811 KAR 2:200. Licensing totalizator companies

Link to law: http://www.lrc.ky.gov/kar/811/002/200.htm
Published: 2015

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      811 KAR 2:200. 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 quarter horse, appaloosa or Arabian

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 2:140, 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 2:140,

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. 193; 616; eff. 10-7-11.)