§ 12-412. Required bond or permissible investments

   (a) "Trust company" defined. -- In this section, "trust company" has the meaning stated in § 1-101 of the Estates and Trusts Article.

(b) General rule. -- With the application for a new or renewal license, the applicant shall file evidence of a surety device with the Commissioner as provided in this section.

(c) Bond. --

   (1) A surety bond purchased to satisfy the provisions of subsection (b) of this section shall run to this State for the benefit of any individual who has been damaged by a violation of State law or regulation governing the business of money transmission committed by a licensee or an authorized delegate of a licensee.

   (2) The surety bond shall be:

      (i) In the amount required under subsection (e) of this section; and

      (ii) Issued by a bonding, surety, or insurance company that is authorized to do business in this State.

   (3) The surety bond shall be conditioned so that the licensee and any authorized delegate of the licensee shall comply with all State and federal laws and regulations governing the business of money transmission and shall fulfill all obligations to all parties to a money transmission.

   (4) The liability of a surety:

      (i) Is not affected by the insolvency or bankruptcy of the licensee or by any misrepresentation, breach of warranty, failure to pay a premium, or other act or omission of the licensee; and

      (ii) Continues as to all transactions of the licensee or an authorized delegate, for no longer than 5 years after the licensee ceases, for any reason, to be licensed. However, the Commissioner may permit the surety bond to be reduced or eliminated prior to that time if the amount of the licensee's payment instruments outstanding in this State are reduced.

   (5) A licensee or surety may cancel a surety bond by giving the Commissioner notice of the cancellation by certified mail, return receipt requested, bearing a postmark from the United States Postal Service. However, the cancellation is not effective until 90 days after the Commissioner receives the notice.

(d) Permissible investments. --

   (1) A deposit in lieu of a surety bond made to satisfy the provisions of subsection (b) of this section shall:

      (i) Have a market value equal to the amount required under subsection (e) of this section; and

      (ii) Be held by the Commissioner to secure the same obligations as are required to be secured by a surety bond under subsection (c) of this section.

   (2) At any time, a licensee may exchange investments for other investments that meet the requirements of this subsection.

   (3) The Commissioner may sell or transfer investments and distribute the proceeds on the same basis as provided for claims against a surety bond under paragraph (c) (1) of this section.

   (4) As long as a licensee is solvent, the licensee is entitled to receive any interest or dividends earned by the investments.

   (5) (i) The Commissioner may place the investments in the custody of any qualified trust company in this State.

      (ii) The licensee shall pay the compensation of this custodian.

(e) Minimum and maximum amounts. --

   (1) The amount of the surety device shall be in an amount of not less than $ 150,000 and not more than $ 1,000,000, as determined by the Commissioner.

   (2) In setting the amount of the surety device, the Commissioner shall consider:

      (i) The financial condition of the licensee or applicant;

      (ii) For a licensee, the average monthly outstanding payment instruments or outstanding money transmission liability for the previous 12 months;

      (iii) For an applicant, the projected monthly payment instrument sales and money transmission volume in the State, the business experience, and any other factor deemed appropriate; and

      (iv) The potential loss of buyers and holders of payment instruments or persons for whom or to whom money is transmitted if the applicant or licensee becomes financially impaired.

(f) Additional security. --

   (1) If the principal amount of a surety device is reduced by a payment of a claim or judgment, the licensee shall file with the Commissioner evidence of any new or additional surety device in the amount that the Commissioner sets.

   (2) If the Commissioner at any time believes that the surety device is insufficient, exhausted, or otherwise unsatisfactory, the Commissioner may require evidence of an additional surety device to be filed by the licensee. Within 30 days after the Commissioner makes a written demand for the new surety device, the licensee shall file the evidence of the new surety device.

(g) Penalties. -- A penalty imposed under § 12-426(e)(2) of this subtitle may be paid and collected from the proceeds of a surety device.

HISTORY: An. Code 1957, art. 11, § 212; 1980, ch. 33, § 2; ch. 541; 1982, ch. 882; 1983, ch. 563; 1995, ch. 432; 1996, ch. 10, § 1; ch. 326, § 2; 1997, ch. 23; 2002, ch. 539; 2003, ch. 21, § 1.