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6148 Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Proposed Rulescontinued to be assessed based on totalassets of the licensee, but at higher rates.The new fee schedule was designed toproduce total revenue sufficient to coverthe current direct costs to SBA ofconducting examinations.Since the effective date andimplementation of this regulation(March 1, 1996), SBA has received anumber of comments regarding theimpact of the new fee schedule onlicensees in certain asset size groups. Inparticular, bank-owned SBICs argue thatthey are required to bear an unfairportion of the overall fees. In thisregard, they note that they generallyhave no federal funds at risk. However,because fees are based on total assetsand they generally have the largestamount of total assets, they are requiredto pay fees at levels which far exceedthe level of effort and risk associatedwith the examination process. Similarly,larger SBICs which are not bank-ownedand do rely on federal funds tosupplement private capital argue thatthe fees greatly exceed the amount theypay for financial audits and are notrepresentative of the level of effort andtime attributable to the process.Because of these comments, the SBAhas re-assessed its examination feeschedule and its impact on the variousclasses of licensees. Based on itsreassessment, the SBA has concludedthat the current fee schedule places adisproportionate burden on certainclasses of licensees and, in some cases,results in fee assessments that exceedreasonable charges based on the level ofeffort and time associated with theexamination process.To remedy this situation, the SBA isproposing revisions to § 107.692 toestablish fees that are more reasonablein relation to the level of effort andresources expended by the Agency. Theproposed fee schedule would establish‘‘base fees’’ for examinations. The basefee increases as a licensee’s total assetsincrease, but is capped at $14,000. Thebase fee would be adjusted upward incircumstances where the Agency incursadditional cost or burdens in theprocess because of circumstances solelyrelated to the licensee to be examined.Similarly, the base fee would beadjusted downward wherecircumstances solely related to thelicensee to be examined are such thatthe Agency’s level of effort and time areminimized. In SBA’s view, theseadjustments are incentives for thelicensees to adhere to programregulations and will serve to furtherenhance the safety and soundness of theSBIC program. The new fee schedulewould apply to examinations beginningafter the effective date of a final rule.Compliance With Executive Orders,12612, 12778, and 12866, theRegulatory Flexibility Act (5 U.S.C. 601,et seq.), and the Paperwork ReductionAct (44 U.S.C. Ch. 35)SBA certifies that this proposed rulewould not be a significant regulatoryaction for purposes of Executive Order12866 because it would not have anannual effect on the economy of morethan $100 million, and that it would nothave a significant economic impact ona substantial number of small entitieswithin the meaning of the RegulatoryFlexibility Act, 5 U.S.C. 601, et seq. Thepurpose of the proposed rule is tomodify the existing regulatory guidancerelated to SBIC examination fees. Theproposed regulations would provide formore reasonable and equitableexamination fees. The proposed feestructure would more properly reflectthe level of effort and Agency resourcesexpended to conduct an examination,would encourage continued compliancewith program regulations, and wouldcontinue to allow for efficient andeffective program administration.The proposed regulations would havesome economic effect. The base fee forexaminations would continue to bebased on total assets of a licensee and,for the most part, at the rates prescribedin current regulations. However, nolicensee would have a base fee greaterthan $14,000. The proposed regulationswould provide for discounts of the baseexamination fee for (1) licensees thathad no outstanding regulatory violationsat the time of the examination and therewere no violations noted as a result ofthe most recent prior examination; and(2) licensees that are cooperative withSBA examination personnel by beingfully responsive to the letter ofnotification of examination. Similarly,the proposed regulations would provideincreases to the base examination fee fora licensee that (1) is organized as apartnership or limited liabilitycompany; (2) is authorized to issueParticipating Securities; and/or (3)maintains its records/files in multiplelocations.The largest licensees, those with totalassets exceeding $60 million, wouldrealize substantial fee decreases. Theexamination base fee of all licenseespotentially could be increased ordecreased. Therefore, all licensees withtotal assets below $60 million mayexperience a 5% to 25% increase or a10% to 25% decrease in the cost of anannual examination. The economicimpact in either case is inconsequentialgiven the total number of licensees andthe base fees applicable to the majorityof the licensees. Further, even assumingthe maximum increases provided for inthe proposed regulations, most licenseeswith total assets greater than $60million would realize significantexamination fee reductions.For purposes of the PaperworkReduction Act, 44 U.S.C. Ch. 35, SBAcertifies that this proposed rule, ifadopted in final form, would contain nonew reporting or recordkeepingrequirements that have not already beenapproved by the Office of Managementand Budget.For purposes of Executive Order12612, SBA certifies that this rulewould not have any federalismimplications warranting the preparationof a Federalism Assessment.For purposes of Executive Order12778, SBA certifies that this rule isdrafted, to the extent practicable, inaccordance with the standards set forthin Section 2 of that Order.List of Subjects in 13 CFR Part 107Investment companies, Loanprograms-business, Reporting andrecordkeeping requirements, Smallbusinesses.For the reasons set forth above, SBAhereby proposes to amend Part 107 ofTitle 13 of the Code of FederalRegulations as follows:PART 107—SMALL BUSINESSINVESTMENT COMPANIES1. The authority citation for part 107is revised 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 readas follows:§ 107.692 Examination fees.(a) General. SBA will assess fees forexaminations in accordance with this§ 107.692. Unless SBA determinesotherwise on a case by case basis, SBAwill not assess fees for specialexaminations to obtain specificinformation.(b) Base fee. A base fee will beassessed based on your total assets (atcost) as of the date of your latestcertified financial statement or a morerecent interim statement requested byand submitted to SBA in connectionwith the examination. The base fee tableis as follows: