RULES AND REGULATIONS
Title 58—RECREATION
PENNSYLVANIA GAMING CONTROL BOARD
[ 58 PA. CODE CH. 433a ]
Principal Licensing Amendments
[40 Pa.B. 6676]
[Saturday, November 20, 2010]The Pennsylvania Gaming Control Board (Board), under the general authority in 4 Pa.C.S. § 1202(b)(30) (relating to general and specific powers) and the specific authority in 4 Pa.C.S. § 1202(b)(9) and (23) and 4 Pa.C.S. §§ 1311.1 and 1326 (relating to licensing of principals; and license renewals), amends Chapter 433a (relating to principal licenses) to read as set forth in Annex A.
Purpose of the Final-Form Rulemaking
This final-form rulemaking amends and updates Chapter 433a to improve its clarity, codify Board policy, eliminate or reduce some of the requirements to obtain a principal license and to reflect amendments to 4 Pa.C.S. Part II (relating to gaming).
Explanation of Amendments to Chapter 433a
Throughout this final-form rulemaking, references to ''an intermediary or holding company of an applicant or licensee'' were used in place of ''principal affiliate.'' ''Principal affiliate'' is a defined term that had not been incorporated into the body of the regulations.
In § 433a.1 (relating to definitions), the definition of ''officer'' has been amended to include individuals who may have an ability to influence or direct matters related to the operations of a licensee.
In § 433a.2 (relating to officers and directors of licensees), a number of amendments have been made to improve the clarity of the existing licensing requirements. References to applicants for licenses have been deleted. While principals of slot machine, manufacturer, manufacturer designee, supplier and management company applicants (entity applicant) will be required to file principal applications as part of the entity application process, the principals of the entity applicant do not have to hold a license as a precondition for an entity applicant to apply for a license. Similar amendments have been made in other sections of Chapter 433a for the same reason.
Subsection (b) has been amended to apply to all licensees, not just slot machine licensees, eliminating the need for the requirements in subsection (c) regarding licensees other than slot machine licensees. As a result of the amendments to subsection (b), subsection (c) has been amended to address the licensing requirements for officers and directors of a subsidiary of a slot machine licensee.
Subsection (d) has been deleted. It is no longer needed because of the amendments to the definition of ''officer'' in § 433a.1. The waiver provisions in subsections (e) and (g) are also deleted and have been replaced with new subsection (d), formerly subsection (f), which provides an exemption from licensure for outside directors of a public traded corporation. This will eliminate the paperwork required under the waiver request process for these directors who typically do not have significant involvement with the operations of a licensee.
New subsections (e) and (f) have been added to address the filing requirements of new officers and directors. Under subsection (e), most new directors or officers will be allowed to begin their duties upon appointment and will be required to file a completed Multi Jurisdictional Personal History Disclosure Form and the Pennsylvania Supplement to the Multi Jurisdictional Personal History Disclosure Form within 30 days of performing duties or exercising powers as an officer or director. However, an officer or director of a privately held slot machine licensee, privately held licensed management company or privately held principal affiliate of a slot machine licensee or licensed management company may not perform any duties or exercise powers of an officer or director prior to being granted temporary authorization from the Bureau of Licensing. The Bureau of Licensing may grant temporary authorization to a new officer or director of a privately held entity if the individual has submitted a completed Multi Jurisdictional Personal History Disclosure Form, a completed Pennsylvania Supplement to the Multi Jurisdictional Personal History Disclosure Form and fingerprints in a manner prescribed by the Bureau of Investigation and Enforcement. The more restrictive provisions for directors or officers of these privately held entities have been imposed because of the potential threat to the integrity of gaming and the lack of any other regulatory oversight of these entities.
New § 433a.3 (relating to interests in licensees held by individuals) has been reorganized. Subsection (a) now requires individuals who meet the criteria in this subsection to both apply for and obtain a principal license before acquiring an interest in a slot machine or management company licensee. In subsection (b), individuals acquiring an interest in other licensees will only be required to file a principal application before acquiring the interest; however, under subsection (c), if the individual does not obtain a principal license, the individual shall divest the interest. The more rigorous requirements regarding interests in slot machine or management company licensees are in recognition of the greater potential threat to the integrity of gaming from the acquisition of an interest in a slot machine or management company licensee as opposed to other licensees.
New subsections (d) and (e) establish new principal licensing requirements for individuals seeking to acquire a direct or indirect ownership interest of 20% or more in licensees other than slot machine or management company licensees. Under subsection (d), these individuals will be required to file a completed principal application and a Notification of a Change in Control of a Licensee Form at least 30 days prior to the acquisition. This will allow the Bureau of Licensing to review the acquisition before it actually takes place. Additionally, under subsection (e), the Board may require that the individual successfully complete the licensing process prior to completing the acquisition. This is being done to ensure the suitability of these individuals prior to their acquisition of a controlling interest in these licensees.
New subsections (f), (g) and (h) provide higher thresholds for principal licensing for interests acquired in publicly traded corporations and exempted private investment funds. This is because of the more limited ability of these acquisitions to affect the operations of a licensee. Finally, the existing subsection (g), which is now subsection (i), still retains the Board's ability to require any individual to obtain a principal license if the Board determines licensure to be appropriate.
New § 433a.4 (relating to interests in licensees held by entities) has been reorganized in the same manner as § 433a.3. Subsection (a) addresses entities acquiring an interest in a slot machine or management company licensee and subsection (b) addresses entities acquiring an interest in other licensees. Subsections (c)—(g) also mirror § 433a.3(c)—(g). Subsection (h), formerly subsection (f), has been amended to improve its clarity and existing subsection (g) has been deleted because it no longer applies. Existing subsection (h), which is now subsection (j), has been revised to make it consistent with the amendments to § 433a.3(i).
Section 433a.5 (relating to institutional investors) has been revised to reduce the filing requirements imposed on institutional investors. Under subsection (a), institutional investors that meet the criteria in paragraphs (1) and (2) will be allowed to file an Institutional Investor Notice of Ownership Form instead of being required to file an application for a principal licensee. Additionally, the Board deleted the existing provisions regarding waivers because they are not needed.
In § 433a.6 (relating to lenders and underwriters), references to applicants for a license have been deleted for the reasons previously discussed. Existing subsection (c) has been deleted and replaced with new text that includes specific criteria pertaining to when a lender will not be required to be licensed as a principal. Additionally, subsection (e) has been added to set forth the circumstances under which the purchaser of debt issued by a licensee will not be required to be licensed as a principal. Subsection (f), formerly subsection (d), has been revised to make it consistent with the requirements in new subsection (e). These revisions codify Board policy and will make it easier for lenders that are not banks or lending institutions to determine whether or not they will be required to be licensed as principals.
In § 433a.7 (relating to trusts), existing subsections (a)—(c) have been revised and rearranged to mirror §§ 433a.3(a) and (b) and 433a.4(a) and (b) so that trusts will be treated in the same manner as an individual or other entity. New subsection (c) is a reformatted version of the current subsection (d). Subsections (d) and (e) mirror the language in §§ 433a.3(g)—(i) and 433a.4(g)—(i).
Comment and Response Summary
Notice of proposed rulemaking was published at 40 Pa.B. 434 (January 16, 2010).
During the public comment period, the Board received a letter from International Game Technology thanking the Board for the opportunity to comment and supported the proposed rulemaking. Comments were also received from Washington Trotting Association, Inc. (WTA) and Shuffle Master, Inc. By letter dated March 18, 2010, the Independent Regulatory Review Commission (IRRC) also submitted comments on the proposed rulemaking.
In § 433a.2(e), Shuffle Master suggested that a 30-day requirement for officers and directors of a publicly traded company to file an application is a burdensome time constraint and requests that the subsection be amended to allow officers and directors to perform their duties prior to filing an application. Additionally, Shuffle Master request that the subsection allow for the Board to grant extensions of time to file. IRRC asked the Board to explain why 30 days is reasonable and consider allowing extensions on a case-by-case basis.
In response to Shuffle Master's and IRRC's suggestions, language was added allowing for an extension of time to file the application provided that the officer or director file a written request with the Bureau of Licensing and the extension is granted prior to the expiration of the 30-day filing requirement. Shuffle Master's other concern, allowing officers and directors to perform their duties prior to filing, was addressed in the proposed rulemaking. As proposed, an officer or director of a publicly traded company may begin performing his job duties prior to filing for licensure provided that the application is submitted within 30 days. A change is therefore not needed.
IRRC also asked the Board to explain why 30 days is a reasonable time period for an officer or director to file an application. The Board believes that because the proposed rulemaking allows officers and directors of a publicly traded company to begin their duties upon appointment but prior to applying for licensure, that the time period is reasonable. Therefore, the Board has not expanded the filing requirement beyond 30 days unless a written request is filed and the Bureau of Licensing allows for more time.
In § 433a.4, IRRC asked the Board to provide clarity on how to accomplish divestiture and include a time frame for completion. The Board did not include language on how to accomplish divestiture or the time period for completion as it will depend entirely on the nature of the interest held and the person holding the interest and therefore will be determined on a case-by-case basis. Instead, language was added that allows the Office of Enforcement Counsel to establish the time period for divestiture.
In § 433a.5, IRRC and Shuffle Master requested that this section include a time frame that the institutional investor will be required to file the Institutional Investor Notice of Ownership Form. In response, the Board established a filing deadline of 30 days from the date the institutional investor files its Schedule 13G with the United States Securities Exchange Commission. An extension for more time was not added to this section because the form is one page and contains a check box on whether the institutional investor is still eligible to file a Schedule 13(G) with the United States Securities Exchange Commission and requests disclosure on the percentage of ownership the institutional investor has in a licensee.
In § 433a.6, WTA stated that the amendment is contrary to the Board's stated intention to eliminate or reduce the requirements to obtain a principal license and is too rigid and inflexible. WTA requests that the proposed section be revised to include a more general provision allowing the Board discretion. IRRC requested that the Board explain how the proposed amendments will eliminate or reduce the requirement to obtain a principal license.
The overall purpose of the amendments to Chapter § 433a is to eliminate or reduce the requirements to obtain a principal license and to provide clarity as to whether a person is required to be licensed. With respect to § 433.6, these amendments were added to codify current policy of the Board and to provide greater clarity regarding when a lender must be licensed as a principal. The lenders referenced in subsection (c), which would be required to be licensed, are not banks or lending institutions but are companies that are not in the business of providing debt or equity loans or financing. The Board determined that requiring those lenders that do not provide debt or equity capital in the ordinary course of the lender's business to submit to a background investigation is necessary to protect the integrity of gaming. Subsection (d) was added allowing the lender to provide financing prior to licensure provided that an application had been filed and the lender received authorization from the Bureau of Licensing. The lender may receive authorization once the agency has had an opportunity to review the application and loan documents and to verify revenue sources.
In this section, lenders to management companies that obtain financing for the construction or operation of a slot machine licensee were added to the lender requirements in subsection (c). With the passage of the act of January 7, 2010 (P. L. 1, No. 1) (Act 1), the application period for Category 3 slot machine licensees was reopened. Several of the new applicants have opted to use management companies to oversee aspects of the slot operations including obtaining the financing for the project. With this additional language, lenders to management companies that are obtaining financing for the construction or operation of a slot machine licensee would be treated the same as lenders to principal affiliates of a slot machine licensee. Since a management company oversees all aspects of slot operations, the Board has determined that requiring lenders that are providing the financing to the management company to be licensed as principals is necessary to protect the integrity of gaming.
Additional Revisions
Throughout the final-form rulemaking, minor editorial changes have been made to enhance the clarity of the regulations. Several sections were also amended to the final-form rulemaking to reflect the policy decisions of the Board.
Throughout Chapter 433a, references to ''junket enterprise license'' have been deleted from the final-form rulemaking. With the passage of Act 1, gaming junket enterprises are now required to obtain a gaming junket enterprise license. The Board, however, has discretion to develop a classification system for the regulation of gaming junket enterprises and the individuals and entities associated with the gaming junket enterprise. The Board determined that the licensing of officers, directors and owners of the gaming junket enterprise, which provides a service to the slot machine licensee, as principals is overly burdensome and is not necessary to protect the integrity of gaming. Instead, officers, directors and owners will now complete applications that more closely parallel the gaming service provider requirements in Chapter 437a (relating to vendor certification and registration).
Throughout this final-form rulemaking, references to ''an intermediary or holding company of an applicant or licensee'' were used in place of ''principal affiliate.'' ''Principal affiliate'' is a defined term but had not been incorporated into the body of the regulations. Additionally, in § 433a.1, the language added to the definition of ''principal affiliate'' in the proposed rulemaking has been deleted. Instead this language was incorporated into the body of the regulations.
In § 433a.3(a)(3), language was added requiring those who receive payment from a slot machine licensee based directly or indirectly on earnings, profits or receipts from table games to apply for a principal license. This language was added in response to the amendments to 4 Pa.C.S. Part II. A management company licensee was added in subsection (a)(4) for consistency with § 433a.4(a)(4).
Additionally, language was added to § 433a.3(a)(5) and (6) and (b)(4) and (5) requiring an individual who is a general partner (GP) of a limited partnership (LP) of licensees and those who have the power or right to control or vote, directly or indirectly, 20% or more of the outstanding voting securities of a licensee to apply for a principal license. GPs of LPs that are intermediaries or holding companies (principal affiliates) of licensees have not previously been required to be licensed as principals because the GPs' interests in LPs is typically less than 1%. Despite the actual ownership interest, GPs characteristically have management control of LPs, carry the liability for the debts and have the right to bind the LPs in contracts. The Board determined that the licensure of an individual who has an interest in or is a GP who controls 20% or more of the outstanding voting securities of a licensee is necessary to protect the integrity of gaming. The ''general partner of a limited partnership'' language was added to the definition of ''principal affiliate'' but had not been incorporated in the proposed rulemaking into the licensing requirements in § 433a.3. The incorporation of the language in subsections (a)(5) and (6) and (b)(4) and (5) makes clear that individuals who are the GPs of LPs that are intermediaries or holding companies of a licensee, defined as principal affiliates, are required to be licensed as principals. The numbering in subsection (b) was therefore updated to reflect the addition of paragraphs (4) and (5).
Proposed subsection (b) was amended to mirror the format of subsection (a). Language was added in subsection (c) for consistency with the divestiture language in § 433a.4(c), which was added based on comments received from IRRC.
Subsection (h) was amended to correspond with the section on exemption from licensure for private investment funds, which is found in § 433a.4(h), not subsection (e).
Section 433a.4(a)(3) was amended to add language requiring those entities that receive payment from a slot machine licensee based directly or indirectly on earnings, profits or receipts from table games to apply for a principal license. This language was added in response to the amendments to 4 Pa.C.S. Part II. Language was also added in subsections (a)(5) and (6) and (b)(4) and (5) requiring entities that are the GP of a limited partner to be licensed as principals for the same reasons previously discussed. The numbering in subsection (b) was updated to reflect the addition of paragraphs (4) and (5). The term ''individual'' was amended to ''entity'' in subsection (b)(2) as § 433a.4 relates to interests held by entities, not individuals.
Proposed subsection (b) was amended to mirror the format of subsection (a). Language in subsection (c) was added based on comments received from IRRC and is consistent with the language added to § 433a.3(c).
The current regulations require that intermediaries, holding companies and subsidiaries be licensed as principals. Subsidiaries were inadvertently deleted from the proposed rulemaking as subsidiaries do not have an interest or right in a licensee, but are, instead, possessed by a licensee. The language in subsection (i) was added which no longer mandates the licensure of subsidiaries of a licensee but allows the Board discretion as to when a subsidiary would be required to be licensed. The remainder of § 433.4 was therefore renumbered.
A minor editorial change from ''license'' to ''licensee'' was made in § 433a.5(a)(1).
In § 433a.7, language was added in subsections (a)(5) and (6) and (b)(4) and (5) requiring trusts that are the GP of an LP to be licensed for the reasons previously discussed. Additionally, ''management company'' was moved from subsection (b) to subsection (a) for consistency between this section and §§ 433a.3(a) and 433a.4(a). Interests in management companies held by trusts will therefore be treated like interests in management companies held by individuals and other business entities.
In section (d), the proposed rulemaking excludes trusts from the requirements of licensure if the trust owns less than 5% of the voting securities of a publicly traded slot machine licensee or holding company of a slot machine licensee. The proposed rulemaking, however, did not provide for the same exclusion if a trust held a similar interest in a licensed manufacturer, supplier, manufacturer designee or management company. The amendment applies the exclusion to trusts that hold interests in publicly traded licensees and is consistent with the exclusion in §§ 433a.3(f) and 433a.4(f) for individuals and entities that hold similar interests in licensees.
In § 433a.8(c) (relating to principal applications), language was amended to improve clarity.
The amendment to § 433a.9(a) (relating to principal license term and renewal) reflects the statutory change to 4 Pa.C.S. Part II which extended the renewal period for principals from yearly to once every 3 years. Subsection (b) was added because, unlike slot machine licensees, licensed manufacturers and suppliers are subject to an initial 1-year renewal. The manufacturer or supplier license, however, can only be renewed when the principals, including the affiliates, intermediaries, holding companies, officers, directors and owners also apply for renewal and are investigated. After the initial 1-year renewal, the principals will be on a 3-year renewal cycle along with the licensed supplier or manufacturer for which they are a principal. Subsections (b) and (c) were renumbered to reflect the additional renewal language.
Affected Parties
This final-form rulemaking will affect officers and directors of licensees; individuals, entities, institutional investors and trusts that hold an interest in a licensee; and lending institutions and other purchasers who hold debt of a licensee. It will provide greater clarity regarding who will be licensed as a principal and eliminate the need for some of these entities to be licensed as principals.
Fiscal Impact
Commonwealth
There will not be significant increase or decrease in regulatory costs for the Board or other State agencies as a result of this final-form rulemaking. This is because the Board recovers the costs associated with licensing activities from the applicants for licenses.
Political subdivisions
This final-form rulemaking will not have fiscal impact on political subdivisions of this Commonwealth.
Private sector
Overall, this final-form rulemaking should result in a slight reduction in the number of applications for a principal license from the affected groups listed in this preamble.
General public
This final-form rulemaking will not have fiscal impact on the general public.
Paperwork Requirements
This final-form rulemaking will, in general, reduce the number of applications that are filed for principal licenses and allow some institutional investors to file the shorter Institutional Investor Notice of Ownership Form.
Effective Date
This final-form rulemaking will become effective upon publication in the Pennsylvania Bulletin.
Contact Person
The contact person for questions about this final-form rulemaking is Susan A. Yocum, Assistant Chief Counsel, (717) 265-8356.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on January 6, 2010, the Board submitted a copy of the notice of proposed rulemaking, published at 40 Pa.B. 434, to IRRC and the Chairpersons of the House Gaming Oversight Committee and the Senate Community, Economic and Recreational Development Committee for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Board has considered all comments from IRRC, the House and Senate Committees and the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on October 6, 2010, the final-form rulemaking was deemed approved by the Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on October 7, 2010, and approved the final-form rulemaking.
Findings
The Board finds that:
(1) Public notice of proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The final-form rulemaking is necessary and appropriate for the administration and enforcement of 4 Pa.C.S. Part II.
Order
The Board, acting under 4 Pa.C.S. Part II, orders that:
(a) The regulations of the Board, 58 Pa. Code Chapter 433a, are amended by amending §§ 433a.1—433a.9 to read as set forth in Annex A.
(b) The Chairperson of the Board shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(c) This order shall take effect upon publication in the Pennsylvania Bulletin.
GREGORY C. FAJT,
Chairperson(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 40 Pa.B. 6226 (October 23, 2010).)
Fiscal Note: Fiscal Note 125-108 remains valid for the final adoption of the subject regulations.
Annex A
TITLE 58. RECREATION
PART VII. GAMING CONTROL BOARD
Subpart B. LICENSING, PERMITTING, CERTIFICATION AND REGISTRATION
CHAPTER 433a. PRINCIPAL LICENSES § 433a.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
Applicant—A person that has submitted an application to the Board for a slot machine license, manufacturer license, manufacturer designee license, supplier license or management company license.
Director—A director of a corporation, member of an audit committee or any person performing similar functions with respect to an entity, whether incorporated or unincorporated.
Entity—A person, other than an individual.
Indirect ownership interest—An ownership interest in an entity that has a direct ownership interest in an applicant or licensee, or a direct ownership interest in an entity that has an ownership interest in an applicant or licensee through one or more intervening entities.
Individual—A natural person.
Lending institution—A person who has been issued a license to lend money by a state or Federal agency or a person who satisfies the definition of ''qualified institutional buyer'' under 17 CFR 230.144a (relating to private resales of securities to institutions).
Licensee—A person that has been issued a slot machine license, manufacturer license, manufacturer designee license, supplier license or management company license.
Officer—A president, chief executive officer, chief operating officer, secretary, treasurer, principal legal officer, principal compliance officer, principal financial officer, principal accounting officer, chief engineer or technical officer of a manufacturer, principal slot operations officer of a slot machine licensee, senior surveillance and audit executives of a principal affiliate of a slot machine licensee and any person routinely performing corresponding functions with respect to an entity whether incorporated or unincorporated.
Principal affiliate—An intermediary or holding company of an applicant or licensee.
Principal entity—An entity that meets the definition of ''principal'' in section 1103 of the act (relating to definitions) or is otherwise required to be licensed as a principal and is not an intermediary or holding company of an applicant or licensee.
Private investment fund—An entity that meets the definition of ''investment company'' under section 3(a)(1) of the Investment Company Act of 1940 (15 U.S.C.A. § 80a-3(a)(1)), but is otherwise exempt from the definition of ''investment company'' under section 3(c)(7) of the Investment Company Act of 1940.
Registered investment adviser—An investment adviser registered with the SEC under the Investment Advisers Act of 1940 (15 U.S.C.A. §§ 80b-1—80b-21).
Registered investment company—An investment company registered with the SEC under the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1—80a-64).
Voting security—A security or other interest which entitles the owner to vote for the election of:
(i) A director of a corporation.
(ii) A person performing functions similar to a director with respect to an organization, whether incorporated or unincorporated.
§ 433a.2. Officers and directors of licensees.
(a) Each officer and director of a licensee shall be licensed as a principal.
(b) Each officer and director of a principal affiliate shall be licensed as a principal.
(c) Each officer and director of a subsidiary of a slot machine licensee shall be licensed as a principal.
(d) Notwithstanding subsection (a) or (b), an outside director of a publicly traded corporation, who is neither a member of the audit committee nor chairperson of the board of directors of the publicly traded corporation shall not be required to be licensed as a principal unless the Board determines that the licensure of the individual is necessary to protect the integrity of gaming in this Commonwealth.
(e) Except as provided in subsection (f), an officer or director required to be licensed under this section shall submit a completed Multi Jurisdictional Personal History Disclosure Form and the Pennsylvania Supplement to the Multi Jurisdictional Personal History Disclosure Form within 30 days of performing any duties or exercising any powers as an officer or director unless the officer or director files a written request for an extension with the Bureau of Licensing and the extension is granted prior to the expiration of the 30-day filing deadline.
(f) An officer or director of a privately held slot machine licensee, privately held licensed management company or privately held principal affiliate of a slot machine licensee or licensed management company may not perform any duties or exercise any powers of an officer or director prior to being granted temporary authorization from the Bureau of Licensing. The Bureau of Licensing may grant temporary authorization to a new officer or director of a privately held entity if the individual has submitted a completed Multi Jurisdictional Personal History Disclosure Form, a completed Pennsylvania Supplement to the Multi Jurisdictional Personal History Disclosure Form, and fingerprints in a manner prescribed by the Bureau of Investigation and Enforcement.
§ 433a.3. Interests in licensees held by individuals.
(a) An individual shall apply for and obtain a principal license from the Board prior to possessing any of the following:
(1) A direct ownership interest in a slot machine or management company licensee.
(2) A 1% or greater indirect ownership interest in a slot machine or management company licensee. An ownership interest that is held indirectly by an individual through one or more intervening entities will be determined by successive multiplication of the ownership percentages for each link in the vertical chain.
(3) A right to receive a payment from a slot machine licensee based directly or indirectly on the earnings, profits or receipts from the slot machines, table games and associated equipment for use or play in this Commonwealth.
(4) A right or ability to control or influence the management or policies of a slot machine or management company licensee.
(5) A general partnership interest in a limited partnership that is a slot machine or management company licensee.
(6) A general partnership interest in a limited partnership that is a principal affiliate of a slot machine or management company licensee.
(b) An individual shall notify the Board and submit a completed application in accordance with § 433a.8 (relating to principal applications) prior to possessing any of the following:
(1) A direct ownership interest of 1% or more in a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(2) A 1% or greater indirect ownership interest in a licensed manufacturer, licensed supplier or licensed manufacturer designee. An ownership interest that is held indirectly by an individual through one or more intervening entities will be determined by successive multiplication of the ownership percentages for each link in the vertical chain.
(3) A right or ability to control or influence the management or policies of a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(4) A general partnership interest in a limited partnership that is a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(5) A general partnership interest in a limited partnership that is a principal affiliate of a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(c) An individual who has acquired an interest or right set forth in subsection (b)(1)—(5) prior to being licensed, and whose application is denied or withdrawn, shall divest his interest or right within a period of time established by the Office of Enforcement Counsel.
(d) An individual seeking to acquire a direct or indirect ownership interest of 20% or greater in a licensed manufacturer, licensed supplier or licensed manufacturer designee shall submit the following, at least 30 days prior to acquiring the ownership interest:
(1) A Notification of a Change in Control of a Licensee Form.
(2) A completed principal application.
(e) Notwithstanding subsection (d), the Board may require an individual to obtain a principal license prior to acquiring a direct or indirect ownership interest of 20% or greater in a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(f) Notwithstanding subsections (a) and (b), an individual whose ownership interest in a licensee consists of less than 5% of the voting securities of a publicly traded corporation will not be required to be licensed as a principal.
(g) Notwithstanding subsections (a) and (b), an individual who indirectly owns less than 5% of the voting securities of a publicly traded corporation through one or more privately held entities will not be required to be licensed as a principal.
(h) Notwithstanding subsections (a) and (b), an individual who indirectly owns less than 5% of the voting securities of a publicly traded corporation through a private investment fund that has been exempted from licensure under § 433a.4(h) (relating to interests in licensees held by entities) will not be required to be licensed as a principal.
(i) Notwithstanding any provision in this section, the Board may require any individual who has any financial interest in a licensee to be licensed as a principal.
§ 433a.4. Interests in licensees held by entities.
(a) An entity shall apply for and obtain a principal license prior to possessing any of the following:
(1) A direct ownership interest in a slot machine or management company licensee.
(2) A 1% or greater indirect ownership interest in a slot machine or management company licensee. An ownership interest that is held indirectly by an entity through one or more intervening entities will be determined by successive multiplication of the ownership percentages for each link in the vertical chain.
(3) A right to receive a payment from a slot machine or management company licensee based directly or indirectly on the earnings, profits or receipts from the slot machines, table games and associated equipment for use or play in this Commonwealth.
(4) A right or ability to control or influence the management or policies of a slot machine or management company licensee.
(5) A general partnership interest in a limited partnership that is a slot machine or management company licensee.
(6) A general partnership interest in a limited partnership that is a principal affiliate of a slot machine or management company licensee.
(b) An entity shall notify the Board and submit a completed application in accordance with § 433a.8 (relating to principal applications) prior to possessing any of the following:
(1) A direct ownership interest of 1% or more in a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(2) A 1% or greater indirect ownership interest in a licensed manufacturer, licensed supplier or licensed manufacturer designee. An ownership interest that is held indirectly by an entity through one or more intervening entities will be determined by successive multiplication of the ownership percentages for each link in the vertical chain.
(3) A right or ability to control or influence the management or policies of a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(4) A general partnership interest in a limited partnership that is a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(5) A general partnership interest in a limited partnership that is a principal affiliate of a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(c) An entity that has acquired an interest or right set forth in subsection (b)(1)—(5) prior to being licensed, and whose application is denied or withdrawn, shall divest its interest or right within a period of time established by the Office of Enforcement Counsel.
(d) An entity seeking to acquire a direct or indirect ownership interest of 20% or greater in a licensed manufacturer, licensed supplier or licensed manufacturer designee shall submit the following, at least 30 days prior to acquiring the ownership interest:
(1) A notification of a change in control of a licensee form.
(2) A completed principal application.
(e) Notwithstanding subsection (d), the Board may require an entity to obtain a principal license prior to acquiring a direct or indirect ownership interest of 20% or greater in a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(f) Notwithstanding subsections (a) and (b), an entity that indirectly owns less than 5% of the voting securities of a publicly traded corporation will not be required to be licensed as a principal.
(g) Notwithstanding subsections (a) and (b), an entity that indirectly owns less than 5% of the voting securities of a publicly traded corporation through one or more privately held entities will not be required to be licensed as a principal.
(h) Notwithstanding subsections (a) and (b), a private investment fund and its related management entities will not be required to be licensed as a principal if the following apply:
(1) The private investment fund has no voting rights in the licensee and does not possess any other right or ability to control or to influence the licensee.
(2) At least 20% of the investors in the private investment fund are ''institutional investors'' as defined in § 401a.3 (relating to definitions).
(3) Each individual who has an indirect ownership or beneficial interest of 5% or greater in the licensee through the private investment fund applies for and obtains a principal license.
(4) Each individual who has the ability to control or influence the management of the private investment fund applies for and obtains a principal license.
(5) The private investment fund agrees to provide the Board with information the Board deems necessary to evaluate the integrity of the private investment fund and its investors, and its compliance with this section. Information provided to the Board will be confidential.
(6) Each individual required to be licensed as a principal in paragraph (4) shall as part of his principal license application sign a notarized statement affirming, at a minimum, the following:
(i) The private investment fund's investment in the applicant or licensee will not violate applicable United States, Commonwealth or international laws and regulations, including anti-money laundering regulations or conventions, the Internal Revenue Code of 1986, the Employee Retirement Income Security Act of 1974, the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940 and the Investment Advisers Act of 1940.
(ii) To his best knowledge, no investor in the private investment fund:
(A) Holds an interest in the private investment fund in contravention of any applicable United States, Commonwealth or international laws and regulations, including anti-money laundering regulations or conventions, the Internal Revenue Code of 1986, the Employee Retirement Income Security Act of 1974, the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940 and the Investment Advisers Act of 1940.
(B) Is directly or indirectly affiliated with, a prohibited country, territory, individual or entity on the List of Specially Designated Nationals and Blocked Persons maintained by the United States Treasury Department's Office of Foreign Asset Control.
(C) Is currently charged with or is under indictment for any felony or gambling offense in any jurisdiction.
(D) Has been convicted of a felony when 15 years have not elapsed from the date of expiration of the sentence for the offense.
(i) The Board may require a subsidiary of a licensee to be licensed as a principal.
(j) Notwithstanding any provision to the contrary in this section, the Board may require any entity that has any financial interest in a licensee to be licensed as a principal.
§ 433a.5. Institutional investors.
(a) An institutional investor may file an Institutional Investor Notice of Ownership Form with the Bureau of Licensing in lieu of applying for principal licensure required under this chapter, if:
(1) The institutional investor owns or beneficially owns more than 5% but less than 15% of the outstanding voting securities of a publicly traded corporation that is a principal affiliate of a manufacturer licensee, manufacturer designee licensee, supplier licensee, or management company licensee and has filed and remains eligible to file a statement of beneficial ownership on Schedule 13G with the SEC as a result of the institutional investor's ownership interest in the publicly traded corporation.
(2) The institutional investor owns or beneficially owns more than 5% but less than 10% of the outstanding voting securities of a publicly traded corporation that is a principal affiliate of a slot machine licensee and has filed and remains eligible to file a statement of beneficial ownership on Schedule 13G with the SEC as a result of the institutional investor's ownership interest in the publicly traded corporation.
(b) The institutional investor shall file the Institutional Investor Notice of Ownership Form with the Bureau of Licensing within 30 days of the institutional investor filing its Schedule 13G with the SEC.
§ 433a.6. Lenders and underwriters.
(a) Each lender and underwriter of a slot machine, manufacturer or supplier licensee shall be licensed as a principal.
(b) Notwithstanding subsection (a), a lender that is a bank or lending institution which makes a loan to a slot machine, manufacturer or supplier licensee in the ordinary course of business will not be required to be licensed as a principal. The Board may require a bank or lending institution to provide information or other assurances to verify its eligibility for this exemption.
(c) A lender to a principal affiliate of a slot machine licensee or to a management company that is obtaining financing for the construction or operation of a slot machine licensee shall be required to be licensed as a principal unless the following apply:
(1) The lender is in the business of providing debt or equity capital to individuals or entities.
(2) The loan to the principal affiliate or management company of a slot machine licensee is in the ordinary course of the lender's business.
(3) The lender does not have the ability to control or otherwise influence the affairs of the principal affiliate or management company of a slot machine licensee or the slot machine licensee.
(d) A lender that is required to be licensed as a principal in accordance with subsection (c) may lend to a principal affiliate or to a management company of a slot machine licensee prior to licensure if the lender has filed a completed application in accordance with § 433a.8 (relating to principal applications) and has received lender authorization from the Bureau of Licensing.
(e) A person that acquires a debt instrument issued by a licensed supplier, licensed manufacturer, slot machine licensee or principal affiliate of a slot machine licensee in a secondary market shall not be required to be licensed as a principal if:
(1) The person does not have any right or ability to control or influence the affairs of the licensee.
(2) The person's acquisition of the debt instrument is in the ordinary course of business and is not part of a plan or scheme to avoid the requirements of this section.
(f) Notwithstanding any provision to the contrary in this section, the Board may require the licensure of any person that holds a debt instrument issued by a licensee or any principal affiliate or subsidiary of a licensee if the Board has reason to believe that the person would not satisfy the character requirements of section 1310(a) of the act (relating to slot machine license application character requirements).
§ 433a.7. Trusts.
(a) A trust or similar business entity shall apply for and obtain a principal license prior to possessing any of the following:
(1) A direct ownership interest in a slot machine or management company licensee.
(2) A 1% or greater indirect ownership interest in a slot machine or management company licensee. An ownership interest that is held indirectly by an individual through one or more intervening entities will be determined by successive multiplication of the ownership percentages for each link in the vertical chain.
(3) A right to receive a payment from a slot machine licensee based directly or indirectly on the earnings, profits or receipts from the slot machines, table games and associated equipment for use or play in this Commonwealth.
(4) A right or ability to control or influence the management or policies of a slot machine or management company licensee.
(5) A general partnership interest in a limited partnership that is a slot machine or management company licensee.
(6) A general partnership interest in a limited partnership that is a principal affiliate of a slot machine or management company licensee.
(b) A trust or similar business entity shall notify the Board and submit a completed application in accordance with § 433a.8 (relating to principal applications) prior to possessing any of the following:
(1) A direct ownership interest of 1% or more in a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(2) A 1% or greater indirect ownership interest in a licensed manufacturer, licensed supplier or licensed manufacturer designee. An ownership interest that is held indirectly by an individual through one or more intervening entities will be determined by successive multiplication of the ownership percentages for each link in the vertical chain.
(3) A right or ability to control or influence the management or policies of a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(4) A general partnership interest in a limited partnership that is a licensed manufacturer, licensed supplier, or licensed manufacturer designee.
(5) A general partnership interest in a limited partnership that is a principal affiliate of a licensed manufacturer, licensed supplier or licensed manufacturer designee.
(c) Each trustee, grantor and beneficiary, including a minor child beneficiary, of a trust required to be licensed as a principal under this section shall be required to be licensed as a principal.
(d) Notwithstanding subsections (a) and (b), a trust whose ownership interest in a licensee consists of less than 5% of the voting securities of a publicly traded company will not be required to be licensed as a principal.
(e) Notwithstanding any provision to the contrary in this section, the Board may require any trust that has any financial interest in a licensee to be licensed as a principal.
§ 433a.8. Principal applications.
(a) An individual required to be licensed as a principal, unless otherwise directed by the Board, shall file:
(1) An original and three copies of a completed Multi Jurisdictional Personal History Disclosure Form.
(2) An original and three copies of a completed Principal/Key Employee Form—Pennsylvania Supplement to the Multi Jurisdictional Personal History Disclosure Form.
(3) Executed releases requested by the Board, including releases whereby the applicant consents to the release of information that may be requested by the individual pursuant to the Freedom of Information Act (5 U.S.C.A. § 552) to the Board.
(4) The nonrefundable application fee posted on the Board's web site (www.pgcb.state.pa.us).
(b) A principal entity required to be licensed as a principal shall file a completed Principal Entity Form and submit the applicable application fee posted on the Board's web site (www.pgcb.state.pa.us).
(c) A principal affiliate shall apply for a principal license as if the principal affiliate were applying for the slot machine license, manufacturer license, manufacturer designee license, supplier license or management company license.
(d) In addition to the materials required under subsections (a) or (b), an applicant for a principal license shall:
(1) Promptly provide information requested by the Board relating to the principals' application or regulation and cooperate with the Board in investigations, hearings and enforcement and disciplinary actions.
(2) Comply with the general application requirements in Chapters 421a and 423a (relating to general provisions; and applications).
§ 433a.9. Principal license term and renewal.
(a) A principal license or renewal will be valid for 3 years from the date on which the license or renewal is approved by the Board.
(b) Notwithstanding subsection (a), a principal of a manufacturer or supplier shall be subject to an initial annual renewal for each slot machine or table game license held by the manufacturer or supplier. Renewals thereafter will be valid for 3 years from the date of the approval of the renewal of the license by the Board.
(c) A renewal application and renewal fee shall be filed at least 2 months prior to the expiration of the current license.
(d) A principal license for which a completed renewal application and fee has been received by the Board will continue in effect until the Board sends written notification to the holder of the principal license that the Board has approved or denied the license.
[Pa.B. Doc. No. 10-2196. Filed for public inspection November 19, 2010, 9:00 a.m.]
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