Current Status Bill Number:3726 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19970326 Primary Sponsor:Stuart All Sponsors:Stuart, Phillips, Knotts, Spearman, G. Brown and Wilkes Drafted Document Number:bbm\9110mm.97 Residing Body:House Current Committee:Labor, Commerce and Industry Committee 26 HLCI Subject:Money Order Act, Banks and Savings and Loan Associations, financial institutions
Body Date Action Description Com Leg Involved
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House 19970326 Introduced, read first time, 26 HLCI
referred to Committee
View additional legislative information at the LPITS web site.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 37 TO TITLE 34 RELATING TO MONEY AND BANKING SO AS TO PROVIDE FOR THE REGULATION AND LICENSING BY THE SOUTH CAROLINA BOARD OF FINANCIAL INSTITUTIONS OF BUSINESSES SELLING MONEY ORDERS; TO PROVIDE LICENSING REQUIREMENTS; TO AUTHORIZE LICENSE FEES; TO REQUIRE FINANCIAL SURETY, INCLUDING BONDS; TO PERMIT EXAMINATION OF RECORDS AND BOOKS; TO PROVIDE GROUNDS FOR REVOCATION AND SUSPENSION; AND TO PROVIDE PENALTIES.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 34 of the 1976 Code is amended by adding:
Section 34-37-10. This chapter is known and may be cited as the 'Money Order Act'.
Section 34-37-20. It is declared to be the policy of this State that money orders and other similar instruments for transmission or payment of credit or money are widely used by the people of this State as a means of settling accounts or debts and that sellers and issuers of these instruments receive large sums of money from the people of this State. It is imperative that the integrity, experience, financial responsibility, and reliability of those engaged in the various businesses dealing in these instruments be above reproach. So that the people of this State may be safeguarded from default in the payment of these instruments, it is necessary that proper regulatory authority be established through the State Board of Financial Institutions. A person who sells or issues these instruments without complying with the provisions of this chapter endangers the public interest.
Section 34-37-30. As used in this chapter, unless the context otherwise requires:
(1) 'Board' means the State Board of Financial Institutions.
(2) 'Commissioner' means the Commissioner of Banking appointed and serving pursuant to Section 34-1-80.
(3) 'Exchange' means a draft, money order, traveler's check or other instrument for the transmission or payment of money or credit. It does not include the money or currency of a nation, credit card vouchers, letters of credit, or an instrument which is redeemable by the issuer in goods or services.
(4) 'Executive officer' means the licensee or applicant's president, chairman of the board or executive committee, senior officer responsible for licensee's business, chief financial officer, and other persons who perform similar functions.
(5) 'Issuing' means the act of drawing an instrument of exchange by a person who engages in the business of drawing those instruments as a service or for a fee or other consideration.
(6) 'Licensee' means a person duly licensed by the board pursuant to the provisions of this chapter.
(7) 'Material litigation' means litigation that, according to generally accepted accounting principles, is significant to an applicant's or licensee's financial health and is required to be referenced in that entity's annual audited financial statements, report to shareholders, or similar documents.
(8) 'Money transmission' means the sale or issuing of exchange or engaging in the business of receiving money for transmission or transmitting money within the United States or to locations abroad by all means including, but not limited to, payment instrument, wire, facsimile, or electronic transfer.
(9) 'Outstanding payment instrument' means an exchange sold or issued by a licensee, or an exchange issued by the licensee which has been sold by the licensee or an agent in the United States, which has been reported to the licensee as having been sold and which has not been paid by or for the licensee.
(10) 'Person' means a natural person, firm, association, partnership, syndicate, joint stock company, unincorporated company or association, limited liability company, common law trust, or a corporation organized under the laws of the United States or of a state or territory of the United States or of a foreign country.
Section 34-37-40. (A) A person, other than a bank or trust company, a credit union, a savings and loan association, or a savings bank, whether state or federally chartered but domiciled in this State, the authorized agent of a licensee, or the United States Postal Service, may not engage in the business of money transmission without having first obtained a license pursuant to this chapter. This chapter applies to a resident engaged in the business of money transmission in South Carolina and to a nonresident engaged in the business of money transmission in South Carolina through a branch, subsidiary, affiliate, or agent.
(B) Within three months of the effective date of this chapter, every person engaged in the business of money transmission in South Carolina, except those exempted in subsection(A), shall file with the board an application for license in accordance with the provisions of this chapter. A person is not in violation of this chapter for operating without a license if an application is filed within the three-month period, unless and until the application is denied.
Section 34-37-50. To qualify for a license under this chapter an applicant shall:
(1) satisfy the board that it is financially responsible, honest, efficient, and trustworthy;
(2) comply with the bonding requirements, furnish all information, and pay the fees required by this chapter;
(3) have a net worth of not less than one hundred thousand dollars, calculated in accordance with generally accepted accounting principles. Licensees engaging in money transmission at more than one location shall have an additional net worth of five thousand dollars for each location, to a maximum of two hundred thousand dollars.
Section 34-37-60. (A) Each application for a license under this chapter must be made in writing, under oath, in a form prescribed by the commissioner and must contain for all applicants:
(1) the exact name of the applicant, the applicant's principal address, a fictitious or trade name used by the applicant in the conduct of its business, and the location of the applicant's business records;
(2) the history of applicant's material litigation and criminal convictions for the five-year period before the date of application;
(3) a description of the activities conducted by the applicant and a history of operations;
(4) a description of the business activities in which the applicant seeks to be engaged in South Carolina;
(5) a list identifying the applicant's proposed authorized agents in the State, if any, at the time of filing of the license application;
(6) a sample agent contract, if applicable;
(7) a sample form payment instrument;
(8) all locations at which applicant and its authorized agents, if any, propose to conduct the licensed activities in South Carolina;
(9) the name and address of the clearing bank or banks on which the applicant's payment instruments will be drawn or through which the payment instruments will be payable.
(B) If the applicant is a corporation, the applicant also must provide:
(1) the date of applicant's incorporation and state of incorporation;
(2) a certificate of good standing from the state in which the applicant is incorporated;
(3) a description of the corporate structure of the applicant, including the identity of a parent or subsidiary of the applicant, and the disclosure of whether a parent or subsidiary is publicly traded on a stock exchange;
(4) the names, business and residence addresses, and employment histories for the past five years of the applicant's executive officers and the officer or manager who will be in charge of the applicant's activities to be licensed;
(5) the history of material litigation and criminal convictions for the five-year period before the date of application for every executive officer of the applicant;
(6) a copy of the applicant's most recent audited financial statement, including balance sheet, statement of income or loss, statement of changes in shareholder equity, and statement of changes in financial position, and if available, the applicant's audited financial statements for the immediately preceding two-year period. If the applicant is a wholly-owned subsidiary of another corporation, the applicant may submit either the parent corporation's consolidated audited financial statements for the current year and the immediately preceding two-year period or the parent corporation's Form 10K reports filed with the Securities and Exchange Commission for the prior three years instead of the applicant's own financial statements. If the applicant is a wholly-owned subsidiary of a corporation having its principal place of business outside the United States, similar documentation filed with the parent corporation's non-United States regulator may be submitted to satisfy this provision;
(7) copies of all filings made by the applicant with the United States Securities and Exchange Commission, or with a similar regulator in a country other than the United States, within the year preceding the date of filing of the application.
(C) If the applicant is not a corporation, the applicant also must provide:
(1) the names, business and residence addresses, personal financial statement and employment histories for the past five years of each principal of the applicant and the names, business and residence addresses, and employment histories for the past five years of other persons who will be in charge of the applicant's activities to be licensed;
(2) the place and date of the applicant's registration or qualification to do business in South Carolina;
(3) the history of material litigation and criminal convictions for the five-year period before the date of application for each individual having an ownership interest in the applicant and each individual who exercises supervisory responsibility for the applicant's activities;
(4) copies of the applicant's audited financial statements, including balance sheet, statement of income or loss, and statement of changes in financial position for the current year, and if available, for the immediately preceding two-year period.
Section 34-37-70. (A) Before July 1, 1998, each new application for a license pursuant to this chapter must be accompanied by an investigation and evaluation fee in the amount of five hundred dollars. After June 30, 1998, each new application must be accompanied by an investigation and evaluation fee established by the board. The investigation and evaluation fee established in this subsection is a one-time fee paid by an applicant submitting its initial application. An investigation and evaluation fee may not be charged or collected for renewal applications; except that renewal applications must be filed annually in accordance with Section 34-37-100. If a license lapses without renewal, a subsequent effort to obtain a license will be considered an initial application for purposes of collecting the investigation and evaluation fee provided for in this subsection.
(B) Fees collected by the board pursuant to this section may not be remitted to the State General Fund but must be retained by the board, carried forward, and used by the board to fulfill its investigatory, supervisory, and enforcement responsibilities under this chapter.
Section 34-37-80. (A) When an applicant files an application in proper form, accompanied by documents and fees required by this chapter, the board shall investigate to determine the financial responsibility, experience, character, and general fitness of the applicant. If the board determines to its satisfaction that the applicant is of good moral character, is financially responsible, and meets the requirements of this chapter, the board shall give notice in writing of the approval of the application to the applicant. The applicant, within thirty days, shall post the required bond and pay the required license fee. Then the board shall immediately issue to the applicant a license to engage in the business of money transmission in this State subject to the provisions of this chapter.
(B) A license must not be issued to an applicant, if a natural person, unless he is over twenty-one years of age; or if a partnership or syndicate, unless each of the partners is over twenty-one years of age; or if a joint stock association, common law trust, unincorporated company or association, or corporation, unless each of the officers, directors, trustees, or other managing officials is over twenty-one years of age.
(C) Where a corporation engages in the business of selling only exchange issued by another corporation which is primarily obligated for payment of the exchange, and the seller is a wholly-owned subsidiary of or is wholly-owned by the sole corporate shareholder of the issuer, the board may grant a single license naming both the seller and issuer as joint licensees. A single license fee may be collected and only one corporate surety bond pursuant to this chapter may be required where the bond names both the seller and issuer.
(D) A license issued pursuant to this chapter must be conspicuously posted in the principal place of business of the licensee. The license may not be transferred or assigned. If a person or group of persons acquires or proposes to acquire a controlling interest in a current licensee, the new controlling person or entity must notify the commissioner of the acquisition of controlling interest within ten days, and submit a new application for a license not later than thirty days after acquiring control. If the prospective licensee has filed an application which on its face is in compliance with this chapter, the commissioner shall issue a temporary license which automatically expires three months after issuance to allow the prospective licensee to engage in the business of money transmission in South Carolina, pending approval of the permanent license. For purposes of this section, 'controlling interest' means the power to vote twenty-five percent or more of any class of voting securities or interests of the licensee.
(E) Except in the case of a temporary license issued pursuant to subsection (D), a license issued pursuant to this chapter remains in force through the remainder of the calendar year following its date of issuance, unless earlier surrendered, suspended, or revoked pursuant to this chapter.
Section 34-37-90. (A) Before a license or renewal license is issued, the applicant or licensee shall pay to the board a license fee of five hundred dollars. For each license originally issued between July 1 and December 31 of a year, the applicant shall pay one-half the annual fee required in this section. Each license expires on December 31 unless the board has approved renewal and the annual fee for the year has been paid before that date. The license fee established in this subsection is in addition to an applicable investigation and evaluation fee.
(B) Fees collected by the board pursuant to this section may not be remitted to the State General Fund, but must be retained by the board, carried forward, and used by the board to fulfill its investigatory, supervisory, and enforcement responsibilities under this chapter.
Section 34-37-100. (A) A license may be renewed for the next twelve-month period by filing a renewal application after June 30, but before November 1 of the year in which the existing license expires. An investigation and supervision fee is not payable with a renewal application, but an annual license fee to defray the cost of administration must be paid with a renewal application. If renewal is denied, the fee may be refunded, less an administrative charge to be determined by the board.
(B) A renewal application must be sent by the commissioner to each licensee no later than July 1 of each year. The renewal application must be in a form specified by the board and, at a minimum, must require a licensee seeking renewal to provide:
(1) a copy of the licensee's most recent audited consolidated annual financial statement, including balance sheet, statement of income or loss, statement of changes in shareholder equity, and statement of changes in financial position, or in the case of a licensee that is a wholly-owned subsidiary of another corporation, the parent corporation's consolidated audited annual financial statement;
(2) for the most recent quarter for which data is available before the date of the filing of the renewal application, the number of payment instruments sold by the licensee in the State, the dollar amount of those instruments, and the dollar amount of those instruments currently outstanding;
(3) notice of material changes to the information submitted by the licensee in its original application which have not been reported previously to the board on other reports required to be filed under this chapter;
(4) a list of the locations within this State where business regulated by this act is being conducted by either the licensee or its authorized agents.
(C) Notwithstanding the requirement that the commissioner send each licensee a renewal form, it is the responsibility of the licensee to obtain and submit a renewal application within the time allowed under this section.
(D) The commissioner, in writing and by certified mail, shall notify each licensee who does not submit a renewal application with accompanying fee within the time required in this section that failure to submit a renewal application with appropriate fee within fifteen days of receipt of the notice may result in expiration of the licensee's license at the end of the license period. The commissioner, for good cause shown, may grant extensions for filing renewal applications as he finds necessary.
(E) To assure compliance with the provisions of this chapter and in consideration of an application to renew a license, the commissioner may conduct an on-site examination of the books and records of a licensee. If the commissioner determines, based on the information submitted in licensee's renewal application, that an examination is not needed, the commissioner may waive on-site examination.
Section 34-37-101. (A) Before a license is issued pursuant to this chapter, the applicant shall provide to the board a bond or other security in the form and amount specified below:
(1) A corporate surety bond issued by a bonding company or insurance company authorized to do business in this State and approved by the board. The bond must be in the principal sum of one hundred thousand dollars and in an additional principal sum of five thousand dollars for each additional location, at or through which the applicant proposes to engage in this State in the business of money transmission, until the aggregate principal sum is two hundred fifty thousand dollars. The bond must be in a form satisfactory to the board and must run to the State of South Carolina for the benefit of an exchange holder against the licensee or agents of the licensee. The condition of the bond must be that the licensee will pay all monies that become due and owing a creditor of or claimant against the licensee arising out of the licensee's business of money transmission in this State, through its own act or the act of an agent. The aggregate liability of the surety may not exceed the principal sum of the bond. Claimants against the licensee may bring an action directly on the bond. The liability arising under this section is limited to the receipt, handling, transmission, and payment of money arising out of the licensee's business of money transmission in this State.
(2) Instead of a corporate surety bond or of any portion of the principal of a bond, the applicant may deposit with the board or a bank or trust company located in this State, as the applicant designates and the board approves, bonds, notes, debentures, or other obligations of the United States or an agency or instrumentality of the United States or guaranteed by the United States or of the State of South Carolina or of a municipality, county, school, district, or instrumentality of the State of South Carolina or guaranteed by the State to an aggregate amount, based upon principal amount or market value, whichever is lower, of not less than the amount of the required corporate surety bond or portion of the bond. The securities must be held to secure the same obligations as would the surety bond; but the depositor is entitled to receive all interest on the securities and has the right, with the approval of the board, to substitute other securities for those deposited and shall be required to do so on written order of the board for good cause. In case of failure or insolvency of the licensee, the securities, any proceeds from the securities, and the funds deposited pursuant to this item must be applied to the payment in full of claims arising out of transactions in this State for the sale or issuance of exchange. The compensation of a custodian for acting under this section must be paid by the depositing licensee.
(B) A bond filed with the board for the purpose of compliance with this section may not be canceled by either the licensee or the corporate surety except upon notice to the board by registered or certified mail with return receipt requested. The cancellation must not be effective for thirty days after receipt of the notice by the board and then only with respect to a breach of condition occurring after the effective date of the cancellation.
(C) A license may not be renewed unless and until applicant has furnished to the board proof that the bond or security provided by the applicant pursuant to this chapter is in full force and effect.
Section 34-37-102. Each licensee may conduct business at locations within this State as the licensee may desire and through those agents and subagents as the licensee may appoint. Each licensee shall notify the board within thirty days, by certified mail, of an increase in the number of locations at which it conducts its business and shall provide proof that the bond or securities required have been increased accordingly. An additional license other than that obtained by the licensee may not be required of any properly reported agent of a licensee. An agent of a licensee shall sell or issue exchange only at the location designated in the licensee's report to the board or at other locations of which the board has been notified. An agent of a licensee shall, upon demand, transfer and deliver to the licensee the proceeds of the sale of licensee's exchange less the fees due the agent.
Section 34-37-103. (A) For purposes of Section 27-18-320, each licensee shall keep and preserve the following records for each exchange sold while the exchange is outstanding and for a period of three years after the exchange becomes reportable as abandoned property:
(1) a record of each exchange sold;
(2) a general ledger to be posted monthly and containing all assets, liability, capital, income, and expense accounts;
(3) settlement sheets received from authorized agents;
(4) bank statements and bank reconciliation records;
(5) records of outstanding payment instruments;
(6) records of each exchange paid;
(7) a list of the names and addresses of all agents authorized by licensee.
(B) Maintenance of records required by this section in a photographic, electronic, or other similar form constitute compliance with this section.
Section 34-37-104. An exchange issued in the conduct of the business regulated by this chapter must be signed by the licensee or the licensee's authorized representative; and the licensee is liable for the payment of the exchange to the same extent as a drawer of a negotiable instrument, whether or not the exchange is a negotiable instrument pursuant to Chapter 3, Title 36 of the 1976 Code.
Section 34-37-105. (A) A person or corporation may not sell checks as an agent of a principal seller when the principal seller is subject to licensing under this chapter but has not obtained a license. A person who does so is considered to be the principal seller of the checks and not merely an agent, and is liable to the holder or remitter as the principal seller.
(B) A person or corporation, other than a bank or trust company, an agent of a bank or trust company, a licensee, or an agent of a licensee, may not, in the course of carrying on the business regulated in this chapter, receive, transmit, or handle money on behalf of another to whom the person or corporation issues a money order or a similar payment paper; and a person or corporation who does so is liable to the owner of the money or similar payment paper for the payment of the money order or similar payment paper to the same extent as a drawer of a negotiable instrument, whether or not the money order or similar payment paper is a negotiable instrument pursuant to Chapter 3, Title 36 of the 1976 Code.
Section 34-37-106. (A) The licensee shall give notice to the board, by certified mail, of any legal action which is brought against the licensee and of any judgment which is entered against the licensee by a creditor or claimant, relating to selling or issuing exchange or transmitting money, together with details sufficient to identify the action or judgment, within thirty days after the commencement of the action or notice to the licensee of entry of a judgment. After it pays a claim of judgment to a creditor or claimant, the corporate surety shall give notice by certified mail to the board, within thirty days after payment, of the payment, together with details sufficient to identify the claimant or creditor and the claim or judgment paid.
(B) The licensee shall give notice by certified mail to the board, within fifteen days of the occurrence, of any of the following:
(1) the filing of bankruptcy or reorganization by the licensee;
(2) a felony indictment of the licensee or any of its officers, directors, or managers related to money transmission activities;
(3) a felony conviction of licensee or any of its officers, directors, or managers related to money transmission activities.
Section 34-37-107. (A) The board may deny, suspend, or revoke a license if, after affording licensee a reasonable opportunity to be heard, the board determines that:
(1) in the case of denial of an original license, the applicant does not meet the criteria of this chapter;
(2) the applicant or licensee has made a false statement in the application for the license or failed to give a true reply to a question in the application, or has otherwise committed fraud, engaged in dishonest activity, or made a misrepresentation;
(3) the applicant or licensee has failed to maintain or post the required bond;
(4) the licensee has failed to comply with an order, decision, or finding of the board or the commissioner made pursuant to this chapter;
(5) the licensee has violated a provision of this chapter;
(6) in the case of a renewal license, facts exist which would have warranted the board's refusal to issue the original license;
(7) the licensee is engaged in a business a substantial portion of which involves the processing, manufacture, or purchase and sale of commodities or articles of tangible personal property, and the licensee has failed to maintain constantly a separate bank deposit account or accounts for the exclusive payment of exchange issued by the licensee;
(8) the licensee has sold or issued exchange without receiving payment for the face value of the exchange before the time of the sale or issuance;
(9) the licensee has failed to pay or otherwise dispose of, within ninety days after it becomes final, a judgment recovered in a court
within this State by a claimant or creditor in an action arising out of the licensee's business in this State of money transmission;
(10) the licensee becomes insolvent, has suspended payments of its obligations, has made assignments for the benefit of its creditors, has admitted in writing its inability to pay its debts as they become due, or has applied for an adjudication of bankruptcy, reorganization, arrangement, or other relief under the bankruptcy laws of the United States;
(11) the licensee refuses to permit the commissioner to perform an examination authorized by this chapter;
(12) the licensee wilfully fails to make a report or file a document required by this chapter; or
(13) the licensee's net worth becomes inadequate to meet the requirements of this chapter and, after ten days' written notice from the commissioner, licensee fails to remedy the condition.
(B) An applicant or licensee whose license has been denied, suspended, or revoked is entitled to a reasonable opportunity to be heard by the board. For this purpose, the board shall notify every applicant or licensee of the denial, suspension, or revocation of his license and of his right to request a hearing before the board within thirty days of receipt of the notice. The board shall give an applicant or licensee requesting a hearing at least thirty days' notice of the hearing. An order of the board sustaining the denial, suspension, or revocation of a license must state the grounds upon which it is based, and a copy of the order must be forwarded promptly by certified mail addressed to the principal place of business of the applicant or licensee.
(C) A decision of the board denying, suspending, or revoking a license is final and conclusive unless appealed to the Administrative Law Judge Division within thirty days of receipt, and the appeal is treated the same as appeals pursuant to Section 1-23-600(D). The filing of an appeal does not stay enforcement of an order, but the Administrative Law Judge Division may order a stay upon the terms it considers proper.
(D) The board may enter into consent orders as it considers necessary to resolve matters pending before it.
(E) A licensee may surrender a license at any time by delivering to the board written notice of the surrender, but the surrender must not affect the licensee's civil or criminal liability for acts committed before the surrender, or affect the liability on a bond, or entitle the licensee to a return of a part of a license fee.
Section 34-37-108. The board may make, promulgate, alter, amend, or revise reasonable rules and regulations as may be necessary for the enforcement and execution of this chapter.
Section 34-37-109. A person, partnership, association, or corporation and the members, officers, directors, agents, and employees of the person, partnership, association, or corporation who violate any of the provisions of this chapter are guilty of a misdemeanor and, upon conviction, must be imprisoned for not more than one year or fined not more than five hundred dollars, or both."
SECTION 2. This act takes effect upon approval by the Governor.