811 KAR 1:290. Licensing totalizator
companies.
RELATES
TO: KRS 230.225, 230.260, 230.290, 230.300, 230.310, 230.320, 230.361, 230.370,
230.380
STATUTORY
AUTHORITY: KRS 230.215, 230.260, 230.300, 230.370, 230.380
NECESSITY,
FUNCTION, AND CONFORMITY: KRS 230.260(3) and 230.380 vest the commission with
authority over any totalizator company that provides totalizator services to
racing associations and simulcast facilities located in the Commonwealth. KRS
230.260(3) further requires
the commission to license any totalizator company under its jurisdiction,
regardless of whether the company is located in the Commonwealth, or operates
from a location or locations outside of the Commonwealth. This administrative
regulation establishes the license application procedures and requirements for
totalizator companies that provide totalizator services to racing associations
located in the Commonwealth that offer standardbred racing.
Section 1. Definitions. (1) "Applicant"
means an individual, person, or entity that has submitted an application for a
license pursuant to this administrative regulation.
(2)
"Individual" means a natural person, at least eighteen years of age,
but does not include any corporation, partnership, limited liability company,
trust, or estate.
(3)
"Nominal change in ownership" is defined in 811 KAR 1:037, Section
1(1).
(4)
"Person" means any corporation, whether organized for profit or not,
partnership, limited liability company, trust, estate, association, joint
venture, or any other group or combination acting as a unit.
(5)
"Principal" is defined in KRS 230.210 when used in the context of a licensed
association or an applicant for a license to conduct a horse race meeting; when
used in the context of any other type of entity, "Principal" means
any of the following individuals associated with a partnership, trust
association, limited liability company, or corporation:
(a) The chairman and all
members of the board of directors of a corporation;
(b) All partners of a
partnership and all participating members of a limited liability company;
(c) All trustees and
trust beneficiaries of an association;
(d) The president or
chief executive officer and all other officers, managers, and employees who
have policy-making or fiduciary responsibility within the organization;
(e) All stockholders or
other individuals who own, hold, or control, either directly or indirectly,
five percent (5%) or more of stock or financial interest in the collective
organization; and
(f) Any other employee,
agent, guardian, personal representative, or lender or holder of indebtedness
who has the power to exercise a significant influence over the applicant’s or
licensee’s operation.
(6)
"Substantial change in ownership" is defined by 811 KAR 1:037,
Section 1(4).
(7)
"Totalizator"
means the system, including hardware, software, communications equipment, and
electronic devices that accepts and processes the cashing of wagers, calculates
the odds and prices of such wagers, and records, displays, and stores
pari-mutuel wagering information.
(8)
"Totalizator company" means any person providing totalizator services
or equipment to a racing association or simulcast facility.
Section 2. License Required. (1)
Any totalizator company that provides totalizator services to a racing association or
simulcast facility located in the Commonwealth shall apply to the commission for a license
pursuant to KRS 230.260(3). Deadlines for new license applications shall be as
follows:
(a)
Any totalizator company that provides totalizator services to a racing association or
simulcast facility located in the Commonwealth prior to October 7, 2011, shall apply to
the commission for a license by submitting a completed "Initial/Renewal
License Application to Provide Totalizator Services" on or before December
6, 2011. Between the time that the license application is submitted and the
commission renders a decision, the totalizator company may continue to operate.
The license shall be effective upon approval of the commission.
(b)
Any other totalizator company shall apply to the commission for a license by submitting
a completed "Initial/Renewal License Application to Provide Totalizator
Services." The license shall be effective, and the totalizator company may
begin operations, upon approval of the commission.
(2)
Renewal applications. A license to provide totalizator services shall be
renewed annually in accordance with this administrative regulation. A renewal
application shall be submitted on the form "Initial/Renewal License
Application to Provide Totalizator Services" on or before August 1 of the
preceding year. The commission shall render a decision on the application on or
before December 20. If approved, a renewal license shall be effective January
1.
(3) The applicant shall
provide all information required to be disclosed in the application. If an
applicant is unable, despite best efforts, to provide any information required,
the applicant shall fully explain and document its reasons to the satisfaction
of the commission, and shall provide the information promptly upon being able
to do so.
Section
3. Licensing Costs and Fees. (1) In accordance with KRS 230.260(6), the
applicant shall pay all costs incurred by the commission in reviewing an
application for an initial license, including legal and investigative costs,
including the cost of performing background checks on the applicant’s employees,
owners and principals, and the cost of other necessary outside professionals
and consultants. As an initial payment for these costs, the applicant shall
submit, along with a license application, a cashier's check or certified check
payable to the commission in the amount of ten thousand dollars ($10,000). Any
portion of the payment not required to complete the investigation shall be
refunded to the applicant within twenty (20) days of the granting, withdrawal,
or rejection of the initial license application. To the extent additional costs
become necessary, the applicant shall submit a cashier's check or certified
check payable to the commission in an amount reasonably requested by the commission
within ten (10) days of receipt of the request. Failure to submit an additional
requested payment shall result in suspension of the processing of the license
application and may result in denial of the license.
(2)
An applicant for a renewal license shall pay all reasonable costs incurred by
the commission in reviewing a renewal license, including legal and
investigative costs and the cost of other necessary outside professionals and
consultants. The applicant shall submit a cashier’s check or certified check
payable to the commission in an amount requested by the commission within ten
(10) days of receipt of request. Failure to submit the payment shall result in
suspension of the processing of renewing the license and may result in denial
of the license.
(3)
The commission may waive the requirements of subsections (1) and (2) of this
section, in part or completely, if the applicant has undergone a certification
process or other investigative review by a commission-approved industry or
regulatory body.
(4)
An annual license fee one thousand dollars ($1,000) shall be payable to the
commission upon issuance of the original license and thereafter, if a renewal
license is granted, on or before January 1 of each year. A license shall not be
issued until receipt of the license fee each year.
Section
4. License Application Procedures. (1) An application for a license shall be in
the form and manner prescribed by the commission in accordance with Section
2(1) of this administrative regulation. The commission may deny a license to
any applicant that provides false or misleading information on or omits
material information from the application. The application shall include:
(a)
The applicant’s legal name;
(b)
The location of the applicant’s principal office;
(c)
The name, address, and date of birth of each principal with a five percent (5%)
or greater share of ownership or beneficial interest in the applicant;
(d)
Audited financial statements for the last three years or, if the applicant does
not have audited financial statements, financial and other pertinent
information as required by the commission to determine that the applicant is
financially capable of operating as a going concern;
(e)
A Standards
for Attestation Engagements (SSAE) No. 16 report, or other independent report in a form
acceptable to the commission, completed within the preceding 12 months, to assure
adequate financial controls are in place and compliance with totalizator standards.
The commission may require that a SSAE 16 audit, or other independent report in
a form acceptable to the commission, be conducted annually in order to receive
a renewal license;
(f)
A list of personnel assigned to work in Kentucky, which shall be kept current
and be provided to the commission upon request;
(g)
A certification of compliance with the Kentucky Horse Racing Commission Totalizator
Standards;
(h)
An agreement to testing of hardware and software as may be directed by the commission;
and
(i)
Copies of all documents described and required pursuant to the "Initial/Renewal License
Application to Provide Totalizator Services."
(2)
In reviewing an application, the commission may consider any information, data,
reports, findings, or other factors available that it considers important or
relevant to its determination of whether the applicant is qualified to hold a
license, including the following:
(a)
The integrity of the applicant and its principals, including whether the
applicant has:
1.
Been convicted of any crime of moral turpitude, embezzlement, or larceny, or
any violation of any law pertaining to illegal gaming or gambling, or any crime
that is inimical to the declared policy of the Commonwealth of Kentucky with
regard to horse racing and pari-mutuel wagering thereon;
2.
Been convicted in any jurisdiction within ten (10) years preceding initial
licensing or license renewal of any crime that is or would be a felony or class
A misdemeanor in the Commonwealth of Kentucky;
3.
Been identified in the published reports of any federal or state legislative or
executive body, or in an opinion of any judicial body, as being a member or
associate of organized crime, or of being of notorious or unsavory reputation;
4.
Been charged by any federal, state, or local law enforcement authority with a
violation of any federal, state, or local law;
5.
Had a gaming or totalizator company license revoked in another jurisdiction on
grounds that would have been grounds for revoking the license in Kentucky;
6.
Engaged in any other activities that would pose a threat to the public interest
or to the effective regulation of horse racing and wagering in Kentucky, or
enhance the dangers of unsuitable, unfair, or illegal practices, methods, and
activities in the conduct of racing and wagering or in the operation of the
business and financial arrangements incidental thereto;
7.
Been a party to litigation over business practices or disciplinary actions over
a business license;
8.
Been a party to proceedings in which unfair labor practices, discrimination, or
violation of government regulations pertaining to racing or gaming laws was an
issue, or bankruptcy proceedings;
9.
Failed to satisfy judgments, orders, or decrees; and
10.
Whether the applicant or its principals has been delinquent in filing tax
reports or remitting taxes;
(b)
The quality of physical facilities and equipment;
(c)
The management ability of the applicant and its principals;
(d)
Compliance of the applicant with applicable statutes, charters, ordinances, and
administrative regulations; and
(e)
The efforts of the applicant to safeguard and promote the integrity of
pari-mutuel wagering in the Commonwealth.
Section
5. Oral Presentation by Applicant. (1) Prior to making its ruling, the
commission may require an applicant to make an oral presentation concerning its
application in order to clarify or otherwise respond to questions concerning
the application. The presentation shall be limited to the information contained
in the applicant’s application and any supplemental information relevant to the
commission’s determination of the applicant’s suitability. The admission as
evidence of the supplemental information shall be subject to the discretion of
the commission.
(2)
If the commission deems an applicant’s application incomplete and does not
accept it for filing, the applicant shall not be entitled to make an oral
presentation.
Section
6. Additional Information. (1) The commission may request additional
information from an applicant if the additional information would assist the
commission in deciding whether to issue or renew a license, including copies of
any documents used by the applicant in preparing the application and contracts
between the applicant and third parties related to operations.
Section
7. Operations. (1) Before doing business in Kentucky, the licensee shall be
qualified to do business in Kentucky.
(2)
In addition to the information the commission may request under this or any
other applicable administrative regulation or statute, the commission may
require the licensee to remit contemporaneously to the commission a copy of any
documents required to be filed with the Department of Revenue or other
regulatory agency.
(3)
The licensee shall operate in conformity with the Kentucky Horse Racing
Commission Totalizator Standards.
Section 8. Transfers of Licenses. (1) A license issued
under this administrative regulation shall not be transferable or assignable.
(2)
A substantial change in ownership in a licensee shall result in termination of
the license unless prior written approval for the change has been obtained from
the commission. Any request for approval of a substantial change in ownership
shall be made on the form "Totalizator Change of Control Form." Upon
receipt of all required information, the commission shall, as soon as
practicable, make a determination whether to authorize and approve the substantial
change in ownership.
(3)
Notice of a nominal change in ownership shall be filed with the commission within
fifteen (15) days of the execution of the documents upon which the proposed
nominal change in ownership will be based.
(4)
For purposes of subsection (3) of this section, notice is not required for:
(a)
A nominal change in ownership if the licensee is a publicly traded corporation;
(b)
The transfer of an ownership interest in an association, whether substantial or
nominal, direct or indirect, if by a publicly traded corporation, and if the
beneficial ownership transferred is acquired by a person who will hold the
voting securities of the publicly traded corporation for investment purposes
only; or
(c)
A debt transaction of a publicly traded corporation, unless the transaction
results in the pledge or encumbrance of the assets or any portion of the assets
of the association.
Section
9. Duration of License. A license issued under this administrative regulation
shall be valid for the calendar year for which it is issued.
Section
10. Penalties and Enforcement. (1) The commission shall have all of the rights,
powers, and remedies provided for in KRS Chapter 230, KAR Title 810, and KAR
Title 811 to ensure compliance with this administrative regulation, including,
but not limited to, revocation, suspension, or modification of a license and
the imposition of fines.
Section
11. Incorporation by Reference. (1) The following material is incorporated by
reference:
(a)
"Initial/Renewal License Application to Provide Totalizator Services"
KHRC 150-01, 6/11;
(b)
"Totalizator Change of Control Form," KHRC 150-02, 6/11; and
(c)
"Kentucky Horse Racing Commission Totalizator Standards," KHRC 150-03,
6/11.
(2)
This material may be inspected, copied, or obtained, subject to applicable
copyright law, at the Kentucky Horse Racing Commission, 4063 Iron Works
Parkway, Building B, Lexington, Kentucky 40511, Monday through Friday, 8:00
a.m. to 4:30 p.m.
(3)
This material may also be obtained at the commission’s Web site, www.khrc.ky.gov. (38 Ky.R. 186; 613; eff.
10-7-2011.)
