the fees paid or to be paid to any such persons; (2) execute an agreement binding any such business enterprise for a period of two years after any assistance is rendered by the Administration to such business enterprise, to refrain from employing, tendering any office or employment to, or retaining for professional services, any person who, on the date such assistance or any part thereof was rendered, or within one year prior thereto, shall have served as an officer, attorney, agent, or employee of the Administration occupying a position or engaging in activities which the Administration shall have determined involve discretion with respect to the granting of assistance under this title; and (3) furnish the names of lending institutions to which such business enterprise has applied for loans together with dates, amounts, terms, and proof of refusal.

"SEC. 213. To the fullest extent the Administration deems practicable, it shall make a fair charge for the use of Government-owned property and make and let contracts on a basis that will result in a recovery of the direct costs incurred by the Administration.

"SEC. 214. To effectuate the purposes of this title, small-business concerns within the meaning of this title shall receive any award or contract or any part thereof as to which it is determined by the Administration and the contracting procurement agency (1) to be in the interest of maintaining or mobilizing the Nation's full productive capacity, or (2) to be in the interest of war or national defense programs.

"SEC. 215. When directed by the President it shall be the duty of the Administration to consult and cooperate with governmental departments and agencies in the issuance of all orders or in the formulation of policy or policies in any way affecting small-business concerns. When directed by the President all such governmental departments or agencies are required, before issuing such orders or announcing such policy or policies, to consult and cooperate with the Administration in order that the interests of small-business enterprises may be recognized, protected, and preserved.

"SEC. 216. (a) Whoever makes any statement knowing it to be false, or whoever willfully overvalues any security for the purpose of obtaining for himself or for any applicant any loan, or extension thereof by renewal, deferment of action, or otherwise, or the acceptance, release, or substitution of security therefor, or for the purpose of influencing in any way the action of the Administration, or for the purpose of obtaining money, property, or anything of value, under this title, shall be punished by a fine of not more than $5,000 or by imprisonment for not more than two years, or both.

"(b) Whoever, being connected in any capacity with the Administration (1) embezzles, abstracts, purloins, or willfully misapplies any moneys, funds, securities, or other things of value, whether belonging to it or pledged or otherwise entrusted to it, or (2) with intent to defraud the Administration or any other body politic or corporate, or any individual, or to deceive any officer, auditor, or examiner of the Administration, makes any false entry in any book, report, or statement of or to the Administration, or, without being duly authorized, draws any order or issues, puts forth, or assigns any note, debenture, bond, or other obligation, or draft, bill of exchange, mortgage, judgment, or decree thereof, or (3) with intent to defraud participates, shares, receives directly or indirectly any money, profit, property, or benefit through any transaction, loan, commission, contract, or any other act of the Administration, or (4) gives any unauthorized information concerning any future action or plan of the Administration which might affect the value of securities, or, having such knowledge, invests or speculates, directly or indirectly, in the securities or property of any company or corporation receiving loans or other assistance from the Administration shall be punished by a fine of not more than $10,000 or by imprisonment for not more than five years, or both.

"SEC. 217. The Administration shall not duplicate the work or activity of any other department or agency of the Federal Government and nothing contained in this Act shall be construed to authorize any such duplication unless such work or activity is expressly provided for in this Act.

"SEC. 218. If any provision of this Act, or the application thereof to any person or circumstances, is held invalid, the remainder of this Act, and the application of such provision to other persons or circumstances, shall not be affected thereby."

[S. 1992, 85th Cong., 1st sess.]

A BILL To amend section 24 of the Federal Reserve Act

Be it enacted by the Senate and House of Representaives of the United States of America in Congress assembled, That section 24 of the Federal Reserve Act, as amended, is hereby amended by adding the following new sentence after the fourth sentence thereof: "Loans made to borrowers in which the Small Business Administration cooperates or purchases a participation under its authority to make disaster loans contained in the Small Business Act of 1953, as amended, shall not be subject to the restrictions or limitations of this section imposed upon loans secured by real estate."

[S. 2160, 85th Cong., 1st sess.]

A BILL To make capital more readily available for financing small business and thus to promote, foster, and develop the domestic and foreign commerce of the United States, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE

SECTION 1. This Act may be cited as the "National Investment Company Act of 1957."

DECLARATION OF POLICY

SEC. 2. It is the policy of the Congress

(a) to foster the development and growth of independent small-business enterprises with the objective of enabling them to make their maximum contribution to productive investment and employment and to the economic stability and growth of the Nation;

(b) to make capital for such enterprises more readily available in adequate amounts and on reasonable terms,

(c) to facilitate maximum participation of private financial institutions and investors in financing these enterprises; and

(d) to supplement the existing facilities of banks and other private financial institutions by providing for the establishment of privately owned national investment companies.

TITLE I-NATIONAL INVESTMENT COMPANIES

ORGANIZATION OF NATIONAL INVESTMENT COMPANIES

SEC. 101. (a) National investment companies may be formed for the purpose of operating under this Act by any number of persons not less than five, who shall subscribe to the articles of incorporation of any such company; except that in the case of any company in whose stock one or more Federal Reserve banks invest, the Federal Reserve bank or banks may alone subscribe to the articles of incorporation. The total number of national investment companies formed by Federal Reserve banks pursuant thereto shall not exceed one in each of the several States, the District of Columbia, the several Territories and the several possessions of the United States, and the Commonwealth of Puerto Rico.

(b) The articles of incorporation of any national investment company shall specify in general terms the objects for which the company is formed, the name assumed by such company, the area or areas where its operations are to be carried on, the place where its principal office is to be located, and the amount and classes of its shares of capital stock; and the articles may contain any other provisions not inconsistent with this Act that the company may see fit to adopt for the regulation of its business and the conduct of its affairs, including provision for cumulative voting in election of directors. Such articles and any amendments thereto adopted from time to time shall be subject to the approval of the Board of Governors of the Federal Reserve System (hereinafter called the "Board").

(c) The articles of incorporation and amendments thereto shall be forwarded to the Board for consideration and approval or disapproval. In determining whether to approve the establishment of such a company and its proposed articles of incorporation, the Board shall give due regard, among other things, to the need for the financing of independent small-business enterprises in the area in

which the proposed company is to commence business, the general character of the proposed management of the company, the number of such companies previously organized in the United States, and the volume of their operations. After consideration of all relevant factors, the Board may in its discretion approve the articles of incorporation and issue a permit to begin business.

(d) Upon issuance of such permit, the company shall become and be a body corporate, and as such, and in the name designated in its articles, shall have

power

(1) to adopt and use a corporate seal;

(2) to have succession for a period of thirty years, unless extended as provided in section 110 (g), or unless sooner dissolved by the act of the shareholders owning two-thirds of the stock or by an Act of Congress, or unless its franchise becomes forfeited by some violation of law or regulation issued hereunder;

(3) to make contracts;

(4) to sue and be sued, complain, and defend in any court of law or equity;

(5) by its board of directors, to appoint such officers and employees as may be deemed proper, define their authority and duties, fix their compensation, require bonds of such of them as it deems advisable and fix the penalty thereof, dismiss such officers or employees, or any thereof, at pleasure and appoint others to fill their places;

(6) to adopt bylaws regulating the manner in which its stock shall be transferred, its officers and employees appointed, its property transferred, and the privileges granted to it by law exercised and enjoyed;

(7) to establish branch offices or agencies subject to the approval of the Board;

(8) to acquire, hold, operate, and dispose of any property (real, personal, or mixed) whenever necessary or appropriate to the carrying out of its lawful functions;

(9) to act as depository or fiscal agent of the United States when so designated by the Secretary of the Treasury;

(10) to operate in such area or areas as may be specified in its articles of incorporation and approved by the Board; and

(11) to exercise the other powers set forth in this Act and such incidental powers as may be reasonably necessary to carry on the business for which the company is established.

(e) The board of directors of each national investment company shall consist of nine members all of whom shall be elected annually by the holders of the shares of stock of the company.

CONVERSION OF STATE DEVELOPMENT CORPORATIONS

SEC. 102. (a) Any State development corporation incorporated by special law of any State or organized under the general laws of any State may, by the vote of the shareholders owning not less than 51 percent of the capital stock of such corporation, with the approval of the Board, be converted into a national investment company under this Act. For a period of six months following enactment of this Act, or for such longer period as the Board may determine, no Federal Reserve bank or banks shall form a national investment company, except by such conversion, in any State, Territory, possession, the Commonwealth of Puerto Rico, or the District of Columbia in which a State development corporation is in being as of the date of enactment of this Act, unless such development corporation shall have stated in writing to the Board that such corporation does not intend to convert into a national investment company as herein provided. (b) In such case the articles of association and organization certificate may be executed by a majority of the directors of the corporation, and the certificate shall declare that the owners of 51 per centum of the capital stock have authorized the directors to make such certificate and to change or convert the corporation into a national investment company. A majority of the directors, after executing the articles of association and the organization certificate, shall have power to execute all other papers and to do whatever may be required to make its organization perfect and complete as a national investment company. The shares of any such corporation may continue to be for the same amount each as they were before the conversion, and the directors regardless of number, may continue to be directors of the corporation until the election of the board of directors is held in accordance with section 101 (e).

(c) When the Board has given to such corporation a certificate that the provisions of this Act have been complied with, such corporation, and all its stockholders, owners, and employees, shall have the same powers and privileges and shall be subject to the same duties, liabilities, and regulations, in all respects, as shall have been prescribed by this Act for corporations originally organized as national investment companies.

CAPITAL-STOCK PROVISIONS

SEC. 103. (a) Each company organized under this Act shall have a paid-in capital and surplus equal to at least $5,000,000 before it shall commence business. In order to facilitate the formation of national investment companies, each Federal Reserve bank is hereby authorized, notwithstanding any other provisions of law, to invest in the shares of stock of one or more such companies formed by any Federal Reserve bank under section 101 hereof, but with a view to the ultimate disposal of such stock to banks and other private investors as herein provided. Each Federal Reserve bank which forms a national investment company shall invest in shares of stock of such company in an amount equal to at least $5,000,000, or an amount which, when added to the amounts, if any, of shares subscribed by other Federal Reserve banks, member banks, nonmember banks, financial institutions, corporations, partnerships, or other persons, shall equal the sum of $5,000,000. In no event shall any Federal Reserve bank invest in shares of national investment companies if as a result thereof it will hold an amount of such shares aggregating more than 4 percent of the aggregate amount of the combined capital and surplus of all its member banks.

(b) The shares of stock in any national investment company shall be eligible for purchase by member banks of the Federal Reserve System, nonmember banks, financial institutions, corporations, partnerships, or other persons. Each member bank is hereby authorized, notwithstanding any other provision of Federal law, to acquire and hold an amount of such shares equal to not more than 4 percent of the capital and surplus of member bank. Upon the demand of any such eligible purchaser, a Federal Reserve bank which holds shares of stock in a national investment company shall, with the approval of the Board, including approval as to price, sell to such eligible purchaser all or a portion of such shares.

(c) The aggregate amount of shares in any such company or companies which may be owned or controlled by any stockholder, or by any group or class of stockholders, may be limited by the Board; and no one stockholder, other than a Federal Reserve bank, shall at any time, without the approval of the Board, own or control more than 10 percent of the total outstanding shares of any such company.

BORROWING POWER

SEC. 104. Each national investment company shall have authority to borrow money and to issue its debentures, bonds, promissory notes, or other obligations under such general conditions and subject to such limitations and regulations as the Board may prescribe.

ELIGIBLE ENTERPRISES

SEC. 105. The Board, after consultation with the Secretary of Commerce, shall promulgate standards to determine the eligibility of business enterprises for the purposes of this Act. In promulgating such standards, which may differ according to the types of financing or other relevant factors, the Board shall give consideration to—

(a) the policies set forth in section 2; and

(b) the extent to which such enterprises have reasonable access to facilities for credit and equity financing.

LOANS AND INVESTMENTS

SEC. 106. (a) Each national investment company shall have authority to make or acquire loans with or without security to business enterprises which are eligible under this Act, or to purchase obligations of such enterprises. Such loans, purchases, or other acquisitions may be made either directly or in cooperation with banks or other lending institutions, through agreements to participate or by the purchase of participations, commitments to purchase, or otherwise, as the company may determine.

(b) Each national investment company shall have authority to acquire, and to resell to the issuer or to others, the income debentures or bonds, common or preferred stocks, or other capital shares of business enterprises eligible under this Act.

AGGREGATE LIMITATIONS

SEC. 107. Without the approval of the Board, the aggregate amount of obligations and securities acquired and for which commitments may be issued by any national investment company under the provisions of this Act which exceed the sum of $1,000,000 for any single enterprise shall not exceed 33% percent of the combined capital and surplus and maximum indebtedness of such national investment company authorized by this Act.

EXEMPTIONS

SEC. 108. (a) The loans of any national banking association which are required by any national investment company, in the making of which such company participates, or for any part of which a commitment to purchase is issued hereunder shall not be subject to the limitations on real-estate loans prescribed in section 24 of the Federal Reserve Act, as amended (12 U. S. C. 371).

(b) Section 3 of the Securities Act of 1933, as amended (15 U. S. C. 77 C), is hereby amended by inserting at the end thereof the following new subsection (c):

"(c) The Commission may from time to time by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add to the securities exempted as provided in this section any class of securities issued by a national investment company under the National Investment Company Act of 1957, if it finds, having regard to the purposes of that Act, that the enforcement of this Act with respect to such securities is not necessary in the public interest and for the protection of investors."

(c) Section 304 of the Trust Indenture Act of 1939 (15 U. S. C. 77 ddd) is hereby amended by adding the following subsection (e):

"(e) The Commission may from time to time by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add to the securities exempted as provided in this section any class of securities issued by a national investment company under the National Investment Company Act of 1957, if it finds, having regard to the purposes of that Act, that the enforcement of this Act with respect to such securities is not necessary in the public interest and for the protection of investors."

TAX PROVISIONS

SEC. 109. (a) Section 851 (a) (1) of the Internal Revenue Code of 1954 is amended by inserting before the word "registered" the following: "chartered under the National Investment Company Act of 1957 as a national investment company or is".

(b) Section 851 (b) (2) of the Internal Revenue Code of 1954 is amended by inserting immediately after the words "90 percent" the following: "(75 percent in the case of a national investment company chartered under the National Investment Company Act of 1957)".

(c) Section 851 of the Internal Revenue Code of 1954 is amended by adding at the end thereof a new subsection as follows:

"(f) EXEMPTION OF NATIONAL INVESTMENT COMPANIES FROM LIMITATIONS OF SUBSECTION (b) (4).—If the Board of Governors of the Federal Reserve System determines that it is necessary and appropriate to accomplishment of the purposes of the National Investment Company Act of 1957 that any national investment company chartered under such Act be exempt from the requirements of this subsection (b) (4), it shall certify such determination to the Secretary or his delegate and, in such event, the limitations prescribed in subsection (b) (4) shall not apply to such national investment company."

(d) (1) Section 852 (a) of the Internal Revenue Code of 1954 is amended by adding at the end thereof the following: "The investment company taxable income of a regulated investment company which is a national investment company chartered under the National Investment Company Act of 1957 shall, for purposes of paragraph (1), be increased by the amounts described in subsection (d) (3) (D) and decreased by the amounts described in subsection (d) (5) (B)."