Current through Register Vol. 49, No. 9, September, 2024
16.010
Definitions.
As used in Rule 16:
1.
"Private investment company" means any privately held legal entity except a
natural person which holds or applies for a license, or owns, directly or
indirectly, a beneficial interest in any corporation, firm, partnership,
limited partnership, limited-liability company, trust or other form of business
organization which holds or applies for a license, and which has the following
characteristics:
(a) 100% of the economic
securities of the company are held, directly or indirectly, by (i) one or more
private investment funds that are managed by an investment manager or managers,
which investment manager or managers collectively have more than one billion
dollars in assets under management or (ii) one or more institutional investors
as defined in these Rules that each has assets of more than one billion
dollars;
(b) 100% of the voting
securities of the company are held by one or more legal entities that is
controlled by one or more controlling persons or key executives of the
investment managers or institutional investors; and
(c) The company is not a "publicly traded
corporation" or has received Commission approval to convert its registration
from a publicly traded corporation to a private investment company.
[] The Commission may waive or modify one or more of the
characteristics above for reasons consistent with these Rules.
2. "Affiliate" or
"affiliated company" means a subsidiary company, holding company, intermediate
company or any other form of business organization that controls, is controlled
by or is under common control with a private investment company.
3. "Control," when used as a noun, means the
possession, direct or indirect, of the power to direct or cause the direction
of management and policies of a person, and when used as a verb means to
possess, directly or indirectly, such power.
4. "Controlling person" means, with respect
to a private investment company, each person who controls the private
investment company.
5. "Economic
security" means a non-voting interest which entitles the holder to the economic
benefits, without the right to control or vote, of a corporation, firm,
partnership, limited partnership, limited-liability company, trust or other
form of business organization.
6.
"Holding company" defined.
(a) "Holding
company" means any corporation, firm, partnership, limited partnership,
limited-liability company, trust or other form of business organization not a
natural person which, directly or indirectly:
(1) Owns;
(2) Has the power or right to control;
or
(3) Holds with power to vote,
any part of the limited partnership interests, interests in a limited-liability
company or outstanding voting securities of a private investment
company
(b) For purposes
of this section, in addition to any other reasonable meaning of the words used,
a holding company "indirectly" has, holds or owns any power, right or security
mentioned in subsection (a) if it does so through any interest in a subsidiary
or successive subsidiaries, however many such subsidiaries may intervene
between the holding company and the private investment company.
7. "Intermediary company" means
any corporation, firm, partnership, limited partnership, limited-liability
company, trust or other form of business organization other than a natural
person which:
(a) Is a holding company with
respect to private investment company; and
(b) Is a subsidiary with respect to any
holding company.
8. "Key
executive" means any person performing a principal business or policy making
function for a business organization, as determined by the Commission on a case
by case basis.
9. "Person" means
any natural person, corporation, firm, partnership, limited partnership,
limited-liability company, trust or other form of business organization,
whether or not a legal entity.
10.
"Private investment fund" means a business entity exempted from registration
under
15 USC §
80a-3(c).
11. "Subsidiary" means: any corporation,
firm, partnership, limited partnership, limited-liability company, trust or
other form of business organization not a natural person, any interest in which
is:
(a) Owned;
(b) Subject to a power or right of control;
or
(c) Held with power to vote, by
a holding company or intermediary company.
12. "Voting security" means an interest which
entitles the holder to vote for the election of a member or members of the
board of directors or board of trustees of a corporation or a comparable person
or persons in the case of a partnership, limited-liability company, or other
form of business organization.
16.020
Powers of Commission.
The Commission shall have full and absolute power and authority, to the extent
permitted by law, to recommend the granting, denial, limitation, conditioning,
restriction, revocation, or delay of any license, registration, approval, or
finding of suitability required or permitted by this Rule, or any application
therefor, or to recommend other disciplinary action for any cause deemed
reasonable by the Commission. The Commission shall have full and absolute power
and authority, to the extent permitted by law, to grant, deny, condition,
restrict, revoke, suspend, or delay any license, registration, approval, or
finding of suitability required or permitted under this Rule, or any
application therefor, or to take other disciplinary action for any cause deemed
reasonable by the Commission.
16.030
Burden of proof. The
burden of proof with respect to the granting of any approval required or
permitted by this Rule is at all times upon the person applying for such
approval. Each applicant shall satisfy the Commission, as the case may be, that
the granting of an approval is consistent with the state policies regarding
gaming set forth in these Rules.
16.040
Exemptions from certain
requirements. Except as otherwise set forth herein, private investment
companies are exempt from the requirements of these Rules. However, the legal
entities that own the voting securities of the private investment company shall
be registered and found suitable by the Commission as holding companies and
shall be subject to Rules 7, 13.585.7-1 to 13.585.7-7, 14.170 to 14.190, and
15.170 to 15.190.
16.050
Private investment companies owning or controlling applicant or licensee;
Duties and power of Commission to investigate.
1. If a corporation, partnership, limited
partnership, limited-liability company or other business organization applying
for or holding a state Casino license is, or becomes owned or controlled, in
whole or in part, by a private investment company, or if a private investment
company applies for or holds a state Casino license, the private investment
company shall:
(a) Maintain a ledger in its
principal office or the principal office of its subsidiary which is licensed to
conduct gaming in this state, which must:
(1)
Reflect the ownership of record of each holder of economic securities and
voting securities in the private investment company; and
(2) Be available for inspection by the
Commission and their authorized agents at all reasonable times without
notice.
(b) Subject to
subsection (d) below, register with the Commission and provide the following
information to the Commission:
(1) The
organization, financial structure and nature of the business of the private
investment company, including the names of all key executives and employees
actively and directly engaged in the administration or supervision of the
activities of the Casino licensee, and the names, addresses and percentage
ownership interest held of record by each economic security holder and each
voting security holder;
(2) The
rights and privileges accorded the holders of different classes of its
authorized economic securities and voting securities;
(3) The terms on which its economic
securities and voting securities are to be, and during the preceding three
years have been, offered by the private investment company to the public or
otherwise initially issued by it;
(4) The terms and conditions of all its
outstanding loans, mortgages, trust deeds, pledges or any other indebtedness or
security device, directly relating to the gaming activities of the Casino
licensee;
(5) The extent of the
economic securities and voting securities of record in the private investment
company held by all key executives and any employees, and any payment received
by any such persons from the private investment company for each of its three
preceding fiscal years for any reason whatever;
(6) Remuneration exceeding [$100,000] per
annum to persons other than key executives and employees who are actively and
directly engaged in the administration or supervision of the gaming activities
of the Casino licensee;
(7) Bonus
and profit-sharing arrangements of the private investment company directly or
indirectly relating to the gaming activities of the Casino licensee;
(8) Management and service contracts of the
private investment company directly or indirectly relating to the gaming
activities of the Casino licensee;
(9) Options existing or from time to time
created in respect of its economic securities and voting securities;
(10) Balance sheets, certified by independent
public accountants, for at least the three preceding fiscal years, or if the
private investment company is less than three years old, balance sheets from
the time of its formation;
(11)
Profit and loss statements, certified by independent certified public
accountants, for at least the three preceding fiscal years, or, if the private
investment company is less than three years old, profit and loss statements
from the time of its formation;
(12) A description of the private investment
company's affiliated companies and intermediary companies, and the various
Casino licenses and approvals obtained by those entities; and
(13) Any further information within the
knowledge or control of the private investment company which either the
Commission may deem necessary or appropriate for the protection of this state,
or licensed gambling, or both. The Commission may make such investigation of
the private investment company or any of its key executives, interest holders
or other persons associated therewith as it deems necessary.
(c) Upon request of the
Commission, furnish to the Commission a non-interference letter, in a form
acceptable to the Commission, which provides that the investment managers and
institutional investors described in these Rules will not take any action to
influence the controlling persons or key executives described in these Rules,
as applicable, in the exercise of their management or voting rights in respect
of the gaming activities of the private investment company or any of its
affiliated, intermediary or subsidiary companies, and that such controlling
persons or key executives, as applicable, are authorized to exercise such
rights independently of, and without consultation with, the investment managers
and institutional investors.
(d) A
private investment company registered with the Commission as a publicly traded
corporation will be considered registered for purposes of this section and will
not be required to re-register under subsection (b) above following the
submission to the Commission and an approval by the Commission of an
application to convert the registration to that of a private investment
company.
2. If the
private investment company is a foreign legal entity, it must also qualify to
do business in this state.
16.060
Individual licensing of key
executives and employees; removal from position if found unsuitable or if
license is denied or revoked; suspension of suitability by Commission.
1. Each key executive and employee of a
private investment company who the Commission determines is or is to become
actively and directly engaged in the administration or supervision of, or have
any other significant involvement with, the gaming activities of the private
investment company or any of its affiliated, intermediary or subsidiary
companies must be found suitable therefor and may be required to be licensed by
the Commission. Any person who has a relationship to a private investment
company of a type described in these Rules with respect to publicly traded
corporations shall file an application for finding of suitability and may be
required to be licensed.
2. If any
key executive or employee of a private investment company required to be
licensed or found suitable pursuant to subsection 1 fails to apply for a Casino
license or finding of suitability within 30 days after being requested to do so
by the Commission, or is denied a license or is not found suitable by the
Commission, or if his or her license or the finding of his or her suitability
is revoked after appropriate findings by the Commission, the private investment
company shall immediately remove that key executive or employee from any office
or position wherein the key executive or employee is actively and directly
engaged in the administration or supervision of, or has any other significant
involvement with, the gaming activities of the private investment company or
any of its affiliated or intermediary companies. If the Commission suspends the
finding of suitability of any key executive or employee, the private investment
company shall, immediately and for the duration of the suspension, suspend that
key executive or employee from performance of any duties wherein the key
executive or employee is actively and directly engaged in administration or
supervision of, or has any other significant involvement with, the gaming
activities of the private investment company or any of its affiliated or
intermediary companies.
16.070
Suitability of persons
acquiring beneficial or record ownership of any economic security or debt
security in private investment company; report of acquisition; application;
penalty.
1. Each person who acquires
beneficial ownership or record ownership of any direct or indirect interest in
any economic security in a private investment company which is registered with
the Commission may be required to be found suitable in the discretion of the
Commission.
2. Each person who
acquires beneficial or record ownership of any direct or indirect interest in
any debt security in a private investment company which is registered with the
Commission may be required to be found suitable in the discretion of the
Commission.
3. Any person required
by the Commission or by this section to be found suitable shall:
(a) Apply for a finding of suitability within
30 days after the Commission requests that the person do so; and
(b) Together with the application, deposit
with the Commission a sum of money which, in the opinion of the Commission,
will be adequate to pay the anticipated costs and charges incurred in the
investigation and processing of the application, and deposit such additional
sums as are required by the Commission to pay final costs and
charges.
4. Any person
required by the Commission or this section to be found suitable who is found
unsuitable by the Commission shall not hold directly or indirectly the
beneficial or record ownership of any economic security or debt
security.
5. As used in this
section, "debt security" means any instrument generally recognized as a
corporate security representing money owed and reflected as debt on the
financial statement of a legal entity.
16.080
Remuneration, contracts and
employment prohibited for certain unsuitable or unlicensed persons. If
any person who is required, pursuant to this Rule, to be licensed or found
suitable because of the person's connection with a corporation, partnership,
limited partnership, limited-liability company or other business organization
holding a license, or a holding company or intermediary company, including a
private investment company, fails to apply for a license or a finding of
suitability after being requested to do so by the Commission or is denied a
license or a finding of suitability, or if the person's license or finding of
suitability is revoked, the corporation, partnership, limited partnership,
limited-liability company, business organization, holding company, intermediary
company or any person who directly or indirectly controls, is controlled by or
is under common control with the corporation, partnership, limited partnership,
limited-liability company, business organization, holding company or
intermediary company shall not, and any licensee or an affiliate of the
licensee shall not, after receipt of written notice from the Commission:
1. Pay the person any remuneration for any
service relating to the activities of a licensee, except for amounts due for
services rendered before the date of receipt of notice of such action by the
Commission. Any contract or agreement for personal services or the conduct of
any activity at a licensed gaming establishment between a former employee whose
employment was terminated because of failure to apply for a license or a
finding of suitability, denial of a license or finding of suitability, or
revocation of a license or a finding of suitability, or any business enterprise
under the control of that employee and the licensee, holding or intermediary
company or private investment company is subject to termination. Every such
agreement shall be deemed to include a provision for its termination without
liability on the part of the licensee upon a finding by the Commission that the
business or any person associated therewith is unsuitable to be associated with
a gaming enterprise. Any failure to include expressly such a condition in the
agreement is not a defense in any action brought pursuant to this section to
terminate the agreement;
2. Enter
into any contract or agreement with the person or with a business organization
that the licensee knows or under the circumstances reasonably should know is
under the person's control which involves the operations of a licensee, without
the prior approval of the Commission; or
3. Employ the person in any position
involving the activities of a licensee without prior approval of the
Commission.
16.090
Powers of Commission. The Commission may determine, upon
recommendation of the Commission, at the time of initial application by a
private investment company, or at any time thereafter, that the public interest
and the purposes of the Act require that any person who has a material
relationship to, or material involvement with, a private investment company,
affiliated company or a licensee that is subject to the jurisdiction of the Act
should apply for a finding of suitability or licensing. A person may be deemed
to have a material relationship to, or material involvement with, a private
investment company, affiliated company or licensee if the person is a
controlling person or key executive of the private investment company,
affiliated company or licensee, or if the person, as an agent, consultant,
advisor or otherwise, exercises significant influence upon the management or
affairs of the private investment company, affiliated company or licensee. The
foregoing powers of the Commission are not limited to persons having a formal
and direct involvement or relationship with a private investment company,
affiliated company or licensee, nor to persons who are beneficial owners of any
stated percentage of the outstanding economic securities of a private
investment company, affiliated company or licensee.
16.100
Required reports and
statements; income tax return; documents filed with Commission.
1. After a private investment company has
registered pursuant to this chapter, and while the private investment company
or any of its affiliated, intermediary or subsidiary companies holds a Casino
license, the private investment company shall:
(a) Report promptly to the Commission, in
writing, any change in its key executives or employees who are actively and
directly engaged in the administration or supervision of the gaming activities
of the private investment company or any of its affiliated, intermediary or
subsidiary companies;
(b) Within 45
days after the close of the quarter to which they relate, furnish to the
Commission a quarterly profit and loss statement and a balance sheet of the
private investment company;
(c)
Each year furnish to the Commission a profit and loss statement and a balance
sheet of the private investment company as of the end of the year, certified by
independent certified public accountants, and, upon request of the Commission
therefor, a copy of the private investment company's federal income tax return
within 30 days after the return is filed with the Internal Revenue Service. All
profit and loss statements and balance sheets must be submitted within 120 days
after the close of the fiscal year to which they relate;
(d) Report promptly to the Commission, in
writing, any changes that would result in the private investment company no
longer having one or more of the characteristics of a private investment
company as described in these Rules, unless such characteristic has been waived
or modified by the Commission;
(e)
Establish and maintain a gaming compliance program for the purpose of, at a
minimum, performing due diligence, determining the suitability of relationships
with other persons, and to review and ensure compliance by the private
investment company, its subsidiaries and any affiliated companies, with the
Act, as amended, the Rules, as amended, and the laws and regulations of any
other jurisdictions in which the private investment company, its subsidiaries
and any affiliated entities operate. The gaming compliance program, any
amendments thereto, and the members of the compliance committee, at least one
such member who shall be independent and knowledgeable of the Act and the
Rules, shall be administratively reviewed and approved by the Commission or the
Commission's designee. The private investment company shall amend the gaming
compliance program, or any element thereof, and perform such duties as may be
assigned by the Commission or the Commission's designee, related to a review of
activities relevant to the continuing qualification of the private investment
company, its subsidiaries and any affiliated companies under the provisions of
the Act and the Rules;
2. In addition to the requirements set forth
in subsection (1), upon request of the Commission, the private investment
company shall provide any other documents, papers, reports, or other
information deemed relevant by the Commission.
16.200
Approvals required for
dividends and distributions. Without the prior approval of the
Commission, neither the private investment company, nor any of its affiliated,
intermediary or subsidiary companies who have been found suitable by the
Commission pursuant to these Rules, shall declare any dividends or
distributions on any class of securities to any person who has not been
licensed or found suitable by the Commission; provided, however, that any of
the foregoing entities may, with the prior administrative approval of the
Commission or the Commission's designee, pay dividends and make distributions
to their direct or indirect equity owners who have not been licensed or found
suitable by the Commission for the purpose of defraying tax liabilities and
tax-related expenses of such direct or indirect equity owners that arise
directly out of such direct or indirect ownership interest, and further
provided that any of the foregoing entities may, upon five days prior written
notice to the Commission, make distributions to their direct or indirect equity
owners who have not been licensed or found suitable by the Commission for the
purpose of the payment of debt service by such direct or indirect equity owners
for debt incurred in connection with the acquisition of any licensed subsidiary
or the assets comprising a licensed establishment.
16.210
Administrative approval
required for certain transfers of economic securities in private investment
companies. Each person who acquires beneficial ownership or record
ownership of any direct interest in any economic security in a private
investment company which is registered with the Commission shall not, without
the prior administrative approval of the Commission, sell, assign, transfer,
pledge or otherwise dispose of any economic security of such private investment
company, or any other security held by it that is convertible or exchangeable
into an economic security of the private investment company.
16.220
Reporting required for certain
transfers and changes affecting economic securities in private investment
companies. A private investment fund and any of its affiliates and
subsidiaries who acquire beneficial ownership or record ownership of any
indirect interest in any economic security in a private investment company
which is registered with the Commission, shall report quarterly to the
Commission, in writing:
(i) the sale,
assignment, transfer, pledge or other disposition of any interest in the
private investment fund, affiliate or subsidiary; and
(ii) the addition of any new members,
partners, shareholders, trustees or beneficiaries in the private investment
fund, affiliate or subsidiary, excluding persons that are holders of publicly
traded securities issued by those entities. The Commission may require the
private investment company to provide such additional information regarding any
of the aforesaid transactions as it deems necessary.
16.230
Commission approval required
for transfers by the beneficial owners of voting securities of private
investment companies. Each person who acquires beneficial ownership or
record ownership of any direct or indirect interest in any voting security in a
private investment company which is registered with the Commission, and who has
been found suitable by the Commission shall not, without the prior approval of
the Commission, sell, assign, transfer, pledge or otherwise dispose of any
voting security of such private investment company, or any other security held
by it that is convertible or exchangeable into a voting security of the private
investment company.
16.240
Commission approval required to issue voting securities. A private
investment company which is registered with the Commission shall not issue
voting securities, or any other security that is convertible or exchangeable
into a voting security, without the prior approval of the Commission.
16.300
Penalties for noncompliance
with laws and Rules. If any corporation, partnership, limited
partnership, limited-liability company or other business organization holding a
license is owned or controlled by a private investment company subject to the
provisions of this chapter, or that private investment company, does not comply
with the laws of this state and the Rules of the Commission, the Commission may
in its discretion do any one, all or a combination of the following:
1. Revoke, limit, condition or suspend the
license of the licensee; or
2. Fine
the persons involved, the licensee or the private investment company in
accordance with the laws of this state and the Rules of the
Commission.
16.310
Fraudulent and deceptive practices prohibited. It is grounds for
disciplinary action if any person, in connection with the purchase or sale of
any security issued by a private investment company or an affiliated company or
in connection with any document required to be filed pursuant to these Rules or
the Amendment:
1. Employs any device, scheme
or artifice to defraud;
2. Makes
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading;
3. Engages in any act, practice, or course of
business which operates or would operate as a fraud or deceit upon any person;
or
4. Causes any document,
correspondence, filing or statement containing materially untrue, incorrect or
misleading information to be made or filed with the Commission, regardless of
whether said information has been made or filed with another regulatory
agency.
16.400
Exemptions.
1. The Commission may,
either generally or specifically, exempt a person, a security, a transaction,
or any portion thereof, from the application of these Rules or any portion
thereof if the Commission determines that such exemption is consistent with the
purpose of the Amendment.
