,,ii #aafth ,,congress #b;d ,session ,s4 #cdhc ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,march #ab1 #bjbj,mr4 ,booker 7for himself and ,mrs4 ,gillibrand7 introduced the following bill2 which was read twice and referred to the ,committee on ,small ,business and ,entrepreneurship ,a ,,bill ,to amend the ,small ,business ,investment ,act of #aieh to establish the ,scale-,up ,manufacturing ,investment ,company 7,,sumic7 ,program4 #a4 ,short title ,this ,act may be cited as the ,scale-,up ,manufacturing ,investment ,company ,act of #bjbj4 #b4 ,findings ,congress finds that-- 7#a7 the strength of the ,united ,states manufacturing sector is critical to the economy and the global competitiveness of the ,united ,states2 7#b7 ,united ,states manufacturers support #ag1fjj1jjj jobs in the ,united ,states and account for #ab percent of the gross domestic product of the ,united ,states2 7#c7 access to capital is essential to growth and innovation in the manufacturing sector2 7#d7 small1 emerging manufacturers face unique challenges scaling commercial production in the ,united ,states1 driving many young manufacturers to other countries2 7#e7 structural barriers exist in the ,united ,states that prevent key investments in first-commercial manufacturing facilities2 7#f7 a healthy manufacturing sector is essential to innovation economy of the ,united ,states1 providing three-quarters of all private sector research and development1 employing nearly two-thirds of all research and development workers1 and producing the majority of all patents issued2 7#g7 technology-intensive manufacturing small businesses1 some of which may be start-ups1 with the potential to anchor the next generation of manufacturing production where they locate1 face special challenges in accessing the capital to move from idea to prototype and into commercial production2 7#h7 already more capital intensive than software or services start-ups1 manufacturing start-ups and small businesses face a second and wider valley of death when it comes to raising the capital to scale up for commercial production because of their capital intensity and novel technology2 7#i7 a number of countries1 including ,china1 ,south ,korea1 ,germany1 and ,japan1 provide publicly funded incentives to attract these firms1 recognizing that despite the risks1 the long-term benefits of establishing leadership in emerging technology areas are large2 7#aj7 a study of manufacturing technology-intensive start-ups licensed by the ,massachusetts ,institute of ,technology found that almost all that scaled up into commercial production did so overseas largely because of this far more attractive capital and investment environment for manufacturing start-ups1 which is a huge loss for the future of manufacturing in the ,united ,states2 7#aa7 if the ,united ,states loses the first generation of production for a new technology or manufacturing process1 history suggests that it is an uphill battle once lost to reclaim that capability here given the unique learning and know-how acquired during the building of that first factory2 and 7#ab7 to ensure that manufacturing technologies invented in the ,united ,states are ultimately made in the ,united ,states will require addressing the unique capital access challenges faced by these technology-intensive manufacturing start-ups4 #c4 ,scale-,up ,manufacturing ,investment ,program 7a7 ,in general ,title ,,iii of the ,small ,business ,investment ,act of #aieh 7#ae ,u4,s4,c4 #fha et seq47 is amended by adding at the end the following3 ,d ,scale-,up ,manufacturing ,investment ,company ,program #cii;,a4 ,definitions ,in this part-- 7#a7 the term ,associate ,administrator means the ,associate ,administrator described in section #bja2 7#b7 the term ,council means the ,scale-,up ,manufacturing ,investment ,company ,credit ,council that may be established under section #cii,k2 7#c7 the term participating investment fund means a privately managed investment fund licensed under section #cii;,c to operate under the program2 7#d7 the term private capital has the meaning given the term in section #ajc7i72 7#e7 the term program means the scale-up manufacturing investment company program established under section #cii;,b2 7#f7 the term qualifying manufacturing project means an investment in a small and emerging manufacturer for the purposes of building first commercial production facilities1 novel manufacturing capabilities1 or the introduction into production of emerging manufacturing technologies2 7#g7 the term small and emerging manufacturer means any advanced manufacturer that does not exceed the size standard established by the ,administrator for the applicable ,north ,american ,industry ,classification ,system code under section #c of the ,small ,business ,act 7#ae ,u4,s4,c4 #fcb72 and 7#h7 the term small business concern owned and controlled by socially and economically disadvantaged individuals has the meaning given the term in section #h7;d77#c77;,c7 of the ,small ,business ,act 7#ae ,u4,s4,c4 #fcg7;d77#c77;,c774 #cii;,b4 ,establishment 7a7 ,in general ,the ,administrator shall establish and carry out a scale-up manufacturing investment company program under which the ,administrator shall provide leverage to participating investment funds to support debt and equity investments in qualifying manufacturing projects of small and emerging manufacturers in the ,united ,states4 7b7 ,administration of program ,the program shall be administered by the ,administrator acting through the ,associate ,administrator4 #cii;,c4 ,selection of participating investment funds 7a7 ,application for license 7#a7 ,submission of application ,an investment fund desiring to receive a license to operate under the program shall submit an application to the ,administrator at such time and in such manner as the ,administrator may require4 7#b7 ,requirement ,an application submitted under paragraph 7#a7 shall demonstrate that the investment fund-- 7,a7 has the requisite minimum private capital raised from investors2 and 7,b7 committed to operate under the program as of the date of submission of the application4 7#c7 ,status ,not later than #ij days after the date on which the ,administrator receives an application submitted under paragraph 7#a71 the ,administrator shall provide the applicant with a written report detailing the status of the application and any requirements remaining for completion of the application4 7b7 ,selection 7#a7 ,in general ,not later than #ahj days after the date on which the ,administrator receives an application under subsection 7a71 the ,administrator shall approve or deny the application for a license to operate under the program and notify the applicant of the determination4 7#b7 ,criteria ,the ,administrator shall establish selection criteria to evaluate applications to operate under the program1 which shall include1 at a minimum-- 7,a7 the proven investment experience of the investment fund manager2 7,b7 the proven1 balanced1 and positive-investment track record of a previous investment fund or the principals and fund performance analysis measured against benchmarks and peer funds2 7,c7 the experience of the investment fund with investments relating to small manufacturers and emerging technologies related to advanced manufacturing2 7,d7 an evaluation of the use of leverage by the investment fund managers in past deals2 7,e7 evidence indicating a cohesive and effective team and team dynamic2 7,f7 principals with strong reputations2 7,g7 a record of positive realizations and exits from previous investments in the investment track record2 7,h7 clearly articulated focus1 investment thesis1 investment themes1 and investment instruments to be used to capitalize companies2 and 7,i7 fund structure and economics that reflect standard practices and industry norms1 such as-- 7i7 preferred returns to limited partners2 7ii7 general partner carried interest allocations1 fees and vesting schedules2 7iii7 adequate fund infrastructure and supporting back office services2 and 7iv7 evidence of fund raising traction and capability4 7c7 ,fees 7#a7 ,in general ,the ,administration shall prescribe fees to be paid by each applicant for a license to operate as a participating investment fund under the program4 7#b7 ,use of amounts ,fees collected under this subsection-- 7,a7 shall be deposited in the account for salaries and expenses of the ,administration2 and 7,b7 are authorized to be appropriated solely to cover the costs of licensing examinations4 #cii;,d4 ,provision of leverage to participating investment funds 7a7 ,in general ,not later than #fj days after the date on which the ,administrator approves and issues a license under section #cii;,c to operate as a participating investment fund under the program1 the ,administrator may provide not more than #a of leverage for every #a of private capital raised by the participating investment fund4 7b7 ,maximum leverage ,the maximum amount of outstanding leverage made available in any given fiscal year-- 7#a7 to any participating investment fund may not exceed #ejj1jjj1jjj2 and 7#b7 to all participating investment funds in aggregate may not exceed #a1jjj1jjj1jjj4 7c7 ,private capital requirement 7#a7 ,in general ,the private capital of a participating investment fund shall be not less than #bej1jjj1jjj4 7#b7 ,financial institution investments ,any national bank1 or any member bank of the ,federal ,reserve ,system or nonmember insured bank to the extent permitted under applicable ,state law1 may invest in any one or more participating investment funds1 or in any entity established to invest solely in participating investment funds1 except that in no event shall the total amount of such investments of any such bank exceed #e percent of the capital and surplus of the bank4 7d7 ,leverage fee ,the ,administrator shall charge and collect a leverage fee of not more than #e4e percent and not less than #c percent of the face amount of the leverage issued4 #cii;,e4 ,borrowing power 7a7 ,in general ,each participating investment fund shall have the authority to borrow money and issue debentures and preferred securities1 subject to such limitations and regulations as the ,administration may prescribe4 7b7 ,limitation ,of the leverage provided by the ,administrator to a participating investment fund under section #cii;,d-- 7#a7 not less than #gj percent shall be issued as debentures under subsection 7a72 and 7#b7 not more than #cj percent may be issued as preferred securities under subsection 7a74 7c7 ,federal ,financing ,bank ,the ,federal ,financing ,bank may acquire a debenture issued by a participating investment fund company under subsection 7a74 7d7 ,purchase and guarantee by ,,sba 7#a7 ,in general ,the ,administration may purchase or guarantee the timely payment of all principal and interest as scheduled on debentures or preferred securities issued by participating investment funds under subsection 7a71 subject to such limitations and regulations as the ,administration may prescribe4 7#b7 ,full faith and credit ,the full faith and credit of the ,united ,states is pledged to the payment of all amounts which may be required to be paid under any guarantee under this subsection4 7e7 ,third-,party debt ,the ,administrator-- 7#a7 shall not permit a participating investment fund having outstanding leverage to incur third-party debt that would create or contribute to an unreasonable risk of default or loss to the ,federal ,government2 and 7#b7 shall permit such participating investment funds to incur third-party debt only on such terms and subject to such conditions as may be established by the ,administrator1 by regulation or otherwise4 7f7 ,calculation of subsidy rate ,all fees1 interest1 and profits received and retained by the ,administration under this section and section #cii;,d shall be included in the calculations made by the ,director of the ,office of ,management and ,budget to offset the cost 7as that term is defined in section #ejb of the ,federal ,credit ,reform ,act of #aiij 7#b ,u4,s4,c4 #ffa;a77 to the ,administration of purchasing and guaranteeing debentures and preferred securities under this ,act4 #cii;,f4 ,investments in small business concerns 7a7 ,in general ,a participating investment fund shall use leverage received under section #cii;,d to make debt and equity investments in small and emerging manufacturers to carry out qualifying manufacturing projects4 7b7 ,limitation ,not more than #ej percent of the amount provided by a participating investment fund to a small and emerging manufacturer under subsection 7a7 for a qualifying manufacturing project shall consist of leverage provided to the participating investment fund under the program4 7c7 ,portfolio management ,a single investment made by a participating investment fund under subsection 7a7 may not exceed #aj percent of the total capital of the participating investment fund1 which includes private capital and any leverage projected to be provided to the participating investment fund1 if applicable4 7d7 ,increased outreach ,the ,administration shall issue policy directives to provide for enhanced outreach efforts to increase investments by participating investment funds in-- 7#a7 a small business concern owned and controlled by socially and economically disadvantaged individuals2 and 7#b7 small business concerns owned and controlled by-- 7,a7 women2 7,b7 veterans2 or 7,c7 individuals with disabilities4 #cii;,g4 ,examinations and valuations 7a7 ,examinations 7#a7 ,in general ,each participating investment fund shall be subject to examinations made at the direction of the ,investment ,division of the ,administration in accordance with this subsection4 7#b7 ,assistance of private sector entities ,examinations under this subsection may be conducted with the assistance of a private sector entity that has the qualifications and the expertise necessary to conduct such examinations4 7#c7 ,costs 7,a7 ,assessment 7i7 ,in general ,the ,administrator may assess the cost of examinations under this subsection1 including compensation of the examiners1 against the participating investment fund examined4 7ii7 ,payment ,any participating investment fund against which the ,administrator assesses costs under subparagraph 7,a7 shall pay such costs4 7,b7 ,deposit of funds ,funds collected under this subsection-- 7i7 shall be deposited in the account for salaries and expenses of the ,administration2 and 7ii7 are authorized to be appropriated solely to cover the costs of examinations and other program oversight activities4 7b7 ,valuations 7#a7 ,frequency of valuations 7,a7 ,in general ,each participating investment fund shall submit to the ,administrator a written valuation of the loans and investments of the participating investment fund not less often than semiannually or otherwise upon the request of the ,administrator1 except that any participating investment fund with no leverage outstanding shall submit such valuations annually1 unless the ,administrator determines otherwise4 7,b7 ,material adverse changes ,not later than #cj days after the end of a fiscal quarter of a participating investment fund during which a material adverse change in the aggregate valuation of the loans and investments or operations of the participating investment fund occurs1 the participating investment fund shall notify the ,administrator in writing of the nature and extent of that change4 7,c7 ,independent certification 7i7 ,in general ,not less than once during each fiscal year1 each participating investment fund shall submit to the ,administrator the financial statements of the participating investment fund1 audited by an independent certified public accountant approved by the ,administrator4 7ii7 ,audit requirements ,each audit conducted under clause 7i7 shall include-- 7,i7 a review of the procedures and documentation used by the participating investment fund in preparing the valuations required by this subsection2 and 7,,ii7 a statement by the independent certified public accountant that such valuations were prepared in conformity with the valuation criteria applicable to the participating investment fund established in accordance with paragraph 7#b74 7#b7 ,valuation criteria ,each valuation submitted under this subsection shall be prepared by the participating investment fund in accordance with valuation criteria1 which shall-- 7,a7 be established or approved by the ,administrator2 and 7,b7 include appropriate safeguards to ensure that the noncash assets of a participating investment fund are not overvalued4 #cii;,h4 ,miscellaneous ,the ,administrator may take such action as set forth in sections #cji1 #caa1 #cab1 #cad1 #cae1 and #caf and an owner 7including a member1 partner1 or shareholder71 officer1 director1 employee1 agent1 or other participant in the management or conduct of the affairs of a participating investment fund shall be subject to the requirements of such sections4 #cii;,i4 ,violations2 removal or suspension of management officials 7a7 ,violations ,if any participating investment fund violates or fails to comply with any of the provisions of this part or of regulations prescribed hereunder1 all of its rights1 privileges1 and franchises derived therefrom may thereby be forfeited4 ,before any such participating investment fund shall be declared dissolved1 or its rights1 privileges1 and franchises forfeited1 any noncompliance with or violation of this ,act shall be determined and adjudged by a court of the ,united ,states of competent jurisdiction in a suit brought for that purpose in the district1 territory1 or other place subject to the jurisdiction of the ,united ,states1 in which the principal office of such participating investment fund is located4 ,any such suit shall be brought by the ,united ,states at the instance of the ,administration or the ,attorney ,general4 7b7 ,suspension of management officials ,using the procedures for removing or suspending a director or an officer of a licensee set forth in section #cac1 the ,administrator may remove or suspend any management official of a participating investment fund4 #cii;,j4 ,reports ,each participating investment fund shall1 on a semi-annual basis1 provide to the ,administrator such information as the ,administrator may require1 including-- 7#a7 information related to the measurement criteria that the participating investment fund proposed in the application for the program2 7#b7 information on the use of leverage by the participating investment fund2 and 7#c7 in each case in which the participating investment fund makes an investment in a small business concern that is not a small business concern owned and controlled by socially and economically disadvantaged individuals1 a report on the number and percentage of employees of the small business concern who are socially and economically disadvantaged individuals4 #cii,k4 ,scale-,up ,manufacturing ,investment ,company ,credit ,council 7a7 ,establishment ,the ,administrator may establish a ,scale-,up ,manufacturing ,investment ,company ,credit ,council1 which1 if established1 shall consist of #e members from the private sector with aggregate and collective experience in technology development1 manufacturing financing1 and capital investment4 7b7 ,duties ,the ,council1 if established1 shall advise the ,administrator on carrying out the program1 which shall include-- 7#a7 providing advice from time to time on advanced scale-up manufacturing industries2 and 7#b7 establishing and conducting an annual briefing beginning not later than #ah months after the date of enactment of this section4 #cii,l4 ,regulations ,the ,administrator may issue such regulations as the ,administrator determines necessary to carry out the provisions of this part in accordance with its purposes4 4 7b7 ,bank ,holding ,company ,act of #aief ,section #ac7;d77#a77;,e7 of the ,bank ,holding ,company ,act of #aief 7#ab ,u4,s4,c4 #ahea7;d77#a77;,e77 is amended by inserting investments in one or more participating investment funds1 as defined in section #cii;,a of the ,small ,business ,investment ,act of #aieh1 before or investments4 7c7 ,ineligibility for bankruptcy ,section #aji7;b77#b7 of title #aa1 ,united ,states ,code1 is amended by inserting a participating investment fund as defined in section #cii;,a of the ,small ,business ,investment ,act of #aieh1 before credit union4 7d7 ,eligibility for ,,cra credit ,section #hjd of the ,community ,reinvestment ,act of #aigg 7#ab ,u4,s4,c4 #bijc7 is amended by adding at the end the following3 7e7 ,investments in participating investment funds ,in assessing and taking into account1 under subsection 7a71 the record of a financial institution1 the appropriate ,federal financial supervisory agency shall consider1 as a factor1 investments made in one or more participating investment funds under part ,d of title ,,iii of the ,small ,business ,investment ,act of #aieh4 4