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PA Bulletin, Doc. No. 05-2429

Title 58--RECREATION

PENNSYLVANIA GAMING CONTROL BOARD

[58 PA. CODE CHS. 401, 405, 421, 423, 435, 437 AND 441]

Temporary Regulations

[35 Pa.B. 7085]

   Under the Pennsylvania Gaming Control Board's (Board) Resolution No. 2005-3 REG, entitled Adoption of Temporary Regulations, dated June 16, 2005, and Resolution No. 2005-4, entitled Adopting of Draft Regulations as Temporary Regulations for the General Licensing Standards for Slot Machine License Applicants Temporary Regulations, dated July 21, 2005, the Board has the authority to amend the temporary regulations, adopted on June 16, 2005, and July 21, 2005, as it deems necessary in accordance with the purpose of the act of July 5, 2004 (P. L. 572, No. 71) (Act 71) and to further the intent of Act 71. Therefore, the Board has decided to make editorial changes to the temporary regulations, dated June 16, 2005, and July 21, 2005, as deposited with the Legislative Reference Bureau (Bureau) and published at 35 Pa.B. 4045 (July 15, 2005) and 35 Pa.B. 4828 (August 6, 2005).

   Therefore, the Board has deposited with the Bureau amendments to 58 Pa. Code §§ 401.4, 405.3, 421.2, 421.4, 423.5, 435.1, 435.2, 435.4, 437.1, 437.3, 441.7, 441.9 and 441.10. The amendments are effective as of December 15, 2005.

   The temporary regulations of the Board, 58 Pa. Code Chapters 401, 405, 421, 423, 435, 437 and 441, are amended by amending §§ 401.4, 405.3, 421.2, 421.4, 423.5, 435.1, 435.2, 435.4, 437.1, 437.3, 441.7, 441.9 and 441.10 to read as set forth in Annex A, with ellipses referring to the existing text of the regulations.

THOMAS A. DECKER,   
Chairperson

   Fiscal Note:  125-11. No fiscal impact; (8) recommends adoption.

Annex A

TITLE 58.  RECREATION

PART VII.  GAMING CONTROL BOARD

Subpart A.  GENERAL PROVISIONS

CHAPTER 401.  PRELIMINARY PROVISIONS

§ 401.4.  Definitions.

   The following words and terms, when used in this part, have the following meanings, unless the context clearly indicates otherwise:

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Controlling interest--

   (i)  A person shall be deemed to have the ability to control a publicly traded entity, or to elect one or more of the members of its board of directors, if the holder owns or beneficially holds 5% or more of the securities of the publicly traded domestic or foreign corporation, partnership, limited liability company or other form of legal entity, unless the presumption of control or ability to elect is rebutted by clear and convincing evidence.

   (ii)  A person who is a holder of securities of a privately held domestic or foreign corporation, partnership, limited liability company or other form of legal entity shall be deemed to possess a controlling interest unless the presumption of control is rebutted by clear and convincing evidence.

   (iii)  A person who owns or is the beneficial holder of less than 5% of the securities of a privately held domestic or foreign corporation, partnership, limited liability company or other form of legal entity shall be deemed as having rebutted the presumption of control by clear and convincing evidence.

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Gaming employee--

   (i)  An employee of a slot machine licensee, including, but not limited to:

   (A)  Cashiers.

   (B)  Change personnel.

   (C)  Counting room personnel.

   (D)  Slot attendants.

   (E)  Hosts or other persons authorized to extend complimentary services.

   (F)  Machine mechanics or computer machine technicians.

   (G)  Security personnel.

   (H)  Surveillance personnel.

   (I)  Supervisors and managers.

   (ii)  The term includes:

   (A)  Employees of a person holding a supplier license whose duties are directly involved with the repair, service or distribution of slot machines and associated equipment sold or provided to a licensed facility within this Commonwealth.

   (B)  Employees of a person holding a manufacturer license whose duties meet one or more of the following criteria:

   (I)  The employee's duties are directly involved with slot monitoring systems, casino management systems, player tracking systems and wide-area progressive systems approved and installed for use or play in this Commonwealth.

   (II)  The employee's presence may be required from time to time in restricted areas of a licensed facility.

   (C)  Other employees as determined by the Board.

   (iii)  The term does not include bartenders, cocktail servers or other persons engaged solely in preparing or serving food or beverages, clerical or secretarial personnel, parking attendants, janitorial, stage, sound and light technicians and other nongaming personnel as determined by the Board.

*      *      *      *      *

Key employee--

   (i)  Any individual who is:

   (A)  Employed in a director or department head capacity and who is empowered to make discretionary decisions that regulate slot machine operations in this Commonwealth, including the general manager and assistant manager of the licensed facility, director of slot operations, director of cage and credit operations, director of surveillance, director of marketing, director of management information systems, director of security, comptroller and any employee who supervises the operations of these departments or to whom these department directors or department heads report.

   (B)  Employed by a slot machine licensee or applicant, manufacturer licensee or applicant, supplier licensee or applicant, certified vendor or licensed junket enterprise whose duties affect or require contact with slot machines, slot monitoring systems, casino management systems, player tracking systems and wide-area progressive systems for use or play in this Commonwealth, whether or not the individual is assigned to gaming operations in this Commonwealth.

   (C)  Employed in other positions which the Board will determine based on detailed analyses of the employee's duties or the job descriptions as provided in the internal controls of the applicant or licensee as approved by the Board under section 1322(c) of the act (relating to slot machine accounting controls and audits).

   (ii)  All other gaming employees unless otherwise designated by the Board, will be classified as nonkey employees.

*      *      *      *      *

   Key employee qualifier--Officers; directors; persons who directly or indirectly hold any beneficial interest in or ownership of an amount equal to 5% or more of the securities of an applicant or licensee; a person who has the ability to control the applicant or licensee, has a controlling interest in the applicant or licensee, elects a majority of the board of directors of the applicant or licensee, or otherwise has the ability to control the applicant or licensee; a lender, other than a bank or lending institution which makes a loan or holds a mortgage or other lien acquired in the ordinary course of business; an underwriter; a financial backer whose holdings are valued at an amount equal to 5% or more of an equity interest in the applicant or licensee including holders of convertible bonds, the conversion of which would or does result in the owner holding 5% or more of an equity interest in the applicant or licensee; employees of a slot machine applicant or licensee, manufacturer applicant or licensee or supplier applicant or licensee required to be licensed by the Board as a key employee qualifier; and any other person required to be licensed by the Board as a key employee qualifier.

*      *      *      *      *

   Publicly traded--An entity that meets one or more of the following criteria:

   (i)   The entity has a class or series of securities registered under the Securities Exchange Act of 1934 (15 U.S.C.A. §§ 78a--78nn).

   (ii)   The entity is a registered management company under the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1--80a-64).

   (iii)   The entity is subject to the reporting obligations imposed by section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.A. § 78o) by reason of having filed a registration statement which has become effective under the Securities Act of 1933 (15 U.S.C.A. §§ 77a--77aa).

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   Vendor--A person who provides goods or services to a slot machine licensee or applicant, but who is not required to be licensed as a manufacturer, supplier, management company or junket enterprise.

CHAPTER 405.  BUREAU OF INVESTIGATION AND ENFORCEMENT.

§ 405.3.  Office of Enforcement Counsel.

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   (d)  The Director of the Office of Enforcement Counsel may be removed by the Board only for good cause shown.

Subpart B.  LICENSING, REGISTERING, CERTIFYING AND PERMITTING

CHAPTER 421.  GENERAL PROVISIONS

§ 421.2.  Licenses, registrations, certifications and permits.

   (a)  Licenses that may be issued by the Board include:

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   (6)  Junket enterprise license, which authorizes the approved licensee to arrange a junket to a licensed facility with a slot machine licensee.

   (b)  Permits that may be issued by the Board include occupation permits which authorize individuals to be employed as gaming employees by slot machine licensees, supplier licensees and manufacturer licensees who are excluded from the supplier requirement.

   (c)  Certifications that may be issued by the Board include vendor certifications which authorize approved vendors to provide goods or services to slot machine licensees on a regular or continuing basis.

   (d)  Registrations that may be issued by the Board include:

   (1)  Nongaming employee registration, which authorizes individuals to be employed as nongaming employees by slot machine licensees or certified vendors.

   (2)  Vendor registration, which authorizes approved vendors to provide goods or services to slot machine licensees or applicants.

§ 421.4.  Investigations; supplementary information.

   (a)  The Board and the Bureau may:

   (1)  Make an inquiry or investigation concerning an applicant, licensee or any affiliate, intermediary, subsidiary or holding company of the applicant or licensee as it may deem appropriate either at the time of the initial application and licensure or at any time thereafter.

   (2)  Upon request from an eligible applicant or licensee and upon receipt of an application and appropriate fees, make an inquiry or investigation concerning a purchaser of an applicant or licensee prior to the conclusion of the purchase, as if the purchaser were an eligible applicant. This inquiry or investigation does not replace the application procedure or process required under the act and this part which is a requirement for licensure.

   (b)  It shall be the continuing duty of all applicants and licensees to provide full cooperation to the Board and the Bureau in the conduct of the inquiry or investigation and to provide supplementary information requested by the Board or the Bureau.

CHAPTER 423.  APPLICATIONS

§ 423.5.  Application withdrawal.

   (a)  A request for withdrawal of an application may be made by petition to the Board in the following manner:

   (1)  If the request for application withdrawal is made by an applicant for a Category 1, Category 2 or Category 3 slot machine license, the petition shall be filed within 6 months from the date slot machine license applications are deemed complete by the Board, unless otherwise designated by the Board.

   (2)  If the request for application withdrawal is made by an applicant for any license, permit, certification or registration or renewal thereof, other than an initial slot machine license applicant, the petition may be filed at any time prior to issuance by the Board of its determination with respect to the application.

   (b)  The petition should set forth the reasons for the withdrawal.

   (c)  An applicant may petition for the withdrawal of its application or an application submitted by one of its affiliates or persons or entities required to be qualified under section 1311 of the act (relating to slot machine license application business entity requirements), or both.

   (d)   In all requests for withdrawal, the Board may set the conditions of withdrawal and may deny or grant the request with or without prejudice.

   (1)  If a request for withdrawal is granted with prejudice, the person or entity whose application has been withdrawn will not be eligible to apply for licensure with the Board until after expiration of 5 years from the date of the withdrawal.

   (2)  If a request for withdrawal is granted without prejudice the Board will determine when the person or entity whose application has been withdrawn may be eligible to apply for licensure.

   (e)  Unless the Board otherwise directs, fees or other payments relating to any application will not become refundable by reason of withdrawal of the application or any portion thereof.

CHAPTER 435.  EMPLOYEES

§ 435.1.  General provisions.

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   (m)  The Board may issue, renew or deny a license, permit or registration under this section, consistent with 18 Pa.C.S. § 9124 (relating to use of records by licensing agencies).

   (1)  If the Board provides an individual with the opportunity to demonstrate rehabilitation, the individual shall provide certification from the Board of Probation and Parole or the county probation and parole office, whichever is applicable, that all obligations for restitution, fines and penalties have been met.

   (i)  The Board will provide notice to the district attorney of the individual's county of residence of the individual's request for a determination of rehabilitation.

   (ii)  The district attorney shall have 15 days from receipt of the notice to provide input into the determination.

   (2)  For an individual with out-of-State convictions, if the Board provides the individual with the opportunity to demonstrate rehabilitation, the individual shall provide certification from the equivalent state or county board of probation or parole, whichever is applicable, that all obligations for restitution, fines and penalties have been met.

   (i)  The Board will provide notice to the district attorney or equivalent thereof of the individual's place of conviction of the individual's request for a determination of rehabilitation.

   (ii)  The district attorney or equivalent thereof shall have 15 days from receipt of the notice to provide input into the determination.

   (n)  Nothing in subsection (m) will be construed to authorize the issuance of a license, permit or registration to an individual who meets one or more of the following criteria:

   (i)  The individual has been convicted of an offense under 18 Pa.C.S. (relating to crimes and offenses) or under the criminal laws of any other jurisdiction which conviction indicates that the issuance of the license, permit or registration to the individual would be inimical to the public policy of the act or this part.

   (ii)  The individual has been convicted in any jurisdiction of a felony or gambling offense within the past 15 years under section 1213 of the act (relating to license or permit prohibition).

§ 435.2.  Key employee qualifier license.

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   (g)  Notwithstanding the definition of key employee qualifier in § 401.4 (relating to definitions), any of the following persons may request in writing that the Board waive their obligation to be licensed as a key employee qualifier as part of a manufacturer, supplier or slot machine license issuance or renewal, vendor certification or renewal or junket enterprise license issuance or renewal by making the appropriate showing:

   (1)  If the person required to be licensed is a key employee qualifier as an officer of an affiliate, intermediary, subsidiary or holding company of the applicant or licensee, the person shall be required to demonstrate that he is not significantly involved in and has no authority over the conduct of business of the applicant or licensee. The request must include, at a minimum, the following:

   (i)  A description of his title, duties and responsibilities with the applicant, licensee or with any of its affiliates, intermediaries, subsidiaries or holding companies.

   (ii)  The terms of his compensation.

   (iii)  A certification by the officer stating that the officer is not significantly involved in and has no authority over the conduct of business of the applicant or licensee.

   (2)  If the person required to be licensed as a key employee qualifier as an outside director of an affiliate, intermediary, subsidiary or holding company of an applicant or licensee, the person shall be required to demonstrate that he is not significantly involved in the management or ownership of the applicant or licensee. The request must include, at a minimum, the following:

   (i)  A description of his title, duties and responsibilities with the applicant, licensee or with any of its affiliates, intermediaries, subsidiaries or holding companies.

   (ii)  The terms of his compensation.

   (iii)  Any board committee memberships, including a description of the functions and responsibilities of the committee.

   (iv)  A description of his ownership interest.

   (v)  A certification by the director stating that the director is not significantly involved in the management of the applicant or licensee.

   (3)  If the person required to be licensed is a key employee qualifier as an owner of the applicant or licensee or any of its affiliates, intermediaries, subsidiaries or holding companies, and requests a waiver as an institutional investor, the person shall be required to demonstrate the following:

   (i)  The institutional investor shall demonstrate that its ownership interest consists of one of the following:

   (A)  Under 15% of the equity securities of a licensee or its holding or intermediary companies, if the securities are those of a publicly traded corporation and its holdings of the securities were purchased for investment purposes only.

   (B)  Debt securities of a licensee or its affiliates, intermediaries, subsidiaries or holding companies or holding company of a licensee's affiliate, intermediary, subsidiary or holding company which is related in any way to the financing of the licensee, where the securities represent a percentage of the outstanding debt of the company not exceeding 20% or a percentage of any issue of the outstanding debt of the company not exceeding 50%, if the securities are those of a publicly traded corporation and its holdings of the securities were purchased for investment purposes only.

   (ii)  A request for waiver by an institutional investor must include, at a minimum, the following:

   (A)  The number of shares or units held by it and the percentage of ownership of the entity that the shares or units represent.

   (B)  A copy of the most recent notice filed by it with the Securities and Exchange Commission.

   (C)  A list of any direct or indirect owners of the institutional investor.

   (D)  An explanation as to why the investor should be considered an institutional investor under the definition in § 401.4.

   (E)  A certification by the investor stating that the investor has no present involvement in, and no intention of influencing or affecting the affairs of, the applicant or licensee or any of its affiliates, intermediaries, subsidiaries or holding companies and will give the Board 30 days notice if the investor intends to become involved in or to influence or affect the affairs in the future. The institutional investor will be permitted to vote on matters put to the vote of the outstanding security holders.

   (4)  If the person is otherwise required to be licensed as a key employee qualifier of the applicant or licensee or any of its affiliates, intermediaries, subsidiaries or holding companies, and requests a waiver, the person will be required to demonstrate the following:

   (i)  The person is not significantly involved in the activities of the applicant or licensee or its holding or intermediary companies and, in the case of security holders, does not have the ability to control the applicant or licensee or its holding or intermediary companies or elect one or more directors.

   (ii)  The licensure of the person is not necessary to protect the public interest.

   (iii)  Good cause exists for the granting of a waiver.

   (5)  A request for waiver must include, at a minimum, the following:

   (i)  The number of shares or units held by it, the dollar amount of the securities and the percentage of ownership of the entity that the shares or units represent.

   (ii)  A certification stating that the person has no present involvement in, and no intention of influencing or affecting the affairs of, the applicant or licensee or any of its affiliates, intermediaries, subsidiaries or holding companies and will give the Board 30 days notice if the person intends to become involved in or to influence or affect the affairs in the future. The person will be permitted to vote on matters put to the vote of the outstanding security holders.

   (h)  A request for a waiver of a key employee qualifier license must include a nonrefundable application processing fee. The Board may charge additional fees based on the actual expenses incurred in processing the waiver request.

   (i)  Notwithstanding the provisions of subsection (g)(3), an applicant or licensee may file a notice and provide payment of the nonrefundable application processing fee set forth in subsection (h) on behalf of an institutional investor whose ownership interest consists of under 10% of the equity securities of an applicant or licensee or its holding or intermediary companies, if the securities are those of a publicly traded corporation and its holdings of the securities were purchased for investment purposes only. The notice shall consist of the following:

   (1)  The number of shares or units held by the institutional investor and the percentage of ownership of the entity that the shares or units represent.

   (2)  A copy of the institutional investor's most recent notice filed with the Securities and Exchange Commission.

   (3)  A certification by the applicant or licensee that the investor should be considered an institutional investor under the definition in § 401.4.

   (4)  A certification by the investor stating that the investor has no present involvement in, and no ability to influence or affect the business affairs of, the applicant or licensee or any of its affiliates, intermediaries, subsidiaries or holding companies and will give the Board 30 days notice if the investor intends to become involved in or to influence or affect the affairs in the future. The investor will be permitted to vote on matters put to the vote of the outstanding security holders.

   (5)  A certification by the applicant or licensee stating that it shall immediately notify the Board of any information about, or actions of, an institutional investor holding its equity securities where such information or action may impact upon the eligibility of the institutional investor for a waiver under this subsection.

§ 435.4.  Occupation permit.

*      *      *      *      *

   (f)  A permit issued under this section shall be nontransferable.

   (g)  An individual who is employed by a licensed manufacturer that is specifically excluded from the supplier requirement shall be required to obtain a permit under this section.

CHAPTER 437.  VENDOR REGISTRATION AND CERTIFICATION

§ 437.1.  Vendor registration requirements.

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   (d)  Vendor registrations issued under this part shall be subject to renewal every 4 years upon the application of the slot machine licensee submitted to the Board at least 60 days prior to the expiration of the registration. The application for renewal must include an update of the information contained in the initial and any prior renewal applications and the payment of any renewal fee required by the Board. A registration for which a completed renewal application and fee has been received by the Board will continue in effect unless the Board sends written notification to the slot machine licensee and the holder of the registration that the Board has denied the renewal of the registration.

§ 437.3.  Vendor certification requirements.

*      *      *      *      *

   (e)  Vendor certifications issued under this part shall be subject to renewal every 4 years upon the application of the slot machine licensee submitted to the Board at least 60 days prior to the expiration of the certification. The application for renewal must include an update of the information contained in the initial and any prior renewal applications and the payment of any renewal fee required by the Board. A certification for which a completed renewal application and fee has been received by the Board will continue in effect unless the Board sends written notification to the slot machine licensee and the holder of the certification that the Board has denied the renewal of the certification.

CHAPTER 441.  SLOT MACHINE LICENSES

§ 441.7.  Procedure

   If the Board determines that the applicant has proven by clear and convincing evidence that it has the financial stability, integrity and responsibility and is of good character, honesty and integrity, it may issue a slot machine license under this chapter.

§ 441.9.  Responsibilities of licensed organizations.

   (a)  General. A Category 1 license, including a Conditional Category 1 license, may be issued to any qualifying legal business entity within an organization, if a legal business entity within the organization has been approved or issued a license from either the State Horse Racing Commission or the State Harness Racing Commission to conduct thoroughbred or harness race meetings. If a Category 1 license is issued to a legal business entity within an organization, all requirements, duties and obligations imposed by this part or the act on the licensed racing entity or a licensed racetrack shall be deemed to be requirements imposed on any legal business entity within the organization that has been approved or issued a Category 1 license. If more than one licensed racing entity, on July 5, 2004, was conducting a racing meet at the same licensed racetrack where an organization has been issued a Category 1 slot machine license, section 1303 of the act (relating to additional category 1 slot machine license requirements) applies to each licensed racing entity at the licensed racetrack.

*      *      *      *      *

§ 441.10.  Application bond or letter of credit requirement.

*      *      *      *      *

   (b)  Unless otherwise required by the Board, a payment bond or letter of credit provided under this section must comply with the following:

   (1)  A payment bond must be issued by a surety company that is licensed by the Insurance Department and guaranteed by a guarantor that is licensed by the Insurance Department.

   (2)  A letter of credit must be issued by a bank, trust company, National banking association or corporation subject to regulation by the Federal Reserve System under the Bank Holding Company Act of 1956 (12 U.S.C.A. §§ 1841--1849) whose unsecured obligations or uncollateralized long term debt obligations have been assigned a rating within the three highest rating categories by Moody's or Standard and Poor's, or upon the discontinuance of Moody's or Standard and Poor's, by another Nationally recognized rating service.

   (c)  An application is not deemed complete until the Board investigates and approves the proposed terms of the payment bond or irrevocable letter of credit, the surety or financial institution that will issue the payment bond or irrevocable letter of credit and the guarantor that will guaranty the payment bond.

*      *      *      *      *

   (f)  The payment bond or irrevocable letter of credit must state that it runs continuously and remains in full force and effect throughout the period in which the application is on file with the Board and until the application is denied or one of the following occurs:

   (1)  The license is issued and 10 business days have elapsed following the issuance of the license.

   (2)  The license fee is paid.

   (3)  The applicant is permitted by the Board to withdraw its application under § 423.5 (relating to application withdrawal).

[Pa.B. Doc. No. 05-2429. Filed for public inspection December 30, 2005, 9:00 a.m.]



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