2019 Connecticut General Statutes
Title 36a - The Banking Law of Connecticut
Chapter 668 - Nondepository Financial Institutions
Section 36a-602 - (Formerly Sec. 36-538). Surety bond. Investments in lieu of surety bond.

(a) As a condition for the issuance and retention of the license, applicants for a license and licensees shall file with the commissioner a surety bond, the form of which shall be approved by the Attorney General, issued by a bonding company or insurance company authorized to do business in this state. The bond shall be conditioned upon the licensee and the licensee's authorized delegates faithfully performing all obligations with respect to the licensee's money transmission business in this state and conducting such business in this state consistent with the provisions of sections 36a-595 to 36a-612, inclusive. The bond shall be in favor of the commissioner and run concurrently with the period of the license. For applicants and licensees who will not be engaged in the business of transmitting monetary value in the form of virtual currency, such bond shall be in the principal sum of not less than: (1) Three hundred thousand dollars for any applicant and any licensee with an average weekly amount of money transmissions in this state of less than three hundred thousand dollars for the most recent twelve-month period ending June thirtieth, (2) five hundred thousand dollars for any licensee with an average weekly amount of money transmissions in this state equal to or greater than three hundred thousand dollars but less than or equal to five hundred thousand dollars for the most recent twelve-month period ending June thirtieth, or (3) one million dollars for any licensee with an average weekly amount of money transmissions in this state exceeding five hundred thousand dollars for the most recent twelve-month period ending June thirtieth. For purposes of this section, “money transmissions” includes (A) money or monetary value received or transmitted in this state, and (B) stored value and payment instruments issued or sold in this state. For applicants and licensees who will or may engage in the business of transmitting monetary value in the form of virtual currency, such bond shall be in a principal sum as determined by the commissioner and shall be calculated reasonably to address the current and prospective volatility of the market in such currency or currencies.

(b) The proceeds of the bond, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of any claimants against the licensee to serve the faithful performance of the obligations of the licensee and the licensee's authorized delegates with respect to the licensee's money transmission business in this state in the event of the bankruptcy of the licensee, and shall be immune from attachment by creditors or judgment creditors. Any person who may be damaged as a result of the failure by the licensee or the licensee's authorized delegates to perform obligations with respect to the licensee's money transmission business in this state may proceed against the licensee's bond to recover damages. The commissioner may proceed on such bond against the principal or surety thereon, or both, to collect any civil penalty imposed upon the licensee pursuant to subsection (a) of section 36a-50, any restitution imposed pursuant to subsection (c) of section 36a-50, and any unpaid costs of examination of the licensee as determined pursuant to subdivision (6) of subsection (c) of section 36a-65. The bond shall cover claims for damages arising from the licensee's money transmission business in this state made not later than two years from the date of the act, error or omission that allegedly caused or resulted in such damages. When an action is commenced on a licensee's bond, the commissioner may require the filing of a new bond and, immediately upon recovery on any action on the bond, the licensee shall file a new bond. If the commissioner finds that the financial condition of a licensee so requires, as evidenced by the reduction of tangible net worth, financial losses or potential losses as a result of a violation of sections 36a-595 to 36a-612, inclusive, the commissioner may require one or more additional bonds meeting the standards set forth in this section. The licensee shall file any such additional bonds not later than ten days after receipt of the commissioner's written notice of such requirement.

(c) The surety company may cancel the bond at any time by a written notice to the licensee and the commissioner, stating the date cancellation shall take effect. If the bond is issued electronically on the system, such written notice may be provided by the surety company to the licensee and the commissioner through the system at least thirty days prior to the date of cancellation. Any notice of cancellation not provided through the system shall be sent by certified mail to the licensee and the commissioner at least thirty days prior to the date of cancellation. A surety bond shall not be cancelled unless the surety company notifies the commissioner in writing not less than thirty days prior to the effective date of cancellation. After receipt of such notification from the surety company, the commissioner shall give written notice to the licensee of the date such bond cancellation shall take effect. The commissioner shall automatically suspend the license on such date, unless the licensee, prior to such date, submits (1) a letter of reinstatement of the bond from the surety company, (2) a new bond, (3) evidence that all of the principal sum of such surety bond has been invested as provided in subsection (d) of this section, (4) a new bond that replaces the surety bond in part and evidence that the remaining part of the principal sum of such surety bond has been invested as provided in subsection (d) of this section, or (5) evidence that the licensee has ceased business and has surrendered the license. After a license has been automatically suspended, the commissioner shall (A) give the licensee notice of the automatic suspension pending proceedings for revocation or refusal to renew such license and an opportunity for a hearing on such actions in accordance with section 36a-51, and (B) require the licensee to take or refrain from taking such action as the commissioner deems necessary to effectuate the purposes of this section.

(d) In lieu of all or part of the principal sum of such surety bonds, applicants for a license and licensees may invest such sum as provided in this subsection. The book or market value, whichever is lower, of such investments shall be equal to the amount of the bond required by subsection (a) of this section less the amount of the bond filed with the commissioner by the applicant or licensee. Such applicants and licensees shall keep such investments with such banks, Connecticut credit unions or federal credit unions as such applicants or licensees may designate and the commissioner may approve, and subject to such conditions as the commissioner deems necessary for the protection of consumers and in the public interest. As used in this subsection, “investments” means: (1) Dollar deposits; and (2) interest-bearing bills, notes, bonds, debentures or other obligations issued or guaranteed by (A) the United States or any of its agencies or instrumentalities, or (B) any state, or any agency, instrumentality, political subdivision, school district or legally constituted authority of any state if such investment is of prime quality. The investments shall secure the same obligation as would a surety bond filed under this section. The investments shall be held at such banks or credit unions to cover claims during the period the license remains in full force and effect and the succeeding two years after such license has been surrendered, revoked or suspended or has expired in accordance with the provisions of sections 36a-595 to 36a-612, inclusive. The licensee shall be permitted to collect interest on such investments and at any time to exchange, examine and compare such investments. The investments made pursuant to this section, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of any claimants against the licensee to serve the faithful performance of the obligations of the licensee and the licensee's authorized delegates with respect to the licensee's money transmission business in this state in the event of the bankruptcy of the licensee, and shall be immune from attachment by creditors or judgment creditors.

(P.A. 81-264, S. 9; P.A. 91-306, S. 1; P.A. 94-122, S. 280, 340; P.A. 98-192, S. 6; P.A. 01-56, S. 9; P.A. 02-111, S. 39; P.A. 03-61, S. 4; P.A. 04-14, S. 7; P.A. 06-35, S. 9; P.A. 07-91, S. 9; P.A. 09-208, S. 17; P.A. 13-253, S. 8; P.A. 15-53, S. 8; P.A. 18-173, S. 55.)

History: P.A. 91-306 amended Subsec. (a) by deleting existing provisions re amount of bond and added Subdivs. (1), (2) and (3) re principal sum of bond; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-538 transferred to Sec. 36a-602 in 1995; P.A. 98-192 amended Subsec. (a) by adding provision re two-year time period for bond to remain in place and adding specific requirements for licensees that engage in the business of receiving money for transmitting the same; P.A. 01-56 amended Subsec. (a) by changing “Connecticut instruments” to “Connecticut payment instruments”, by rewording language re money transmission and by replacing provisions re trust fund with provisions re proceeds of bond deemed to be held in trust for benefit of claimants, and amended Subsec. (c) by replacing provisions re investment maintained in trust with provisions re investments deemed to be held in trust for benefit of claimants; P.A. 02-111 amended Subsec. (a) by adding provision re authority of commissioner to proceed on bond to collect civil penalty imposed pursuant to Sec. 36a-50(a); P.A. 03-61 changed “corporate surety bond” to “surety bond” throughout, amended Subsec. (a) by revising provisions re approval of form, coverage of bond and beginning of two-year period and by adding provision re surrendered, revoked, suspended or expired license and amended Subsec. (c) by inserting “Connecticut”; P.A. 04-14 amended Subsec. (a)(1), (2) and (3) to replace references to “equivalent thereof” with references to “monetary value received or transmitted, whichever amount is greater”, and to insert references to “monetary value” in provisions re proceeds of the bond to be held in trust for benefit of claimants against licensee, added new Subsec. (b) re cancellation of surety bond and automatic suspension of license and redesignated existing Subsecs. (b) and (c) as new Subsecs. (c) and (d), respectively, revising internal reference accordingly, effective April 16, 2004; P.A. 06-35 amended Subsec. (c) to require applicants and licensees to keep investments with such banks, Connecticut credit unions or federal credit unions as applicants or licensees designate, to require that investments be held subject to such conditions as commissioner deems necessary for protection of consumers and in the public interest and to define “investments” to include “dollar deposits” and “interest-bearing” bills, notes, bonds, debentures or other obligations, deleting former Subdiv. designators (1) and (2), reference to “in accordance with such regulations as the commissioner may adopt”, and Subsec. designator (d), to add provision requiring investments to be held at banks or credit unions to cover claims during period license remains in effect and the succeeding two years after license has been surrendered, revoked or suspended or has expired, and to make conforming changes, effective May 8, 2006; P.A. 07-91 amended Subsec. (a) to insert references to “Connecticut” payment instruments and transmission of “monetary value”, and amended Subsec. (c) to insert references to transmission or payment of “monetary value” and to make a technical change; P.A. 09-208 amended Subsec. (b) by requiring commissioner to give written notice to licensee of the effective date of a bond cancellation, by providing that license shall be automatically suspended unless licensee submits letter of reinstatement from the surety company or a new bond, and by making conforming and technical changes; P.A. 13-253 amended Subsec. (a) by adding provision requiring that bond be conditioned upon faithful performance of all obligations with respect to money transmission business in this state, deleting provisions re bond covering claims arising during licensure period and bond amounts being dependent upon daily balances and adding provisions re bond running concurrently with period of the license and being in a sum dependent upon the amount of applicant's average weekly transmissions, designated provisions re proceeds of the bond as new Subsec. (b) and amended same to add reference to licensee's authorized delegates, replace provision re sale and issuance of Connecticut payment instruments or transmission of money with provision re licensee's money transmission business in this state, add provision re person damaged as a result of a failure to perform obligations may proceed against the bond to recover damages, delete provision re lowering principal sum of bond, add provision re commissioner to proceed on bond to collect any restitution imposed pursuant to Sec. 36a-50 and any unpaid costs of examination, add provision re bond to cover claims for damages and add provision re commissioner to require filing of new bond when action is commenced on licensee's bond or if licensee's financial condition so requires, redesignated existing Subsec. (b) as Subsec. (c) and amended same by making technical changes, and redesignated existing Subsec. (c) as Subsec. (d) and amended same to add reference to Secs. 36a-611 and 36a-612, add reference to the licensee's authorized delegates and replace provision re sale and issuance of Connecticut payment instruments or transmission of money with provision re licensee's money transmission business in this state; P.A. 15-53 amended Subsec. (a) by adding provisions re surety bond requirements for engaging in transmissions involving virtual currency; P.A. 18-173 amended Subsec. (c) by adding references to the commissioner, and adding provision re notice of cancellation for bond issued electronically, designating provision re notice of automatic suspension as Subpara. (A) and designating provision re commissioner to require licensee take or refrain from taking action as Subpara. (B), and making technical and conforming changes.