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| 4 | 4 | | |
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| 5 | 5 | | 2025 -- H 5564 |
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| 6 | 6 | | ======== |
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| 7 | 7 | | LC001803 |
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| 8 | 8 | | ======== |
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| 9 | 9 | | S T A T E O F R H O D E I S L A N D |
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| 10 | 10 | | IN GENERAL ASSEMBLY |
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| 11 | 11 | | JANUARY SESSION, A.D. 2025 |
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| 12 | 12 | | ____________ |
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| 13 | 13 | | |
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| 14 | 14 | | A N A C T |
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| 15 | 15 | | RELATING TO STATE AFFAIRS AND GOVERNMENT -- RHODE ISLAND ECONOMIC |
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| 16 | 16 | | GROWTH BLOCKCHAIN AC T |
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| 17 | 17 | | Introduced By: Representatives Place, Hopkins, and Nardone |
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| 18 | 18 | | Date Introduced: February 26, 2025 |
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| 19 | 19 | | Referred To: House Corporations |
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| 20 | 20 | | |
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| 21 | 21 | | |
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| 22 | 22 | | It is enacted by the General Assembly as follows: |
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| 23 | 23 | | SECTION 1. Legislative findings. 1 |
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| 24 | 24 | | The general assembly finds and declares: 2 |
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| 25 | 25 | | (1) It is declared to be the policy of the state to promote a vigorous and growing economy, 3 |
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| 26 | 26 | | to prevent economic stagnation, and to encourage the creation of new job opportunities in order to 4 |
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| 27 | 27 | | ameliorate the hazards of unemployment and underemployment, reduce the level of public 5 |
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| 28 | 28 | | assistance, increase revenues to the state and its municipalities, and to achieve a stable diversified 6 |
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| 29 | 29 | | economy. 7 |
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| 30 | 30 | | (2) The State of Rhode Island understands that to compete in the twenty-first century 8 |
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| 31 | 31 | | economy, Rhode Island must offer one of the best business environments in the United States for 9 |
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| 32 | 32 | | blockchain and technology innovators, and should offer a comprehensive regulatory technology 10 |
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| 33 | 33 | | sandbox for these innovators to develop the next generation of digital products and services in 11 |
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| 34 | 34 | | Rhode Island. 12 |
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| 35 | 35 | | (3) Building a more robust public-private partnership framework is mandatory for 13 |
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| 36 | 36 | | economic success. 14 |
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| 37 | 37 | | (4) The State of Rhode Island understands that further developing technology industries 15 |
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| 38 | 38 | | within a robust public-private partnership brings better efficiency, trust, and accountability between 16 |
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| 39 | 39 | | Rhode Island state government, businesses, and residents. 17 |
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| 40 | 40 | | (5) The state understands a public-private partnership developing an immutable 18 |
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| 41 | 41 | | |
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| 42 | 42 | | |
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| 43 | 43 | | LC001803 - Page 2 of 29 |
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| 44 | 44 | | interagency-industry-operability blockchain filing system is vital and redevelopment investment in 1 |
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| 45 | 45 | | opportunity zones that shall install, maintain, and organize within the system of blockchain records 2 |
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| 46 | 46 | | throughout the state is advantageous. 3 |
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| 47 | 47 | | (6) Financial and health technology is undergoing a transformational period in which new 4 |
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| 48 | 48 | | technologies are providing greater automation, connectivity and transparency for provenance of 5 |
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| 49 | 49 | | products and services: 6 |
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| 50 | 50 | | (i) Existing legal frameworks are restricting technology innovation because these 7 |
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| 51 | 51 | | frameworks were largely established at a time when technology was not a fundamental component 8 |
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| 52 | 52 | | of products and services; 9 |
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| 53 | 53 | | (ii) Technology innovators require a supervised, flexible regulatory sandbox to test new 10 |
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| 54 | 54 | | products and services using waivers of specified statutes and rules under defined conditions; 11 |
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| 55 | 55 | | (iii) Jurisdictions which establish regulatory sandboxes are more likely to provide a 12 |
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| 56 | 56 | | welcoming business environment for technology innovators and may experience significant 13 |
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| 57 | 57 | | business growth; 14 |
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| 58 | 58 | | (iv) Other jurisdictions have enacted, or are considering, regulatory sandboxes for financial 15 |
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| 59 | 59 | | technology innovators in their jurisdictions; 16 |
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| 60 | 60 | | (7)(i) The rapid innovation of blockchain technology including the growing use of virtual 17 |
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| 61 | 61 | | currency and other digital assets has resulted in many blockchain innovators being unable to access 18 |
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| 62 | 62 | | secure and reliable banking services thereby hampering development of blockchain services and 19 |
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| 63 | 63 | | products in the marketplace; 20 |
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| 64 | 64 | | (ii) Federally insured financial institutions are not generally permitted to manage accounts 21 |
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| 65 | 65 | | in virtual currency or hold other digital assets; 22 |
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| 66 | 66 | | (iii) Blockchain innovators have greater compliance challenges with federal customer 23 |
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| 67 | 67 | | identification, anti-money laundering and beneficial ownership requirements because of the 24 |
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| 68 | 68 | | complex nature of these obligations and the unfamiliarity of regulators with blockchain innovators' 25 |
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| 69 | 69 | | businesses; 26 |
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| 70 | 70 | | (iv) These intricate obligations have resulted in many financial institutions in Rhode Island 27 |
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| 71 | 71 | | and across the United States refusing to provide banking services to blockchain innovators and also 28 |
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| 72 | 72 | | refusing to accept deposits in United States currency obtained from the sale of virtual currency or 29 |
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| 73 | 73 | | other digital assets; 30 |
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| 74 | 74 | | (v) Compliance with applicable federal and state laws is critical to ensuring the future 31 |
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| 75 | 75 | | growth and reputation of the blockchain and technology industries as a whole; 32 |
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| 76 | 76 | | (vi) Most financial institutions today do not have the requisite expertise or familiarity with 33 |
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| 77 | 77 | | the challenges facing blockchain innovators which is required to provide secure and reliable 34 |
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| 78 | 78 | | |
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| 79 | 79 | | |
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| 80 | 80 | | LC001803 - Page 3 of 29 |
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| 81 | 81 | | banking services to these innovators; 1 |
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| 82 | 82 | | (vii) A new type of Rhode Island financial payments and depository institution that has 2 |
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| 83 | 83 | | expertise with customer identification, anti-money laundering and beneficial ownership 3 |
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| 84 | 84 | | requirements could seamlessly integrate these requirements into its operating model; and 4 |
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| 85 | 85 | | (viii) Authorizing special purpose depository institutions to be chartered in Rhode Island 5 |
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| 86 | 86 | | will provide a necessary and valuable service to blockchain innovators, emphasize Rhode Island's 6 |
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| 87 | 87 | | partnership with the technology and financial industry and safely grow this state's developing 7 |
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| 88 | 88 | | financial sector. 8 |
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| 89 | 89 | | SECTION 2. Title 42 of the General Laws entitled "STATE AFFAIRS AND 9 |
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| 90 | 90 | | GOVERNMENT" is hereby amended by adding thereto the following chapter: 10 |
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| 91 | 91 | | CHAPTER 64.35 11 |
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| 92 | 92 | | RHODE ISLAND ECONOMIC GROWTH BLOCKCH AIN ACT 12 |
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| 93 | 93 | | 42-64.35-1. Short title. 13 |
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| 94 | 94 | | This chapter shall be known and may be cited as the "Rhode Island Economic Growth 14 |
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| 95 | 95 | | Blockchain Act." 15 |
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| 96 | 96 | | 42-64.35-2. Definitions. 16 |
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| 97 | 97 | | As used in this chapter, the following words and phrases shall have the following meanings, 17 |
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| 98 | 98 | | unless the context otherwise requires: 18 |
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| 99 | 99 | | (1) "Agency" or "public body" means any executive, legislative, judicial, regulatory, 19 |
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| 100 | 100 | | administrative body of the state, or any political subdivision thereof: including, but not limited to, 20 |
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| 101 | 101 | | any department, division, agency, commission, board, office, bureau, authority, any school, fire, or 21 |
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| 102 | 102 | | water district, or other agency or quasi-public agency of Rhode Island state or local government 22 |
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| 103 | 103 | | which exercises governmental functions or any other public or private agency, person, partnership, 23 |
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| 104 | 104 | | corporation, or business entity acting on behalf of any public agency. 24 |
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| 105 | 105 | | (2) "Bank" means any corporation, excluding national banks, having a place of business 25 |
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| 106 | 106 | | within this state which engages in banking business, and includes a special purpose depository 26 |
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| 107 | 107 | | institution, subject to the limitations set forth in § 42-64.35-5. 27 |
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| 108 | 108 | | (3) "Batch" means a specific quantity of real or digital product that is part of a regulated 28 |
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| 109 | 109 | | industry, such as hemp or vital records. 29 |
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| 110 | 110 | | (4) "Blockchain" means a digital ledger or database which is chronological, consensus-30 |
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| 111 | 111 | | based, decentralized and mathematically verified in nature. 31 |
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| 112 | 112 | | (5) "Bureau" means an office or department in charge of administering any agency or bank 32 |
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| 113 | 113 | | regulated by the provisions of this chapter. 33 |
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| 114 | 114 | | (6) "Custodial services" means the safekeeping and management of customer currency and 34 |
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| 115 | 115 | | |
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| 116 | 116 | | |
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| 117 | 117 | | LC001803 - Page 4 of 29 |
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| 118 | 118 | | digital assets through the exercise of fiduciary and trust powers under this chapter as a custodian, 1 |
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| 119 | 119 | | and includes fund administration and the execution of customer instructions. 2 |
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| 120 | 120 | | (7) "Database" means a set of data held on a secured computer software program or 3 |
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| 121 | 121 | | encrypted electronic storage system providing an immutable distributed ledger of records. 4 |
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| 122 | 122 | | (8) "Department" means the department of business regulation, division of banking. 5 |
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| 123 | 123 | | (9) "Developer" means the person primarily responsible for creating an open blockchain 6 |
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| 124 | 124 | | token or otherwise designing the token, including by executing the technological processes 7 |
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| 125 | 125 | | necessary to create the token; 8 |
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| 126 | 126 | | (10) "Digital asset" means a representation of economic, proprietary or access rights that 9 |
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| 127 | 127 | | is stored in a computer readable format, and includes digital consumer assets, digital securities and 10 |
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| 128 | 128 | | virtual currency; 11 |
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| 129 | 129 | | (11) "Digital consumer asset" means a digital asset that is used or bought primarily for 12 |
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| 130 | 130 | | consumptive, personal or household purposes and includes: 13 |
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| 131 | 131 | | (i) An open blockchain token constituting intangible personal property as otherwise 14 |
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| 132 | 132 | | provided by law; and 15 |
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| 133 | 133 | | (ii) Any other digital asset which does not fall within the scope of this chapter. 16 |
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| 134 | 134 | | (12) "Exchange," used as a verb, means to assume control of virtual currency from or on 17 |
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| 135 | 135 | | behalf of a resident, at least momentarily, to sell, trade, or convert: 18 |
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| 136 | 136 | | (i) Virtual currency for legal tender, bank credit, or one or more forms of virtual currency; 19 |
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| 137 | 137 | | or 20 |
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| 138 | 138 | | (ii) Legal tender or bank credit for one or more forms of virtual currency. 21 |
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| 139 | 139 | | (13) "Facilitator" means a person who, as a business, makes open blockchain tokens under 22 |
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| 140 | 140 | | this chapter available for resale to the public after a token has been purchased by an initial buyer. 23 |
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| 141 | 141 | | (14) "Fees" means charge(s) imposed by the private entity of a qualifying project for use 24 |
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| 142 | 142 | | of all or a portion of such qualifying project pursuant to a comprehensive agreement; 25 |
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| 143 | 143 | | (15) "Financial investment" means a contract, transaction or arrangement where a person 26 |
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| 144 | 144 | | invests money in a common enterprise and is led to expect profits solely from the efforts of a 27 |
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| 145 | 145 | | promoter or a third party. 28 |
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| 146 | 146 | | (16) "Financial product or service" means a product or service related to finance, including 29 |
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| 147 | 147 | | banking, securities, consumer credit or money transmission, which is subject to statutory or rule 30 |
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| 148 | 148 | | requirements identified in title 19 and is under the jurisdiction of the commissioner or secretary. 31 |
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| 149 | 149 | | (17) "Financial technology sandbox" means the program created by this chapter which 32 |
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| 150 | 150 | | allows a person to make an innovative financial product or service available to consumers during a 33 |
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| 151 | 151 | | sandbox period through a waiver of existing statutory and rule requirements, or portions thereof, 34 |
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| 152 | 152 | | |
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| 153 | 153 | | |
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| 154 | 154 | | LC001803 - Page 5 of 29 |
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| 155 | 155 | | by the commissioner or secretary. 1 |
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| 156 | 156 | | (18) "Innovative" means new or emerging technology, or new uses of existing technology, 2 |
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| 157 | 157 | | that provides a product, service, business model or delivery mechanism to the public and has no 3 |
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| 158 | 158 | | substantially comparable, widely available analogue in Rhode Island including blockchain 4 |
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| 159 | 159 | | technology. 5 |
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| 160 | 160 | | (19) "Issuer" means a person that issues or proposes to issue a security 6 |
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| 161 | 161 | | (20) "Legal tender" means a medium of exchange or unit of value, including the coin or 7 |
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| 162 | 162 | | paper money of the United States, issued by the United States or by another government. 8 |
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| 163 | 163 | | (21) "License'' means a state license issued under this chapter, and includes both a 9 |
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| 164 | 164 | | cultivation license and a medicinal use license, as well as a testing laboratory license. 10 |
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| 165 | 165 | | (22) "Licensee" means any person holding a license under this chapter, regardless of the 11 |
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| 166 | 166 | | license held, and includes the holder of a testing laboratory license. 12 |
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| 167 | 167 | | (23) "Licensing authority" means the state agency responsible for the issuance, renewal, or 13 |
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| 168 | 168 | | reinstatement of the license, or the state agency authorized to take disciplinary action against the 14 |
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| 169 | 169 | | licensee. 15 |
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| 170 | 170 | | (24) "Local jurisdiction" means a city or town. 16 |
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| 171 | 171 | | (25) "Monetary value" means a medium of exchange, whether or not redeemable in money. 17 |
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| 172 | 172 | | (26) "Open blockchain token" means a digital unit which is: 18 |
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| 173 | 173 | | (i) Created in response to the verification or collection of a specified number of transactions 19 |
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| 174 | 174 | | relating to a digital ledger or database; 20 |
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| 175 | 175 | | (ii) Created by deploying computer code to a digital ledger or database, which may include 21 |
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| 176 | 176 | | a blockchain, that allows for the creation of digital tokens or other units; 22 |
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| 177 | 177 | | (iii) Created by using a combination of the methods specified in §§ 42-64.35-4 or 42-64.35-23 |
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| 178 | 178 | | 5; 24 |
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| 179 | 179 | | (iv) Recorded to a digital ledger or database, which may include a blockchain; or 25 |
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| 180 | 180 | | (v) Capable of being traded or transferred between persons without an intermediary or 26 |
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| 181 | 181 | | custodian of value. 27 |
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| 182 | 182 | | (27) "Opportunity zones" means designated areas included in the Tax Cuts and Jobs Act of 28 |
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| 183 | 183 | | 2017. Rhode Island opportunity zones are located in twenty-five (25) census tracts spread across 29 |
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| 184 | 184 | | the following fifteen (15) municipalities: Bristol, Central Falls, Cranston, Cumberland, East 30 |
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| 185 | 185 | | Providence, Narragansett, Newport, North Providence, Pawtucket, Providence, South Kingstown. 31 |
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| 186 | 186 | | Warren, West Warwick, Westerly, and Woonsocket. 32 |
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| 187 | 187 | | (28) "Owner" means any of the following: 33 |
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| 188 | 188 | | (i) A person with an aggregate ownership interest of twenty percent (20%) or more in the 34 |
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| 189 | 189 | | |
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| 190 | 190 | | |
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| 191 | 191 | | LC001803 - Page 6 of 29 |
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| 192 | 192 | | person applying for a license or a licensee, unless the interest is solely a security, lien, or 1 |
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| 193 | 193 | | encumbrance; 2 |
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| 194 | 194 | | (ii) The chief executive officer of a nonprofit or other entity; 3 |
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| 195 | 195 | | (iii) A member of the board of directors of a nonprofit; or 4 |
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| 196 | 196 | | (iv) An individual who will be participating in the direction, control, or management of the 5 |
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| 197 | 197 | | person applying for a license. 6 |
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| 198 | 198 | | (29) "Person" means and includes any individual, firm, partnership, joint venture, 7 |
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| 199 | 199 | | association, corporation, limited-liability company, estate, trust, business trust, receiver, syndicate, 8 |
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| 200 | 200 | | or any other group or combination acting as a unit, and the plural as well as the singular. 9 |
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| 201 | 201 | | (30) "Private entity" means any natural person, corporation, general partnership, limited 10 |
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| 202 | 202 | | liability company, limited partnership, joint venture, business trust, public benefit corporation, 11 |
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| 203 | 203 | | nonprofit entity, or one other private business entity. 12 |
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| 204 | 204 | | (31) "Proposal" means a plan for a qualifying project with detail beyond a conceptual level 13 |
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| 205 | 205 | | for which terms such as fixing costs, payment schedules, financing, deliverables, and project 14 |
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| 206 | 206 | | schedules are defined. 15 |
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| 207 | 207 | | (32) "Qualifying project" means: 16 |
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| 208 | 208 | | (i) A facility or project that serves a public purpose, including, but not limited to, any ferry 17 |
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| 209 | 209 | | or mass transit facility, vehicle parking facility, airport or seaport facility, rail facility or project, 18 |
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| 210 | 210 | | transportation facilities, technology infrastructure, fuel supply facility, oil or gas pipeline, medical 19 |
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| 211 | 211 | | or nursing care facility, or educational facility or other building or facility that is used or will be 20 |
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| 212 | 212 | | used by a public educational institution, or any other public facility or infrastructure that is used or 21 |
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| 213 | 213 | | will be used by the public at large or in support of an accepted public purpose or activity; 22 |
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| 214 | 214 | | (ii) An improvement, including equipment, of a building that will be principally used by a 23 |
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| 215 | 215 | | public entity or the public at large or that supports a service delivery system in the public sector; 24 |
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| 216 | 216 | | (iii) A water, wastewater, or surface water management facility or other related 25 |
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| 217 | 217 | | infrastructure; or 26 |
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| 218 | 218 | | (iv) Notwithstanding any provision of this subsection, for projects that involve a facility 27 |
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| 219 | 219 | | owned or operated by the governing board of a city or town, district, or hospital or health care 28 |
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| 220 | 220 | | system, or projects that involve a facility owned or operated by an electric utility, only those 29 |
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| 221 | 221 | | projects that the governing board designates as qualifying projects pursuant to this subsection. 30 |
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| 222 | 222 | | (33) "Reciprocity agreement" means an arrangement between the department and the 31 |
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| 223 | 223 | | appropriate licensing agency of another state that permits a licensee operating under a license 32 |
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| 224 | 224 | | granted by the other state to engage in currency transmission business activity with or on behalf of 33 |
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| 225 | 225 | | a resident. 34 |
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| 226 | 226 | | |
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| 227 | 227 | | |
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| 228 | 228 | | LC001803 - Page 7 of 29 |
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| 229 | 229 | | (34) "Record" means information that is inscribed on a tangible medium or that is stored 1 |
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| 230 | 230 | | in an electronic or other medium and is retrievable in perceivable form. 2 |
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| 231 | 231 | | (35) "Registry" means the Nationwide Multistate Licensing System. 3 |
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| 232 | 232 | | (36) "Resident" means a person that: 4 |
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| 233 | 233 | | (i) Is domiciled in this state; 5 |
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| 234 | 234 | | (ii) Is physically located in this state for more than one hundred eighty-three (183) days of 6 |
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| 235 | 235 | | the previous three hundred sixty-five (365) days; or 7 |
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| 236 | 236 | | (iii) Has a place of business in this state and includes a legal representative of a person that 8 |
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| 237 | 237 | | satisfies subsection (36)(i) of this subsection. 9 |
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| 238 | 238 | | (37) "Responsible individual" means an individual who has managerial authority with 10 |
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| 239 | 239 | | respect to a licensee's currency transmission business activity with or on behalf of a resident. 11 |
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| 240 | 240 | | (38) "Revenue" means the income, earnings, user fees, lease payments, or other service 12 |
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| 241 | 241 | | payments relating to the development or operation of a qualifying project, including, but no limited 13 |
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| 242 | 242 | | to, money received as grants or otherwise from the federal government, a public entity, or an agency 14 |
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| 243 | 243 | | or instrumentality thereof in aid of the qualifying project. 15 |
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| 244 | 244 | | (39) "Sandbox period" means the period of time, initially not longer than twenty-four (24) 16 |
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| 245 | 245 | | months, in which the commissioner or secretary has authorized an innovative financial product or 17 |
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| 246 | 246 | | service to be made available to consumers, which shall also encompass any extension granted under 18 |
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| 247 | 247 | | §§ 42-64.35-l through 42-64.35-5. 19 |
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| 248 | 248 | | (40) "Secretary" means the secretary of state; 20 |
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| 249 | 249 | | (41) "Seller" means a person who makes an open blockchain token available for purchase 21 |
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| 250 | 250 | | to an initial buyer. 22 |
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| 251 | 251 | | (42) "Service contract" means a contract between a public entity and the private entity 23 |
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| 252 | 252 | | which defines the terms of the services to be provided with respect to a qualifying project. 24 |
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| 253 | 253 | | (43) "Sign" means with present intent to authenticate or adopt a record, to execute or adopt 25 |
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| 254 | 254 | | a tangible symbol or to attach to or logically associate with the record an electronic symbol, sound, 26 |
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| 255 | 255 | | or process. 27 |
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| 256 | 256 | | (44) "Special purpose depository institution" means a corporation operating pursuant to § 28 |
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| 257 | 257 | | 42-64.35-5; 29 |
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| 258 | 258 | | (45) "State" means a state of the United States, the District of Columbia, Puerto Rico, the 30 |
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| 259 | 259 | | United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the 31 |
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| 260 | 260 | | United States. 32 |
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| 261 | 261 | | (46) "Store," except in the phrase "store of value," means to maintain control of virtual 33 |
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| 262 | 262 | | currency on behalf of a resident by a person other than the resident. "Storage" and "storing" have 34 |
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| 263 | 263 | | |
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| 264 | 264 | | |
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| 265 | 265 | | LC001803 - Page 8 of 29 |
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| 266 | 266 | | corresponding meanings. 1 |
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| 267 | 267 | | (47) "Supervisor of the regulatory body" means the chief or head of a section having 2 |
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| 268 | 268 | | enforcement responsibility for a particular statute or set of rules and regulations within a regulatory 3 |
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| 269 | 269 | | agency 4 |
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| 270 | 270 | | (48) "System of vital records" means the registration, collection, preservation, amendment, 5 |
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| 271 | 271 | | and certification of vital statistics records, and activities related to them including the tabulation, 6 |
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| 272 | 272 | | analysis, and publication of statistical data derived from those records. 7 |
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| 273 | 273 | | (49) "Transfer" means to assume control of virtual currency from or on behalf of a resident 8 |
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| 274 | 274 | | and to: 9 |
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| 275 | 275 | | (i) Credit the virtual currency to the account of another person; 10 |
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| 276 | 276 | | (ii) Move the virtual currency from one account of a resident to another account of the 11 |
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| 277 | 277 | | same resident; or 12 |
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| 278 | 278 | | (iii) Relinquish control of virtual currency to another person. 13 |
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| 279 | 279 | | (50) "Unique identifier" means an alphanumeric code or designation used for reference to 14 |
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| 280 | 280 | | a specific plant on a licensed premises and any hemp or hemp product derived or manufactured 15 |
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| 281 | 281 | | from that plant. 16 |
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| 282 | 282 | | (51) "U.S. Dollar equivalent of virtual currency" means the equivalent value of a particular 17 |
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| 283 | 283 | | virtual currency in United States dollars shown on a virtual currency exchange based in the United 18 |
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| 284 | 284 | | States for a particular date or period specified in this chapter. Virtual currency or a digital security, 19 |
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| 285 | 285 | | as defined in §§ 19-14-1 and 19-14.3-1.1, shall not constitute an open blockchain token as defined 20 |
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| 286 | 286 | | within §§ 42-64.35-4 and 42-64.35-5. 21 |
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| 287 | 287 | | 42-64.35-3. Council established. 22 |
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| 288 | 288 | | There is hereby created a Rhode Island blockchain technology advisory council to consist 23 |
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| 289 | 289 | | of thirteen (13) members: three (3) of whom shall be appointed by the governor, with two (2) of 24 |
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| 290 | 290 | | those so appointed to be designated by the governor as co-chairs; six (6) of whom shall be directors 25 |
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| 291 | 291 | | from the Rhode Island commerce corporation, as established by chapter 64 of title 42; four (4) 26 |
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| 292 | 292 | | members shall be appointed by majority of the nine (9) members appointed by the governor and 27 |
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| 293 | 293 | | Rhode Island commerce corporation; two (2) of the four members shall be appointed from the 28 |
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| 294 | 294 | | private sector: with one holding expertise in complex financial services, and one with expertise in 29 |
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| 295 | 295 | | cybersecurity; two (2) of the four members shall be appointed from academia: with one holding 30 |
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| 296 | 296 | | expertise in financial systems, and one with expertise in computer engineering. The membership 31 |
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| 297 | 297 | | of said council shall receive no compensation for their services. The council shall support the state's 32 |
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| 298 | 298 | | research institutions, promote entrepreneurial development, enable all organizations to become 33 |
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| 299 | 299 | | more innovative, and perform any other advisory functions as the legislature may designate. 34 |
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| 300 | 300 | | |
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| 301 | 301 | | |
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| 302 | 302 | | LC001803 - Page 9 of 29 |
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| 303 | 303 | | 42-64.35-4. Financial sandbox -- Financial technology sandbox waiver -- Applicability 1 |
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| 304 | 304 | | of criminal and consumer protection statutes -- Referral to investigatory agencies -- Civil 2 |
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| 305 | 305 | | liability. 3 |
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| 306 | 306 | | (a) Notwithstanding any other provision of law, a person who makes an innovative 4 |
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| 307 | 307 | | financial product or service available to consumers in the financial technology sandbox may be 5 |
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| 308 | 308 | | granted a waiver of specified requirements imposed by statute or rule, or portions thereof, if these 6 |
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| 309 | 309 | | statutes or rules do not currently permit the product or service to be made available to consumers. 7 |
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| 310 | 310 | | A waiver under this subsection shall be no broader than necessary to accomplish the purposes and 8 |
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| 311 | 311 | | standards set forth in this chapter, as determined by the commissioner or secretary. 9 |
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| 312 | 312 | | (b) A person who makes an innovative financial product or service available to consumers 10 |
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| 313 | 313 | | in the financial technology sandbox is: 11 |
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| 314 | 314 | | (1) Not immune from civil damages for acts and omissions relating to this act; and 12 |
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| 315 | 315 | | (2) Subject to all criminal and consumer protection laws, including, but not limited to, 13 |
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| 316 | 316 | | violations of any provisions of title 11, title 19, and title 21. 14 |
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| 317 | 317 | | (c) The commissioner or secretary may refer suspected violations of law relating to this 15 |
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| 318 | 318 | | chapter to appropriate state or federal agencies for investigation, prosecution, civil penalties and 16 |
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| 319 | 319 | | other appropriate enforcement actions, including, but not limited to, suspension or revocation of 17 |
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| 320 | 320 | | any license or authorization granted under this chapter. 18 |
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| 321 | 321 | | (d) If service of process, relative to any civil proceeding, on a person making an innovative 19 |
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| 322 | 322 | | financial product or service available to consumers in the financial technology sandbox is not 20 |
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| 323 | 323 | | feasible, service on the secretary of state shall be deemed service on the person. 21 |
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| 324 | 324 | | (e)(1) A person shall apply to the commissioner or secretary to make an innovative 22 |
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| 325 | 325 | | financial product or service available to consumers in the financial technology sandbox, based on 23 |
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| 326 | 326 | | the office that administers the statute, regulation, rule or portion thereof, for which a waiver is 24 |
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| 327 | 327 | | sought. 25 |
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| 328 | 328 | | (2) If both the commissioner and the secretary jointly administer a statute or regulation or 26 |
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| 329 | 329 | | rule, or if the appropriate office is not known, an application may be filed with either the 27 |
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| 330 | 330 | | commissioner or the secretary. 28 |
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| 331 | 331 | | (3) If an application is filed with an office that does not administer the statute, regulation 29 |
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| 332 | 332 | | or rule for which a waiver is sought, the receiving office shall forward the application to the correct 30 |
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| 333 | 333 | | office. 31 |
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| 334 | 334 | | (4) The person shall specify in an application the statutory or rule requirements for which 32 |
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| 335 | 335 | | a waiver is sought and the reasons why these requirements prohibit the innovative financial product 33 |
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| 336 | 336 | | or service from being made available to consumers. The commissioner and secretary shall each, by 34 |
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| 337 | 337 | | |
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| 338 | 338 | | |
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| 339 | 339 | | LC001803 - Page 10 of 29 |
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| 340 | 340 | | rule, prescribe a method of application. 1 |
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| 341 | 341 | | (f) A business entity making an application under this section shall be a domestic 2 |
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| 342 | 342 | | corporation or other organized domestic entity with a physical presence, other than that of a 3 |
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| 343 | 343 | | registered office or agent, in Rhode Island. 4 |
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| 344 | 344 | | (g) Before an employee applies on behalf of an institution, firm or other entity intending to 5 |
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| 345 | 345 | | make an innovative financial product or service available through the financial technology sandbox, 6 |
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| 346 | 346 | | the employee shall obtain the consent of the institution, firm or entity before filing an application 7 |
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| 347 | 347 | | under this section. 8 |
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| 348 | 348 | | (h) The individual filing an application under this section and the individuals who are 9 |
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| 349 | 349 | | substantially involved in the development, operation or management of the innovative financial 10 |
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| 350 | 350 | | product or service shall, as a condition of an application, submit to a criminal history background 11 |
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| 351 | 351 | | check with the department of attorney general. 12 |
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| 352 | 352 | | (i) An application made under this section shall be accompanied by a fee of five hundred 13 |
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| 353 | 353 | | dollars ($500). The fee shall be deposited into the financial technology innovation account as 14 |
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| 354 | 354 | | required by title 19. 15 |
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| 355 | 355 | | (j) The commissioner or secretary, as applicable, shall authorize or deny a financial 16 |
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| 356 | 356 | | technology sandbox application in writing within ninety (90) days of receiving the application. The 17 |
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| 357 | 357 | | commissioner or secretary and the person who has made an application may jointly agree to extend 18 |
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| 358 | 358 | | the time beyond ninety (90) days. The commissioner or secretary may impose conditions on any 19 |
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| 359 | 359 | | authorization, consistent with this chapter. In deciding to authorize or deny an application under 20 |
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| 360 | 360 | | this section, the commissioner or secretary shall consider each of the following: 21 |
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| 361 | 361 | | (1) The nature of the innovative financial product or service proposed to be made available 22 |
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| 362 | 362 | | to consumers in the sandbox, including all relevant technical details which may include whether 23 |
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| 363 | 363 | | the product or service utilizes blockchain technology; 24 |
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| 364 | 364 | | (2) The potential risk to consumers and methods which will be used to protect consumers 25 |
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| 365 | 365 | | and resolve complaints during the sandbox period; 26 |
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| 366 | 366 | | (3) A business plan proposed by the person, including proof of capital requirements; 27 |
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| 367 | 367 | | (4) Whether the person has the necessary personnel, adequate financial and technical 28 |
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| 368 | 368 | | expertise and a sufficient plan to test, monitor and assess the innovative financial product or service; 29 |
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| 369 | 369 | | (5) Whether any person substantially involved in the development, operation or 30 |
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| 370 | 370 | | management of the innovative financial product or service has been convicted of, or is currently 31 |
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| 371 | 371 | | under investigation for, fraud, state or federal securities violations or any property based offense; 32 |
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| 372 | 372 | | (6) A copy of the disclosures required under this chapter that will be provided to 33 |
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| 373 | 373 | | consumers; and 34 |
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| 374 | 374 | | |
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| 375 | 375 | | |
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| 376 | 376 | | LC001803 - Page 11 of 29 |
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| 377 | 377 | | (7) Any other factor that the commissioner or secretary determines to be relevant. 1 |
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| 378 | 378 | | (k) If an application is authorized under subsection (j) of this section, the commissioner or 2 |
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| 379 | 379 | | secretary shall specify the statutory or rule requirements, or portions thereof, for which a waiver is 3 |
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| 380 | 380 | | granted and the length of the initial sandbox period. The commissioner or secretary shall also post 4 |
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| 381 | 381 | | notice of the approval of a sandbox application under this section, a summary of the innovative 5 |
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| 382 | 382 | | financial product or service and the contact information of the person making the product or service 6 |
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| 383 | 383 | | available through the sandbox on the Internet website of the commissioner or secretary. 7 |
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| 384 | 384 | | (l) A person authorized under section (j) of this section to enter into the financial 8 |
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| 385 | 385 | | technology sandbox shall post a consumer protection bond with the commissioner or secretary as 9 |
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| 386 | 386 | | security for potential losses suffered by consumers. The bond amount shall be determined by the 10 |
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| 387 | 387 | | commissioner or secretary in an amount not less than ten thousand dollars ($10,000) and shall be 11 |
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| 388 | 388 | | commensurate with the risk profile of the innovative financial product or service. The 12 |
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| 389 | 389 | | commissioner or secretary may require that a bond under this subsection be increased or decreased 13 |
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| 390 | 390 | | at any time based on risk profile. Unless the bond is enforced, the commissioner or secretary shall 14 |
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| 391 | 391 | | cancel or allow the bond to expire two (2) years after the date of the conclusion of the sandbox 15 |
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| 392 | 392 | | period. 16 |
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| 393 | 393 | | (m) A person authorized under subsection (j) of this section to enter into the financial 17 |
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| 394 | 394 | | technology sandbox shall be deemed to possess an appropriate license for the purposes of federal 18 |
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| 395 | 395 | | law requiring state licensure or authorization. 19 |
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| 396 | 396 | | (n) Authorization under subsection (j) of this section shall not be construed to create a 20 |
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| 397 | 397 | | property right. 21 |
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| 398 | 398 | | (o)(1) There is hereby created the financial technology innovation account. Funds within 22 |
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| 399 | 399 | | the account shall only be expended by legislative appropriation. All funds within the account shall 23 |
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| 400 | 400 | | be invested by the state treasurer and all investment earnings from the account shall be credited to 24 |
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| 401 | 401 | | the general fund. The account shall be divided into two (2) sub-accounts controlled by the 25 |
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| 402 | 402 | | commissioner and secretary, respectively, for the purposes of administrative management. For the 26 |
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| 403 | 403 | | purposes of accounting and investing only, the subaccounts shall be treated as separate accounts. 27 |
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| 404 | 404 | | (2) Subject to legislative appropriation, application fees remitted to the account shall be 28 |
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| 405 | 405 | | deposited into the subaccount controlled by the commissioner or secretary, as applicable, based on 29 |
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| 406 | 406 | | the receiving official. These funds, and any additional funds appropriated by the legislature, shall 30 |
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| 407 | 407 | | be used only for the purposes of administering this chapter, including processing of sandbox 31 |
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| 408 | 408 | | applications and monitoring, examination and enforcement activities relating to this chapter. 32 |
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| 409 | 409 | | (p)(1) Except as otherwise provided under chapter 56 of title 6 ("uniform supplemental 33 |
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| 410 | 410 | | commercial law for the uniform regulation of virtual-currency businesses act"), chapter 14 of title 34 |
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| 411 | 411 | | |
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| 412 | 412 | | |
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| 413 | 413 | | LC001803 - Page 12 of 29 |
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| 414 | 414 | | 19 ("licensed activities"), and chapter 14.3 of title 19 ("currency transmissions"), a person 1 |
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| 415 | 415 | | authorized under this chapter to enter into the financial technology sandbox may make an 2 |
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| 416 | 416 | | innovative financial product or service available to consumers during the sandbox period. 3 |
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| 417 | 417 | | (2) The commissioner or secretary may, on a case by case basis, specify the maximum 4 |
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| 418 | 418 | | number of consumers permitted to receive an innovative financial product or service, after 5 |
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| 419 | 419 | | consultation with the person authorized under this chapter to make the product or service available 6 |
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| 420 | 420 | | in the financial technology sandbox. 7 |
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| 421 | 421 | | (3) Before a consumer purchases or enters into an agreement to receive an innovative 8 |
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| 422 | 422 | | financial product or service through the financial technology sandbox, the person making the 9 |
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| 423 | 423 | | product or service available shall provide a written statement of the following to the consumer: 10 |
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| 424 | 424 | | (i) The name and contact information of the person making the product or service available 11 |
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| 425 | 425 | | to consumers; 12 |
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| 426 | 426 | | (ii) That the product or service has been authorized to be made available to consumers for 13 |
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| 427 | 427 | | a temporary period by the commissioner or secretary, as applicable, under the laws of Rhode Island; 14 |
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| 428 | 428 | | (iii) That the State of Rhode Island does not endorse the product or service and is not 15 |
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| 429 | 429 | | subject to liability for losses or damages caused by the product or service; 16 |
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| 430 | 430 | | (iv) That the product or service is undergoing testing, may not function as intended and 17 |
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| 431 | 431 | | may entail financial risk; 18 |
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| 432 | 432 | | (v) That the person making the product or service available to consumers is not immune 19 |
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| 433 | 433 | | from civil liability for any losses or damages caused by the product or service; 20 |
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| 434 | 434 | | (vi) The expected end date of the sandbox period; 21 |
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| 435 | 435 | | (vii) The name and contact information of the commissioner or secretary, as applicable, 22 |
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| 436 | 436 | | and notification that suspected legal violations, complaints or other comments related to the product 23 |
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| 437 | 437 | | or service may be submitted to the commissioner or secretary; and 24 |
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| 438 | 438 | | (viii) Any other statements or disclosures required by rule of the commissioner or secretary 25 |
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| 439 | 439 | | which are necessary to further the purposes of this chapter. 26 |
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| 440 | 440 | | (q) A person authorized to make an innovative financial product or service available to 27 |
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| 441 | 441 | | consumers in the financial technology sandbox shall maintain comprehensive records relating to 28 |
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| 442 | 442 | | the innovative financial product or service. The person shall keep these records for not less than 29 |
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| 443 | 443 | | five (5) years after the conclusion of the sandbox period. The commissioner and secretary may 30 |
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| 444 | 444 | | specify further records requirements under this subsection by rule. 31 |
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| 445 | 445 | | (r) The commissioner or secretary, as applicable, may examine the records maintained 32 |
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| 446 | 446 | | under or by any depository or financial technology innovation account opened pursuant to this 33 |
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| 447 | 447 | | chapter, with or without notice. All direct and indirect costs of an examination conducted under 34 |
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| 448 | 448 | | |
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| 449 | 449 | | |
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| 450 | 450 | | LC001803 - Page 13 of 29 |
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| 451 | 451 | | this subsection shall be paid by the person making the innovative financial product or service 1 |
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| 452 | 452 | | available in the financial technology sandbox. Records made available to the commissioner or 2 |
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| 453 | 453 | | secretary under this subsection shall be confidential and shall not be subject to disclosure under 3 |
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| 454 | 454 | | chapter 2 of title 38; provided, however, the records may be released to appropriate state and federal 4 |
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| 455 | 455 | | agencies for the purposes of investigation. 5 |
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| 456 | 456 | | (s) Unless granted an extension not less than thirty (30) days before the conclusion of the 6 |
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| 457 | 457 | | sandbox period, a person who makes an innovative financial product or service available in the 7 |
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| 458 | 458 | | financial technology sandbox shall provide written notification to consumers regarding the 8 |
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| 459 | 459 | | conclusion of the sandbox period and shall not make the product or service available to any new 9 |
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| 460 | 460 | | consumers after the conclusion of the sandbox period until legal authority outside of the sandbox 10 |
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| 461 | 461 | | exists to make the product or service available to consumers. The person shall wind down 11 |
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| 462 | 462 | | operations with existing consumers within sixty (60) days after the conclusion of the sandbox 12 |
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| 463 | 463 | | period, except that, after the sixtieth day, the person may: 13 |
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| 464 | 464 | | (1) Collect and receive money owed to the person and service loans made by the person, 14 |
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| 465 | 465 | | based on agreements with consumers made before the conclusion of the sandbox period; 15 |
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| 466 | 466 | | (2) Take necessary legal action; and 16 |
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| 467 | 467 | | (3) Take other actions authorized by the commissioner or secretary by rule which are not 17 |
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| 468 | 468 | | inconsistent with this subsection. 18 |
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| 469 | 469 | | (t) The commissioner and the secretary may, jointly or separately, enter into agreements 19 |
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| 470 | 470 | | with state, federal or foreign regulatory agencies to allow persons who make an innovative financial 20 |
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| 471 | 471 | | product or service available in Rhode Island through the financial technology sandbox to make 21 |
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| 472 | 472 | | their products or services available in other jurisdictions and to allow persons operating in similar 22 |
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| 473 | 473 | | financial technology sandboxes in other jurisdictions to make innovative financial products and 23 |
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| 474 | 474 | | services available in Rhode Island under the standards of this chapter. 24 |
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| 475 | 475 | | (u) The commissioner or secretary may, by order, revoke or suspend authorization granted 25 |
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| 476 | 476 | | to a person under this chapter if: 26 |
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| 477 | 477 | | (1) The person has violated or refused to comply with this chapter or any lawful rule, order 27 |
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| 478 | 478 | | or decision adopted by the commissioner or secretary; 28 |
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| 479 | 479 | | (2) A fact or condition exists that, if it had existed or become known at the time of the 29 |
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| 480 | 480 | | financial technology sandbox application, would have warranted denial of the application or the 30 |
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| 481 | 481 | | imposition of material conditions; 31 |
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| 482 | 482 | | (3) A material error, false statement, misrepresentation or material omission was made in 32 |
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| 483 | 483 | | the financial technology sandbox application; or 33 |
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| 484 | 484 | | (4) After consultation with the person, continued testing of the innovative financial product 34 |
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| 485 | 485 | | |
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| 486 | 486 | | |
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| 487 | 487 | | LC001803 - Page 14 of 29 |
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| 488 | 488 | | or service would: 1 |
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| 489 | 489 | | (i) Be likely to harm consumers; or 2 |
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| 490 | 490 | | (ii) No longer serve the purposes of this chapter because of the financial or operational 3 |
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| 491 | 491 | | failure of the product or service. 4 |
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| 492 | 492 | | (v) Written notification of a revocation or suspension order made under subsection (c) of 5 |
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| 493 | 493 | | this section shall be served using any means authorized by law, and if the notice relates to a 6 |
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| 494 | 494 | | suspension, include any conditions or remedial action which shall be completed before the 7 |
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| 495 | 495 | | suspension will be lifted by the commissioner or secretary. 8 |
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| 496 | 496 | | (w) A person granted authorization under subsection (j) of this section may apply for an 9 |
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| 497 | 497 | | extension of the initial sandbox period for not more than twelve (12) additional months. An 10 |
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| 498 | 498 | | application for an extension shall be made not later than sixty (60) days before the conclusion of 11 |
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| 499 | 499 | | the initial sandbox period specified by the commissioner or secretary. The commissioner or 12 |
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| 500 | 500 | | secretary shall approve or deny the application for extension in writing not later than thirty-five 13 |
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| 501 | 501 | | (35) days before the conclusion of the initial sandbox period. An application for extension by a 14 |
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| 502 | 502 | | person shall cite one of the following reasons as the basis for the application and provide all relevant 15 |
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| 503 | 503 | | supporting information that: 16 |
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| 504 | 504 | | (1) Statutory or rule amendments are necessary to conduct business in Rhode Island on a 17 |
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| 505 | 505 | | permanent basis; or 18 |
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| 506 | 506 | | (2) An application for a license or other authorization required to conduct business in 19 |
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| 507 | 507 | | Rhode Island on a permanent basis has been filed with the appropriate office and approval is 20 |
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| 508 | 508 | | currently pending. 21 |
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| 509 | 509 | | (x)(1) The commissioner and secretary shall each adopt rules and regulations to implement 22 |
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| 510 | 510 | | this chapter. The rules and regulations adopted by the commissioner and secretary under this 23 |
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| 511 | 511 | | chapter shall be as consistent as reasonably possible, but shall account for differences in the statutes 24 |
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| 512 | 512 | | and programs administered by the commissioner and secretary. 25 |
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| 513 | 513 | | (2) The commissioner or secretary may issue: 26 |
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| 514 | 514 | | (i) All necessary orders to enforce this chapter, including, but not limited to, ordering the 27 |
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| 515 | 515 | | payment of restitution and enforcement of these orders in any court of competent jurisdiction; and 28 |
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| 516 | 516 | | (ii) An order under subsection (x)(2)(i) of this section to enforce the bond or portion of the 29 |
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| 517 | 517 | | bond posted under this chapter, and use proceeds from the bond to offset losses suffered by 30 |
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| 518 | 518 | | consumers as a result of an innovative financial product or service. 31 |
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| 519 | 519 | | (3) All actions of the commissioner or secretary under this chapter shall be subject to the 32 |
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| 520 | 520 | | rules and regulations under title 19 and chapter 14 of title 42. 33 |
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| 521 | 521 | | (y)(1) Criminal history record information shall be disseminated by criminal justice 34 |
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| 522 | 522 | | |
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| 523 | 523 | | |
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| 524 | 524 | | LC001803 - Page 15 of 29 |
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| 525 | 525 | | agencies in this state, whether directly or through any intermediary, only to the banking 1 |
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| 526 | 526 | | commissioner or the secretary of state for purposes of obtaining background information on persons 2 |
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| 527 | 527 | | applying for financial technology sandbox authorization; provided, however, that all officers and 3 |
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| 528 | 528 | | directors subsequently hired or appointed, shall be required to submit to a criminal history 4 |
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| 529 | 529 | | background check. 5 |
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| 530 | 530 | | (z)(1) The following persons shall be required to submit to fingerprinting in order to obtain 6 |
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| 531 | 531 | | state and national criminal history record information: 7 |
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| 532 | 532 | | (i) Applicants for a financial technology sandbox authorization. 8 |
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| 533 | 533 | | (aa) The financial technology sandbox definitions shall apply to this chapter. 9 |
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| 534 | 534 | | (bb) This chapter modifies, limits, and supersedes the federal Electronic Signatures in 10 |
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| 535 | 535 | | Global and National Commerce Act, but does not modify, limit, or supersede section 101(c) of that 11 |
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| 536 | 536 | | act (15 U.S.C. § 7001 (c)) or authorize electronic delivery of any of the notices described in section 12 |
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| 537 | 537 | | 103(b) of that act (15 U.S.C. § 7003(b)). This chapter authorizes the filing of records and signatures, 13 |
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| 538 | 538 | | when specified by provisions of this chapter or by a rule adopted or order issued under this chapter, 14 |
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| 539 | 539 | | in a manner consistent with section 104(a) of that act (15 U.S.C. § 7004(a)). 15 |
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| 540 | 540 | | 42-64.35-5. Special depository institutions. 16 |
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| 541 | 541 | | (a) The legislature shall create special purpose depository institutions as a new financial 17 |
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| 542 | 542 | | institution, providing that the following rules shall apply to these institutions: 18 |
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| 543 | 543 | | (1) Special purpose depository institutions shall be corporations; 19 |
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| 544 | 544 | | (2) Require that depositors be business entities; 20 |
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| 545 | 545 | | (3) Specify compliance with applicable federal laws; 21 |
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| 546 | 546 | | (4) Establish procedures for the incorporation, chartering and operation of special purpose 22 |
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| 547 | 547 | | depository institutions; 23 |
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| 548 | 548 | | (5) Establish procedures for liquidation, conservatorship and voluntary dissolution; 24 |
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| 549 | 549 | | (6) Require a surety bond or pledged investments and specified private insurance; 25 |
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| 550 | 550 | | (7) Authorize special purpose depository institutions to obtain federal deposit insurance; 26 |
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| 551 | 551 | | (8) Make conforming amendments; 27 |
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| 552 | 552 | | (9) Authorize positions; 28 |
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| 553 | 553 | | (10) Provide an appropriation; and 29 |
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| 554 | 554 | | (11) Provide for effective dates. 30 |
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| 555 | 555 | | (b) Except as otherwise provided in this section, if any provision of law conflicts with this 31 |
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| 556 | 556 | | chapter, this chapter shall control, except as to those provisions set forth in §42-64.35-6. 32 |
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| 557 | 557 | | (1) Consistent with this chapter, special purpose depository institutions shall be organized 33 |
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| 558 | 558 | | as corporations under chapter 1.2 of title 7, (the "Rhode Island business corporation act"), to 34 |
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| 559 | 559 | | |
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| 560 | 560 | | |
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| 561 | 561 | | LC001803 - Page 16 of 29 |
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| 562 | 562 | | exercise the powers set forth in this section; 1 |
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| 563 | 563 | | (2) Each special purpose depository institution may: 2 |
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| 564 | 564 | | (i) Make contracts as a corporation under Rhode Island law; 3 |
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| 565 | 565 | | (ii) Sue and be sued; 4 |
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| 566 | 566 | | (iii) Receive notes and buy and sell gold and silver coins and bullion as permitted by federal 5 |
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| 567 | 567 | | law; 6 |
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| 568 | 568 | | (iv) Carry on a non-lending banking business for depositors, consistent with subsection (d) 7 |
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| 569 | 569 | | of this section; 8 |
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| 570 | 570 | | (v) Provide payment services upon the request of a depositor; 9 |
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| 571 | 571 | | (vi) Make an application to become a member bank of the Federal Reserve System; 10 |
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| 572 | 572 | | (vii) Engage in any other activity that is usual or incidental to the business of banking, 11 |
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| 573 | 573 | | subject to the prior written approval of the commissioner. The commissioner shall not approve a 12 |
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| 574 | 574 | | request to engage in an incidental activity if the commissioner finds that the requested activity will 13 |
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| 575 | 575 | | adversely affect the solvency or the safety and soundness of the special purpose depository 14 |
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| 576 | 576 | | institution or conflict with any provision of this chapter; and 15 |
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| 577 | 577 | | (viii) Exercise powers and rights otherwise authorized by law which are not inconsistent 16 |
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| 578 | 578 | | with this chapter. 17 |
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| 579 | 579 | | (d) Except as otherwise provided in this subsection, a special purpose depository institution 18 |
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| 580 | 580 | | shall not make loans, including the provision of temporary credit relating to overdrafts. A special 19 |
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| 581 | 581 | | purpose depository institution may purchase debt obligations consistent with provisions of title 19. 20 |
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| 582 | 582 | | (e) A special purpose depository institution shall maintain its principal operating 21 |
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| 583 | 583 | | headquarters and the primary office of its chief executive officer in Rhode Island. 22 |
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| 584 | 584 | | (f) As otherwise authorized by this section, the special purpose depository institution may 23 |
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| 585 | 585 | | conduct business with depositors outside this state. 24 |
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| 586 | 586 | | (g) Subject to the laws of the host state, a special purpose depository institution may open 25 |
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| 587 | 587 | | a branch in another state upon obtaining a certificate of good standing from the commissioner or 26 |
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| 588 | 588 | | secretary, as long as any new branch located outside of this state is in compliance with state and 27 |
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| 589 | 589 | | federal regulations. A special purpose depository institution, including any branch of the institution, 28 |
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| 590 | 590 | | may only accept deposits or provide other services under this chapter to depositors engaged in a 29 |
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| 591 | 591 | | bona fide business which is lawful under the laws of Rhode Island, the laws of the host state and 30 |
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| 592 | 592 | | federal law. 31 |
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| 593 | 593 | | (h)(1) No depositor shall maintain an account with a special purpose depository institution 32 |
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| 594 | 594 | | or otherwise receive any services from the institution unless the depositor meets the criteria of this 33 |
|---|
| 595 | 595 | | subsection. A depositor shall: 34 |
|---|
| 596 | 596 | | |
|---|
| 597 | 597 | | |
|---|
| 598 | 598 | | LC001803 - Page 17 of 29 |
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| 599 | 599 | | (i) Be a legal entity other than a natural person; 1 |
|---|
| 600 | 600 | | (ii) Be in good standing with the jurisdiction in the United States in which it is incorporated 2 |
|---|
| 601 | 601 | | or organized; 3 |
|---|
| 602 | 602 | | (iii) Maintain deposits with the institution totaling not less than five thousand dollars 4 |
|---|
| 603 | 603 | | ($5,000); 5 |
|---|
| 604 | 604 | | (iv) Be engaged in a lawful, bona fide business; and 6 |
|---|
| 605 | 605 | | (v) Make sufficient evidence available to the special purpose depository institution to 7 |
|---|
| 606 | 606 | | enable compliance with anti-money laundering practices, customer identification and beneficial 8 |
|---|
| 607 | 607 | | ownership requirements, as determined by the institution. 9 |
|---|
| 608 | 608 | | (2) A depositor which meets the criteria of this subsection (h) shall be issued a depository 10 |
|---|
| 609 | 609 | | account and otherwise receive services from the special purpose depository institution contingent 11 |
|---|
| 610 | 610 | | on the availability of sufficient insurance as required under § 19-4-10. 12 |
|---|
| 611 | 611 | | (3) Consistent with this subsection (h) and in addition to any requirements specified by 13 |
|---|
| 612 | 612 | | federal law, a special purpose depository institution shall require that a potential depositor provide 14 |
|---|
| 613 | 613 | | reasonable evidence that the person is engaged in a lawful, bona fide business or is likely to open 15 |
|---|
| 614 | 614 | | a lawful, bona fide business within the next six (6) months. As used in this subsection, "reasonable 16 |
|---|
| 615 | 615 | | evidence" includes business entity filings, articles of incorporation or organization, bylaws, 17 |
|---|
| 616 | 616 | | operating agreements, business plans, promotional materials, financing agreements or other 18 |
|---|
| 617 | 617 | | evidence. 19 |
|---|
| 618 | 618 | | (i)(1) At all times, a special purpose depository institution shall maintain unencumbered 20 |
|---|
| 619 | 619 | | liquid assets valued at not less than one hundred percent (100%) of its depository liabilities; 21 |
|---|
| 620 | 620 | | (2) As used in this section, "liquid assets" means: 22 |
|---|
| 621 | 621 | | (i) United States currency held on the premises of the special purpose depository 23 |
|---|
| 622 | 622 | | institution; 24 |
|---|
| 623 | 623 | | (ii) United States currency held for the special purpose depository institution by a federal 25 |
|---|
| 624 | 624 | | reserve bank or a federally insured financial institution; and 26 |
|---|
| 625 | 625 | | (iii) Investments which are highly liquid, and obligations of the United States treasury or 27 |
|---|
| 626 | 626 | | other federal agency obligations consistent with rules adopted by the commissioner. 28 |
|---|
| 627 | 627 | | (j)(1) A special purpose depository institution shall maintain a contingency account to 29 |
|---|
| 628 | 628 | | account for unexpected losses and expenses. A special purpose depository institution may require 30 |
|---|
| 629 | 629 | | the payment of contributions from depositors to fund a contingency account. Sufficient funding as 31 |
|---|
| 630 | 630 | | determined and required by the commissioner for the initial capitalization shall constitute 32 |
|---|
| 631 | 631 | | compliance with this subsection for the first three (3) years a special purpose depository institution 33 |
|---|
| 632 | 632 | | is in operation. After the conclusion of the first three (3) years of operation, a special purpose 34 |
|---|
| 633 | 633 | | |
|---|
| 634 | 634 | | |
|---|
| 635 | 635 | | LC001803 - Page 18 of 29 |
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| 636 | 636 | | depository institution shall maintain a contingency account totaling not less than two percent (2%) 1 |
|---|
| 637 | 637 | | of the depository liabilities of the special purpose depository institution; provided, however, that 2 |
|---|
| 638 | 638 | | the contingency account shall be adequate and reasonable in light of current and prospective 3 |
|---|
| 639 | 639 | | business conditions. as determined by the commissioner; 4 |
|---|
| 640 | 640 | | (2) A depositor shall obtain a refund of any contingency account contributions made under 5 |
|---|
| 641 | 641 | | this subsection after closing an account with the special purpose depository institution. 6 |
|---|
| 642 | 642 | | (k) A special purpose depository institution shall comply with all applicable federal laws, 7 |
|---|
| 643 | 643 | | including, but not limited to, those relating to anti-money laundering practices, customer 8 |
|---|
| 644 | 644 | | identification and beneficial ownership. 9 |
|---|
| 645 | 645 | | (l)(1) A special purpose depository institution shall display on any Internet website it 10 |
|---|
| 646 | 646 | | maintains, and at each window or place where it accepts deposits, a sign conspicuously stating that 11 |
|---|
| 647 | 647 | | deposits are not insured by the federal deposit insurance corporation, if applicable. 12 |
|---|
| 648 | 648 | | (2) Upon opening an account and if applicable, a special purpose depository institution 13 |
|---|
| 649 | 649 | | shall require each depositor to execute a statement acknowledging that all deposits at the special 14 |
|---|
| 650 | 650 | | purpose depository institution are not insured by the federal deposit insurance corporation. The 15 |
|---|
| 651 | 651 | | special purpose depository institution shall permanently retain this acknowledgment. 16 |
|---|
| 652 | 652 | | (3) A special purpose depository institution shall include in all advertising a disclosure that 17 |
|---|
| 653 | 653 | | deposits are not insured by the federal deposit insurance corporation, if applicable. 18 |
|---|
| 654 | 654 | | (m)(1) Except as otherwise provided, five (5) or more adult persons may form a special 19 |
|---|
| 655 | 655 | | purpose depository institution. The incorporators shall subscribe the articles of incorporation and 20 |
|---|
| 656 | 656 | | transmit them to the commissioner as part of an application for a charter under title 19. 21 |
|---|
| 657 | 657 | | (2) The articles of incorporation shall include the following information: 22 |
|---|
| 658 | 658 | | (i) The corporate name; 23 |
|---|
| 659 | 659 | | (ii) The purpose for which the corporation is organized; 24 |
|---|
| 660 | 660 | | (iii) The term of its existence, which may be perpetual; 25 |
|---|
| 661 | 661 | | (iv) The place where its office shall be located and its operations conducted; 26 |
|---|
| 662 | 662 | | (v) The amount of capital stock and the number of shares; 27 |
|---|
| 663 | 663 | | (vi) The name and residence of each shareholder subscribing to more than ten percent 28 |
|---|
| 664 | 664 | | (10%) of the stock and the number of shares owned by that shareholder; 29 |
|---|
| 665 | 665 | | (vii) The number of directors and the names of those who shall manage the affairs of the 30 |
|---|
| 666 | 666 | | corporation for the first year; and 31 |
|---|
| 667 | 667 | | (viii) A statement that the articles of incorporation are made to enable the incorporators to 32 |
|---|
| 668 | 668 | | avail themselves of the advantages of the laws of the state. 33 |
|---|
| 669 | 669 | | (n) Copies of all amended articles of incorporation shall be filed in the same manner as the 34 |
|---|
| 670 | 670 | | |
|---|
| 671 | 671 | | |
|---|
| 672 | 672 | | LC001803 - Page 19 of 29 |
|---|
| 673 | 673 | | original articles of incorporation. 1 |
|---|
| 674 | 674 | | (o) The incorporators shall raise sufficient capital prior to filing an application for a charter 2 |
|---|
| 675 | 675 | | with the commissioner, consistent with § 19-2-2. In the event an application for a charter is not 3 |
|---|
| 676 | 676 | | filed or is denied by the board, all capital shall be promptly returned without loss, to each person 4 |
|---|
| 677 | 677 | | or entity investing. 5 |
|---|
| 678 | 678 | | (p) Subject to applicable federal and state law, a bank holding company may apply to hold 6 |
|---|
| 679 | 679 | | a special purpose depository institution to raise required initial capital and surplus and additional 7 |
|---|
| 680 | 680 | | capital. 8 |
|---|
| 681 | 681 | | (q) The capital stock of each special purpose depository institution chartered under this 9 |
|---|
| 682 | 682 | | chapter shall be subscribed for as fully paid stock. No special purpose depository institution shall 10 |
|---|
| 683 | 683 | | be chartered with capital stock less than five million dollars ($5,000,000). 11 |
|---|
| 684 | 684 | | (r) No special purpose depository institution shall commence business until the full amount 12 |
|---|
| 685 | 685 | | of its authorized capital is subscribed and all capital stock is fully paid in. No special purpose 13 |
|---|
| 686 | 686 | | depository institution may be chartered without a paid up surplus fund of not less than three (3) 14 |
|---|
| 687 | 687 | | years of estimated operating expenses in an amount to be determined by the commissioner; 15 |
|---|
| 688 | 688 | | (s) A special purpose depository institution may acquire additional capital prior to the 16 |
|---|
| 689 | 689 | | granting of a charter and may report this capital in its charter application. 17 |
|---|
| 690 | 690 | | (t)(1) No person shall act as a special purpose depository institution without first obtaining 18 |
|---|
| 691 | 691 | | a charter and certificate of authority to operate from the commissioner under this chapter 19 |
|---|
| 692 | 692 | | (2) The incorporators, under title 19, shall apply to the commissioner for a charter. The 20 |
|---|
| 693 | 693 | | application shall contain the special purpose depository institution's articles of incorporation, a 21 |
|---|
| 694 | 694 | | detailed business plan, a comprehensive estimate of operating expenses for the first three (3) years 22 |
|---|
| 695 | 695 | | of operation, a complete proposal for compliance with the provisions of this chapter and evidence 23 |
|---|
| 696 | 696 | | of the capital as required under subsection (s) of this section. The commissioner may prescribe the 24 |
|---|
| 697 | 697 | | form of application by rule. 25 |
|---|
| 698 | 698 | | (3) Each application for a charter shall be accompanied by an application fee established 26 |
|---|
| 699 | 699 | | by the commissioner pursuant to rule, which shall be no greater than the costs incurred by the 27 |
|---|
| 700 | 700 | | commissioner in reviewing the application. The application fee shall be credited to the special 28 |
|---|
| 701 | 701 | | purpose depository institutions subaccount created by subsection (o) of this section 29 |
|---|
| 702 | 702 | | (u) Funds in the subaccount shall be used by the commissioner to supervise special purpose 30 |
|---|
| 703 | 703 | | depository institutions and to otherwise carry out the duties specified by this chapter. Funds in the 31 |
|---|
| 704 | 704 | | subaccount are continuously appropriated to the subaccount and shall not lapse at the end of any 32 |
|---|
| 705 | 705 | | fiscal period. For purposes of accounting and investing only the special purpose depository 33 |
|---|
| 706 | 706 | | institutions subaccount shall be treated as a separate account from the financial institutions 34 |
|---|
| 707 | 707 | | |
|---|
| 708 | 708 | | |
|---|
| 709 | 709 | | LC001803 - Page 20 of 29 |
|---|
| 710 | 710 | | administration account. 1 |
|---|
| 711 | 711 | | (v)(1) Upon receiving an application for a special purpose depository charter, the 2 |
|---|
| 712 | 712 | | commissioner shall notify the applicants in writing within thirty (30) calendar days of any 3 |
|---|
| 713 | 713 | | deficiency in the required information or that the application has been accepted for filing. When 4 |
|---|
| 714 | 714 | | the commissioner is satisfied that all required information has been furnished, the commissioner 5 |
|---|
| 715 | 715 | | shall notify the chairman of the board who shall establish a time and place for a public hearing 6 |
|---|
| 716 | 716 | | which shall be conducted not less than sixty (60) days, nor more than one hundred twenty (120) 7 |
|---|
| 717 | 717 | | days, after notice from the commissioner to the applicants that the application is in order. 8 |
|---|
| 718 | 718 | | (2) Within thirty (30) days after receipt of notice of the time and place of the public hearing, 9 |
|---|
| 719 | 719 | | the applicants shall cause notice of filing of the application and the hearing to be published at the 10 |
|---|
| 720 | 720 | | applicant's expense in a newspaper of general circulation within the county where the proposed 11 |
|---|
| 721 | 721 | | special purpose depository institution is to be located. Publication shall be made at least once a 12 |
|---|
| 722 | 722 | | week for three (3) consecutive weeks before the hearing and shall state: the proposed location of 13 |
|---|
| 723 | 723 | | the special purpose depository institution; the names of the applicants for a charter; the nature of 14 |
|---|
| 724 | 724 | | the activities to be conducted by the proposed institution and other information required by rule. 15 |
|---|
| 725 | 725 | | The applicants shall furnish proof of publication to the commissioner not more than ten (10) days 16 |
|---|
| 726 | 726 | | prior to the hearing. The commissioner shall send notice of the hearing to state and national banks, 17 |
|---|
| 727 | 727 | | federal savings and loan associations and other financial institutions in the state and federal 18 |
|---|
| 728 | 728 | | agencies who have requested notice from the commissioner. 19 |
|---|
| 729 | 729 | | (w) The hearing for a charter application shall be conducted as a contested case under 20 |
|---|
| 730 | 730 | | chapter 35 of title 42 ("administrative procedures") and shall comply with the requirements of that 21 |
|---|
| 731 | 731 | | chapter. 22 |
|---|
| 732 | 732 | | (x)(1) Upon receiving the articles of incorporation, the application for a charter and other 23 |
|---|
| 733 | 733 | | information required by the commissioner, the commissioner shall make a careful investigation and 24 |
|---|
| 734 | 734 | | examination of the following: 25 |
|---|
| 735 | 735 | | (i) The character, reputation, financial standing and ability of the incorporators; 26 |
|---|
| 736 | 736 | | (ii) The character, financial responsibility, banking or other financial experience and 27 |
|---|
| 737 | 737 | | business qualifications of those proposed as officers and directors; and 28 |
|---|
| 738 | 738 | | (iii) The application for a charter, including the adequacy and plausibility of the business 29 |
|---|
| 739 | 739 | | plan of the special purpose depository institution and whether the institution has offered a complete 30 |
|---|
| 740 | 740 | | proposal for compliance with the provisions of this chapter. 31 |
|---|
| 741 | 741 | | (2) The commissioner shall submit the results of the commissioner's investigation and 32 |
|---|
| 742 | 742 | | examination at the public hearing on the charter application and shall be subject to cross 33 |
|---|
| 743 | 743 | | examination by any interested party. No relevant information shall be excluded by the board as 34 |
|---|
| 744 | 744 | | |
|---|
| 745 | 745 | | |
|---|
| 746 | 746 | | LC001803 - Page 21 of 29 |
|---|
| 747 | 747 | | hearsay. 1 |
|---|
| 748 | 748 | | (y)(1) Within ninety (90) days after receipt of the transcript of the public hearing, the board 2 |
|---|
| 749 | 749 | | shall render a decision on the charter application based solely on the following criteria: 3 |
|---|
| 750 | 750 | | (i) Whether the character, reputation, financial standing and ability of the incorporators is 4 |
|---|
| 751 | 751 | | sufficient to afford reasonable promise of a successful operation; 5 |
|---|
| 752 | 752 | | (ii) Whether the character, financial responsibility, banking or other financial experience 6 |
|---|
| 753 | 753 | | and business qualifications of those proposed as officers and directors is sufficient to afford 7 |
|---|
| 754 | 754 | | reasonable promise of a successful operation; 8 |
|---|
| 755 | 755 | | (iii) The adequacy and plausibility of the business plan of the special purpose depository 9 |
|---|
| 756 | 756 | | institution; 10 |
|---|
| 757 | 757 | | (iv) Compliance with the capital and surplus requirements as set forth in this section; 11 |
|---|
| 758 | 758 | | (v) The special purpose depository institution is being formed for no other purpose than 12 |
|---|
| 759 | 759 | | legitimate objectives authorized by law; 13 |
|---|
| 760 | 760 | | (vi) That the name of the proposed special purpose depository institution does not resemble 14 |
|---|
| 761 | 761 | | so closely the name of any other financial institution transacting business in the state so as to cause 15 |
|---|
| 762 | 762 | | confusion; and 16 |
|---|
| 763 | 763 | | (vii) Whether the applicants have complied with all applicable provisions of state law. 17 |
|---|
| 764 | 764 | | (2) The board shall approve an application upon making favorable findings on the criteria 18 |
|---|
| 765 | 765 | | set forth in this section. If necessary, the board may either conditionally approve an application by 19 |
|---|
| 766 | 766 | | specifying conditions relating to the criteria or may disapprove the application. The board shall 20 |
|---|
| 767 | 767 | | state findings of fact and conclusions of law as part of its decision. If the board approves the 21 |
|---|
| 768 | 768 | | application, the commissioner shall endorse upon the articles of incorporation the approval of the 22 |
|---|
| 769 | 769 | | board and shall transmit one copy to the secretary of state, retain one copy and return a copy to the 23 |
|---|
| 770 | 770 | | applicants within twenty (20) days after the date of the decision of the board approving the 24 |
|---|
| 771 | 771 | | application. If the board conditionally approves an application and upon compliance with necessary 25 |
|---|
| 772 | 772 | | conditions required by the board, the commissioner shall proceed as provided in the preceding 26 |
|---|
| 773 | 773 | | sentence. If the board disapproves the application, the commissioner shall mail notice of the 27 |
|---|
| 774 | 774 | | disapproval to the applicants within twenty (20) days of the board's disapproval. 28 |
|---|
| 775 | 775 | | (z)(1) If an application is approved and a charter granted by the board, the special purpose 29 |
|---|
| 776 | 776 | | depository institution shall not commence business before receiving a certificate of authority to 30 |
|---|
| 777 | 777 | | operate from the commissioner. The application for a certificate of authority shall be made to the 31 |
|---|
| 778 | 778 | | commissioner and shall certify the address at which the special purpose depository institution will 32 |
|---|
| 779 | 779 | | operate and that all adopted bylaws of the institution have been attached as an exhibit to the 33 |
|---|
| 780 | 780 | | application. The application shall state the identities and contact information of officers and 34 |
|---|
| 781 | 781 | | |
|---|
| 782 | 782 | | |
|---|
| 783 | 783 | | LC001803 - Page 22 of 29 |
|---|
| 784 | 784 | | directors. The commissioner shall approve or deny an application for a certificate of authority to 1 |
|---|
| 785 | 785 | | operate within thirty (30) days after a complete application has been filed. The authority of the 2 |
|---|
| 786 | 786 | | commissioner to disapprove any application shall be restricted solely to noncompliance with this 3 |
|---|
| 787 | 787 | | section; provided that, if the commissioner approves the application, the commissioner shall issue 4 |
|---|
| 788 | 788 | | a certificate of authority to the applicants within twenty (20) days. If the commissioner denies the 5 |
|---|
| 789 | 789 | | application, the commissioner shall mail a notice of denial to the applicants within twenty (20) 6 |
|---|
| 790 | 790 | | days, stating the reasons for denying the application, and grant to the applicants a period of ninety 7 |
|---|
| 791 | 791 | | (90) days to resubmit the application with the necessary corrections. If the applicants fail to comply 8 |
|---|
| 792 | 792 | | with requirements of the notice of denial within ninety (90) days from the receipt of the notice, the 9 |
|---|
| 793 | 793 | | charter of the special purpose depository institution shall be revoked by the commissioner. The 10 |
|---|
| 794 | 794 | | failure of the commissioner to act upon an application for a certificate of authority within thirty 11 |
|---|
| 795 | 795 | | (30) days shall be deemed an approval 12 |
|---|
| 796 | 796 | | (2) If an approved special purpose depository institution fails to commence business in 13 |
|---|
| 797 | 797 | | good faith within six (6) months after the issuance of a certificate of authority to operate by the 14 |
|---|
| 798 | 798 | | commissioner, the charter and certificate of authority shall expire. The board, for good cause and 15 |
|---|
| 799 | 799 | | upon an application filed prior to the expiration of the six (6) month period, may extend the time 16 |
|---|
| 800 | 800 | | within which the special purpose depository institution may open for business. 17 |
|---|
| 801 | 801 | | (aa) Any decision of the board or commissioner in approving, conditionally approving or 18 |
|---|
| 802 | 802 | | disapproving a charter for a special purpose depository institution or the issuance or denial of a 19 |
|---|
| 803 | 803 | | certificate of authority to operate is appealable to the district court of the county in which the 20 |
|---|
| 804 | 804 | | institution is to be located, in accordance with the provisions of chapter 35 of title 42 21 |
|---|
| 805 | 805 | | ("administrative procedures"). In addition to the grounds for appeal contained in chapter 35 of title 22 |
|---|
| 806 | 806 | | 42 ("administrative procedures"), an appellant may appeal if the board or the commissioner fails to 23 |
|---|
| 807 | 807 | | make any of the required findings or otherwise take an action required by law. 24 |
|---|
| 808 | 808 | | (bb)(1) Except as otherwise provided by this section, a special purpose depository 25 |
|---|
| 809 | 809 | | institution shall, before transacting any business, pledge or furnish a surety bond to the 26 |
|---|
| 810 | 810 | | commissioner to cover costs likely to be incurred by the commissioner in a liquidation or 27 |
|---|
| 811 | 811 | | conservatorship of the special purpose depository institution. The amount of the surety bond or 28 |
|---|
| 812 | 812 | | pledge of assets under this section shall be determined by the commissioner in an amount sufficient 29 |
|---|
| 813 | 813 | | to defray the costs of a liquidation or conservatorship. 30 |
|---|
| 814 | 814 | | (2) In lieu of a bond, a special purpose depository institution may irrevocably pledge 31 |
|---|
| 815 | 815 | | specified capital equivalent to a bond to satisfy this subsection. Any capital pledged to the 32 |
|---|
| 816 | 816 | | commissioner under this subsection shall be held in a state or nationally chartered bank or savings 33 |
|---|
| 817 | 817 | | and loan association having a principal or branch office in this state. All costs associated with 34 |
|---|
| 818 | 818 | | |
|---|
| 819 | 819 | | |
|---|
| 820 | 820 | | LC001803 - Page 23 of 29 |
|---|
| 821 | 821 | | pledging and holding such capital are the responsibility of the special purpose depository 1 |
|---|
| 822 | 822 | | institution. 2 |
|---|
| 823 | 823 | | (3) Capital pledged to the commissioner shall be of the same nature and quality as those 3 |
|---|
| 824 | 824 | | required for state financial institutions under title 19. 4 |
|---|
| 825 | 825 | | (4) Surety bonds shall run to the State of Rhode Island, and shall be approved under the 5 |
|---|
| 826 | 826 | | terms and conditions established by the commissioner pursuant to the commissioner's authority 6 |
|---|
| 827 | 827 | | under title 19. 7 |
|---|
| 828 | 828 | | (5) The commissioner may adopt rules to establish additional investment guidelines or 8 |
|---|
| 829 | 829 | | investment options for purposes of the pledge or surety bond required by this subsection. 9 |
|---|
| 830 | 830 | | (6) In the event of a liquidation or conservatorship of a special purpose depository 10 |
|---|
| 831 | 831 | | institution pursuant to chapters 10, 11 or 12 of title 19, the commissioner may, without regard to 11 |
|---|
| 832 | 832 | | priorities, preferences or adverse claims, reduce the surety bond or capital pledged under this 12 |
|---|
| 833 | 833 | | section to cash as soon as practicable and utilize the cash to defray the costs associated with the 13 |
|---|
| 834 | 834 | | liquidation or conservatorship. 14 |
|---|
| 835 | 835 | | (7) Income from capital pledged under this subsection shall be paid to the special purpose 15 |
|---|
| 836 | 836 | | depository institution, unless a liquidation or conservatorship takes place. 16 |
|---|
| 837 | 837 | | (8) Upon evidence that the current surety bond or pledged capital is insufficient, the 17 |
|---|
| 838 | 838 | | commissioner may require a special purpose depository institution to increase its surety bond or 18 |
|---|
| 839 | 839 | | pledged capital by providing not less than thirty (30) days' written notice to the institution. The 19 |
|---|
| 840 | 840 | | special purpose depository institution may request a hearing before the board not more than thirty 20 |
|---|
| 841 | 841 | | (30) days after receiving written notice from the commissioner under this subsection. Any hearing 21 |
|---|
| 842 | 842 | | before the board shall be held pursuant to chapter 35 of title 42 ("administrative procedures"). 22 |
|---|
| 843 | 843 | | (cc)(1) The commissioner may call for reports verified under oath from a special purpose 23 |
|---|
| 844 | 844 | | depository institution at any time as necessary to inform the commissioner of the condition of the 24 |
|---|
| 845 | 845 | | institution. 25 |
|---|
| 846 | 846 | | (2) All reports required of special purpose depository institutions by the commissioner and 26 |
|---|
| 847 | 847 | | all materials relating to examinations of these institutions shall be subject to the provisions of 27 |
|---|
| 848 | 848 | | chapter 4 of title 19. 28 |
|---|
| 849 | 849 | | (3) Every special purpose depository institution is subject to the examination of the 29 |
|---|
| 850 | 850 | | commissioner. The commissioner or a duly appointed examiner shall visit and examine special 30 |
|---|
| 851 | 851 | | purpose depository institutions on a schedule established by rule. The commissioner or a duly 31 |
|---|
| 852 | 852 | | appointed examiner shall make a complete and careful examination of the condition and resources 32 |
|---|
| 853 | 853 | | of a special purpose depository institution, the mode of managing institution affairs and conducting 33 |
|---|
| 854 | 854 | | business, the actions of officers and directors in the investment and disposition of funds, the safety 34 |
|---|
| 855 | 855 | | |
|---|
| 856 | 856 | | |
|---|
| 857 | 857 | | LC001803 - Page 24 of 29 |
|---|
| 858 | 858 | | and prudence of institution management, compliance with the requirements of this chapter and such 1 |
|---|
| 859 | 859 | | other matters as the commissioner may require. After an examination, the special purpose 2 |
|---|
| 860 | 860 | | depository institution shall remit to the commissioner an amount equal to the total cost of the 3 |
|---|
| 861 | 861 | | examination. This amount shall be remitted to the state treasurer and deposited into the special 4 |
|---|
| 862 | 862 | | purpose depository institutions subaccount established under this chapter. 5 |
|---|
| 863 | 863 | | (4) On or before January 31 and July 31 of each year, a special purpose depository 6 |
|---|
| 864 | 864 | | institution shall compute and pay supervisory fees to the commissioner based on the total assets of 7 |
|---|
| 865 | 865 | | the special purpose depository institution as of the preceding December 31 and June 30, 8 |
|---|
| 866 | 866 | | respectively. Supervisory fees under this section shall provide for the operating costs of the office 9 |
|---|
| 867 | 867 | | of the commissioner and the administration of the laws governing special purpose depository 10 |
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| 868 | 868 | | institutions. Such fees shall be established by rule of the commissioner and shall be adjusted by the 11 |
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| 869 | 869 | | commissioner to ensure consistency with the cost of supervision. Supervisory fees shall be 12 |
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| 870 | 870 | | deposited by the commissioner with the state treasurer and credited to the special purpose 13 |
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| 871 | 871 | | depository institutions subaccount established under this chapter 14 |
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| 872 | 872 | | (5) A special purpose depository institution shall maintain appropriate insurance or a bond 15 |
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| 873 | 873 | | covering the operational risks of the institution, which shall include coverage for directors' and 16 |
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| 874 | 874 | | officers' liability, errors and omissions liability and information technology infrastructure and 17 |
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| 875 | 875 | | activities liability. 18 |
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| 876 | 876 | | (dd)(1) The commissioner may suspend or revoke the charter of a special purpose 19 |
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| 877 | 877 | | depository institution if, after notice and opportunity for a hearing, the commissioner determines 20 |
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| 878 | 878 | | that: 21 |
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| 879 | 879 | | (i) The special purpose depository institution has failed or refused to comply with an order 22 |
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| 880 | 880 | | issued by the commissioner or other regulatory body; 23 |
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| 881 | 881 | | (ii) The application for a charter contained a false statement or material misrepresentation 24 |
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| 882 | 882 | | or material omission; or 25 |
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| 883 | 883 | | (iii) An officer, director or agent of the special purpose depository institution, in connection 26 |
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| 884 | 884 | | with an application for a charter, examination, report or other document filed with the 27 |
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| 885 | 885 | | commissioner, knowingly made a false statement, material misrepresentation or material omission 28 |
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| 886 | 886 | | to the board, the commissioner or the duly authorized agent of the board or commissioner. 29 |
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| 887 | 887 | | (ee) If the charter of a special purpose depository institution is surrendered, suspended or 30 |
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| 888 | 888 | | revoked, the institution shall continue to be subject to the provisions of this chapter during any 31 |
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| 889 | 889 | | liquidation or conservatorship. 32 |
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| 890 | 890 | | (ff)(1) If the commissioner finds that a special purpose depository institution has failed or 33 |
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| 891 | 891 | | is operating in an unsafe or unsound condition, as defined in this section, that has not been remedied 34 |
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| 892 | 892 | | |
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| 893 | 893 | | |
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| 894 | 894 | | LC001803 - Page 25 of 29 |
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| 895 | 895 | | within the time prescribed under chapter 4 of title 19 or an order of the commissioner, the 1 |
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| 896 | 896 | | commissioner shall conduct a liquidation or appoint a conservator pursuant to chapters 11 or 12 of 2 |
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| 897 | 897 | | title 19; 3 |
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| 898 | 898 | | (2) As used in this section: 4 |
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| 899 | 899 | | (i) "Failed" or "failure" means, consistent with rules adopted by the commissioner, a 5 |
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| 900 | 900 | | circumstance when a special purpose depository institution has not: 6 |
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| 901 | 901 | | (A) Complied with the requirements of this chapter; 7 |
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| 902 | 902 | | (B) Maintained a contingency account, as required by this section; or 8 |
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| 903 | 903 | | (C) Paid, in the manner commonly accepted by business practices, its legal obligations to 9 |
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| 904 | 904 | | depositors on demand or to discharge any certificates of deposit, promissory notes or other 10 |
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| 905 | 905 | | indebtedness when due. 11 |
|---|
| 906 | 906 | | (ii) "Unsafe or unsound condition" means, consistent with rules adopted by the 12 |
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| 907 | 907 | | commissioner, a circumstance relating to a special purpose depository institution which is likely 13 |
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| 908 | 908 | | to: 14 |
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| 909 | 909 | | (A) Cause the failure of the institution as defined in this subsection; 15 |
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| 910 | 910 | | (B) Cause a substantial dissipation of assets or earnings: 16 |
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| 911 | 911 | | (C) Substantially disrupt the services provided by the institution to depositors; or 17 |
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| 912 | 912 | | (D) Otherwise substantially prejudice the depository interests of depositors. 18 |
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| 913 | 913 | | (gg)(1) A special purpose depository institution may voluntarily dissolve in accordance 19 |
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| 914 | 914 | | with the provisions of this section. Voluntary dissolution shall be accomplished by either 20 |
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| 915 | 915 | | liquidating the special purpose depository institution or reorganizing the institution into an 21 |
|---|
| 916 | 916 | | appropriate business entity that does not engage in any activity authorized only for a special purpose 22 |
|---|
| 917 | 917 | | depository institution. Upon complete liquidation or completion of the reorganization, the 23 |
|---|
| 918 | 918 | | commissioner shall revoke the charter of the special purpose depository institution and afterward, 24 |
|---|
| 919 | 919 | | the company shall not use the word "special purpose depository institution" or "bank" in its business 25 |
|---|
| 920 | 920 | | name or in connection with its ongoing business. 26 |
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| 921 | 921 | | (2) The special purpose depository institution may dissolve its charter either by liquidation 27 |
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| 922 | 922 | | or reorganization. The board of directors shall file an application for dissolution with the 28 |
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| 923 | 923 | | commissioner, accompanied by a filing fee established by rule of the commissioner. The 29 |
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| 924 | 924 | | application shall include a comprehensive plan for dissolution setting forth the proposed disposition 30 |
|---|
| 925 | 925 | | of all assets and liabilities, in reasonable detail to effect a liquidation or reorganization, and any 31 |
|---|
| 926 | 926 | | other plans required by the commissioner. The plan of dissolution shall provide for the discharge 32 |
|---|
| 927 | 927 | | or assumption of all of the known and unknown claims and liabilities of the special purpose 33 |
|---|
| 928 | 928 | | depository institution. Additionally, the application for dissolution shall include other evidence, 34 |
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| 929 | 929 | | |
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| 930 | 930 | | |
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| 931 | 931 | | LC001803 - Page 26 of 29 |
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| 932 | 932 | | certifications, affidavits, documents or information as the commissioner may require, including a 1 |
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| 933 | 933 | | demonstration of how assets and liabilities will be disposed, the timetable for effecting disposition 2 |
|---|
| 934 | 934 | | of the assets and liabilities and a proposal of the special purpose depository institution for 3 |
|---|
| 935 | 935 | | addressing any claims that are asserted after dissolution has been completed. The commissioner 4 |
|---|
| 936 | 936 | | shall examine the application for compliance with this section, the business entity laws applicable 5 |
|---|
| 937 | 937 | | to the required type of dissolution and applicable rules. The commissioner may conduct a special 6 |
|---|
| 938 | 938 | | examination of the special purpose depository institution consistent with chapter 4 of title 19 and 7 |
|---|
| 939 | 939 | | the guidelines set forth in this chapter for purposes of evaluating the application. 8 |
|---|
| 940 | 940 | | (3) If the commissioner finds that the application is incomplete, the commissioner shall 9 |
|---|
| 941 | 941 | | return it for completion not later than sixty (60) days after it is filed. If the application is found to 10 |
|---|
| 942 | 942 | | be complete by the commissioner, the commissioner shall approve or disapprove the application 11 |
|---|
| 943 | 943 | | not later than thirty (30) days after it is filed. If the commissioner approves the application the 12 |
|---|
| 944 | 944 | | special purpose depository institution may proceed with the dissolution pursuant to the plan 13 |
|---|
| 945 | 945 | | outlined in the application subject to any further conditions the commissioner may prescribe. If the 14 |
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| 946 | 946 | | special purpose depository institution subsequently determines that the plan of dissolution needs to 15 |
|---|
| 947 | 947 | | be amended to complete the dissolution, it shall file an amended plan with the commissioner and 16 |
|---|
| 948 | 948 | | obtain approval to proceed under the amended plan. If the commissioner does not approve the 17 |
|---|
| 949 | 949 | | application or amended plan, the special purpose depository institution may appeal the decision to 18 |
|---|
| 950 | 950 | | the board pursuant to chapter 35 of title 42 ("administrative procedures"). 19 |
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| 951 | 951 | | (4) Upon completion of all actions required under the plan of dissolution and satisfaction 20 |
|---|
| 952 | 952 | | of all conditions prescribed by the commissioner, the special purpose depository institution shall 21 |
|---|
| 953 | 953 | | submit a written report of its actions to the commissioner. The report shall contain a certification 22 |
|---|
| 954 | 954 | | made under oath that the report is true and correct. Following receipt of the report, the 23 |
|---|
| 955 | 955 | | commissioner, no later than sixty (60) days after the filing of the report, shall examine the special 24 |
|---|
| 956 | 956 | | purpose depository institution to determine whether the commissioner is satisfied that all required 25 |
|---|
| 957 | 957 | | actions have been taken in accordance with the plan of dissolution and any conditions prescribed 26 |
|---|
| 958 | 958 | | by the commissioner. If all requirements and conditions have been met, the commissioner shall, 27 |
|---|
| 959 | 959 | | within thirty (30) days of the examination, notify the special purpose depository institution in 28 |
|---|
| 960 | 960 | | writing that the dissolution has been completed and issue a certificate of dissolution. 29 |
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| 961 | 961 | | (5) Upon receiving a certificate of dissolution, the special purpose depository institution 30 |
|---|
| 962 | 962 | | shall surrender its charter to the commissioner. The special purpose depository institution shall then 31 |
|---|
| 963 | 963 | | file articles of dissolution and other documents required by § 7-1.2-1309. In the case of 32 |
|---|
| 964 | 964 | | reorganization, the special purpose depository institution shall file the documents required by the 33 |
|---|
| 965 | 965 | | secretary of state to finalize the reorganization. 34 |
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| 966 | 966 | | |
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| 967 | 967 | | |
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| 968 | 968 | | LC001803 - Page 27 of 29 |
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| 969 | 969 | | (6) If the commissioner determines that all required actions under the plan for dissolution, 1 |
|---|
| 970 | 970 | | or as otherwise required by the commissioner, have not been completed the commissioner shall 2 |
|---|
| 971 | 971 | | notify the special purpose depository institution not later than thirty (30) days after this 3 |
|---|
| 972 | 972 | | determination, in writing what additional actions shall be taken in order for the institution to be 4 |
|---|
| 973 | 973 | | eligible for a certificate of dissolution. The commissioner shall establish a reasonable deadline for 5 |
|---|
| 974 | 974 | | the submission of evidence that additional actions have been taken and the commissioner may 6 |
|---|
| 975 | 975 | | extend any deadline upon good cause. If the special purpose depository institution fails to file a 7 |
|---|
| 976 | 976 | | supplemental report showing that the additional actions have been taken before the deadline, or 8 |
|---|
| 977 | 977 | | submits a report that is found not to be satisfactory by the commissioner, the commissioner shall 9 |
|---|
| 978 | 978 | | notify the special purpose depository institution in writing that its voluntary dissolution is not 10 |
|---|
| 979 | 979 | | approved, and the institution may appeal the decision to the board pursuant to chapter 35 of title 42 11 |
|---|
| 980 | 980 | | ("administrative procedures"). 12 |
|---|
| 981 | 981 | | (hh) If a special purpose depository institution fails to submit any report required by this 13 |
|---|
| 982 | 982 | | chapter or by rule within the prescribed period, the commissioner may impose and collect a fee of 14 |
|---|
| 983 | 983 | | up to one thousand dollars ($1,000) for each day the report is overdue, as established by rule. 15 |
|---|
| 984 | 984 | | (ii) Each officer, director, employee or agent of a special purpose depository institution, 16 |
|---|
| 985 | 985 | | following written notice from the commissioner is subject to removal upon order of the 17 |
|---|
| 986 | 986 | | commissioner if they knowingly or willfully fail to perform any duty required by this chapter or 18 |
|---|
| 987 | 987 | | other applicable law or conform to any rule or order of the commissioner. 19 |
|---|
| 988 | 988 | | 42-64.35-6. Severability in a pari material construction with other chapters. 20 |
|---|
| 989 | 989 | | (a) Except as provided in subsection (b) of this section, if any provision of this chapter or 21 |
|---|
| 990 | 990 | | the application of this chapter to any person or circumstances is held invalid or unconstitutional, 22 |
|---|
| 991 | 991 | | the invalidity or unconstitutionality shall not affect other provisions or applications of this chapter 23 |
|---|
| 992 | 992 | | that can be given effect without the invalid or unconstitutional provision or application, and to this 24 |
|---|
| 993 | 993 | | end the provisions of this chapter are declared to be severable. 25 |
|---|
| 994 | 994 | | (b) The provisions of this chapter 64.35 of title 42 ("this chapter") shall be interpreted to 26 |
|---|
| 995 | 995 | | be in pari material with, consistent with, and harmonized with the provisions of chapter 56 of title 27 |
|---|
| 996 | 996 | | 6 ("uniform supplemental commercial law for the uniform regulation of virtual-currency businesses 28 |
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| 997 | 997 | | act"), chapter 14 of title 19 ("licensed activities"), and chapter 14.3 of title 19 ("currency 29 |
|---|
| 998 | 998 | | transmissions"). To the extent any provision of this chapter 64.35 of title 42 is determined to be 30 |
|---|
| 999 | 999 | | inconsistent with and cannot be harmonized with the provisions of any of the aforesaid chapters, 31 |
|---|
| 1000 | 1000 | | the provisions of chapter 56 of title 6, chapter 14 of title 19, and chapter 14.3 of title 19 shall control 32 |
|---|
| 1001 | 1001 | | and prevail over the provisions of this chapter. 33 |
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| 1002 | 1002 | | |
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| 1003 | 1003 | | |
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| 1004 | 1004 | | LC001803 - Page 28 of 29 |
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| 1005 | 1005 | | SECTION 3. This act shall take effect upon passage. 1 |
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| 1006 | 1006 | | ======== |
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| 1007 | 1007 | | LC001803 |
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| 1008 | 1008 | | ======== |
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| 1009 | 1009 | | |
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| 1010 | 1010 | | |
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| 1011 | 1011 | | LC001803 - Page 29 of 29 |
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| 1012 | 1012 | | EXPLANATION |
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| 1013 | 1013 | | BY THE LEGISLATIVE COUNCIL |
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| 1014 | 1014 | | OF |
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| 1015 | 1015 | | A N A C T |
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| 1016 | 1016 | | RELATING TO STATE AFFAIRS AND GOVERNMENT -- RHODE ISLAND ECONOMIC |
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| 1017 | 1017 | | GROWTH BLOCKCHAIN AC T |
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| 1018 | 1018 | | *** |
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| 1019 | 1019 | | This act would establish an economic growth blockchain and would regulate virtual and 1 |
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| 1020 | 1020 | | digital assets, and establish depository banks for these purposes. 2 |
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| 1021 | 1021 | | This act would take effect upon passage. 3 |
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| 1022 | 1022 | | ======== |
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| 1023 | 1023 | | LC001803 |
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| 1024 | 1024 | | ======== |
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