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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: April 23, 2001

SUBJECT: Small Business Administration; New Markets Venture Capital Program

SOURCE: Federal Register, April 23, 2001, Vol. 66, No. 78, pages 20529 and 20531

AGENCIES: Small Business Administration (SBA)

ACTION: Delay of Interim Final Rule; Proposed Withdrawal of Interim Final Rule; Proposed Rule

SYNOPSIS: SBA is delaying the effective date of new Title 13 of the Code of Federal Regulations, Part 108, New Markets Venture Capital ("NMVC") Program, from April 23, 2001, to June 22, 2001; proposes to withdraw that interim final rule before it becomes effective; and proposes to replace the regulations in the interim final rule with new proposed regulations instead.

EDITOR'S NOTE: For more on the interim final rule, see the January 22, 2001, FEDERAL CONTRACTS DISPATCH "Small Business Administration; New Markets Venture Capital Program."

For more on the previous delay of the interim final rule's effective date, see the February 20, 2001, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Delay of Effective Date of New Markets Venture Capital Program Rule."

DATES: The effective date for the interim final rule is delayed from April 23, 2001, until June 22, 2001. Comments on the proposed replacement regulations must be submitted on or before May 4, 2001.

ADDRESSES: Send comments to Austin Belton, Investment Division, Office of New Markets Venture Capital, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: Austin Belton, Director, Office of New Markets Venture Capital, 202-205-7027.

SUPPLEMENTAL INFORMATION: Between 1997 and 1998, the median income for the nation's households rose 3.5% in real terms, yet 12.7% of Americans (34.5 million people) still lived below the poverty line. Many of these Americans live in inner city and rural areas, where job opportunities are scarce and there is little to attract small business investors. In rural and urban communities, poverty remains a persistent problem. Job growth is well below the national average, with unemployment at or above 14%. Unemployment is 7.5% in the African American urban community, and is 6.4% in the Hispanic urban population; both are nearly double the national average.

Congress decided that it is not enough to create jobs in these pockets of poverty, but that these communities need a new economic infrastructure to enable them to develop their full potential and participate fully in the economic mainstream, so it enacted the NMVC program as part of the Consolidated Appropriations Act of 2001 (Public Law 106-554, enacted December 21, 2000). The NMVC is intended to help create an economic infrastructure in underserved areas by encouraging business growth through program-supported investment. The NMVC program will encourage the growth of such an infrastructure by supporting new equity capital investments by NMVC companies and Specialized Small Business Investment Companies (SSBICs) and by providing operational assistance to smaller enterprises located in low-income geographic areas whose growth will foster the creation of wealth and job opportunities in such areas.

SBA published an interim final rule implementing the NMVC program on January 22, 2001, with an effective date of February 21, 2001, and comments on the interim final rule were due on March 23, 2001. However, on January 20, 2001, the day President Bush was inaugurated, the Executive Office of the President issued a memorandum to the heads of all federal agencies directing them to withdraw all rules and regulations that had been sent to the Federal Register but not published, and to postpone for 60 days the effective date of all rules and regulations that have been published in the Federal Register but have not taken effect. Therefore, to comply with President Bush's direction, SBA delayed the effective date of the interim final rule from February 21, 2001, to April 23, 2001.

Since the interim final rule was to go into effect today, it is being delayed an additional 60 days "to give the [Bush] Administration further opportunity to consider new regulations and to conduct a rulemaking..." The reason for this further delay is because SBA received three comments on the interim final rule, and the SBA has decided that several changes are required to 13 CFR Part 108. Therefore, SBA is proposing to withdraw the 13 CFR Part 108 that was in the interim final rule and substitute a proposed 13 CFR Part 108.

The proposed 13 CFR Part 108 is based in large part on the interim final rule's 13 CFR Part 108, but there are many technical and substantive changes between the two versions, such as definitions of terms, requirements for applications, evaluation and selection criteria (six new ones are proposed), and time periods.

Also, SBA had published a notice of funds availability (NOFA) for the NMVC, with an application deadline of April 19, 2001. This deadline has been extended to May 21, 2001, and SBA may extend it further if it is unable to complete its rulemaking in time.

EDITOR'S NOTE: The NMVC regulations have been patterned after the similar regulations governing SBA's Small Business Investment Company ("SBIC") program in 13 CFR Part 107. Since SBA has been administering the SBIC program for 43 years, most of the problems and challenges the NMVC program will face have already been addressed in the SBIC regulations. The new NMVC regulations incorporate many of the SBIC regulations that SBA believes are fundamental to the safety and soundness of the SBIC program.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2001 by Panoptic Enterprises. All Rights Reserved.

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