2022 Arizona Revised Statutes
Title 6 - Banks and Financial Institutions
§ 6-1230 - Types of permissible investments

6-1230. Types of permissible investments

A. The following investments are permissible under section 6-1229:

1. Cash, including demand deposits, savings deposits and monies in such accounts held for the benefit of the licensee's customers in a federally insured depository financial institution, and cash equivalents, including automated clearinghouse items in transit to the licensee and automated clearinghouse items or international wires in transit to a payee, cash in transit by armored car, cash in smart safes, cash in licensee-owned locations, debit card or credit card-funded transmission receivables owed by any bank or money market mutual funds rated " AAA" by Standard and Poor's or the equivalent from any eligible rating service.

2. Certificates of deposit or senior debt obligations of an insured depository institution as defined in the federal deposit insurance act (12 United States Code section 1813) or as defined in the federal credit union act (12 United States Code section 1752).

3. An obligation of the United States or a commission, agency or instrumentality of the United States.

4. An obligation that is guaranteed fully as to principal and interest by the United States.

5. An obligation of a state or a governmental subdivision, agency or instrumentality of a state.

6. One hundred percent of the surety bond provided for under section 6-1228 that exceeds the average daily money transmission liability in this state.

7. The full drawable amount of an irrevocable standby letter of credit for which the stated beneficiary is the director that stipulates that the beneficiary only needs to draw a sight draft under the letter of credit and present it to obtain money up to the letter of credit amount within seven days after presentation of the items required by subsection C of this section. The letter of credit must:

(a) Be issued by a federally insured depository financial institution, a foreign bank that is authorized under federal law to maintain a federal agency or federal branch office in a state or a foreign bank that is authorized under state law to maintain a branch in a state that:

(i) Bears an eligible rating or whose parent company bears an eligible rating.

(ii) Is regulated, supervised and examined by United States federal or state authorities that have regulatory authority over banks, credit unions and trust companies.

(b) Be irrevocable and unconditional and indicate that it is not subject to any condition or qualifications outside of the letter of credit.

(c) Not contain reference to any other agreements, documents or entities or otherwise provide for any security interest in the licensee.

(d) Contain an issue date and expiration date and expressly provide for automatic extension, without a written amendment, for an additional period of one year after the present or future expiration date, unless the issuer of the letter of credit notifies the director in writing by certified or registered mail or courier mail or other receipted means, at least sixty days before any expiration date, that the irrevocable letter of credit will not be extended.

B. For a notice of expiration or nonextension of a letter of credit issued under subsection A, paragraph 7, subdivision (d) of this section, at least fifteen days before the expiration of the letter of credit, the licensee shall demonstrate to the satisfaction of the director that the licensee maintains permissible investments pursuant to section 6-1229, subsection A. If the licensee does not comply with this subsection, the director may draw on the letter of credit in an amount up to the amount necessary to meet the licensee's requirements to maintain permissible investments pursuant to section 6-1229, subsection A. The draw shall be offset against the licensee's outstanding money transmission obligations. The drawn money shall be held in trust by the director or the director's designated agent, to the extent authorized by law, as agent for the benefit of the purchasers and holders of the licensee's outstanding money transmission obligations.

C. The letter of credit issued under subsection A, paragraph 7, subdivision (d) of this section shall provide that the issuer of the letter of credit will honor a presentation made by the beneficiary to the issuer of the following documents on or before the expiration date of the letter of credit:

1. The original letter of credit, including any amendments.

2. A written statement from the beneficiary stating that any of the following events have occurred:

(a) The filing of a petition by or against the licensee under the United States bankruptcy code (11 United States Code sections 101 through 112) for bankruptcy or reorganization.

(b) The filing of a petition by or against the licensee for receivership or the commencement of any other judicial or administrative proceeding for its dissolution or reorganization.

(c) The seizure of assets of a licensee by the director pursuant to an emergency order issued in accordance with applicable law, on the basis of an action, violation or condition that has caused or is likely to cause the insolvency of the licensee.

(d) The beneficiary has received notice of expiration or nonextension of a letter of credit and the licensee fails to demonstrate to the satisfaction of the beneficiary that the licensee will maintain permissible investments pursuant to section 6-1229, subsection A on the expiration or nonextension of the letter of credit.

D. The director may designate an agent to serve on the director's behalf as beneficiary to a letter of credit if the agent and letter of credit meet requirements established by the director. The director's agent may serve as agent for multiple licensing authorities for a single irrevocable letter of credit if the proceeds of the drawable amount for the purposes of subsection A, paragraph 7 of this section are assigned to the director.

E. The director may participate in multistate processes designed to facilitate issuing and administering letters of credit, including services provided by the nmls and a state regulatory registry.

F. Unless otherwise allowed by the director, the following investments are permissible under section 6-1229:

1. Receivables that are payable to a licensee from its authorized delegates in the ordinary course of business that are less than seven days old, up to fifty percent of the aggregate value of the licensee's total permissible investments. Of the receivables permissible under this paragraph, receivables that are payable to a licensee from a single authorized delegate in the ordinary course of business may not exceed ten percent of the aggregate value of the licensee's total permissible investments.

2. The following investments, up to twenty percent per category and combined up to fifty percent of the aggregate value of the licensee's total permissible investments:

(a) A short-term investment bearing an eligible rating. For the purposes of this subdivision, " short-term" means up to six months.

(b) Commercial paper bearing an eligible rating.

(c) A bill, note, bond or debenture bearing an eligible rating.

(d) United States tri-party repurchase agreements collateralized at one hundred percent or more with United States Government or agency securities, municipal bonds or other securities bearing an eligible rating.

(e) Money market mutual funds rated less than " aaa" and equal to or higher than " a-" by Standard and Poor's, or the equivalent from any other eligible rating service.

(f) A mutual fund or other investment fund composed solely and exclusively of one or more permissible investments listed in subsection A, paragraph 1, 2, 3, 4 or 5 of this section.

3. Cash, including demand deposits and savings deposits and money in such accounts held for the benefit of the licensee's customers, at foreign depository institutions, up to ten percent of the aggregate value of the licensee's total permissible investments if the licensee has received a satisfactory rating in its most recent examination and the foreign depository institution:

(a) Has an eligible rating.

(b) Is registered under the foreign account tax compliance act.

(c) Is not located in any country subject to sanctions from the office of foreign assets control.

(d) Is not located in a high-risk or noncooperative jurisdiction as determined by the director.

G. For the purposes of this section:

1. Long-term credit ratings are eligible if the rating is equal to or higher than an " A-" by Standard and Poor's or the equivalent from any other eligible rating service. If ratings differ among eligible rating services, the highest rating applies when determining whether a security bears an eligible rating.

2. Short-term credit ratings are eligible if the rating is equal to or higher than a-2 or sp-2 by Standard and Poor's or the equivalent from any other eligible rating service. If ratings differ among eligible rating services, the highest rating applies when determining whether a security bears an eligible rating.