[Federal Register Volume 62, Number 83 (Wednesday, April 30, 1997)]
[Rules and Regulations]
[Pages 23337-23339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11109]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 107
Small Business Investment Companies
AGENCY: Small Business Administration.
ACTION: Final rule.
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SUMMARY: This final rule modifies the examination fees charged to small
business investment companies (SBICs). The revised fee schedule
eliminates the disproportionate burden on certain classes of licensees
(particularly those with the largest amount of total assets) and
results in fee assessments that more closely reflect the level of
effort and time associated with the examination process.
DATES: This final rule is effective April 30, 1997.
FOR FURTHER INFORMATION CONTACT: Leonard W. Fagan, Investment Division,
at (202) 205-7583.
SUPPLEMENTARY INFORMATION: On January 31, 1996, the Small Business
Administration (SBA) published final regulations which, among other
things, increased the examination fees charged to SBICs. See 61 FR
3177. Fees continued to be assessed based on total assets of the
licensee, but at higher rates. The new fee schedule was designed to
produce total revenue sufficient to cover the current direct costs to
SBA of conducting examinations. In response to concerns raised by a
number of SBICs, SBA proposed on February 11, 1997 to modify the
examination fee schedule. See 62 FR 6147. This proposed rule is hereby
adopted in final form.
The proposed rule was intended to respond to concerns that the
existing fee schedule resulted in unreasonably high examination fees
for the group of SBICs with the largest amount of total assets. Many of
the largest SBICs are bank-owned and do not use federal leverage funds,
so that fees computed on the basis of total assets do not appropriately
reflect the level of effort and risk associated with the examination
process. Similarly, larger SBICs which are not bank-owned and do rely
on federal funds to supplement private capital have been required to
pay fees that substantially exceed the amount they pay for financial
audits, which are generally more extensive than the compliance
examinations performed by SBA.
To address these concerns, SBA proposed to revise Sec. 107.692 by
establishing ``base fees'' for examinations. The base fee increases as
a licensee's total assets increase, but is capped at $14,000. The base
fee would be adjusted upward in circumstances where the Agency incurs
additional cost or burdens in the process because of circumstances
solely related to the licensee to be examined. Similarly, the base fee
would be adjusted downward where circumstances solely related to the
licensee to be examined are such that the Agency's level of effort and
time are minimized.
SBA received two comments on the proposed rule, both of which were
generally supportive. One commenter agreed with the concept of capping
the base fee, but suggested a $10,000 cap instead of the proposed
$14,000. The commenter considered the lower fee to be more in line with
rates charged by independent auditors. The other comment dealt with the
proposed adjustments to the base fee, suggesting that SBA consider
additional discounts for those licensees which do not use SBA leverage
and those with only a limited number of investments which SBA must
review. The commenter also suggested elimination of the 5 percent
additional charge for licensees organized as partnerships or limited
liability companies. The commenter stated that these changes would
further the goal of tying SBIC examination fees to the level of effort
and resources expended by SBA in performing the examinations.
SBA believes that the proposed maximum base fee of $14,000 is
reasonable relative to the size of the SBICs which will be required to
pay it (those with total assets greater than $60,000,000). The $14,000
base represents a significantly reduced rate for most of these larger
SBICs. For these reasons, SBA has not adopted this suggested change.
SBA generally supports the concept of linking fees to the risk and
complexity of the examination. However, the Agency believes that the
introduction of additional criteria for discounts would result in an
overly complex fee structure. SBA also believes that the additional
charge for partnerships is justified because of the complexity of most
partnership agreements and the need to perform certain examination
procedures at the level of the general partner as well as the SBIC
itself.
SBA is making one editorial change to the table in Sec. 107.692(d),
so that the language concerning records kept in multiple locations is
the same in that paragraph as in Sec. 107.692(c)(5). In all other
respects, the rule is adopted as proposed.
Compliance With Executive Orders, 12612, 12778, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
SBA certifies that this final rule will not be a significant
regulatory action for purposes of Executive Order 12866 because it will
not have an annual effect on the economy of more than $100 million, and
that it will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. The purpose of the rule is to
modify the existing regulatory guidance related to SBIC examination
fees. The rule will provide for more reasonable and equitable
examination fees. The revised fee structure will more properly reflect
the level of effort and Agency resources expended to conduct an
examination, will encourage continued compliance with program
regulations, and will continue to allow for efficient and effective
program administration.
The regulation will have some economic effect. The base fee for
examinations will continue to be based on total assets of a licensee
and, for the most part, at the rates previously prescribed. However, no
licensee will have a base fee greater than $14,000. The regulation will
provide for
[[Page 23338]]
discounts of the base examination fee for: (1) Licensees with no
outstanding regulatory violations at the time of the examination and no
violations noted as a result of the most recent prior examination; and
(2) licensees that are cooperative with SBA examination personnel by
being fully responsive to the letter of notification of examination.
Similarly, the regulation will provide increases to the base
examination fee for a licensee that: (1) Is organized as a partnership
or limited liability company; (2) is authorized to issue Participating
Securities; and/or (3) maintains its records/files in multiple
locations.
The largest licensees, those with total assets exceeding $60
million, will realize substantial fee decreases. The examination base
fee of all licensees potentially could be increased or decreased.
Therefore, all licensees with total assets below $60 million may
experience a 5% to 25% increase or a 10% to 25% decrease in the cost of
an annual examination. The economic impact in either case is
inconsequential given the total number of licensees and the base fees
applicable to the majority of the licensees. Further, even assuming the
maximum increases provided for in the proposed regulations, most
licensees with total assets greater than $60 million will realize
significant examination fee reductions.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
certifies that this final rule contains no new reporting or
recordkeeping requirements that have not already been approved by the
Office of Management and Budget.
For purposes of Executive Order 12612, SBA certifies that this rule
does not have any federalism implications warranting the preparation of
a Federalism Assessment.
For purposes of Executive Order 12778, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in Section 2 of that Order.
List of Subjects in 13 CFR Part 107
Investment companies, Loan programs--business, Reporting and
recordkeeping requirements, Small businesses.
For the reasons set forth above, SBA hereby amends part 107 of
title 13 of the Code of Federal Regulations as follows:
PART 107--SMALL BUSINESS INVESTMENT COMPANIES
1. The authority citation for part 107 continues to read as
follows:
Authority: 15 U.S.C. 681 et seq., 683, 687(c), 687b, 687d, 687g
and 687m, Pub. L. 104-208.
2. Section 107.692 is revised to read as follows:
Sec. 107.692 Examination fees.
(a) General. SBA will assess fees for examinations in accordance
with this Sec. 107.692. Unless SBA determines otherwise on a case by
case basis, SBA will not assess fees for special examinations to obtain
specific information.
(b) Base fee. A base fee will be assessed based on your total
assets (at cost) as of the date of your latest certified financial
statement or a more recent interim statement requested by and submitted
to SBA in connection with the examination. The base fee table is as
follows:
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Total assets of licensee Base fee Plus, percent of assets
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$0 to $1,500,000.................... $3,500 +0%
$1,500,001 to $5,000,000............ 3,700 +.065% of the amount over $1,500,000
$5,000,001 to $10,000,000........... 6,000 +.02% of the amount over $5,000,000
$10,000,001 to $15,000,000.......... 7,000 +.01% of the amount over $10,000,000
$15,000,001 to $25,000,000.......... 7,700 +.015% of the amount over $15,000,000
$25,000,001 to $50,000,000.......... 9,200 +.015% of the amount over $25,000,000
$50,000,001 to $60,000,000.......... 13,000 +.01% of the amount over $50,000,000
$60,000,001 and above............... 14,000 +0%
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(c) Adjustments to base fee. Your base fee, as determined by the
table in paragraph (b) of this section, will be adjusted (increased or
decreased) based on the following criteria:
(1) If you have no outstanding regulatory violations at the time of
the commencement of the examination and SBA did not identify any
violations as a result of the most recent prior examination, you will
receive a 15% discount on your base fee;
(2) If you were fully responsive to the letter of notification of
examination (that is, you provided all requested documents and
information within the time period stipulated in the notification
letter in a complete and accurate manner, and you prepared and had
available all information requested by the examiner for on-site
review), you will receive a 10% discount on your base fee;
(3) If you are organized as a partnership or limited liability
company, you will pay an additional charge equal to 5% of your base
fee;
(4) If you are a Licensee authorized to issue Participating
Securities, you will pay an additional charge equal to 10% of your base
fee; and
(5) If you maintain your records/files in multiple locations (as
permitted under Sec. 107.600(b)), you will pay an additional charge
equal to 10% of your base fee.
(d) Fee discounts and additions table. The following table
summarizes the discounts and additions noted in paragraph (c) of this
section:
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Amount of Amount of
discount--% Addition--%
Examination fee discounts of base Examination fee additions of base
examination examination
fee fee
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No prior violations........................... 15 Partnership or limited liability 5
company.
Responsiveness................................ 10 Participating Security Licensee....... 10
[[Page 23339]]
Records/files at multiple locations... 10
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(e) Delay fee. If, in the judgement of SBA, the time required to
complete your examination is delayed due to your lack of cooperation or
the condition of your records, SBA may assess an additional fee of up
to $500 per day.
Dated: April 17, 1997.
Aida Alvarez,
Administrator.
[FR Doc. 97-11109 Filed 4-29-97; 8:45 am]
BILLING CODE 8025-01-P
