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DRAFT

FOR DISCUSSION ONLY



UNIFORM NONDEPOSITORY PROVIDERS OF FINANCIAL SERVICES ACT



NATIONAL CONFERENCE OF COMMISSIONERS

ON UNIFORM STATE LAWS

SEPTEMBER, 1998



UNIFORM NONDEPOSITORY PROVIDERS OF FINANCIAL SERVICES ACT





With Notes





Copyright © 1998

By



NATIONAL CONFERENCE OF COMMISSIONERS

ON UNIFORM STATE LAWS



The ideas and conclusions set forth, in this draft, including the proposed statutory language and any comments or reporter's notes, have not been passed upon by the National Conference of Commissioners on Uniform State Laws or the Drafting Committee. They do not necessarily reflect the views of the Conference and its Commissioners and the Drafting Committee and its Members and Reporters. Proposed statutory language may not be used to ascertain the intent or meaning of any promulgated final statutory proposal.

DRAFTING COMMITTEE ON UNIFORM NONDEPOSITORY PROVIDERS OF FINANCIAL SERVICES ACT



TOM BOLT, Corporate Place, Royal Dane Mall, St. Thomas, VI 00802-6410, Chair

ARTHUR E. BONFIELD, University of Iowa, College of Law, Iowa City, IA 52242

DAVID A. GIBSON, P.O. Box 1767, 10 Park Place, Brattleboro, VT 05302

MICHAEL HOUGHTON, P.O. Box 1347, 18th Floor, 1201 N. Market Street, Wilmington, DE 19899

L. GENE LEMON, 1850 N. Central Avenue, Suite 2411, Phoenix, AZ 85077

SCOTT SCHERER, 1085 Palms Airport Drive, Las Vegas, NV 89119

SANDRA S. STERN, 509 Madison Avenue, Suite 612, New York, NY 10022

KEN H. TAKAYAMA, Legislative Reference Bureau, State Capitol, Room 446, Honolulu, HI 96813

ANITA RAMASASTRY, University of Washington, School of Law, Condon Hall, 1100 N.E. Campus Parkway, Seattle, WA 98105-6617, Reporter



EX OFFICIO



GENE N. LEBRUN, P.O. Box 8250, 9th Floor, 909 St. Joseph Street, Rapid City, SD 57709, President

SCOTT N. HEIDEPRIEM, 431 N. Phillips Avenue, Suite 400, Sioux Falls, SD 57104, Division Chair



AMERICAN BAR ASSOCIATION ADVISOR



DAVID S. WILLENZIK, 643 Magazine Street, New Orleans, LA 70130-3405



EXECUTIVE DIRECTOR



FRED H. MILLER, University of Oklahoma, College of Law, 300 Timberdell Road, Norman, OK 73019, Executive Director

WILLIAM J. PIERCE, 1505 Roxbury Road, Ann Arbor, MI 48104, Executive Director, Emeritus















Copies of this Draft Act may be obtained from:



NATIONAL CONFERENCE OF COMMISSIONERS

ON UNIFORM STATE LAWS

211 East Ontario Street, Suite 1300

Chicago, Illinois 60611

(312) 915-0195DRAFT NONDEPOSITORY PROVIDERS OF

FINANCIAL SERVICES ACT

TABLE OF CONTENTS

PART 1

GENERAL PROVISIONS

SECTION 101. SHORT TITLE.

SECTION 102. DEFINITIONS.

PART 2

SCOPE, EXCEPTIONS AND EXCLUSIONS

SECTION 201. SCOPE.

SECTION 202. SUPERVISORY POWERS OF [SUPERINTENDENT].

SECTION 203. EXCLUSIONS.

SECTION 204. LICENSE REQUIREMENT.



PART 3

LICENSING OF MONEY TRANSMITTERS, CHECK SELLERS, CHECK ISSUERS [AND STORED VALUE PROVIDERS]

SECTION 301. APPLICATION FOR LICENSE.

SECTION 302. BOND AND NET WORTH REQUIREMENTS.

SECTION 303. ISSUANCE OF LICENSE.

SECTION 304. LICENSE RENEWAL.

SECTION 305. LICENSE FEE.

SECTION 306. NET WORTH.

PART 4

LICENSING OF CHECK CASHERS AND CURRENCY EXCHANGERS

SECTION 401. APPLICATION FOR LICENSE.

SECTION 402. ISSUANCE OF LICENSE.

SECTION 403. LICENSE RENEWAL.

SECTION 404. LICENSE FEE.

SECTION 405. NET WORTH.

PART 5

AUTHORIZED DELEGATES

SECTION 501. RELATIONSHIP BETWEEN LICENSEES AND AUTHORIZED

DELEGATES.

SECTION 502. SCOPE OF AUTHORIZED DELEGATE ACTIVITY.

SECTION 503. PROHIBITED TRANSACTIONS.

PART 6

EXAMINATIONS, REPORTS AND RECORDS

SECTION 601. AUTHORITY TO CONDUCT EXAMINATIONS.

SECTION 602. JOINT EXAMINATIONS

SECTION 603. REPORTS.

SECTION 604. CHANGE OF CONTROL.

SECTION 605. BOOKS AND RECORDS

SECTION 606. TRANSACTION RECORDS.

SECTION 607. MONEY LAUNDERING REPORTS.

SECTION 608. CONFIDENTIALITY OF RECORDS.

PART 7

PERMISSIBLE INVESTMENTS

SECTION 701. MAINTENANCE OF PERMISSIBLE INVESTMENTS.

PART 8. ENFORCEMENT.

SECTION 8001. CEASE AND DESIST ORDERS; SUSPENSION AND

REVOCATION POWERS.

SECTION 8002. AUTHORIZED DELEGATES; CEASE AND DESIST

ORDERS.

SECTION 8003. CONSENT ORDERS.

SECTION 8004. CIVIL PENALTIES.

SECTION 8005. CRIMINAL PENALTIES.

SECTION 8006. UNAUTHORIZED ACTIVITY.

SECTION 8007. INJUNCTIONS.

PART 9

ADMINISTRATIVE PROCEDURES

SECTION 901. ADMINISTRATIVE PROCEDURES.

SECTION 902. HEARINGS.

PART 10

MISCELLANEOUS PROVISIONS

SECTION 1001. CONSUMER DISCLOSURE.

SECTION 1002. APPOINTMENT OF [SUPERINTENDENT] AS AGENT FOR

SERVICE OF PROCESS.

SECTION 1003. UNIFORMITY OF APPLICATION AND CONSTRUCTION.

SECTION 1004. SEVERABILITY.

SECTION 1005. EFFECTIVE DATE.

SECTION 1006. SAVINGS AND TRANSITIONAL PROVISIONS.



PART 1.

GENERAL PROVISIONS.

SECTION 101. SHORT TITLE. This [Act] may be cited as the Nondepository Providers Act.

SECTION 102. DEFINITIONS. In this [Act]:

(1) "Applicant" means a person filing an application for a license under this [Act].

Source: Non-Bank Funds Transmitter Group Model Act Regulating Money Transmitters ("Model Act Regulating Money Transmitters") Section 3.



SUBPARAGRAPH (2) ALTERNATIVE 1

(2) "Authorized delegate" means an entity designated by the licensee under this [Act] to sell or issue payment instruments, to transmit funds, cash checks, sell or exchange currency, or sell, issue, or redeem stored value products on behalf of a licensee.

Source: Model Act Regulating Money Transmitters Section 3.

Reporter's Note: It is important to clearly define the outlets through which money service businesses conduct their business. This definition will help to define the legal relationship between money service businesses and those outlets. The Money Transmitters Regulators' Association Model Legislation Outline ("Model Legislation Outline") uses the term "authorized agent" as an alternative to authorized delegate. The Financial Crimes Enforcement Network of the United States Department of Treasury ("FinCEN") in its recent proposed rulemaking concerning money service businesses uses the term "agent" for those same entities. In its comments, FinCEN notes that "Treasury intends that the concept of 'agent' for the list requirement should be as broad as the common law of agency would allow, that is, it would extent to any relationship that would be deemed to create obligations of principal and agent at common law. Thus, for example, it is likely that virtually all independent contractor arrangements for money service businesses -- whatever their characterization for employment law or income tax purposes -- would be treated as creating principal-agent relationships to define the parameters of the rights, obligations and direct and derivative liabilities of the parties. See Restatement (Second) of Agency Sections 2© and 14N." 62 Fed. Reg. 27895. Finally, the Non-Bank Funds Transmitters Group has suggested another alternative, "money transmitter outlet" to refer to independently owned sales outlets. The definition of money transmitter outlet defines the entity as "a person, whether or not licensed or required to be licensed, who is engaged in the business of transferring funds through a money transmitter even if incidental to another business."



SUBPARAGRAPH (2) ALTERNATIVE 2

(2) "Agent" means a person whom the licensee appoints as its agent with authority to conduct money service business activities on behalf of the licensee.

Source: Modification of definition contained in Section 33043 of the California Financial Code.

Reporter's Note: Rather than use the term delegate the committee may consider using the term "agent" to signify the relationship between a licensee and outlets that conduct business on behalf of the licensee.



(3) "Check casher" means a person who, for compensation sells currency in exchange for payment instruments received. The term does not include a person who cashes checks in an amount less than or equal to [$500] for any person on a single day.

Source: Florida Money Transmitters Code Section 560.102 (with modifications).

Reporter's Note: The $1,000 per day threshold is an attempt to exempt small businesses such as grocery stores and businesses where check cashing is a service offered to customer incidental to another business (e.g., hotels) from having to obtain a license. FinCEN, in its proposed amendments to the Bank Secrecy Act used a $500 per day threshold. Many of the responses to FinCEN's proposed rules advocated a higher dollar limit of $1,000 or more. An alternative definition that is used in some of the states excludes "persons engaged in check cashing [or currency exchanging] which is incidental to the retail sale of goods and services, whose compensation for cashing checks [or exchanging currency] does not exceed 5 percent of the total gross income from the retail sale of goods or services . . . ."



The Drafting Committee, at its February meeting, noted that the $1,000 threshold might be too high and would potentially exempt too many money service businesses. Consequently, the recommended threshold remains at $500.



(4) "Check cashing" means exchanging for compensation a payment instrument for money delivered to the presenter at the time and place of the presentation.

Source: Arizona Money Transmitter Act Section 6-1201 (with modifications).

Reporter's Note: It is important to have a definition for each of the services that have been grouped under the general heading of nondepository providers of financial services.



(5) "Check issuer" means a person who engages in the business of issuing payment instruments and who is responsible for payment on the instruments, other than a person who issues payment instruments in an amount less than $500 in currency or monetary or other negotiable instrument to any person on any day.

Source: FinCEN proposed amendments to the Bank Secrecy Act Regulations -- Definition and Registration of Money Service Businesses amending 31 C.F.R. Part 103 (with modifications).



(6) "Check seller" means a person who engages in the business of selling payment instruments issued by another person, even if incidental to another business.

Source: FinCEN Proposed Amendments to the Bank Secrecy Act Regulations B Definition and Registration of Money Service Businesses amending 31 C.F.R. Part 103 with proposed modifications of Non-Bank Funds Transmitters Group.

Reporter's Note: An alternative term is "Payment Instrument Seller."



(7) "Closed-end stored value product" means a stored value product where the issuer is also the payee and the product is issued to pay for a series of goods and services that are provided by the issuer.

Source: New.

Reporter's Note: This definition is derived from A Commercial Lawyer's Take on the Electronic Purse: An Analysis of Commercial Law Issues Associated with Stored Value Cards and Electronic Money prepared by the American Bar Association's Uniform Commercial Code Committee, Subcommittee on Payments, the Banking Law Committee, Subcommittee on Domestic and International Payments and EFT and the Committee on Law of Commerce in Cyberspace (1996). Many of the comments received by FinCEN with respect to registration requirements for stored value issuers discussed the distinction between closed-end systems such as phone cards and metro cards and open systems that can be used by consumers for a wide variety of transactions. The definitions provided in the proposed act are an attempt to distinguish between closed and open systems for purposes of licensing and regulation. Other exceptions that may need to be included in the definition of stored value include (I) a small dollar exception for issuers and (ii) an exception for merchants or others that honor stored value instruments.



(8) "Control" means ownership of, or the power to vote, 25% or more of the outstanding voting securities of a licensee or controlling person. The interests of any other person controlled by that person are aggregated with that person's interest for the purposes of determining the percentage of a licensee controlled by a person.

Source: Model Act Regulating Money Transmitters Section 3.



(9) "Controlling person" means any person directly or indirectly in control of a licensee.

Source: Arizona Money Transmitter Act Section 6-1201; Model Act Regulating Money Transmitters Section 3 (modified to include the word "indirectly").



(10) "Currency" means the coin and paper money of the United States or of any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in a foreign country.

Source: Florida Money Transmitters Code Section 560.102.



(11) "Currency exchanger" means a person who exchanges, for compensation, currency of the United States or a foreign government to currency of another government.

Source: Florida Money Transmitters Code Section 560.102.



(12) "Executive officer" means the licensee's president, chairman of the executive committee, senior officer responsible for the licensee's business, a chief financial officer, and any other person who performs similar functions.

Source: Model Act Regulating Money Transmitters, Section 3.



(13) "Key Shareholder" means any person or group or persons acting in concert who is the owners of [25%] percent or more of any voting class of the stock of an applicant.

Source: Model Act Regulating Money Transmitters Section 3.



(14) "Licensee" means a person licensed under this [Act].

Source: Model Act Regulating Money Transmitters Section 3.



(15) "Location" means a place of business at which money service business activity occurs.

Source: New.



(16) "Material litigation" means litigation that, according to generally accepted accounting principles, is considered significant to an applicant's or licensee's financial health, and is referenced in that entity's annual audited financial statements, reports to shareholders, or similar documents.

Source: Model Act Regulating Money Transmitters Section 3.



(17) "Mobile location" means a mobile check cashing facility, where on no more than [2] days per week, on property occupied by an employer, a licensed check casher may, under written contract with the employer, engage in the business of cashing payroll checks for the employees of the employer.

Source: Connecticut Negotiable Instruments, Check and Check Cashing Services Act, Section 36a-580.

Reporter's Note: The Drafting Committee recommended that mobile check cashing facilities be included as a specific type of location.



(18) "Money" means a medium of exchange that is authorized or adopted by a domestic or foreign government [and includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more nations].

Source: Uniform Commercial Code Section 1-201(24).



PARAGRAPH (19) ALTERNATIVE 1

(19) "Money service business" means a person who is located or doing business within this State, as an organized business concern, in one or more of the capacities listed as follows:

(A) currency dealer or exchanger;

(B) check issuer;

(C) check seller;

(D) check casher;

(E) money transmitter; or

(F) stored value provider.

Source: FinCEN Proposed Amendments to Bank Secrecy Act Regulations B Definition and Registration of money Service Businesses (with modifications) amending 31 C.F.R, Part 103.

Reporter's Note: FinCEN defines each of the money service businesses within the definition itself. This draft includes general definitions of each money service business as well as a global definition. FinCEN also uses the terms "issuer of traveler checks, money orders or stored value rather than check issuer" and "seller or redeemer of traveler's checks, money orders, or stored value." This draft uses the term check seller and check issuer to more closely mirror existing state legislation.



PARAGRAPH (19) ALTERNATIVE 2

(19) "Money service business" means a person who is located or doing business in this State, including a check casher, check seller, money transmitter, and stored value provider, who does any of the following:

(A) sells or issues payment instruments;

(B) engages in the business of receiving money for the transmission of or transmitting money;

(C) engages in the business of exchanging payment instruments or money into any form of money or payment instrument;

(D) engages in the business of receiving money for obligors for the purpose of paying the obligor's bills, invoices or accounts; or

Source: Model Money Transmitter Licensing and Regulation Act.

Reporter's Note: The Model Money Transmitter Licensing and Regulating Act groups all money service businesses (except stored value issuers or sellers) together as "money transmitters." The current definition simply substitutes the term "money transmitter" with "money service business." Subsection (E), which included entities that meet the definition of a bank, financial agency or financial institution as set forth in 31 U.S.C. Section 5312, was omitted from this draft by agreement of the Drafting Committee.



PARAGRAPH (20) ALTERNATIVE 1

(20) "Money transmitter" means a person who engages in the transmission of money by any means including transmissions within this country or to or from locations outside this country by payment instrument, wires, facsimile, electronic transfer, or courier. The term does not include a clearinghouse or other association of banks that effect transfers of funds between or among banks through check clearing, wire transfer, automated clearinghouse, or similar services.

Source: Model Act Regulating Money Transmitters Section 3 (with modifications) proposed by New York Clearinghouse in letter dated October 2, 1997 to FinCEN concerning FinCEN's proposed amendments to the Bank Secrecy Act. The exclusion language proposed by the New York Clearinghouse is based in part on the New York Uniform Commercial Code Section 4A-105(1)(E) and the New York Superintendent of Banks regulations on money Transmitters, N.Y. Comp. Codes. R. & Regs. Tit. 3. Section 406.2(K)(7).

Reporter's Note: Query to the Drafting Committee: Does the current definition of money transmitter (and also the definition of payment instrument defined below) include stored value providers? (See the Reporter's Note included after Section 301) At present, several states have amended their money transmission legislation to include stored value providers including Connecticut and West Virginia. Other states, such as Texas, have included stored value providers by interpretation. West Virginia defines "currency transmission" or "money transmission" to include "the transmission of funds through the issuance and sale of stored value cards which are intended for general acceptance and use in commercial or consumer transactions." See WV ST. Section 32A-2-1-



PARAGRAPH (20) ALTERNATIVE 2

(20) "Money transmitter" means a person who accepts currency or funds, either directly or through an authorized delegate, and transmits the currency or funds, or the value of currency or funds, by a means through a financial agency or institution, a Federal Reserve Bank, or other facility of the Board of Governors of the Federal Reserve System, or an electronic funds transfer network.

Source: FinCEN proposed amendments to the Bank Secrecy Act Regulations -- Definition and Registration of Money Service Businesses amending 31 C.F.R. Part 103.



(21) "Outstanding payment instrument" means a payment instrument issued by a licensee which has been sold in the United States directly by the licensee or a payment instrument issued by a licensee which has been sold by an authorized delegate of the licensee in the United States, which has been reported to the licensee has having been sold, and which has not yet been paid by or for the licensee.

Source: Model Act Regulating Money Transmitters Section 3.



(22) "Payment instrument" means a check, draft, money order, travelers check, or other instrument or written order for the transmission or payment of money, sold or issued to one or more persons, whether or not the instrument is negotiable. The term does not include a credit card voucher, letter of credit, or any instrument that is redeemable by the issuer in goods or services.

Source: Model Act Regulating Money Transmitters Section 3.

Reporter's Note: Query: Should the term payment instrument include stored value products? Connecticut, for example, has recently amended its money transmission legislation to include the term "electronic payment instrument" which is defined as "a card or other tangible object for the transmission or payment of money which contains a microprocessor chip, magnetic stripe, or other means for the storage of information, that is prefunded and for which the value is decremented upon each use, but does not include a card or other tangible object that is redeemable by the issuer in the issuer's goods and services." CT.ST. Section 36a-596. Connecticut has also amended its definition of "instrument" to include an electronic payment instrument. Id.



(23) "Person" means a individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, [government; governmental subdivision, agency, or instrumentality; public corporation] or any other legal or commercial entity.

Source: USL Drafting Manual.

Reporter's Note: This is the Standard Conference formulation for this definition.



(24) "Permissible investments" means the following:

(A) cash, certificates of deposit, or other debt obligations of a financial institution either domestic or foreign;

(B) bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers' acceptances, which are eligible for purchase by member banks of the Federal Reserve System;

(C) an investment bearing a rating of one of the three highest grades as defined by a nationally recognized organization that rates securities;

(D) investment securities that are obligations of the United States, its agencies, or instrumentalities or obligations which are guaranteed fully as to principal and interest of the United States, or an obligation of a State, municipality, or any political subdivision thereof;

(E) shares in a money market mutual fund, interest-bearing bills or notes or bonds, debentures or stock traded on nay national securities exchange or on a national over-the-counter market, or mutual funds primarily composed of one or more permissible investments as described in this section;

(F) a demand borrowing agreement made to a corporation or a subsidiary of a corporation whose capital stock is listed on a national exchange; and

(G) receivables that are due to a licensee from its authorized delegates pursuant to a contract which are not past due or doubtful of collection; or any other investments or security device approved by the [superintendent].

Source: Model Act Regulating Money Transmitters Section 3.

Reporter's Note: It was previously noted by the Drafting Committee that the investments listed under (f) and (g) may be too risky to be included as permissible investments.



(26) "Remit" means either to make direct payment of the funds to the licensee or its representatives authorized to receive those funds, or to deposit the funds in a bank, credit union, or savings and loan association, or other similar financial institution in an account specified by the licensee.

(27) "Responsible individual" means an individual who is employed by a licensee and who has principal active management within this country or to or from locations outside the country by payment instrument. wire, facsimile, or electronic transfer, courier, or otherwise.

Source: Arizona Money Transmitter Act Section 6-1021.

Reporter's Note: Many states have incorporated some notion of a "responsible" individual or controlling person, or money transmitter affiliated party to indicate persons who have oversight or managerial responsibility with respect to money service businesses. A responsible individual is someone who has an active role in management and operations as contrasted with a controlling person or key shareholder that may or may not have such a role.



(28) "State" means a State of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any Territory or insular possession subject to the jurisdiction of the United States.

Source: USL Drafting Manual.

Reporter's Note: This is standard Conference formulation.



(29) "Stored value" means funds or monetary value [greater than $500] represented in digital electronics format, whether or not specially encrypted, and stored or capable of storage on electronic media so as to be retrievable and transferable electronically. [The term excludes funds or monetary value in digital electronics format that is part of a closed-end stored value network.]

Source: FinCEN proposed amendments to the Bank Secrecy Act Regulations B Definition and Registration of Money Service Businesses amending 31 C.F.R. Part 103.

Reporter's Notes: Most comments received in response to FinCEN's proposed money service business rules suggest that stored value products should be eliminated altogether from the definition of money service businesses. The major reason is that these products are very new and still changing rapidly. At the first committee meeting, however, the Committee members observed that it might be prudent to create a framework for regulation since it would take some time before the draft act would be promulgated. The comments that FinCEN received also suggested that closed-end systems be excluded from a definition of stored value. This would exclude private smart card and debit card systems such as university debit cards or metro cards, etc. In the preamble to the proposed rule, FinCEN states that it may be appropriate to exclude closed system products that are limited to facilitating small transactions (also known as "micro" transactions) FinCEN also notes that "in a purely closed system, the stored value card is accepted only by a single merchant or entity and operates as prepayment for specific goods ands services, such as public transportation or telephone calls. . . ." See 62 Fed. Reg. 27894. The Federal Reserve Bank of New York has suggested that the phrase "funds or monetary value" should be replaced with "intangible entitlement to be paid" because the term "funds" may give the impression that a stored value product has inherent value whereas the product only has value if the issuer is credit worthy.



The other major issue is at what dollar amount stored value products should be excluded from licensing. Comments on FinCEN's proposed rules suggest that only stored value cards that are over $500 in value should be included in the definition of money service businesses. At the October drafting committee meeting, there was much discussion of the issue of whether stored value products would be created in the near future to carry sums over $500. Additionally, the Committee discussed whether smaller denomination products might be purchased and used to launder funds in the aggregate (e.g., a money launderer buys several hundred phone cards). Alternatively, certain stored value products may hold less than $500 but can be reloaded several times and thus exceed the $500 threshold.



(30) "Stored value provider" means a person who engages in the business of issuing, selling, or redeeming open-end stored value products.

Source: New.

Reporter's Note: The scope of regulation for stored value products needs to be clearly defined. As discussed above (under the definitions of payment instrument and money transmitter), states such as West Virginia and Connecticut have already included stored value within the scope of their money transmission statutes.



(31) ["Superintendent"] means the [State superintendent of Banks or other Senior State regulator charged with the regulation of money service businesses.]

Source: Model Act Regulating Money Transmitters Section 3.

Reporter's Note: States use different regulatory bodies to supervise the conduct of money service businesses. In some states, the superintendent of banking is vested with this responsibility. In other jurisdictions, it is the state securities commissioner.



(32) "Traveler's check" means an instrument identified as traveler's check on its face or commonly recognized as a traveler's check and issued in a money multiple of United States of foreign currency with a provision for a specimen signature of the purchaser to be completed at the time of purchase and a countersignature of the purchaser to be completed at the time of negotiation.

Source: Model Act Regulating Money Transmitters Section 3.



(33) "Unsafe or Unsound practice" means any practice or conduct which is contrary to generally-accepted standards applicable to a specific money transmitter, or a violation of any prior order of an appropriate regulatory agency, which practice or conduct, or violation creates the likelihood of material loss, insolvency, or dissipation of assets of the money transmitter or otherwise materially prejudices the interests of its customers. In making this determination, the department may consider the size and condition of the money service business, the magnitude of the loss, the gravity of the violation, and the prior conduct of the person or business involved.

Source: Florida Money Transmitters Code Section 560.103(20).

Reporter's Note: During its annual meeting in July 1998, the Money Transmitter Regulators Association ("MTRA") noted that state regulators needed regulatory authority with respect to the unsafe or unsound practices of money service businesses.



PART 2.

SCOPE, EXCEPTIONS AND EXCLUSIONS.

SECTION 201. SCOPE. Except as otherwise provided in Section 203, this [Act] applies to money service businesses.

SECTION 202. SUPERVISORY POWERS OF [SUPERINTENDENT]. Consistent with this [Act] the [superintendent] has supervision over all money service businesses and their authorized delegates.

Source: Florida Money Transmitters Code Section 560.105.

Reporter's Note: Observers have suggested that an alternative to multi-state supervision would be a home state/host state licensing regime.



SECTION 203. EXCLUSIONS. This [Act] does not apply to:

(1) the United States or any department, agency, or instrumentality thereof;

(2) the United States Post Office;

(3) this State or any political subdivision thereof;

(4) a bank, bank holding company, credit union, building and loan association, savings and loan association, savings bank, or mutual bank, offices of an international banking corporation, Bank Service Act corporation or Edge Act or agreement corporation organized under the laws of any State or the United States which do not issue or sell payment instruments through an authorized delegate who is not such an entity;

(5) the provision of electronic funds transfer of government benefits for a federal, State, county, or governmental agency, by a contractor for and on behalf of the United States, or a department, agency, or instrumentality thereof, or a State or political subdivisions;

(6) a board of trade designated as a contract market under the Commodity Exchange Act, and a person who in the ordinary course of business provides clearance and settlement services for a board of trade;

(7) a person registered as a futures commission merchant under the federal commodities laws to the extent of its operation as such;

(8) a person that provides clearance or settlement services pursuant to a registration as a clearing agency, or an exemption from such registration granted under the federal securities laws;

(9)any payment systems operator that provides processing, clearing and/or settlement services, between or among persons exempt under this section or licensees, in connection with wire transfers, credit card transactions, debit card transactions, stored value transactions; automated clearing house transfers, or similar funds transfers;

(10) a person registered as a securities broker-dealer under the federal securities laws to the extent of its operation as such; or

(11) reserved for future use.

Source: Model Money Transmitter Licensing and Regulation Act (with modifications).

Reporter's Notes: Exemptions are provided liberally to reduce the cost of the act to a minimum both in terms of administration and in terms of regulation. This list should be modified to match a state's existing regulatory categories and terminology as appropriate.



Proposed exclusions involving boards of trade were submitted to FinCEN by various clearing organizations who collectively several of the largest commodities exchanges and commodities/options clearing organizations. In a letter dated October 8, 1997, these organizations recommended that FinCEN change the proposed definition of money service business to exclude regulated entities that are already subject to regulation by the SEC and the CFTC.



This draft omits reference to "businesses where sale of alcohol beverages and food are equal to or greater than fifty (50) percent of the total annual gross sales." The Drafting Committee believed that this exclusion was far too general to be adopted.



A new exclusion has been included under subsection (9) for payment systems operators who provide clearing and/or settlement services. This proposed exemption responds to the comments of observers who note that the provision of those services is distinct from the issuing or selling of payment instruments or stored value products.



SECTION 204. LICENSE REQUIREMENT.

(a) A person may not engage in money service business activities without first obtaining a license under this [Act] or becoming an authorized delegate with respect to those activities.

(b) A person who is not licensed under this [Act] or who is not an authorized delegate of the licensee with respect to those activities is presumed to be engaged in a business that is regulated by this [Act] and that requires a license if the person advertises, solicits, or holds himself or herself out as a money service business and engages in money service business activities.

(c) A person who engages in money service business activities regulated in this [Act] only as an authorized delegate of a licensee and acts solely within the scope of a contract between the authorized delegate and the licensee is not required to apply for a license. A person who is an authorized delegate but who also engages in a money service business activity other than as an authorized delegate must apply for a license under part 2 or part 3 of this [Act].

(d) A license is not transferable or assignable except as otherwise provided in this [Act].

Source: Model Act Regulating Money Transmitters Section 2. combined with Model Money Transmitter Licensing and Regulation Act Section 5; The restrictions on transfer or assignment of a license comes from California Financial Code Section 12219 which prohibits the transfer of check selling licenses.

Reporter's Note: The act will need to distinguish between authorized delegates who provide services solely pursuant to contracts with money service businesses and those entities who serve as delegates but also operate as principals with respect to some aspect of money services. For example, a check casher might operate as a principal with respect to check cashing services and also operate as an authorized delegate for a money transmitter.



PART 3.

LICENSING OF MONEY TRANSMITTERS, CHECK SELLERS, CHECK ISSUERS [AND STORED VALUE PROVIDERS].



SECTION 301. APPLICATION FOR LICENSE.

(a) No person shall engage for consideration, nor in any manner advertise that they engage in money transmission, sell or issue a payment instrument, [or provide stored value products], without first obtaining a license under the provisions of this part.

(b) A person licensed under this part is permitted to engage in money transmission, sell or issue payment instruments, or provide stored value products. A person registered under this part may also engage in check cashing and currency exchange activities as authorized under part 3 of this [Act].

(c) A person applying for a license under this part must do so in writing, under oath, and in the form prescribed by the [superintendent]. The application shall set forth such information as the [superintendent] reasonably requires, including but not limited to:

(1) the name and address of the applicant, including any fictitious or trade names used by the applicant in the conduct of its business;

(2) the history of applicant's material litigation;

(3) a description of them activities conducted by the applicant, the applicant's history of operations, and the business activities in which the applicant seeks to engage in this State;

(4) a list of the applicant's proposed authorized delegates, including the location or locations in its State in which the applicant and its authorized delegates propose to conduct money transmission activities;

(5) a sample form authorized delegate contract, if applicable; sample form of payment instrument, if applicable.

(6) the name and address of the clearing financial institution or financial institutions through which the applicant's payment instruments will be payable; and

(7) documents confirming that the net worth and bonding requirements set forth in section have or will be satisfied.

(d) If the applicant is a corporation, the applicant shall also provide such information as the [superintendent] requires, including, but not limited to:

(1) the date of the applicant's incorporation and state of incorporation;

(2) a certificate of good standing from the state or country in which the applicant was incorporated;

(3) a description of the corporate structure of the applicant, including the parent or subsidiary of the applicant, and whether any parent or subsidiaries is publicly traded on any stock exchange;

(4) the name, business and residential address, and employment history, for the past [5] years for each executive officer, key shareholder, and responsible person;

(5) the history of material litigation and criminal convictions for each executive officer, key shareholder and responsible person;

(6) copies of the applicants audited financial statements for the current year, and if available, for the preceding [2] year period. In cases where the applicant is a wholly owned subsidiary of another corporation, the parent's consolidated audited financial statements may be submitted to satisfy this requirement;

(7) copies of the applicant's unconsolidated unaudited financial statements for the current year, if available, and if available, for the preceding [2] year period; and

(8) if the applicant is a publicly traded company, copies of all filings made with the United States Securities and Exchange Commission, within the year preceding the date of the filing of the application.

(e) Each applicant that is not a corporation shall also provide such information as the [superintendent] reasonably requires, including, but not limited to:

(1) evidence that the applicant is registered to do business in this state;

(2) the name, business and residential addresses, personal financial statements and employment history for the past [5] years for each individual having a controlling ownership interest in the applicant, and each responsible person;

(3) the history of material litigation and criminal convictions for each individual having a controlling ownership interest in the applicant and each responsible person; and

(4) copies of the applicant's audited financial statements for the present year, and if available for the preceding [2] years.

(f) The [superintendent] may waive any requirement of this section or permit an applicant to submit substituted information in lieu of the information required by this section.

Source: Arizona Money Transmitter Law Section 6-1203; Model Money Transmitter Licensing and Regulation Act Section 7; Florida Money Transmitter Code Section 560.205.

Reporter's Notes: Selected Issue: Should the Draft NDP Act include separate licensing regimes for money transmitters and check sellers, and stored value providers (as one group) and check cashers and currency exchangers (as a separate group). At the February Drafting Committee meeting, the Drafting Committee decided to create separate licensing, net worth and bonding requirements for both categories of money service businesses. It was felt that check cashers and currency exchangers posed less safety and soundness concerns because customers were provided with cash immediately. Additionally, observers stated that check cashers are typically subject to minimal net worth requirements in states where they are regulated.



As set forth in Parts 2 and 3, separate licensing, recordkeeping and net worth requirements have been established for money transmitters and for check cashers/foreign currency exchanges. The superintendent's supervisory and enforcement powers, however, are the same for all money service businesses. This is the approach taken by several states including Florida and Georgia. This is to promote the other main goal of the Draft NDP Act which is to create an appropriate regulatory framework to deter and eliminate the use of money service businesses as potential vehicles for money laundering. The licensing application is the first point at which the state may protect the public from permitting entry by those persons who would bring discredit on the industry and the first source of information for investigators and regulators in the event that there is future misconduct by the licensee.



Selected Issue: Should stored value providers be required to obtain a state license? The Committee will need to decide whether stored value products (with the exclusion of closed stored value net works) be treated as payment instruments. If so, stored value providers will fall within the definition of money transmitters. In 1998, Connecticut enacted the Act Concerning Electronic Payment Instruments and Currency and Foreign Transactions Reporting. This act amended existing money transmission legislation such that stored value products (referred to as "electronic payment instruments") are treated as payment instruments. Furthermore, issuers of such payment instruments are subject to licensing and regulation in Connecticut. See CT. Legis 98-192 cited in 1998 Conn. Legis. Serv. P.A. 98-192 (S.S.B. 230) (West). West Virginia also adopted new legislation, designed to amend its current money transmission legislation. West Virginia's legislation includes stored value within the definition of money transmission. 998 West Virginia Laws Ch. 73 (H.B. 4591). As in Connecticut, this triggers licensing and other requirements for stored value providers. Texas has also interpreted its sale of checks statute to apply to smart cards issued by non-banks for us in open networks. See Remarks of Catherine A. Ghigieri, Texas Department of Banking to the PULSE EFT Assoc. Member Conference (October 11, 1996) located at www.banking.state. tx.us/exec/speech10a.



SECTION 302. BOND AND NET WORTH REQUIREMENTS.

SUBSECTIONS (a) AND (b) ALTERNATIVE 1

(a) Each application under this part must be accompanied by a surety bond, irrevocable letter of credit, or other similar security device acceptable to the [superintendent] in the amount of [$50,000].

(b) If the applicant proposes to engage in business under this [Act] at more than one location, through authorized delegates or otherwise, the amount of the security device is increased by [$10,000] per location, up to a maximum of [$250,000]. The security device shall be in a form satisfactory to the [superintendent] and shall run to the State for the benefit of any claimants against the licensee to secure the faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission, and payment of money in connection with the sale and issuance of payment instruments and the transmission of money.

SUBSECTIONS (a) and (b) ALTERNATIVE 2

(a) Each application under this part must be accompanied by a surety bond, irrevocable letter of credit, or other similar security device acceptable to the [superintendent].

(b) The bond shall be in the amount of [$25,000] for a licensee with five or fewer authorized delegates and locations; [$100,000] for a licensee with more than five but fewer than 21 authorized delegates and locations, to a maximum of [$250,000] and an additional [$5,000] for each authorized delegate in excess of 200 authorized delegates and locations, to a maximum of [$500,000]

Source: Model Money Transmitter Licensing and Regulation Act Section 8.

Reporter's Note: At present, money service businesses that engage solely in check cashing or currency dealing and exchange do not have to post bond or a security device. Alternative subsections (a) and (b) are derived mainly from the Model Money Transmitter Licensing and Regulation Act attempts to provide a uniform standard for all money service businesses. An alternative would be to create different security requirements based on the number of locations or authorized delegates, which the licensee utilizes within a state.



(c) In the case of a bond, the aggregate liability of the surety shall not exceed the principal sum of the bond. Claimants against the licensee or the authorized delegates may bring suit directly on the security device or the [superintendent] may bring suit on behalf of the claimants. The bond is conditioned on the compliance of the licensee, including its directors, officers, authorized delegate, and employees, with this [Act]. The bond shall be payable to any person injured by the wrongful act, default, fraud, or misrepresentation of the licensee, his or her authorized delegates or employees, or to the State for the benefit of the person injured. Only one bond is required of a licensee irrespective of the number of offers, directors, locations, employees, or authorized delegates of the licensee.

(d) In the case of an irrevocable letter of credit, the letter of credit must run to the State, for the benefit of the [superintendent] and for the benefit of all persons injured by the wrongful act, omission, default, fraud, or misrepresentation by a licensee in the conduct of its activity as a licensee. Draws upon an irrevocable letter of credit must be available by sight drafts in amounts determined by the [superintendent] up to the aggregate amount of the irrevocable letter of credit.

(e) The security device shall remain in effect until cancellation, which may occur only after [30] day written notice to the [superintendent]. Cancellation shall not affect any liability incurred during this period.

(f) The security device shall remain in place for no longer than [5] years after the licensee ceases money service operations in this State. However, the [superintendent] may permit the security device to be reduced or eliminated before that time to the extent that the amount of the licensee's payment instruments outstanding in this State are reduced. The superintendent may permit a licensee to substitute a letter of credit or other form of security device acceptable to the [superintendent] for the security device in place at the time the licensee ceases money service business activities in this State.

Source: Model Act Regulating Money Transmitters Section 8; Delaware Code, Chapter 27, Section 2714.

Reporter's Note: As discussed at the Drafting Committee's initial meeting in October 1997, irrevocable letters of credit provide an alternative for licensees to the use of surety bonds.



(g) In lieu of the security device prescribed in this section, an applicant for a license or a licensee may deposit with the [superintendent] cash, or alternatives to cash acceptable to the [superintendent], in the amount of the required security device. The principal amount of the deposit may be released to the applicant for a license or licensee only upon written authorization of the [superintendent] or on the order of a court of competent jurisdiction.

Source: Arizona Money Transmitter Act Section 6-1205; Model Money Transmitter Licensing and Regulation Act Section 8.

Reporter's Note: Bonding or net worth requirements are safety and soundness measures designed to protect the public but also to deter companies that have questionable solvency or business practices from entering the market. The bond requirement serves a barrier to entry for unstable companies. Alternatives, however, are provided to the bond requirement in the form of cash or cash alternatives. Licensees may also be permitted to deposit specified liquid assets in the amount of the bond. The Committee will need to strike a balance between the goals of safety and soundness and also providing open access to businesses whom wish to enter the money service market.



SECTION 303. ISSUANCE OF LICENSE.

(a) Upon the filing of a complete application under parts 2 of this [Act] the [superintendent] shall investigate the financial condition and responsibility, financial and business experience, character, and general fitness of the applicant. The [superintendent] may conduct an on-site investigation of the applicant, the reasonable cost, which shall be borne by the applicant. The [superintendent] may issue a license to an applicant if the [superintendent] finds that all of the following conditions are met:

(1) the appellant has complied with section 301 and 302 of the [Act].

(2) the competence and experience of the officers, directors, and controlling persons, and any proposed management personnel indicate that it is in the interest of the public to permit such person to participate in the activities of the licensee; and

(3) the applicant has paid the required license fee.

(b) The [superintendent] shall approve or deny an application for an original license within [120] days after the date an application is filed and is complete. The superintendent may extend this period for good cause. The [superintendent] shall notify the applicant of the date on which the application is determined to be complete. In the absence of approval or denial of the application within [120] days after the date an application is complete or any extended period ends, the application is considered approved. If the application is considered approved, the [superintendent] shall issue the license effective as of the first business day after the [120] day period.

(c) Any applicant that is denied a license by the [superintendent] under part 2 may request a hearing within [30] days of receipt of written notice of the denial.

Source: Arizona Revised State Section 6-1206(B); Tennessee Rev. Code Section 45-7-210.

Reporter's Note: At the February Drafting Committee meeting, the Committee inquired as to whether states had mandatory time frames in which the regulator must respond to license applications. The MTRA representative supplied the Committee with sample statutory provisions that included mandatory time frames for response to a license application. In Tennessee, the time period is 180 days rather than 120. The MTRA Model Legislation Outline recommends an 120-day time period. The extension for "good cause" comes from the Maine Act to Regulate Money Transmitters and Amend Consumer Credit Laws, 32 M.R.S.A. Section 6109(2).



SECTION 303 ALTERNATIVE 1.

SECTION 303. LICENSE RENEWAL.

(a) The [superintendent] shall, by rule, establish an annual fee for renewal of a license under this [Act].

(b) The renewal fee shall be accompanied by a report, in a form prescribed by [the superintendent], which form shall be sent by the [superintendent] to each licensee no later than three months immediately proceeding the date established by the [superintendent] for license renewal. The licensee must include the following in its annual renewal report:

(1) a copy of its most recent audited consolidated annual financial statement, or in the case of a licensee that is a wholly-owned subsidiary of another corporation, the consolidated audited annual financial statement of the parent corporation or the licensee's annual audited financial statement;

(2) the number of payment instruments sold by the licensee in this State, the dollar amount of those instruments, and the dollar amount of those instruments currently outstanding for the most recent quarter for which data is available before the date of filing of the renewal application, but in no event more than [120] days before the renewal date;

(3) any material changes to any information submitted by the licensee on its original license application which have not previously been reported to the [superintendent] on any other report required to be filed under this [Act];

(4) a list of the licensee's permissible investments, if applicable; and

(5) a list of the locations within this State at which business regulated by this [Act] is being conducted by either the licensee or its authorized delegate.

(c) A licensee that has not filed a renewal report or paid its renewal fee by the renewal filing deadline and has not been granted an extension of time to do so by the [superintendent] shall be notified in writing by the [superintendent] that a hearing is scheduled at which time the licensee will be required to show cause why its license should not be suspended pending compliance with these requirements.

Source: Model Act Regulating Money Transmitters, Section 11.

Reporter's Note: The alternative to a provision which outlines the contents of an annual renewal report is for the regulator to prescribe the contents of a renewal application by regulation. The Model Money Transmitters Licensing and Regulation Act contains a provision which takes this approach.



SECTION 305. LICENSE FEE.



(a) Each application for a license must be accompanied by an application fee of [$1,000] and a license fee of [$3,000]. The license fee must be refunded if the application is denied. No application fee is refunded.

Source: Model Money Transmitter Licensing and Regulation Action Section 8.

Reporter's Note: The Drafting Committee decided to omit any references to license fees being placed in a separate fund for the exclusive use of the Superintendent for the administration and enforcement of the [Act].



SECTION 306. NET WORTH. A licensee must maintain a net worth that of [$100,000] plus [$10,000] for each location or authorized delegate to a maximum of [$500,000].

Source: Model Money Transmitter Licensing and Regulation Act Section 8.

Reporter's Note: An alternative to a general net worth requirement is to provide varying net worth requirements for different types of money service businesses. For example, Section 36a-604 of the Connecticut Money Order and Travelers Check Licensees Act requires that check sellers and money transmitters requires that each licensee that issues money orders must have a net worth of at least $100,000. Issuers of travelers checks must have a net worth of at least $1 million.



PART 4.

LICENSING OF CHECK CASHERS AND CURRENCY EXCHANGERS.

SECTION 401. APPLICATION FOR LICENSE.

(a) No person shall engage in or in any manner advertise the business of cashing payment instruments or the exchanging of currency without first obtaining a license under the provisions of this part.

(b) A person licensed pursuant to this part may cash payment instruments or exchange currency. A person registered under this part is prohibited from engaging directly in money transmission but that person is not prohibited from acting as an authorized delegate with a person licensed under part 2.

(c) Each license application shall be in writing and under oath to the [superintendent in such form as the [superintendent] may prescribe. The application shall include the following:

(1) the legal name and residential and business addresses of the applicant, if the applicant is a natural person, or if the applicant is a partnership, association or corporation, the name of every partner, executive officer or director;

(2) the location of he. principal office of the applicant;

(3) the complete address of any other locations at which the applicant proposes to engage in check cashing or currency exchange;

(4) documents confirming that the net worth set forth in section 404 has or will be satisfied; and

(5) other information as the department may reasonably require with respect to the applicant. The [superintendent], however may not require more information than specified in Part 2 of this [Act].

Source: Florida Money Transmitters Code Sections 560.304 and 305.

Reporter's Note: At the February Drafting meeting, observers noted that check cashers should be treated differently than money transmitters with respect to licensing, bonding net worth in particular. Check cashers and currency exchangers provide customers with fund immediately ands therefore do not need the same type of bond or security devices. Existing state legislation makes a distinction between check cashers and money transmitters with respect to information provided to regulators (e.g., audited versus unaided financial statements) and the level of bond and net worth required for check cashiers. The Drafting Committee decided to include separate licensing provisions in this draft a an alternative to a unified licensing system as contained in the February draft. Currency exchanges have also been included in this section. As stated previously, Florida and Maine are examples of states that have grouped check cashers and currency exchangers together for purposes of licensing requirements.



SECTION 402. ISSUANCE OF LICENSE.



(a) Upon the filing of a complete application under part 3 of this [Act] the [superintendent] shall investigate the financial condition and responsibility, financial and business experience, character, and general fitness of the applicant. The [superintendent] may conduct an on-site investigation of the applicant, the reasonable cost which shall be borne by the applicant. The [superintendent] may issue a license to an applicant if the [superintendent] finds that all of the following conditions are met:

(1) the appellant has complied with section 401 and 405 of the [Act].

(2) the competence and experience of the officers, directors, and controlling persons, and any proposed management personnel indicate that it is in the interest of the public to permit that person to participate in the activities of the licensee; and

(3) the applicant has paid the required license fee.

(b) The [superintendent] shall approve or deny an application for an original license within [120] days after the date an application is filed and is complete. The superintendent may extend this period upon a showing of good cause. The [superintendent] shall notify the applicant of the date on which the application is determined to be complete. In the absence of approval or denial of the application within [120] days after the date an application is complete or any extended period ends, the application is considered approved. If the application is considered approved, the [superintendent] shall issue the license effective as of the first business day after the [120] day period.

(c) Any applicant that is denied a license by the [superintendent] under part 3 may request a hearing within [30] days of receipt of written notice if the denial.

Source: Arizona Revised State Section 6-1206(B); Tennessee Rev. Code Section 45-7-210.

Reporter's Note: At the February Drafting Committee meeting, the Committee inquired as to whether states had mandatory time frames in which the regulator must respond to license applications. The MTRA representative supplied the Committee with sample statutory provisions, which included mandatory time frames for response to a license application. In Tennessee, the time period is 180 days rather than 120. The MTRA Model Legislation Outline recommends an 120-day time period.



SECTION 403. LICENSE RENEWAL.

(a) The [superintendent] shall, by rule, establish an annual fee for renewal of a license under this [Act].

(b) The renewal fee shall be accompanied by a report, in a form prescribed by [the superintendent], which form shall be sent by the [superintendent] to each licensee no later than three months immediately proceeding the date established by the [superintendent] for license renewal. The licensee must include the following in its annual renewal report:

(1) any material changes to any information submitted by the licensee on its original license application which have not previously been reported to the [superintendent] on any other report required to be filed under this [Act];

(2) a list of the licensee's permissible investments, if applicable; and

(3) a list of the locations within this State at which either the licensee or its authorized delegate is conducting business regulated by this [Act].

(c) A licensee that has not filed a renewal report or paid its renewal fee by the renewal filing deadline and has not been granted an extension of time to do so by the [superintendent] shall be notified in writing by the [superintendent] that a hearing is scheduled at which time the licensee will be required to show cause why its license should not be suspended pending compliance with these requirements,

Source: Model Act Regulating Money Transmitters, Section 11 (with modifications).

Reporter's Note: The license renewal provisions are slightly different for check cashers and currency exchangers (as opposed to Part 2 licensees). The requirement of audited consolidated financial statements and also information concerning payment instruments sold has been omitted. It is anticipated, however, that the appropriate state regulator would prescribe what type of information should be contained in a renewal report.



SECTION 404. LICENSE FEE.



(a) Each application for a license must be accompanied by an application fee of [$1,000] and a license fee of [$3,000]. The license fee must be refunded if the application is denied. No application fee is refunded.

Source: Model Money Transmitter Licensing and Regulation Action Section 8.

Reporter's Note: The Drafting Committee decided to omit any references to license fees being placed in a separate fund for the exclusive use of the Superintendent for the administration and enforcement of the [Act].



SECTION 405. NET WORTH. A licensee must maintain a net worth of at least [$10,000] in liquid assets for each location at which currency exchange or check cashing takes place and at least [$2,500] for each limited facility location specified in the application

Source: Connecticut Code Section 36a-581(e)(6).

Reporter's Note: As observers noted at the February meeting, check cashers are required to have much lower net worth and bond requirements. This is due primarily to the fact that check cashers and currency exchangers provide customers with funds immediately whereas money transmitters and payment instrument sellers. Check cashers are required to maintain anywhere from $5,000 in liquid assets per location up to $50,000 (New Jersey). Other states also require that the check casher maintain an "adequate" bond (e.g., Massachusetts).



PART 5.

AUTHORIZED DELEGATES.

SECTION 501. RELATIONSHIP BETWEEN LICENSEES AND AUTHORIZED DELEGATES.

(a) Each contract between a licensee and an authorized delegate shall require the authorized delegate to operate in full compliance with the law and shall contain an appendix copy of this [Act]. The licensee shall provide each authorized delegate with written policies and procedures sufficient to permit compliance with this [Act] and rules adopted under this [Act]. The licensee shall promptly update its policies and procedures to permit compliance with those laws and rules.

(b) An authorized delegate shall remit all funds owing to the licensee in accordance with the terms of the contract between the licensee and the delegate.

(c) Upon the suspension or revocation of a license or the failure of a licensee to renew its license, the [superintendent] shall notify all authorized delegates of the licensee who are on record with the [superintendent] of the [superintendent's] action. On receipt of this notice, an authorized delegate shall immediately cease to operate as a delegate of the licensee.

Source: Model Money Transmitter Licensing and Regulation Act Section 10.

Reporter's Note: Section 501 (formerly Section 401 in the February Draft)contains substantial revisions, the following provisions were omitted: