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This opinion was issued in the first quarter of 2000.
The Fund is a limited partnership that invests in a portfolio of Small Business Investment Companies ("SBICs") operating throughout the country. SBICs make loans and investments to small businesses that meet the size, profitability and other criteria established by the Small Business Administration ("SBA"). The Fund is divided into four geographic regions representing the northeast (New England and Middle Atlantic), southern (East South Central, West South Central and South Atlantic), central (East North Central and West North Central) and Pacific (Pacific and Mountain) portions of the United States. A financial institution would invest in the Fund by purchasing interests in the partnership and by designating a targeted region for its investment. During the investment period, the partnership will invest in 12 to 15 SBICs covering different geographies and industries. These SBICs are expected to make investments in approximately 180 to 300 small businesses.
The Division reviewed the applicable state CRA regulations for evaluation of this proposal under the "investment test." The investment test evaluates an institution's record of helping to meet the credit needs of its assessment area(s) through qualified investments that benefit its assessment area(s) or a broader statewide or regional area that includes the institution's assessment area(s). See 209 CMR 46.23(l). A qualified investment is defined as a "lawful investment, deposit, membership share, or grant that has as its primary purpose community development." See 209 CMR 46.12. The definition of community development includes (a) affordable housing (including multi-family rental housing) for low- and moderate-income individuals; (b) community services targeted to low- and moderate-income individuals; (c) activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration's Development Company or Small Business Investment Company programs (13 CFR 121.301) or have gross annual revenues of $1 million or less; (d) activities that revitalize or stabilize the fishing industry; or (e) activities that revitalize or stabilize low- and moderate-income geographies. See 209 CMR 46.12.
Based on the above state regulatory provisions and the objectives of the Fund, the Division would consider an institution's investment in the Fund a qualified investment for CRA purposes, provided the investment benefits the institution's assessment area(s) or a broader statewide or regional area that includes the institution's assessment area.