Regulatory Alerts2007-11-13 | ISGC-2007-010-DOBLimitations on Qualified Investment or Qualified Lending Under the Business Development Company Act
The Washington State Department of Financial Institutions determined that Business Development Corporations are prohibited from making qualified investments or loans to projects located in Idaho or Oregon. This restriction applies to both direct investments in cross-border projects and indirect investments through independent pooled funds that lend to such jurisdictions. The Division noted that permitting these activities would require legislative amendments to the Business Development Company Act.
State of Washington DEPARTMENT OF FINANCIAL INSTITUTIONS P.O. Box 41200 ∙ Olympia, Washington 98504-1200 Telephone (360) 902-8700 ∙ TDD (360) 664-8126 ∙ FAX (360) 586-5068 ∙ http://www.dfi.wa.gov Joseph M. Vincent, General Counsel Direct: 360.902.0516 Mobile: 360.970.4699 E-Fax: 360.704.7036 Email: jvincent@dfi.wa.gov ISGC-2007-010-DOB November 13, 2007 Re: Limitations on “Qualified Investment” or “Qualified Lending” under the Business Development Company Act Dear Mr. Lisaius: Pursuant to your letter to Brad Williamson dated September 27, 2007, the Division of Banks of the Washington State Department of Financial Institutions (“Division”) has been asked to consider whether Business Development Corporation (“BDC ”) is permitted to make a “qualified investment” or “qualified loan” under the Business Development Company Act (Ch. 31.24 RCW) to an independent investment or lending pool that makes business development investments and/or loans in both Washington and Idaho. Currently, the Business Development Company Act does not specifically permit qualified investments or loans to either (1) business development projects which are situated in both Washington and Oregon or Washington and Idaho, or (2) independent, pooled investment or loan funds which, in turn, make investments or loans to business development projects in Idaho and/or Oregon. Doing so would require an amendment of the Legislature, likely in the definitions contained in subsections (7), (17) and (18) of RCW 31.24.010. Nothing in the current prohibition prevents you from acting as a “facilitator” of any transaction involving Idaho or Oregon. However, BDC may not make a “qualified
ISGC-2007-010-DOB Re: Limitations on “Qualified Investment” or “Qualified Lending” under the Business Development Company Act November 13, 2007 – Page 2 of 2 Pages investment” or “qualified loan” that results in an investment or loan to a project located wholly or partially in Idaho or Oregon. If you have any further questions, please do not hesitate to call upon the Division at (360) 902-8704. Very truly yours, WASHINGTON STATE DEPARTMENT OF FINANCIAL INSTITUTIONS By: Joseph M. Vincent General Counsel For Division of Banks