Small Business Administration:

Prohibited Practices and Inadequate Oversight in SBIC and SSBIC Programs

T-OSI-95-16: Published: Sep 28, 1995. Publicly Released: Sep 28, 1995.

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GAO discussed whether small business investment companies (SBIC) and specialized small business investment companies (SSBIC): (1) engaged in improper management practices; and (2) took timely corrective actions for the regulatory violations identified by the Small Business Administration (SBA). GAO noted that the: (1) SBIC and SSBIC engaged in improper management practices by providing loans to officers and directors of the licensees, loans for prohibited real estate purchases, and loans to individuals of questionable eligibility; (2) SBIC and SSBIC seldom took timely corrective actions for regulatory violations, and SBA did not ensure that these violations were corrected; (3) some SBIC and SSBIC violations went unresolved for 2 to 5 years or more; and (4) the estimated losses for 3 of the 5 companies reviewed exceeded $4 million.

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