Division of Special Revenue | 12-568a-1 to 12-568a-24 - Operation of Lottery

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Regulations of Connecticut State Agencies TITLE 12. Taxation

Agency Division of Special Revenue

Subject Operation of Lottery

Inclusive Sections §§ 12-568a-1—12-568a-24

CONTENTS

Sec. 12-568a-1. Definitions, constructions, interpretations Sec. 12-568a-2. General provisions Sec. 12-568a-3. The Gaming Policy Board Sec. 12-568a-4. Division of Special Revenue Sec. 12-568a-5. Purchasers Sec. 12-568a-6. Lottery sales agent Sec. 12-568a-7. Special lottery sales agents Sec. 12-568a-8. Lottery sales Sec. 12-568a-9. Obligations of licensed agents Sec. 12-568a-10. Lottery sales agent employees Sec. 12-568a-11. Accountability Sec. 12-568a-12. Proceeds, CLC property Sec. 12-568a-13. Agent delinquencies Sec. 12-568a-14. Sales suspension Sec. 12-568a-15. Summary suspension Sec. 12-568a-16. Occupational badges and licenses Sec. 12-568a-17. Violations of rules and regulations Sec. 12-568a-18. Requirements of the CLC Sec. 12-568a-19. Financial reporting Sec. 12-568a-20. Security Sec. 12-568a-21. Instant ticket vending machines Sec. 12-568a-22. Management information system (MIS) Sec. 12-568a-23. Internal control system (ICS) Sec. 12-568a-24. Executive director’s decisions

Revised: 2015-3-6 R.C.S.A. §§ 12-568a-1—12-568a-24 - I -

Regulations of Connecticut State Agencies TITLE 12. Taxation

Division of Special Revenue §12-568a-1

Operation of Lottery

Sec. 12-568a-1. Definitions, constructions, interpretations (a) In applying the provisions of sections 12-568a-1 to 12-568a-23, inclusive, of the

Regulations of Connecticut State Agencies, the following definitions, constructions and interpretations shall apply:

(1) “Acceptance test” means a series of hardware, software and terminal tests established and performed by the CLC to assure integrity, conducted prior to the installation of the on- line wagering system or prior to any software or hardware modification(s) to the on-line wagering system.

(2) “Act” means chapter 229a of the Connecticut General Statutes. (3) “Agent” or “lottery sales agent” means a person who has been licensed by the division

to sell and redeem lottery tickets as specified by the division. (4) “Backup site” means the designated secondary location of the on-line computer

system, operated by a vendor and capable of handling all transactions necessary to continue operation of the on-line system.

(5) “Board” or “CLCB” means the thirteen-member board governing the Connecticut Lottery Corporation, established pursuant to the act.

(6) “Business records” means journals, books of accounts, correspondence, memorandums, tapes, discs, papers, books and other documents that may be requested by the division from time to time.

(7) “Central computer system” means the central processing unit(s) for the on-line wagering system with all associated peripherals.

(8) “Chapter 226” means chapter 226 of the Connecticut General Statutes. (9) “Chapter 229a” means chapter 229a of the Connecticut General Statutes. (10) “Control” means the power to exercise authority over, or direct the management

and policies of, a person or business organization. (11) “Corporation” or “CLC” means the Connecticut Lottery Corporation as created

under Section 12-802 of the Connecticut General Statutes. (12) “Delinquency” means the failure by a lottery sales agent to remit all moneys due

and owing as a result of the agent’s lottery ticket sales upon the settlement date established for that agent.

(13) “Disaster recovery plan” means a plan which provides for a back-up site, detailing the computer systems, communications equipment, power supply, security procedures, recovery procedures, and time schedules for the recovery and continuation of the on-line system, in the event the primary site is deemed inoperable due to a disaster or emergency.

(14) “Division” means the Division of Special Revenue within the Department of Revenue Services.

(15) “Drawing” means that process as established in procedures promulgated by the CLC and approved by the division, whereby winners in a lottery game are conclusively determined.

(16) “Executive director” means the executive director of the Division of Special

Revised: 2015-3-6 R.C.S.A. §§ 12-568a-1—12-568a-24 - 1 -

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§12-568a-1 Division of Special Revenue

Revenue within the Department of Revenue Services. (17) “Failover recovery” means the official procedures executed in the event of a system

or component failure that restores full configuration; shall also mean the execution of recovery procedures within a time schedule determined by the CLC and approved by the division.

(18) “Fault-tolerant” means the ability of the central system to allow one faulty component or unit to drop out of the configuration without impact to the other(s); shall also mean the ability of each central processing unit to operate independently while in full synchronization with each other.

(19) “Gaming policy board” or “GPB” means the five member Gaming Policy Board of the state of Connecticut established by section 12-557d of the Connecticut General Statutes.

(20) “Hardware” means all equipment, devices, peripherals, computers, computer components, proms and mountings.

(21) “High tier claim center” means a lottery sales agent designated by the CLC and approved by the division to pay and process claims for lottery winnings of specified denominations, and required to post and maintain a surety bond at the agent’s sole expense, in an amount approved by the CLC.

(22) “Incident” means a statutory, regulatory or criminal violation or allegation of a violation.

(23) “Instant ticket vending machine” means a machine that dispenses instant tickets for sale.

(24) “Key personnel” means any individual who asserts, influence and control over the day to day operations and who has the power to exercise authority over or direct the management and policies of a person or business organization.

(25) “On-line wagering internal control system” or “ICS” means a system, which captures and accounts for all transactions and provides audit capability for the on-line wagering system.

(26) “License” or “lottery sales agent license” means the right to sell lottery tickets or where the context requires, the actual document issued by the division evidencing such right.

(27) “Lottery” means the Connecticut state lottery conducted by the corporation pursuant to sections 12-568a and 12-800 to 12-818, inclusive, of the Connecticut General Statutes, and the state lottery referred to in subsection (a) of section 53-278g of the Connecticut General Statutes.

(28) “Lottery fund” means a fund or funds established by, and under the management and control of, the corporation, into which all lottery revenues of the corporation are deposited, from which all payments and expenses of the corporation are paid and from which transfers to the general fund are made pursuant to section 12-812 of the Connecticut General Statutes.

(29) “Management information system” or “MIS” means a computer system, which supplies real-time and historical on-line information.

R.C.S.A. §§ 12-568a-1—12-568a-24 Revised: 2015-3-6 - 2 -

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Division of Special Revenue §12-568a-1

(30) “Management information workstations” means the workstations supplied by the CLC which have the ability to access real-time and historical information from the on-line system and provides reports for division users.

(31) “Network” means the communications network, which provides interface and compatibility between terminals, modems, data sets, and the central computer system.

(32) “Official procedures” means the documents which contain the formalized methods of operation and management of the various lottery games and the CLC, as required and approved in writing by the division and all procedures concerning security, administration, purchasing and budgeting.

(33) “On-line wagering system” means the complete integrated set of hardware and software elements which functions to issue, cancel and validate wagers, capture pools, determine winners, perform agent accounting, provide real-time and historical reporting, and other functions necessary for the on-line operation of the lottery.

(34) “On-line game” means any game in which a lottery ticket is produced by a terminal, which communicates with a central computer system.

(35) “Operating revenue” means the total revenue received from lottery sales less all canceled sales and amounts paid as prizes but before payment or provision for payment of any other expenses.

(36) “Person” means any individual, partnership, association, corporation, trust, or other public or private entity, organized or existing under the laws of the state or any other state, including federal corporations.

(37) “Pool” means the amount of money wagered for a particular drawing. (38) “President” means the chief executive officer of the corporation responsible for

directing and supervising the operations and management of the corporation. (39) “Primary contract” means goods or services supplied to the CLC by a contractor

who receives or, in the exercise of reasonable business judgment, can be expected to receive more than $75,000 or twenty-five percent (25%) of its gross annual sales from the CLC and any contractor who provides any Lottery game or any on-line wagering system related services.

(40) “Primary site” means the main location of the on-line computer system, the communications network and administrative offices.

(41) “Prize claim period” means the redemption period for winning tickets. (42) “Purge file” means the record of all unclaimed winning tickets which have lapsed

past the prize claim period. (43) “Redundancy” means the ability to log the transaction in more than one medium,

including disk and magnetic tape. (44) “Security Background Investigation” means an investigation of the background of

an applicant performed by the Division of Special Revenue. (45) “Serial number” means the unique algorithmic number on the face of the ticket. (46) “Settlement” means the process by which the CLC receives the monetary amount

equivalent to all tickets sold by an agent, minus an agent’s authorized compensation and

Revised: 2015-3-6 R.C.S.A. §§ 12-568a-1—12-568a-24 - 3 -

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§12-568a-2 Division of Special Revenue

cancels. (47) “Software” means computer and firmware programs. (48) “State” means the state of Connecticut. (49) “State Police Background Investigation” means an investigation of the background

of an applicant performed by the Connecticut State Police on behalf of the division. (50) “Subscription” or “lottery subscription” means a contract under which the

subscription purchaser is automatically entered in designated drawings for a specified period of time.

(51) “Term prize payments” means those payments made to a prizewinner over a period of time.

(52) “Ticket” or “lottery ticket” means any lottery ticket approved for sale to the general public pursuant to sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies.

(53) “Unclaimed prize funds” means the value of prizes, which remain unclaimed after the prize claim period expires, as determined by the CLC.

(54) “Unclaimed prize monies” means prizes that remain unredeemed after the prize claim period expires.

(55) “Vendor” means a person or business organization awarded the primary contract by the CLC to provide facilities, goods, components, and services necessary to carry out the provisions of sections 12-568a and 12-800 to 12-818, inclusive, of the Connecticut General Statutes.

((56))  (Adopted effective October 6, 1999)

Sec. 12-568a-2. General provisions (a) Games. Each different type of lottery game shall be established by the Connecticut

Lottery Corporation (“CLC”) and approved by the Division of Special Revenue (“division”) in writing. For purposes of sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, the types or categories of games shall be (1) instant; (2) on- line and (3) others, including any variations of these. Any game or type or category of game, once having been established may thereafter be discontinued in similar manner provided reasonable notice of such intention is given to the division and its written approval secured within seven (7) business days after receipt; provided, however, if the division does not approve or disapprove of the CLC’s request within seven (7) business days of such request, such approval shall be deemed granted. Such approval shall not be unreasonably withheld. Except as otherwise provided in sections 12-568a-1 to12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, a discontinuation shall not affect the rights of those who purchased tickets prior to the effective date of termination.

(b) Official procedures, division approval. (1) Prior to implementation, the CLC shall obtain the division’s written approval of all

official procedures which assure the integrity of the Connecticut State lottery games in order

R.C.S.A. §§ 12-568a-1—12-568a-24 Revised: 2015-3-6 - 4 -

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to minimize the possibility of corruption or illegal practices for the protection of the public. Procedures shall be required for, but are not limited to, the following: prize claim period(s); unclaimed prizes; ticket validation and verification requirements; controls on the production and distribution of tickets and ticket stock; ticket destruction; central system configuration; failover recovery procedures; acceptance testing; procedures to protect the on-line system from tampering with pools, liabilities or winfiles; procedures for balancing and for reconciling the on-line automated wagering system on a daily and weekly basis; lost or stolen ticket claims; mutilated tickets; payments of prizes to minors; multiple claimants; interrupted games; timing of prize payments; cancellation of tickets; security plans for primary and secondary CLC sites; game additions, changes, discontinuations; game procedures; subscription programs; disaster recovery plans; probability of winning; lump sum versus annuitized payment plans; on-line drawings; confidentiality of drawing procedures; promotional drawings; vendor reports for issuance of ticket stock; fraudulent claims; previously paid claims; rightful ticket ownership and incredulous claims; unclaimed prize information; audits of instant ticket games; ticket reconstruction; definitions of a valid on-line ticket and a valid instant ticket; and instant ticket vending machines.

(2) All procedures shall be promulgated after receipt of the division’s approval; provided, however, if the division does not approve or disapprove of the CLC’s request within seven (7) business days after receipt of such request, such approval shall be deemed granted; provided, further, that the division shall not unreasonably withhold written approval of any and all CLC official procedures that assure the integrity of the lottery.

(c) Emergencies. Notwithstanding the provisions of subsections (a) and (b) of this section, in the event of unforeseen problems which might reasonably cause substantial detriment to the public interest of the state of Connecticut, the division reserves the right to order an immediate suspension of the sales of any tickets or the conducting of any drawing relating to a particular game. The division will thereafter require the CLC to establish new procedures relating to the manner in which any incidental drawings are to be conducted, winners to be determined, and the amount of any prizes to be fixed. In addition, if during the actual conduct of any drawing, a problem arises requiring immediate action, the executive director or the executive director’s designee shall take immediate action.

(d) Prize payouts. (1) Except in the event of a multi-state lottery game, at least forty-five percent (45%) of

the total gross sales in any lottery game shall be returned as prizes to holders of winning tickets.

(2) The CLC may limit its liability in games with fixed payouts and may cause a cessation of sales of tickets of certain designation when such liability limit has been reached.

(e) Notice of change of games; drawing deadline. In the event that the CLC changes a lottery game to a game which is greatly dissimilar to the old game, the CLC may set a date before which all eligible winners must claim to participate in the final drawing of the old game. The CLC shall give adequate notice to the public by publishing in at least two newspapers having substantial circulation in the state that the lottery game is to be changed

Revised: 2015-3-6 R.C.S.A. §§ 12-568a-1—12-568a-24 - 5 -

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§12-568a-3 Division of Special Revenue

and that winning ticket holders must claim by a certain date pursuant to this rule to be eligible for the final drawing. This notice shall be published at least three times a week for at least two weeks commencing no later than three weeks prior to the final claiming date.

(f) Waiver. In the sole discretion of the executive director, any rule contained herein may be waived when such waiver shall be in the best interests of the state of Connecticut and the operation of state lotteries.

(g) Game procedures. All game procedures shall be in written form and kept on file at the CLC offices in sufficient supply to assure distribution to any party requesting a copy. The CLC shall also provide to the division a sufficient supply of copies of all game procedures. Official notice of the adoption of procedures governing any particular game shall be published in at least two newspapers having a substantial circulation in the state not later than one day prior to the beginning of that game.

The CLC may produce and distribute informational brochures and other materials designed to inform the general public as to the manner of participation in a game. This game information may also be printed on the ticket itself. However, in the event of any conflict, the official procedures, as adopted and on file with the CLC, shall control.

(h) General division approval. In any instances in which division approval is required under Sections 12-568a-1 through 12-568a-23, inclusive, of the Regulations of Connecticut State agencies, the division shall not unreasonably withhold its approval. Where no particular time period is otherwise specified for division approval or deemed approval, the division shall not unreasonably delay its approval decision. (Adopted effective October 6, 1999)

Sec. 12-568a-3. The Gaming Policy Board (a) Composition. The Gaming Policy Board (“GPB”) exists pursuant to chapter 226,

within the Department of Revenue Services for administrative purposes. The GPB consists of five (5) members nominated by the Governor and approved by the general assembly.

(b) Powers and duties. The GPB shall work in cooperation with the Division of Special Revenue to implement and administer the provisions of the act. In carrying out its duties the GPB’s responsibilities shall include, but not be limited to:

(1) Assisting the executive director in developing regulations and approving regulations prior to their adoption.

(2) Hearing all appeals as provided in the act, sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, and the division’s rules of practice and hearing procedures.

(3) Conducting any necessary inquiry, investigation, or hearing including the administration of oaths, the taking of testimony, and the subpoena of witnesses.

(4) Providing books in which shall be kept a true, faithful and correct record of all of their proceedings, which books shall be open to the public as provided in section 1-210 of the Connecticut General Statutes.

(5) Advising the Governor on statewide plans and goals for legalized gambling.

R.C.S.A. §§ 12-568a-1—12-568a-24 Revised: 2015-3-6 - 6 -

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(c) Action by the Gaming Policy Board. The powers of the GPB are vested in its members. All actions shall be taken and motions and resolutions adopted by the GPB at any meeting thereof by the affirmative vote of at least four members. Four members of the GPB shall constitute a quorum, or in the instance of a vacancy, a majority of the members remaining qualified.

(d) Powers reserved. All powers of the GPB not specifically defined in subsection (b) of this section are reserved to the GPB under chapter 226. (Adopted effective October 6, 1999)

Sec. 12-568a-4. Division of Special Revenue (a) Composition. Pursuant to chapter 226, a Division of Special Revenue exists within

the Department of Revenue Services for administrative purposes. The division is headed by an executive director who is appointed by the Governor with the approval of the general assembly. Under the executive director’s direction and in cooperation with the Gaming Policy Board the division shall implement and administer the provisions of chapters 226, 226b and 229a of the Connecticut General Statutes.

(b) Powers and duties. The division under the executive director shall have the power and it shall be its duty with the advice and consent of the GPB to carry out the intent of chapters 226, 226b and 229a of the Connecticut General Statutes. These duties shall include, but not be limited to, the following:

(1) The enforcement of the provisions of chapters 226, 226b and 229a of the Connecticut General Statutes and the regulations which may be adopted thereunder.

(2) With the advice and consent of the GPB, the adoption, amendment, repeal, and publishing of all regulations necessary to govern the operation of state lotteries in Connecticut.

(3) Doing whatever is reasonably necessary to carry out the intent of chapters 226, 226b and 229a of the Connecticut General Statutes.

(4) Calling upon other administrative departments of the state government and of municipal governments, state and municipal police departments, and prosecuting officers and state’s attorneys for such information and assistance as it deems necessary for the performance of its duties.

(5) The providing of books in which shall be kept a true, faithful and correct record of all of its proceedings, which books shall be open to the public as provided in section 1-210 of the Connecticut General Statutes.

(6) The conducting of any necessary inquiry, investigation or hearing including the administration of oaths, the taking of testimony, and the subpoena of witnesses.

(c) Powers reserved. All powers of the division and the executive director not specifically defined in subsection (b) of this section are reserved to the division and the executive director under chapters 226, 226b and 229a of the Connecticut General Statutes creating them and specifying their powers and duties. (Adopted effective October 6, 1999)

Revised: 2015-3-6 R.C.S.A. §§ 12-568a-1—12-568a-24 - 7 -

Regulations of Connecticut State Agencies TITLE 12. Taxation

§12-568a-5 Division of Special Revenue

Sec. 12-568a-5. Purchasers (a) Generally. One who participates in an authorized lottery game by purchasing a ticket

at a licensed lottery agent location or by lawfully receiving a ticket so purchased by another shall be deemed for the purposes of this rule a purchaser, and such purchaser agrees to abide by all provisions of sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, CLC’s Rules of Operations, and agrees further to the conditions of this section.

(b) Official procedure. A purchaser shall be bound by the official procedures of the particular game as approved in writing by the division.

(c) Claims. (1) Prizes may be claimed only in accordance with the official procedures or any

emergency procedures as prescribed by the CLC and approved in writing by the division within seven (7) business days after receipt; provided, however, if the division does not approve or disapprove of CLC’s request within seven (7) business days of such request, such approval shall be deemed granted. Such approval shall not be unreasonably withheld.

(2) To be valid, claims must be presented to the CLC within the time period(s) described in the official procedures. Any subsequent change in the time period allowed for presenting valid claims shall be applied to the category of game as a whole and shall not be applied on an individual basis for individual claims.

(d) Validation and verification of claims. Any person who forges or counterfeits any lottery ticket, or who alters any number or symbol on such ticket, or who offers for sale or sells any such forged, counterfeit or altered ticket, knowing it to be such, or who presents such forged, counterfeit or altered ticket for payment with intent to defraud the CLC or any person participating in any such lottery game shall be guilty of a class A misdemeanor.

(e) Sales prohibitions. (1) No lottery ticket shall be purchased by, and no prize shall be paid to any GPB

member, executive director, or employee of the division or to any spouse, child, brother, sister, or parent residing as a member of the same household in the principal place of abode of any of the foregoing persons.

(2) No lottery ticket shall be purchased by, and no prize shall be paid to: any CLCB member, any officer or employee of the CLC, any spouse, child, brother, sister, or parent residing as a member of the same household in the principal place of abode of any of the foregoing persons, or to any officer or employee of a vendor providing goods or services to the CLC necessary for the operation of the lottery.

(f) Reimbursement to state by state debtors who are lottery term prize winners or agents. The CLC shall provide any state agencies upon request with the names of all lottery term prize winner(s) and lottery sales agents. If the agency confirms a debt owed to the state by such person or entity, said agency shall notify the CLC and the division. Thereafter, the CLC shall process and administratively offset those amounts due such entity, currently or in the future, and transfer such debtor payments, at the earliest opportunity, to the

R.C.S.A. §§ 12-568a-1—12-568a-24 Revised: 2015-3-6 - 8 -

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appropriate state authority. (Adopted effective October 6, 1999)

Sec. 12-568a-6. Lottery sales agent (a) CLC certification. The CLC shall certify on each lottery sales agent license

application that it authorizes submission of the application by such applicant at such location and that it shall activate such applicant as a lottery sales agent upon licensure.

(b) Qualifications for licensure. Any person desiring a lottery sales agent license shall make application, under oath, on forms prescribed by the division. An applicant for a lottery sales agent license shall be required to supply in its application, at a minimum: The name, nature, and location of applicant’s business; applicant’s federal tax identification number, Connecticut tax registration number, and, where applicable, social security number; names, addresses and dates of birth of officers, principal owners, and designated employee in charge of applicant’s business; an explanation of any criminal conviction, other than minor traffic offenses, of applicant, its officers, principal owners, or employee-in-charge; an explanation of any tax disputes or delinquencies involving taxes owed to the state of Connecticut by applicant; and the names and addresses of two business references. No applicant will be issued a license to engage in business exclusively as a lottery sales agent. In determining an applicant’s qualifications for licensure as a lottery sales agent, the division shall consider the following factors:

(1) The financial responsibility of the applicant. In this connection, the division may conduct an investigation into the credit worthiness of the applicant as it relates to the integrity of the applicant utilizing the services of a commercial credit-reporting agency. The CLC may require that the applicant post and maintain a surety bond at applicant’s sole expense in an amount determined by the CLC;

(2) The veracity and completeness of the information submitted with the license application;

(3) The applicant’s reputation for honesty and integrity; (4) Insofar as permitted by law, any record of criminal convictions; (5) The security of the particular business premises designated in the application as a

lottery sales location; (6) Certification of municipal tax compliance; and (7) Such other information as the division may deem pertinent to the issuance of a lottery

sales agent license, including, but not limited to, the provisions of section 12-568a-10(d) of the Regulations of Connecticut State Agencies.

(c) Corporate or limited liability company or partnership applicants. In the event the applicant is a corporation, limited liability company or limited liability partnership, the division shall require that its principal owner or a natural person connected with the corporate, limited liability company or limited liability partnership applicant acceptable to the division, assume in writing, joint and several liability with said corporate, limited liability company or limited liability partnership applicant prior to the issuance of said

Revised: 2015-3-6 R.C.S.A. §§ 12-568a-1—12-568a-24 - 9 -

Regulations of Connecticut State Agencies TITLE 12. Taxation

§12-568a-6 Division of Special Revenue

lottery sales agent license. In the event said corporate or limited liability company or partnership lottery sales agent licensee shall thereafter be adjudicated a delinquent agent pursuant to section 12-568a-13 of the Regulations of Connecticut State Agencies, and the CLC Rules of Operation, the division and/or the CLC may avail itself of any appropriate collection procedures against said corporate or limited liability company or partnership licensee or natural person or both.

(d) Change of operations. A lottery sales agent license shall not be transferred or sold. Changes in the ownership, location, or name of an agent’s business may only be made in accordance with the following provisions:

(1) When the ownership of the licensee’s business enterprise is to be transferred, if the proposed transferee wishes to continue lottery sales in connection with such enterprise, said transferee must submit an application for a new lottery sales agent license in advance of such transfer. Provision shall be made at closing for the resolution of any obligations owed the CLC as a result of the transferor’s lottery business, and no license will be issued to the transferee if the transferor’s lottery obligations are unpaid. This subsection shall also apply when there is any change in the parties who comprise the ownership of an agent’s business or when there is a forty-nine percent (49%) or greater change in the ownership of any corporate stock of a corporate agent.

(2) An agent desiring to move its lottery business from one location to another must make proper application on forms provided by the division.

(3) An agent wishing to change its name must inform the division in writing. In considering whether to issue a license to such transferee or to permit lottery sales following a change in business name or location the division may apply the same criteria used in determining initial eligibility. The division, however, may defer action on any such application or request if a delinquency assessment has been imposed, a license suspension or revocation action is pending against the agent or decision having been rendered, an appeal is pending.

(e) License suspension and revocation. The executive director or any designee authorized by him shall have the authority to suspend or revoke a lottery sales agent’s license after a hearing held in accordance with chapter 54 of the Connecticut General Statutes for good cause for any one of the following reasons:

(1) If the agent’s license application contains false or misleading information; (2) If the agent violates or fails to comply with the provisions of sections 12-568a and

12-800 to 12-818, inclusive, of the Connecticut General Statutes or with sections 12-568a- 1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies;

(3) If the agent commits an act which seriously impairs its reputation for honesty and integrity; or

(4) If the agent fails to sell and redeem lottery tickets in accordance with the official procedures of the CLC.

(f) License renewal. (1) Any lottery sales agent license issued by the division shall be valid for no more than

R.C.S.A. §§ 12-568a-1—12-568a-24 Revised: 2015-3-6 - 10 -

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one year. (2) A licensed lottery sales agent having applied for a license renewal prior to its

expiration may continue lottery sales activity until final agency action on the renewal application in accordance with section 4-182 of the Connecticut General Statutes.

(3) Each applicant for license renewal shall certify on the application that all information on file with the division is current, accurate and complete. In the event of any changes, such changes shall be reported to the division within 30 days of such change and the division may require an applicant to apply for a license pursuant to the provisions of this section.

(4) The division shall notify each agent 60 days in advance of the due date for such renewal application. (Adopted effective October 6, 1999)

Sec. 12-568a-7. Special lottery sales agents (a) Special licenses, conditions. The division may issue a special license to a proper

applicant whom, in its opinion, will best serve the public interest and convenience of the state. A special license may be issued to the CLC, a temporary agent or an agent whose premises consist of a motor vehicle registered in the state of Connecticut. The division may attach such reasonable conditions to a special license as will assure the integrity of the lottery program. By way of example and not limitation, these conditions may include:

(1) Length of licensure; (2) Establishment of hours and days of sale; (3) Locations of sales as will be permitted; and (4) Limitation as to specific charitable, social, or other special events. (b) Applicability of other regulations. All other regulations shall apply to a special

lottery sales agent license. (Adopted effective October 6, 1999)

Sec. 12-568a-8. Lottery sales (a) Categories of sales. The CLC in its discretion, shall determine the categories of

tickets (1) instant, (2) on-line, and (3) others, which, for the convenience of the public, an agent shall be allowed to sell. An agent shall sell and redeem all categories of tickets unless otherwise instructed by the CLC.

(b) Sales restricted to premises. The sale of lottery tickets by an agent at other than its licensed premises is prohibited.

(c) Multiple locations. Any agent who desires to sell lottery tickets at more than one address or location must hold a separate license for each location, however, division or CLC disciplinary proceedings or orders concerning any activity by such an agent at any one licensed location may apply to any other licensed location of the agent. Any category (1) instant tickets as described in subsection (a) of this section, allocated for one licensed location, shall be sold at that licensed location only.

(d) Limitations on sales.

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(1) All ticket sales shall be final. (2) Only duly licensed lottery sales agents, and/or locations or their designated

employees may sell lottery tickets, however, persons who may lawfully purchase lottery tickets may make a gift of lottery tickets to another.

(3) Lottery tickets may not be sold for less than or greater than the price established by the CLC. This shall not preclude a person who has purchased lottery tickets from providing those tickets to customers as gifts or as promotional consideration as permitted by law.

(4) No tickets shall be sold to any person under the age of majority as established by law, however, minors may receive lottery tickets as gifts.

(5) An agent for lottery ticket purchases shall accept only bet slips provided by the CLC. (Adopted effective October 6, 1999; Amended May 2, 2006)

Sec. 12-568a-9. Obligations of licensed agents The issuance of a license by the division to any person as a lottery sales agent shall

constitute acceptance by the agent of the following conditions: (1) Fiduciary relationship. An agent shall assume, in the sale of lottery tickets and the

receipt of revenue therefrom, a fiduciary relationship with the CLC. All moneys received by lottery sales agents from the sale of lottery tickets shall constitute

a trust fund. The sales agent, or in the case of a corporation, the natural person guarantor, shall be personally liable for all such lottery ticket proceeds which shall be kept separate and apart from all other funds and assets in a separate bank account and shall not be commingled with any other funds, assets or bank accounts of the lottery sales agent.

(2) Laws and regulations. An agent shall agree to be bound by the provisions of the act, all regulations duly adopted by the division and procedures of the CLC.

(3) CLC instructions. An agent shall conduct the sale and exchange of lottery tickets pursuant to the CLC’s instructions for any game. These may include but are not limited to restrictions as to hours of ticket sale and redemption, the approval of the location of lottery equipment and material on the premises, and the imposition of a minimum required sales level.

(4) Safeguard tickets. An agent shall assume responsibility for and safeguard any tickets and equipment entrusted to its care and shall prevent unauthorized sale or issuance of any tickets. An agent shall be responsible for any such unauthorized sale or issuance of tickets that may nonetheless occur.

(5) Financial records. In accordance with a written request of the executive director, an agent shall permit inspection of the financial books and records relating to its business operation and allow the performance of an audit upon those books or records as it pertains to lottery sales or activities. Only persons clearly authorized by the executive director shall conduct such audit. An agent shall also, upon request, furnish any other papers or information required for the purposes of this section.

(6) Inspection of premises. An agent shall permit physical inspection of its premises during normal business hours upon the request of any division representative for the purpose

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of determining whether the agent is functioning in a manner consistent with the act and with sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies.

(7) License displayed. An agent shall display its license in a location approved by the division. Such license is the property of the division and shall be returned to the division upon license surrender, cancellation, suspension or revocation.

(8) Current information. An agent shall keep all exhibits, statements, reports, or other data, submitted pursuant to an application for a lottery sales agent license, current, accurate and complete. An agent shall immediately provide the division with a full description of any significant operational or other change in the information submitted as part of its application.

(9) Compulsive gambling materials. An agent shall display all informational materials supplied by the division informing the public of the programs available for the prevention, treatment and rehabilitation of compulsive gambling in this state. (Adopted effective October 6, 1999)

Sec. 12-568a-10. Lottery sales agent employees (a) Permitted. A licensed lottery sales agent may utilize the services of its employees in

the activities authorized under such agent’s license. The agent shall assume full responsibility for the activities and their consequences of such employees. The division reserves the right to order that an employee not be engaged in the sale or exchange of lottery tickets. Any such determination of non-eligibility shall be final and shall be complied with promptly.

(b) Person in charge. Where the agent itself will not be directly involved in the sale or exchange of lottery tickets, the agent shall notify the division of a designated employee who shall be the person in charge responsible for managing the agent’s lottery business. Such person in charge shall be subject to the approval of the division. An agent shall notify the division in writing within 15 days whenever said person in charge is replaced.

(c) Agent strictly liable. In any proceedings initiated by the division against an agent it shall be no defense that an employee of that agent acted contrary to an order or that the agent did not participate in any violations. A lottery sales agent shall be held strictly liable for any violations of the act, and sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies. (Adopted effective October 6, 1999)

Sec. 12-568a-11. Accountability (a) Agent’s responsibility. Lottery tickets before sale remain exclusively the property

of the CLC held in trust by the agent. Any loss or theft of tickets shall be reported immediately to the CLC.

(b) Cash. Cash received by the lottery sales agent from the sale of lottery tickets is solely the responsibility of the agent.

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(c) CLC Responsibility. The CLC shall notify the division’s Security Unit immediately of all lost, stolen or otherwise unaccounted for tickets reported by an agent or other person. (Adopted effective October 6, 1999)

Sec. 12-568a-12. Proceeds, CLC property As used in this section, “proceeds” means any moneys received from the sale, both actual

and presumed, of lottery tickets. In accordance with the provisions of section 12-813(b) of the Connecticut General Statutes, all moneys received by lottery sales agents from the sale of lottery tickets constitute property of the corporation while in such agent’s possession and shall be held in trust for the corporation by such agents. During the time period lottery tickets are held in trust for the corporation by such agents, said tickets shall remain the property of the corporation. Agents shall hold in trust for the corporation the proceeds generated from the sale of tickets minus the authorized agent compensation. During the time period said proceeds are held in trust for the corporation by such agents, said proceeds shall remain property of the corporation. (Adopted effective October 6, 1999)

Sec. 12-568a-13. Agent delinquencies (a) Collection agents. The president may designate any person or entity as a collection

agent to collect or receive settlements and delinquencies. Such collection agent shall be bonded in an amount established by the president as sufficient to protect and save harmless the CLC against any loss.

(b) CLC’S determination, division notices to agent. (1) If the CLC determines that a settlement is improper in that all moneys due and owing

the CLC have not been remitted or that an agent has failed to render a timely settlement, the agent shall be so notified by the CLC and shall be afforded a reasonable period of time as determined by the CLC within which to render a proper settlement. If after said period of time the agent remains delinquent, the president shall make a finding of delinquency and notify said agent and the executive director. Thereafter, the executive director shall charge the delinquent agent:

(A) The amount due but unremitted as of the stated past settlement date; (B) A delinquency assessment equal to ten percent of the amount due and unremitted or

ten dollars, whichever amount is greater; (C) Interest at the rate of one and one half percent of the amount due for each month or

fraction of a month computed from the date the settlement was due to the date of payment. (2) Subject to the provisions of section 12-568a of the Connecticut General Statutes, the

executive director may waive all or part of the penalties provided under subparagraph (B) of this subsection if it is proven to executive director’s satisfaction that the failure to pay the moneys due to the state within the time allowed was due to reasonable cause and was not intentional or due to neglect.

(c) Opportunity for hearing, notice. Included conspicuously in the finding of

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delinquency shall be a notice informing the agent that its sales are suspended and informing the agent of its right to contest the finding at a delinquency assessment hearing before the executive director. The notice shall establish a date and time for the hearing which shall not be later that seven (7) calendar days from the date on the notice. The notice shall further inform the agent that failure to appear at the hearing will result in a conclusive presumption of delinquency with the attendant consequences thereof under the act and sections 12-568a- 1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies. A request for a continuance by an agent will be granted only once in extraordinary circumstances and then for not more than seven (7) calendar days. To this end, the executive director may require a statement, under oath, from the agent explaining these extraordinary circumstances.

(d) Delinquency assessment hearing. At a delinquency assessment hearing, the following shall be received into evidence: (1) the agent’s settlement, if any; (2) CLC and division reports; (3) the initial notification of indebtedness; (4) the finding of delinquency; (5) the agent’s past record regarding late settlements; and (6) any other relevant testimony or documents. The agent may then present any testimony, documents or other evidence designed to establish that the alleged delinquency is incorrect in any or all respects. At the conclusion of the hearing and based upon the evidence presented therein, the executive director is authorized to affirm, modify, or rescind the delinquency assessment. The agent shall be formally notified, in writing, of the executive director’s decision in this regard.

(e) Delinquency assessment modification. If the executive director decides to modify the delinquency assessment, the executive director may, as a condition to the modification or the continued licensure of the agent, require that the agent:

(1) Remit the full amount due and owing pursuant to the terms of the modified assessment; or enter into a payment schedule with the CLC pursuant to the terms of the modified assessment;

(2) Thereafter post a bond in such form and amount as the division determines is required to protect and save harmless the CLC from any future loss.

(f) Delinquency assessment affirmance. If the executive director affirms the finding of delinquency at a delinquency assessment hearing, the executive director shall issue in writing a formal finding of delinquency assessment. Thereafter, the president may employ collection agents for the purpose of collecting the delinquency assessment. In this regard, the CLC shall prepare and the executive director may sign a warrant directed to any sheriff, deputy sheriff, constable or designated collection agent employed by the CLC for distraint upon any property (real, personal, tangible or intangible) owned by the agent, in whole or in part, and located in the state of Connecticut. There shall be attached to the warrant an itemized bill, certified by the executive director as a true statement of the full amount due from the agent. Such warrant shall be considered equivalent to an execution issued in accordance with chapter 906 of the Connecticut General Statutes. Such warrant shall be levied on any applicable property and sale made pursuant to such warrant as provided for an execution under chapter 906 of the Connecticut General Statutes.

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(g) Agency action. Notwithstanding any other provisions of this section, the division may at any time initiate the delinquency assessment hearing process against an agent. (Adopted effective October 6, 1999; Amended May 2, 2006)

Sec. 12-568a-14. Sales suspension (a) The president may suspend for cause any licensed lottery sales agent subject to a

final determination through a hearing provided in accordance with sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, and the division rules of practice and hearing procedures.

(b) Upon suspension, no additional lottery materials or tickets shall be delivered to the agent, and any lottery equipment on the agent’s premises shall be rendered inoperative pending a division hearing to be scheduled for said agent within three business days of receipt of notice of the sales suspension. Said notice shall be provided by the CLC to the division within two (2) working days of the sales suspension.

(c) No lottery agent shall be entitled to a hearing by the division for any sales suspension by the CLC on the basis of insufficient agent sales or failure to adhere to marketing criteria as determined by the CLC. (Adopted effective October 6, 1999)

Sec. 12-568a-15. Summary suspension If the division finds that public health, safety or welfare imperatively requires emergency

action, and incorporates a finding to that effect in its order, summary suspension of a lottery sales agent license may be ordered pending proceedings for revocation or other action. These proceedings shall be promptly instituted and determined by the division. (Adopted effective October 6, 1999)

Sec. 12-568a-16. Occupational badges and licenses (a) Badges. (1) The division as it deems necessary shall require occupational licensees to obtain a

badge at the expense of the CLC. Such badges shall be displayed or carried upon such licensee as required. All badges are the property of the division and shall be returned to the division upon termination, license suspension or revocation.

(2) The CLC shall file a list of persons and specific duties of such persons not licensed as occupational licensees who must enter the facilities of the CLC for reasons connected with the operation of the lottery. In such instances, the CLC shall provide nontransferable visitor badges to individuals on such lists.

(3) The division, at its discretion, may provide temporary badges to facilitate operations when an occupational licensee does not have such badge available.

No licensee shall permit any other person to use said licensee’s badge or license. (b) Occupational licenses. (1) No person may be employed by the CLC unless such person is licensed as a class I

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or class II occupational licensee by the executive director pursuant to sections 12-568a and 12-800 to 12-818, inclusive, of the Connecticut General Statutes.

(2) The president, all other officers, and any other individual who in the judgment of the executive director will exercise control, shall be required to be licensed as a class II occupational licensee. All other employees shall be required to be licensed as class I occupational licensees.

(3) If the division shall find that the financial responsibility, character, and general fitness of the applicant are such that the participation of such person will be consistent with the public interests, convenience, or necessity and with the best interests of lottery generally, in conformity with the purposes of chapters 226, 226b and 229a of the Connecticut General Statutes, it shall thereupon grant an occupational license. If the division shall find that the applicant fails to meet any of said conditions, it shall not grant such license and it shall notify the applicant of the denial.

(4) Notwithstanding the provisions of subdivisions (1) to (3), inclusive, of this subsection, former employees of the Division of Special Revenue who continue employment with the CLC shall not be required to be fingerprinted; however, such individuals may be subject to a security background investigation as deemed necessary by the executive director and shall be licensed by the division.

(c) Vendor licenses. No person or business organization awarded a primary contract by the CLC to provide facilities, components, goods or services necessary for the operation of the lottery may do so unless such person or business organization submits to and successfully completes a state police background investigation or is issued a vendor license by the executive director after successful completion of a security background investigation.

(d) Suspension - revocations. If the division finds that the financial responsibility, character and general fitness of the licensee are such that the continued participation of such person will not be consistent with the public interest, convenience or necessity, and with best interests of lottery generally, in conformity with the purposes of the act, it may thereupon revoke or suspend said license.

(e) Examination of licenses. All persons who have been issued a license by the division shall keep such license in their possession, subject to examination by the division or its duly authorized representatives or officials of the CLC, at any time they may deem necessary or proper. (Adopted effective October 6, 1999)

Sec. 12-568a-17. Violations of rules and regulations (a) Liability. Any officer or employee of the CLC violating the act or sections 12-568a-

1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, shall be liable for the penalties in this section. It is the duty and responsibility of all such officers to know sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies. Nothing in sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies shall be deemed to lessen the primary responsibility of the CLC

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to enforce these rules and regulations. (b) Violations. A violation of chapters 226 and 229a of the Connecticut General Statutes

or sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, shall result in the following:

(1) The executive director or designee may for good cause suspend or revoke any occupational license. The executive director or designee may for good cause suspend and revoke any vendor licensee. Any licensee, vendor employee, or CLC employee or officer who is alleged to have defrauded, produced, altered, forged, passed or counterfeited a lottery ticket, may be summarily suspended from involvement with the lottery, and such licensee, employee or officer may be subject to license suspension or revocation.

(2) The executive director or the executive director’s designee may order that any licensees under suspension shall be denied admission to or attendance at all facilities subject to division regulation in Connecticut, including all pari-mutuel operations, CLC offices and lottery high tier claim centers.

(3) In the case of license revocation, the executive director may bar such licensees from all facilities subject to division regulation in Connecticut, including all parimutuel operations, CLC offices and lottery high tier claim centers.

(4) All parties cited for violations of this section shall be given the opportunity for a hearing in accordance with sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, and the division rules of practice and hearing procedures.

(5) All decisions of the division may be appealed pursuant to section 4-183 of the Connecticut General Statutes.

(c) Fraudulent activity. Any licensee, vendor employee, or CLC employee or officer who, with intent to defraud, produces, alters, forges, passes or counterfeits a lottery ticket, shall be terminated from involvement with the lottery, and such licensee, employee or officer may be subject to license suspension or revocation.

(d) Wrongful validation of prizes. Any licensee or employee or officer of the CLC who influences or attempts to influence the winning of a prize, through the use of coercion, fraud, abuse, misuse or misappropriation of confidential system information, including the tampering of lottery files, software or equipment, may be subject to license suspension or revocation.

(e) Prohibition of prize payments for compromised tickets. The CLC shall insure that no prize shall be paid arising from claimed winning tickets that are stolen, counterfeit, altered, fraudulent, unissued, issued in error, unreadable, not received, unclaimed or not recorded by the CLC within applicable deadlines, lacking in captions that conform and agree with the play symbols appropriate to the lottery game involved, or not in compliance with specific rules and with the confidential validation and security tests of the CLC.

(f) Confidentiality of win files and restricted access to proprietary information. The CLC shall prohibit game win files from access by unauthorized person(s). In the event that the CLC becomes aware of a compromise or potential compromise of security regarding exposure of information contained in the game win files, the CLC shall immediately notify

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the executive director and the division director of security. The CLC shall thereafter take all necessary steps to restore security as quickly as possible.

(g) Advance notification of expiring jackpot and grand prize winning tickets. The CLC shall provide the public adequate advance notice of all-expiring jackpot and grand prize winning tickets. The CLC shall utilize broadcast media, and shall publish in at least two newspapers having substantial circulation in the state, that the winning ticket holders must claim by a certain date to be eligible for payment.

(h) Prohibition of financial interest in vendors. No CLCB member, CLC officer or employee or any spouse, child, brother, sister or parent of the foregoing persons shall have a financial interest in any vendor doing business or proposing to do business with the CLC.

(i) Prohibition from purchasing and claiming jackpot and grand prizewinners. The CLC shall not directly or indirectly acquire any beneficial interest in lottery ticket(s), and shall not directly or indirectly receive prizes.

(j) Summary suspension. If the division finds that public health, safety or welfare imperatively requires emergency action, and incorporates a finding to that effect in its order, summary suspension of an occupational or vendor license may be ordered pending proceedings for revocation or other action. These proceedings shall be promptly instituted and determined by the division. (Adopted effective October 6, 1999)

Sec. 12-568a-18. Requirements of the CLC (a) New games, division approval. After acquiring the CLCB’s approval, the CLC shall

obtain the division’s review and approval of all new game designs, and official game procedures and working papers, in order to insure the integrity of the games. The division’s review or approval shall be conducted within seven (7) business days of receipt. If the division fails to approve or disapprove within such seven (7) day period, it shall be deemed to have approved such game designs and procedures. Such approval shall not be unreasonably withheld.

(b) Provision of all CLC records. The CLC shall provide to the division all business records, reports, documents, policies and procedures required by the division in its sole discretion.

(c) Provision of CLC payroll listings and organizational charts. The CLC shall provide to the division a complete payroll listing of all CLC employees

on a monthly basis. The CLC shall provide to the division on an annual basis a complete organizational chart, including officers and directors, and advise the division promptly concerning changes in key personnel.

(d) Annuity providers, division approval. (1) All annuities, from which payments shall be made to winners of lottery prizes, shall

be invested in instruments issued by agencies of the United States government and backed by the full faith and credit of the United States, or shall be issued by insurance companies licensed to do business in the state.

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(2) The division shall approve, prior to utilization by the CLC, the financial stability and acceptable minimum investment rating of all annuity providers.

(e) Cost of regulatory oversight paid for by CLC. The CLC shall reimburse the division for all reasonable direct and indirect costs associated with the regulatory oversight of the corporation, as determined by the division in its sole discretion.

(f) Offices for Division. The CLC shall provide suitable office space for the use of division personnel at the CLC corporate offices and the primary site. Final determination as to the suitability of said office space is in the sole discretion of the division. Division personnel shall have unfettered access to all areas of the CLC offices and the primary site.

(g) Records retention. The CLC and any vendor shall retain all business records for a period of not less than five (5) years.

(h) Return of agent licenses. The CLC shall obtain the lottery sales agent license certificate of surrendered, canceled, suspended, or revoked agents. If the CLC is unable to obtain the license, it shall provide the division with an affidavit explaining the reason therefor.

(i) Changes in agent status. The CLC shall, on a monthly basis, notify the division of changes in the status of issued lottery sales agent licenses and the reason(s) for such, and any withdrawal of pending license applications.

(j) Delinquency assessment accounting. The CLC shall account to the division on a monthly basis, those amounts that remain outstanding for all delinquent agents. Said reporting shall delineate delinquencies by individual agent.

(k) Acceptance testing. (1) Prior to the installation of any on-line wagering system or the implementation of any

software or hardware modifications, the CLC shall certify to the division that the system has been tested and is operating correctly. The CLC shall make available the acceptance test plans, test script and test results for review by the division prior to implementation.

(2) In the sole discretion of the division, the CLC shall require a vendor to produce a test system accessible and available for division testing prior to implementation of the on- line wagering system or any software or hardware modifications.

(3) The division shall have final approval over the implementation of any system modification.

(l) Unclaimed prize funds, accounting. (1) The CLC shall maintain a separate accounting of unclaimed prize funds. Information on unclaimed prize contributions for on-line gaming shall be made available

through the CLC’s on-line wagering system’s management information system and for off- line gaming from other sources, as approved by the division. Such information shall include, but not are limited to, accurate reports of purged tickets.

(2) Information on unclaimed prize dispersals shall be submitted quarterly to the division by the CLC and shall be distinguished by allowable categories as specified in section 12- 806(b)(10) of the Connecticut General Statutes.

(3) The CLC shall make available all information required under this section and shall

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submit an annual report of all unclaimed prize funds available for disposition after the expiration date of the unclaimed prize. All information shall be in a format approved by the CLC.

(m) Tax withholding and reporting. (1) The CLC shall be responsible for all applicable federal and state withholding and

reporting responsibilities arising under the provisions of chapters 226, 226b and 229a of the Connecticut General Statutes pertaining to lottery prize winners, lottery agents and any other applicable person or entity. The division shall be held harmless from any federal or state tax penalties or interest that may arise as a result of the CLC’s activities in performing these responsibilities.

(2) The division shall have the right to inspect withholding and miscellaneous income records and related tax filings as prepared by the CLC at all times.

(n) Federal gaming occupation tax. If, at any time, the operation or the management of the CLC becomes subject to the federal gaming occupation tax, the CLC shall be responsible for meeting all applicable requirements and shall hold lottery agents, any other applicable person or entity and the division, harmless from any penalties or interest that may arise as a result of the CLC’s activities in performing these responsibilities.

(o) Contact personnel. (1) The CLC shall designate individual(s) knowledgeable in, and responsible for, the

CLC’s accounting and reporting systems as contact person(s) who shall respond to and cooperate with the division regarding accounting and other financially related questions or problems.

(2) The CLC shall provide the division with the names(s) of contact persons from each financial consultant and CPA firm utilized for financial advice, accounting and auditing functions, as applicable, and shall provide the name(s) of contact person(s) from any law firm utilized for legal counsel and advice. Such information as submitted to the division shall be updated for any changes as they occur.

(3) The CLC shall provide the division with the name(s) of vendor contact personnel in the event of system problems.

(p) Disclosure of odds of winning. (1) The CLC shall include a prominent and clear statement of the average chances of

winning per lottery ticket in each advertisement intended to promote the purchase of lottery tickets.

(2) The provisions of subdivision (1) of this subsection shall apply only to (A) advertisements in newspapers, magazines, brochures and on posters and (B) television and radio advertisements thirty seconds or longer for one game.

(3) The CLC shall include a prominent and clear statement of the odds of winning each individual prize level on all game brochures.

(q) Automated wagering system balancing and reconciliation. The CLC shall have procedures to internally balance and reconcile the on-line wagering system on a daily,

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weekly, and monthly basis and shall provide reports of same to the division. (Adopted effective October 6, 1999)

Sec. 12-568a-19. Financial reporting (a) Division consultation. Prior to any audit of the CLC that shall be performed by a

certified public accountant, the CLC shall provide to the division the opportunity to meet with the CLC to identify areas of audit to be conducted by the certified public accountant.

(b) Annual report. The CLC shall require that the independent certified public accountant engaged to conduct the audit required under section 12-802(d) of the Connecticut General Statutes submits to the division within one-hundred-fifty (150) days after the close of its fiscal year, a complete set of audited financial statements that present the CLC’s financial position and the results of its operations and its cash flows in conformity with generally accepted accounting principles.

(c) Disclosure. In addition, the CLC shall disclose the following to the division on an annual basis:

(1) Disclosure of all related-party transactions (2) Organizational chart (3) Schedules of: (A) Annuities purchased to fund lottery prizes; (B) Miscellaneous revenue in detail by source (C) Promotions and advertising expenses (D) Payments of major contractual services (E) Professional fees, including legal, accounting and consulting fees Information which

is submitted to the division on a more frequent basis in connection with other sections of these regulations need not be reduplicated in the annual report.

(4) A report as to whether any material deficiencies in internal control were noted by the independent auditor during the course of the annual audit of CLC’s financial statements. In addition, the CLC shall submit to the division a copy of any report issued by the independent auditor in connection with the annual audit.

(5) The CLC’s representation letter to the auditor for accounting information material to the financial statements and for matters relating to audit disclosure requirements. Any reports resulting from an examination or the performance of mutually agreed upon procedures relating to the design and/or operating effectiveness of the CLC’s internal control.

(6) Access to articles of organization and any changes thereto, resolution, amendments to by-laws, minutes of CLC meetings, and schedules of percentage distribution of income.

(d) Recommendations. Recommendations made as a result of an audit shall be implemented within a reasonable time frame as established by the CLC. If the CLC disagrees with the recommendations, it shall provide a written explanation to the division as to why said recommendations will not be implemented.

(e) Additional audits.

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Division of Special Revenue §12-568a-20

(1) The division may require, in its sole discretion, the CLC or any vendor to submit to an audit of its internal control systems. The division or its duly authorized representative(s), shall be provided with total cooperation and such written information in a timely manner as may be requested.

(2) Recommendations made as a result of the audit shall be implemented within a reasonable time frame as established by the CLC and approved by the division. If the CLC disagrees with the recommendations, it shall provide a written explanation to the division as to why said recommendations should not be implemented. Thereafter, a final determination shall be made by the division as to whether said recommendations shall be required. (Adopted effective October 6, 1999)

Sec. 12-568a-20. Security (a) Director of security. Any director of security the CLC may employ shall be a duly

qualified, full time director of security licensed by the executive director as a class II occupational licensee. The duties of the director of security include, but are not limited to, responsibility for the security of CLC buildings and facilities and for monitoring the wearing of badges at said facilities.

(b) Division security unit. The security unit within the division shall enforce all regulations and state statutes as adopted by legislation pertaining to the CLC, ensuring that the lottery is operated with absolute integrity and for the public good. The division security unit shall have overall responsibility for both regulatory and criminal investigations. The division security unit chief shall have the discretion to determine the need to conduct an investigation into any and all perceived or actual incidents or violations.

(c) Reporting requirements. (1) The CLC shall immediately report to the division all incidents or allegations of

misconduct involving any CLC employee, vendor employee or lottery retailer that threatens the integrity of the lottery. In addition to the reporting requirements established by section 4-33a of the Connecticut General Statutes, the CLC shall also notify the division of any unauthorized, illegal, irregular or unsafe handling or expenditure of state or quasi-public agency funds.

(2) The CLC shall immediately report to the division all statutory, regulatory and criminal incidents, or allegations of incidents. The division, in its sole discretion, may conduct its own investigation into any and all suspected incidents or violations.

(3) Failure by the CLC to report said incidents in a timely manner may be cause for license suspension or revocation of CLC officers, after being afforded the opportunity for a hearing in accordance with sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, and the division rules of practice and hearing procedures.

(d) Division notification of system problems and disruptions. (1) The CLC shall notify the division immediately of all material system problems,

downtime, disruptions, or system modifications involving lottery games and/or tickets.

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Upon notification, the CLC shall estimate the time needed to bring the system back to full operation. Thereafter, the CLC shall provide a documented report of the events causing the disruption, the steps taken to resolve the situation, and the name of a contact person in the event additional clarifications are warranted.

(2) Failure to immediately report said incidents may be cause for license suspension or revocation of CLC officers, after being afforded the opportunity for a hearing in accordance with sections 12-568a-1 to 12-568a-23, inclusive, of the Regulations of Connecticut State Agencies, and the division rules of practice and hearing procedures.

(e) Drawings. Division security representatives shall oversee drawings conducted by the CLC. Division security shall formulate, implement, and conduct security procedures for all drawings, and shall be responsible for the safeguarding and testing of all drawing equipment. The division security shall have sole responsibility for the ultimate decision for any and all drawing problems or circumstances that may arise.

(f) Security of transaction tapes prior to the drawings. Until such time as an Internal Control System (ICS) provides the division with direct access to transaction tapes, division security representatives shall take possession of transaction tapes from the on-line vendor prior to any drawing being held.

(g) Promotional drawings. The CLC shall provide the division with advance notice of, and drawing procedures for, any promotional drawings. Said procedures shall be reviewed by the division and approved prior to said events being held. The division security representatives shall oversee promotional drawings. Division security shall have sole responsibility for the “final call”, in the event of any drawing problems or circumstances that may arise.

(h) Unfettered access to, inspection of, and monitoring of all CLC facilities. Employees of the division and its designated representatives shall have the right to unannounced and unfettered entry to all CLC and vendor facilities. Division security shall inspect CLC and vendor facilities for possible breaches of security and physical standards. The CLC shall ensure that all vendors comply with physical security standards as approved by the division.

(i) Instant tickets. The CLC shall submit working papers for instant games to the division. The division shall review and approve said papers for integrity purposes prior to ticket production. Division security representatives shall obtain a sample of instant tickets during production and shall submit such samples to an approved independent laboratory for testing purposes. Tickets shall not be allowed to be distributed by the CLC until the independent laboratory results are received and approved by the division.

(j) Master system console logs. The CLC shall maintain system console logs of activity for the on-line system. These console log reports shall reflect all system activity, including, but not limited to, all system access, system transmissions and system errors.

(k) Retention and inspection of system console logs. The CLC shall retain all system console logs. The logs shall be in a media and format acceptable to the division and shall be retained for no less than five (5) years. The division, in its sole discretion, may request

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to review the system console logs at any time. (l) Disaster recovery. The CLC shall submit for division approval a disaster recovery

plan for the on-line system. (m) Redundant fault-tolerant system. The CLC shall insure the on-line system records

each transaction in at least two separate locations for each processor. (n) Ticket validation requirements. The CLC shall set minimum ticket validation

requirements for both instant and on-line tickets subject to division approval. All claims presented shall be verified in accordance with established procedures for validating winning tickets processed through the on-line system.

(o) Ticket purge requirements for winning tickets. The on-line vendor shall utilize software that restricts access to nearly purged or soon to be purged winning tickets, and insures reporting controls to detect unusual cashing activity by agents, the on-line vendor, and the CLC. The CLC shall provide system reports on a regular basis, as determined by the division, which identify the cashing of nearly purged or soon to be purged tickets.

(p) Tampering with pools, liabilities, winfiles/console log review. The on-line vendor shall utilize software protection in the on-line system to prohibit CLC or vendor employees from tampering with pools, liabilities or winfiles. The on-line vendor shall produce system pool reports generated immediately at the close of games. These reports shall be provided to the division to verify liabilities. If an attempt is made to tamper with information, such activity shall be indicated on the system console log.

(q) System management reports. The CLC shall provide system reports which reveal all system activity generated at and by the terminals, including, but not limited to: wagers, cashes, cancels, errors, statuses, validations, activations, deactivations, special reports, sign- ons, sign-offs, inquiries, and diagnostic requests. These reports shall be available upon the division’s request and shall be used to verify the operating status of the system and agent terminals.

(r) Liability for loss of data. (1) In the event of loss of any data or records necessary for the performance of division

duties, where such loss is due to the error or negligence of the CLC, the CLC shall cause the vendor to recreate such lost data or records at the CLC’s own expense.

(2) In the event of loss of any data or records necessary for the performance of division duties, where such loss is due to the error or negligence of the vendor, the CLC shall cause the vendor to recreate such lost data or records at the vendor’s own expense. (Adopted effective October 6, 1999)

Sec. 12-568a-21. Instant ticket vending machines (a) Licensed agents only. Only lottery sales agents licensed by the division shall provide

instant ticket vending machines on their premises. Said machines shall be at all times within the line of sight of the lottery sales agent or their designated employee. Agents and their designated employees shall use all reasonable efforts to insure that minors do not utilize the instant ticket vending machines.

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(b) Disabling Equipment. Prior to utilization by an agent, all instant ticket vending machines shall be equipped with a device capable of instantly disabling said machines from operation. (Adopted effective October 6, 1999)

Sec. 12-568a-22. Management information system (MIS) MIS implementation. (a) The CLC shall implement a management information system (MIS), including

computers, workstations, networking, databases, software, and data interfaces to insure networked access to the on-line system by division users as designated by the division. The system shall provide both real-time and historical reports as determined by the CLC. At a minimum, the system shall provide daily information as to sales, cashes, cancels and pool totals. The division shall have access to such reports through the MIS system.

(b) The MIS shall provide the division with the capability to verify, validate, and monitor the accuracy of system data and to insure the integrity of the information. (Adopted effective October 6, 1999)

Sec. 12-568a-23. Internal control system (ICS) (a) ICS equipment and network and communications software. In order for the

division to test and approve of the CLC’s Internal Control System, the CLC shall provide the division with access to all of the CLC’s ICS system and shall give the division the ability to independently monitor the system through utilizing on-line system log tapes by providing the necessary hardware and software.

(1) All division ICS hardware and network and communication software shall be enhanced and updated by the CLC to remain current technology. Said enhancements shall be confirmed by the division as operating successfully prior to implementation.

(2) The CLC shall provide the division with all system documentation to support the ICS. The documentation shall include hardware and communications configurations, all data and file formats for wagering system transactions, and all service contracts deemed necessary to maintain the ICS.

(3) The on-line wagering system transactions provided by the CLC through the on-line vendor via real-time communication, tape, or both, at the division’s option, shall be complete data that enables the ICS to achieve independent matching of critical system balances including, but not limited to, pools, liabilities, sales, advance sales, cancels and purges for all games individually and in total.

(4) The CLC shall supply the division with up-to-date information on validation files and the inventory of instant and other off-line games, via tape input, in a format readable by the division.

(b) ICS system problem resolution. (1) In addition to the problem reporting requirements of subsections (c) and (d) of section

12-568a-20 of the Regulations of Connecticut State Agencies, the CLC shall immediately

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notify the division of on-line system problems which may have an impact on the ICS system. (2) The CLC shall implement division approved procedures for the resolution of system

problems. (c) Backup capability. The division may require the CLC to provide full backup

capability for the ICS in order to resume operation in the event of a system failure. At a minimum, this shall include:

(1) Fully maintained and tested computer hardware (servers) in a “hot environment”, connected to the network and capable of immediate system switchover with minimal intervention;

(2) Tape cartridge backup of ICS databases for high speed backup and restore processing; (3) Software to provide full or partial restoration of databases; and (4) Operating system software to allow network system switchover to backup equipment.

(Adopted effective October 6, 1999)

Sec. 12-568a-24. Executive director’s decisions In the event of any occurrence not covered by sections 12-568a-1 to 12-568a-23,

inclusive, of the Regulations of Connecticut State Agencies, the executive director retains the authority to make a decision(s) in the best interests of the lottery and the state of Connecticut. (Adopted effective October 6, 1999)

Revised: 2015-3-6 R.C.S.A. §§ 12-568a-1—12-568a-24 - 27 -