H 3726 Session 112 (1997-1998)
H 3726 General Bill, By Stuart, G. Brown, Knotts, Phillips, Spearman and Wilkes
A BILL 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.
03/26/97 House Introduced and read first time HJ-3
03/26/97 House Referred to Committee on Labor, Commerce and
Industry HJ-3
A BILL
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:
"CHAPTER 37
Money Order Act
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.
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