(Senate Bill 47)
An Act to revise certain provisions regarding money transmission.
Be it enacted by the Legislature of the State of South Dakota:
Section 1. That § 51A-17-1 be AMENDED:
51A-17-1. Terms used in this chapter mean:
(1) "Applicant," any person filing an application for a license under this chapter;
(2) "Authorized delegate," any entity designated by the licensee under the provisions of this chapter to sell or issue payment instruments or engage in the business of transmitting money on behalf of a licensee;
ownership of, or the power to vote, twenty-five percent or more of
the outstanding voting securities of a licensee or controlling
person. For purposes of determining the percentage of a licensee
controlled by any person, there shall be aggregated with the person's
interest the interest of any other person controlled by such person
or by any spouse, parent, or child of such person; (4) "Controlling
person," any person in control of a licensee; (5)(4) "Director,"
the director of the Division of Banking; (6)(5) "Division,"
the Division of Banking; (7)(6) "Electronic
instrument," any card or other tangible object for the
transmission or payment of money that contains a microprocessor chip,
magnetic stripe, or other means for the storage of information, that
is prefunded, and for which the value is decremented upon each use.
The term does not include a card or other tangible object that is
redeemable by the issuer in goods or services; (8)(7) "Executive
officer," the licensee's president, chair of the executive
committee, senior officer responsible for the licensee' (9)(8) "Key
shareholder," any person, or group of persons acting in concert,
who is the owner of twenty-five percent or more of any voting class
of an applicant's stock; (10)(9) "Licensee,"
any person licensed pursuant to this chapter; (11)(10) "Material
litigation," any litigation that, according to generally
accepted accounting principles, is deemed significant to an
applicant's or licensee's financial health and would be required to
be referenced in that entity's annual audited financial statements,
report to shareholders, or similar documents; (12)(11) "Monetary
value," any medium of exchange, whether or not redeemable in
money; (13)(12) "Money
transmission," engagement in the business of the sale or
issuance of payment instruments or stored value or of receiving money
or monetary value for transmission to a location within or outside
the United States by any means ,
wire, facsimile, or electronic transfer; (13A)(13) "Nationwide
mortgage licensing system and registry," a licensing system
developed and maintained by the Conference of State Bank Supervisors
and the American Association of Residential Mortgage Regulators for
the licensing and registration of licensed mortgage loan originators
and other regulated entities;
(14) "Outstanding payment instrument," any payment instrument issued by the licensee which has been sold in the United States directly by the licensee or any payment instrument issued by the licensee which has been sold by an authorized delegate of the licensee in the United States, which has been reported to the licensee as having been sold, and which has not yet been paid by or for the licensee;
(15) "Payment instrument," any electronic or written check, draft, money order, travelers check, or other electronic or written instrument or order for the transmission or payment of money, sold or issued to one or more persons, whether or not such instrument is negotiable. The term, payment instrument, does not include any credit card voucher, any letter of credit, or any instrument which is redeemable by the issuer in goods or services;
(16) "Remit," either the direct payment of the funds to the licensee or its representatives authorized to receive those funds, or the deposit of the funds in a bank, credit union, savings and loan association, or other similar financial institution in an account specified by the licensee;
(17) "Security device," any surety bond, irrevocable letter of credit, or similar security device;
(18) "Stored value,"
monetary value that is evidenced by an electronic record. Stored
value does not include any item that is redeemable by the issuer or
its affiliates in goods or services of the issuer or its affiliates
(19) "Tangible net worth," aggregate assets of a licensee excluding all intangible assets, less liabilities, as determined in accordance with United States generally accepted accounting principles.
Section 2. That chapter 51A-17 be amended with a NEW SECTION:
For purposes of this chapter, the term, control, means:
(1) The power to vote, directly or indirectly, at least twenty-five percent of the outstanding voting shares or voting interests of a licensee or controlling person;
(2) The power to elect or appoint a majority of key individuals or executive officers, managers, directors, trustees, or other persons exercising managerial authority of a licensee or controlling person; or
(3) The power to exercise, directly or indirectly, a controlling influence over the management or policies of a licensee or controlling person.
A person is presumed to exercise controlling influence when the person holds the power to vote, directly or indirectly, at least ten percent of the outstanding voting shares or voting interests of a licensee or controlling person. A person presumed to exercise controlling influence as defined by this section may rebut the presumption of control if the person is a passive investor.
To determine the percentage of a licensee or controlling person controlled by any other person, the person's interest must be aggregated with the interest of the person's spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and any other person who shares the person's home.
Section 3. That chapter 51A-17 be amended with a NEW SECTION:
For purposes of this chapter, the term, passive investor, means a person that:
(1) Does not have the power to elect a majority of key individuals or executive officers, managers, directors, trustees, or other persons exercising managerial authority of a licensee or controlling person;
(2) Is not employed by and does not have any managerial duties of the licensee or controlling person;
(3) Does not have the power to exercise, directly or indirectly, a controlling influence over the management or policies of a licensee or controlling person; and
(a) Attests to subdivisions (1), (2), and (3), in a form and in a medium prescribed by the director; or
(b) Commits to the passivity characteristics of subdivisions (1), (2), and (3) in a written document.
Section 4. That § 51A-17-6 be AMENDED:
under this chapter shall maintain
at all times
have a net worth of not less than one hundred thousand dollars,
calculated in accordance with generally accepted accounting
a tangible net worth of the greater of one hundred thousand dollars
or three percent of total assets for the first one hundred million
dollars, two percent of additional assets from one hundred million
dollars to one billion dollars, and one-half of one percent of
additional assets over one billion dollars.
Tangible net worth must be demonstrated in an initial application by
the applicant's most recent audited financial statement pursuant to
§§ 51A-17-13(8) and 51A-17-14(5).
The director has the authority to exempt, in whole or in part, any applicant or licensee from the requirements of this section for good cause.
Section 5. That § 51A-17-10 be AMENDED:
under this chapter shall at
all times possess permissible investments having an aggregate market
value, calculated in accordance with United
accepted accounting principles, of not less than the aggregate face
amount of all outstanding payment instruments and stored value issued
or sold by the licensee in the United States.
licensee transmitting virtual currencies shall hold like-kind virtual
currencies of the same volume as that held by the licensee but that
is obligated to consumers, in lieu of the permissible investments
otherwise required in this section. A licensee conducting money
transmission activities shall maintain applicable amounts and types
of permissible investments at all times. The requirements of this
section may be
waived by the director if the dollar volume of a licensee's
outstanding payment instruments and stored value does not exceed the
security devices posted by the licensee pursuant to § 51A-17-8.
Permissible investments, even if
commingled with other assets of the licensee,
be deemed by operation of law to
must be held in
trust for the benefit of the purchasers and holders of the licensee's
outstanding payment instruments in the event of the bankruptcy of the
Section 6. That § 51A-17-22 be AMENDED:
business days of the occurrence of any one of the events listed in
this section, a licensee shall
a written report with the director
file an amendment or an advance change notice through the nationwide
mortgage licensing system and registry describing
the event and its expected impact on the licensee's activities in the
(1) Any material changes in information provided in a licensee's application or renewal report;
(2) The filing for bankruptcy or reorganization by the licensee;
(3) The institution of revocation or suspension proceedings against the licensee by any state or governmental authority with regard to the licensees' money transmission activities;
(4) Any felony indictment of the licensee or any of its key officers or directors related to money transmission activities; and
(5) Any felony conviction of the licensee or any of its key officers or directors related to money transmission activities.
Section 7. That § 51A-17-23 be AMENDED:
A licensee shall
the director written notice electronically
file an advance change notice through the nationwide mortgage
licensing system and registry of
a proposed change of control within fifteen days after learning of
the proposed change of control and request approval of the
acquisition. After review of a request for approval, the director may
require the licensee to provide additional information concerning the
proposed persons in control of the licensee. The additional
is limited to
the same types required of the licensee or persons in control of the
licensee as part of its original license or renewal application. The
director shall approve a request for change of control if, after
investigation, the director determines that the person or group of
persons requesting approval has the competence, experience,
character, and general fitness to operate the licensee or person in
control of the licensee in a lawful and proper manner and that the
interests of the public will not be jeopardized by the change of
Section 8. That § 51A-17-27 be AMENDED:
director may conduct an annual on-site examination of a licensee upon
reasonable notice to the licensee. The director may examine a
licensee without prior notice if the director has a reasonable basis
to believe that the licensee is in noncompliance with this chapter.
If the director concludes that an on-site examination of a licensee
is necessary, the licensee shall pay all reasonably incurred costs of
such examination. The on-site examination may be conducted in
conjunction with examinations to be performed by representatives of
any governmental agency. The director, in lieu of an on-site
examination, may accept the examination report of any governmental
agency, and reports so accepted are considered for all purposes as an
official report of the director. The director may waive an on-site
examination and only require a self-examination
or a report prepared by an independent accounting firm. If a licensee
conducts a self-examination, the licenses shall provide any
information requested under oath and on forms provided by the
division. The reasonable expenses incurred by the division, any
governmental agency, or an independent licensed or certified public
accountant in making such examination or report shall be borne by the
The director may conduct an examination or investigation of a
licensee or authorized delegate or otherwise take independent action
authorized by this chapter, rule adopted under this chapter and
promulgated pursuant to chapter 1-26, or order issued under this
chapter that is reasonably necessary to administer and enforce this
chapter, rules adopted under this chapter and promulgated pursuant to
chapter 1-26, and other applicable law. The director may:
(1) Conduct an examination either on-site or off-site;
(2) Conduct an examination in conjunction with an examination conducted by representatives of another state agency, an agency of another state, or the federal government;
(3) Accept the examination report of another state agency, agency of another state, or the federal government, or a report prepared by an independent accounting firm. A report accepted under this subdivision is considered an official report of the director; and
(4) Summon and examine, under oath, a key individual, employee of a licensee, or authorized delegate and require the individual, employee, or delegate to produce records regarding any matter related to the condition and business of the licensee or authorized delegate.
A licensee or authorized delegate shall provide, and the director must have full and complete access to, all records the director may reasonably require to conduct a complete examination. The records must be provided at the location and in the format specified by the director. The director may utilize multistate record production standards and examination procedures when the standards will reasonably achieve the requirements of this section.
Unless otherwise directed by the director, a licensee shall pay all costs reasonably incurred in connection with an examination of the licensee or the licensee's authorized delegates.
Section 9. That § 51A-17-28 be AMENDED:
The director may
request financial data from a licensee in addition to that required
under § 51A-17-19,
or conduct an
examination of any authorized delegate or location of a licensee
within this state without prior notice to the authorized delegate or
licensee only if the director has a reasonable basis to believe that
the licensee or authorized delegate is in noncompliance with this
chapter. If the director examines an authorized delegate's
operations, the authorized delegate shall pay all reasonably incurred
costs of such examination. If the director examines a licensee's
location within the state, the licensee shall pay all reasonably
incurred costs of such examination.
Section 10. That chapter 51A-17 be amended with a NEW SECTION:
The director may participate in multistate supervisory processes established between states and coordinated through the Conference of State Bank Supervisors, Money Transmitter Regulators Association, and affiliates and successors thereof for all licensees in this state and other states. As a participant in multistate supervision, the director may:
(1) Cooperate, coordinate, and share information with other states and federal regulators pursuant to § 51A-17-30;
(2) Enter into written cooperation, coordination, or information-sharing contracts or agreements with organizations comprised of state or federal governmental agencies; and
(3) Cooperate, coordinate, and share information with organizations comprised of state or federal governmental agencies, provided that the organizations agree in writing to maintain the confidentiality and security of the shared information pursuant to § 51A-17-30.
The director may not waive, and nothing in this section constitutes a waiver of, the director's authority to conduct an examination, investigation, or otherwise take independent action authorized by this chapter, rule adopted under this chapter, or order issued under this chapter to enforce compliance with applicable state or federal law. A joint examination or investigation, or acceptance of an examination or investigation report, does not constitute a waiver of an examination assessment provided for in this chapter.
Signed February 8, 2022
Catchlines are not law. (§ 2-16-13.1) Underscores indicate new language.
indicate deleted language.