13 CFR Regulation 120.641

§ 120.641

13 CFR Ch. I (1–1–12 Edition)

(d) SBA ownership rights not limited.
No Federal, State or local law can preclude or limit the exercise by SBA of
its ownership rights in the portions of
loans constituting the Pool against
which the Certificates are issued.
§ 120.641 Disclosure to purchasers.
(a) Information to purchaser. Prior to
any sale, the Pool Assembler, Registered Holder of an Individual Certificate, or any subsequent seller must disclose to the purchaser, verbally or in
writing, information on the terms, conditions, and yield as described in the
SBA
Secondary
Market
Program
Guide.
(b) Information on transfer document.
The seller must provide the same information described in paragraph (a) of
this section in writing on the transfer
document when the seller submits it to
the FTA. After the sale of an Individual Certificate, the FTA will provide the disclosure information in writing to the purchaser.
(c) Information in prospectus. If the
Registered Holder is a trust, investment Pool, mutual fund or other security, it must disclose the information
in paragraph (a) of this section to investors through a prospectus and other
promotional material if an Individual
Certificate or Pool Certificate is placed
into or used as the backing for the investment vehicle.
§ 120.642 Requirements before the FTA
issues Pool Certificates.
Before the FTA issues any Pool Certificate, the Pool Assembler must deliver to it the following documents:
(a) A properly completed Pool application form;
(b) Either:
(1) Individual Certificates evidencing
the guaranteed portions comprising the
Pool; or
(2) An executed SPGA and related
documentation for the loans whose
guaranteed portions are to be part of
the Pool; and
(c) Any other documentation which
SBA may require.
§ 120.643 Requirements before the FTA
issues Individual Certificates.
(a) FTA issuance of initial Certificate.
Before the FTA can issue the Indi-

vidual Certificate for a guaranteed portion of a loan, the original seller must
provide the following documents to the
FTA:
(1) An executed SPGA;
(2) A copy of the note representing
the guaranteed loan; and
(3) Any other documentation which
SBA may require.
(b) Review of documentation. SBA
may review or require the FTA to review any documentation before the
FTA issues a Certificate.
§ 120.644

Transfers of Certificates.

(a) General rule. Certificates are
transferable. Transfers in the Secondary Market must comply with Article 8 of the Uniform Commercial Code
of the State of New York. The seller
must use the detached form of assignment (SBA Form 1088), unless the seller and purchaser choose to use another
form which the SBA approves. The
FTA may refuse to issue a Certificate
until it is satisfied that the documents
of transfer are complete.
(b) Transfer on FTA records. In order
for the transfer of a Certificate to be
effective the FTA must reflect it on its
records.
(c) Contents of letter of transmittal accompanying the transfer of Certificates.
(1) A letter of transmittal must accompany each Certificate which a Registered Holder submits to the FTA for
transfer. The Registered Holder must
supply the following information in the
letter:
(i) Pool number, if applicable;
(ii) Certificate number;
(iii) Name of purchaser of Certificate;
(iv) Address and tax identification
number of the purchaser;
(v) Name and telephone number of
the person handling or facilitating the
transfer;
(vi) Instructions for the delivery of
the new Certificate.
(2) The Registered Holder must also
send the fee which the FTA charges for
this service. The FTA will supply fee
information to the Registered Holder.
(d) Lender cannot purchase guaranteed
portion of loan it made. The Lender (or

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Small Business Administration

§ 120.660

its Associate) that made a 7(a) guaranteed loan cannot purchase the guaranteed portion of that loan in the Secondary Market. If a Lender does purchase the guaranteed portion of one of
its own loans, it shall not have the unconditional guarantee of SBA.
§ 120.645

Redemption of Certificates.

(a) Redemption of Individual Certificate. The prepayment of the underlying
loan or a default on such loan will trigger the redemption of the Certificate
by FTA/SBA in accordance with the
procedures prescribed in the SPGA.
(b) Redemption of Pool Certificate. The
FTA and SBA may redeem a Pool Certificate because of prepayment or default of all loans in a Pool.

(v) The name in which the Certificate
was registered;
(vi) Any assignment, endorsement or
other writing on the Certificate; and
(vii) A statement of the circumstances of the theft or loss.
(b) When the FTA receives notice of
the theft or loss, it will stop any transfer of the Certificate. The Registered
Holder must send to the FTA all available portions of a mutilated or defaced
Certificate. When the Registered Holder completes these steps, the FTA will
replace the Certificate.
§ 120.652 FTA fees.
The FTA may charge reasonable
servicing fees, transfer fees, and other
fees as the SBA and FTA may negotiate under contract.

§ 120.650 Registration duties of FTA in
Secondary Market.
The FTA registers all Certificates.
This means it issues, transfers title to,
and redeems them. All financial transactions relating to a guaranteed portion of a loan flow through the FTA. In
fulfilling its obligation to keep the
central registry current, the FTA may,
with SBA’s approval, obtain any necessary information from the parties involved in the Secondary Market.
§ 120.651 Claim to FTA by Registered
Holder to replace Certificate.
(a) To replace a Certificate because
of loss, theft, destruction, mutilation,
or defacement, the Registered Holder
must:
(1) Give the FTA information about
the Certificate and the facts relating to
the claim;
(2) File an indemnity bond acceptable
to SBA and the FTA with a surety to
protect the interests of SBA and the
FTA;
(3) Pay the FTA its fee to replace a
Certificate; and
(4) Use an affidavit of loss (form
available from the FTA) to report:
(i) The name and address of the Registered Holder (and the name and capacity of any representative actually
filing the claim);
(ii) The Certificate by Pool number,
if applicable;
(iii) The Certificate number;
(iv) The original principal amount;

SUSPENSION OR REVOCATION OF
PARTICIPANT IN SECONDARY MARKET
§ 120.660 Suspension or revocation.
(a) Suspension or revocation of Lender,
broker, dealer, or Registered Holder for
violation of Secondary Market rules and
regulations. The D/FA may suspend or
revoke the privilege of a Lender,
broker, dealer, or Registered Holder to
sell, purchase, broker, or deal in loans
or Certificates for:
(1) Committing a serious violation, in
SBA’s discretion, of:
(i) The regulations governing the
Secondary Market; or
(ii) Any provisions in the contracts
entered into by the parties, including
SBA Forms 1085, 1086, 1088 and 1454; or
(2) Knowingly submitting false or
fraudulent information to the SBA or
FTA.
(b) Additional rules for suspension or
revocation of broker or dealer. In addition to acting under paragraph (a) of
this section, the D/FA may suspend or
revoke the privilege of any broker or
dealer to sell or otherwise deal in Certificates in the Secondary Market if:
(1) Its supervisory agency has revoked or suspended the broker or dealer from engaging in the securities business, or is investigating the firm or
broker for a practice which SBA considers, in its sole discretion, to be relevant to the broker’s or dealer’s fitness
to participate in the Secondary Market;

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