| (4) To continue to be certified, a CAPCO must make qualified investments of certified capital received from certified investors, with respect to Program One and Program Two, according to the following schedule: (A) before the third anniversary of its allocation date, a CAPCO must have made qualified investments in an amount cumulatively equal to at least 30% of the certified capital allocated on such date; and (B) before the fifth anniversary of its allocation date, a CAPCO must have made qualified investments in an amount cumulatively equal to at least 50% of the certified capital allocated on such date, subject to the following: (i) at least 50% of the dollar amount of qualified investments required in subparagraph (B) of this paragraph must be placed in early stage businesses; and (ii) at least 30% of the dollar amount of qualified investments required in subparagraphs (A) and (B) of this paragraph must be placed in strategic investment and/or low income community businesses. (5) The aggregate cumulative amount of all qualified investments made by the CAPCO after its allocation date shall be considered in the computation of the percentage requirements in paragraph (4) of this subsection, subsection (i) of this section, and any other applicable provisions in this section. Any investment returns or profits received by the CAPCO from a qualified investment may be invested in another qualified investment and counted towards any requirement in this section with respect to investments of certified capital. (6) Any amounts received by a certified capital company from a qualified business as commitment fees, closing fees, license fees, royalties or similar charges shall be considered as reductions in the CAPCO's qualified investments in the computation of the percentage requirements in paragraph (4) of this subsection, subsection (i) of this section, and any other applicable provisions in this section. (7) A business that is classified as a qualified business, early stage business, or strategic investment business or low-income community business at the time that the CAPCO first invests in the business remains classified as a qualified business, early stage business, or strategic investment business or low-income community business. The business may receive follow-on investments from any CAPCO, even though the qualified business may not meet the definition of a qualified business, early stage business, or strategic investment business, low income community business as applicable, at the time of the follow-on investment, unless the qualified business no longer has its principle business operations in Texas. Investment in the qualified business by another CAPCO retains the qualified business' original classification. (8) A CAPCO may not make a qualified investment the cost of which is greater than 15% of the total certified capital of the CAPCO at the time of investment. (9) A CAPCO shall invest any certified capital not invested in qualified investments only in the following, provided however, that any such investments are not assigned, pledged, restricted, or otherwise encumbered for the benefit of an affiliate of a CAPCO: (A) cash deposited with a federally insured financial institution located in Texas that is not affiliated with the CAPCO; (B) certificates of deposit in a federally insured financial institution located in Texas that is not affiliated with the CAPCO; (C) investment securities that are obligations of the United States or its agencies or instrumentalities or obligations that are guaranteed fully as to principal and interest by the United States; (D) debt instruments rated at least "A" or its equivalent at the time of purchase by a nationally recognized credit rating organization, or issued by, or guaranteed with respect to payment by an entity whose unsecured indebtedness is rated at least "A" or its equivalent by a nationally recognized credit rating organization and which indebtedness is not subordinated to other unsecured indebtedness of the issuer or the guarantor provided that the debt instruments are not procured through a financial institution affiliated with the CAPCO; (E) obligations of Texas or any municipality or political subdivision of Texas provided that the obligations are not procured through a financial institution affiliated with the CAPCO; and (F) any other investments approved in advance and in writing by the comptroller. (10) If a qualified business moves its principal business operations outside Texas before the 90th day after a CAPCO makes an investment in it, the investment is not considered a qualified investment for the purposes of the percentage requirements in paragraph (4) of this subsection, subsection (i) of this section, and any other applicable provisions in this section. (11) Any transfer, sale, acquisition, purchase, assignment, or merger of a CAPCO ownership interest should be pre-approved by the comptroller. In no event shall an owner or any affiliate, having an ownership interest of 10% or greater, of a CAPCO, acquire an ownership interest of 10% or greater in another CAPCO without the written approval of the comptroller. The comptroller may request any information deemed necessary to evaluate changes in CAPCO ownership. (e) Annual review. Each CAPCO is subject to review as specified in this section to determine compliance with rules and statutes. (1) The comptroller shall conduct an annual review of each CAPCO to: (A) ensure that the CAPCO continues to satisfy the requirements of this section and Insurance Code, Articles 4.51 - 4.73; (B) ensure that the CAPCO has not made any investment in violation of this section and Insurance Code, Articles 4.51 - 4.73; and (C) determine the eligibility status of its qualified investments. (2) Each CAPCO shall pay the reasonable cost for the annual review to be billed by the comptroller or, if the review is conducted by an independent examiner under the authority of the comptroller, the CAPCO shall reimburse the comptroller. (f) Decertification. A CAPCO may be decertified for violations of this section or the Insurance Code, and premium tax credits may be recaptured and forfeited to the extent expressly set forth in this section or in the Insurance Code. (1) A material violation of Insurance Code, Articles 4.56, 4.58, or 4.59 is grounds for decertification of a CAPCO. The comptroller shall notify the officers of the CAPCO in writing of the violations and that the company may be decertified after 120 days from the date on which the notice is mailed, unless the violations are corrected as determined by the comptroller. (A) Violations of Insurance Code, Articles 4.56(a), 4.56(b), 4.56(f) or 4.56(h) shall constitute a material violation of the statutes. (B) Two consecutive violations of the requirements of Insurance Code, Article 4.58 or 4.59 shall constitute a material violation of the statute. (C) Two or more consecutive instances of a CAPCO failing to pay fees or penalties on a timely basis, two or more consecutive omissions of required information, a misstatements of facts in applications or annual reports, shall constitute material violations of the statutes. (2) A hearing is available to a CAPCO that is subject to decertification as provided in Chapter 1, Subchapter A, Division 1, §§1.1 - 1.42 of this title (relating to Central Administration). (3) Decertification is effective on the date on which the company receives notice of decertification from the comptroller. Notices will be sent via certified mail or via an overnight common carrier delivery service, and become effective on receipt by the CAPCO. (4) In the event of decertification of a CAPCO, the comptroller shall notify any appropriate state agency of the decertification including, but not limited to the Secretary of State, the Office of Economic Development and Tourism, and the Office of the Insurance Commissioner. (5) Premium tax credits previously claimed shall be recaptured and future premium tax credits shall be forfeited following decertification of a CAPCO in accordance with the provisions of Insurance Code, Article 4.63. (6) When a CAPCO has invested an amount equal to 100% of its certified capital, with respect to Program One, in qualified investments, any premium tax credit claimed or to be claimed by a certified investor with respect to an investment in Program One is not subject to recapture or forfeiture. When a CAPCO has invested an amount equal to 100% of its certified capital with respect to Program Two in qualified investments, any premium tax credit claimed or to be claimed by a certified investor with respect to an investment in Program Two is not subject to recapture or forfeiture. (7) The comptroller will send a written notice to each certified investor whose premium tax credit is subject to recapture or forfeiture for failure of the CAPCO to maintain certification eligibility. Notification will be sent in accordance with paragraph (3) of this subsection. Cont'd... |
