§ 28-8-4.1-1004 — Enumeration of permissible investments; letter of credit naming department as beneficiary; enumeration of permissible investments subject to limitations

Indiana § 28-8-4.1-1004

• Jurisdiction: Indiana
• Art. 8: FINANCIAL SERVICES
• Ch. 4.1: Money Transmission Modernization Act

Text

(a) The following investments are
permissible under section 1003 of this chapter:
(1) Cash (including demand deposits, savings deposits, and funds
in such accounts held, for the benefit of the licensee's customers,
in a federally insured depository financial institution) and cash
equivalents, including Automated Clearing House (ACH) items
in transit to the licensee and ACH items or international wires in
transit to a payee, cash in transit via armored car, cash in smart
safes, cash at licensee owned locations, debit card or credit card
funded transmission receivables owed by any bank, or money
market mutual funds rated "AAA" by S&P Global, or the
equivalent from any eligible rating service.
(2) Certificates of deposit or senior debt obligations of an insured
depository institution (as defined in Section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) or as defined under the
federal Credit Union Act (12 U.S.C. 1781)).
(3) An obligation of the United States (or of a commission,
agency, or instrumentality of the United States), an obligation that
is guaranteed fully as to principal and interest by the United
States, or an obligation of a state (or of a governmental
subdivision, agency, or instrumentality of a state).
(4) The full drawable amount of an irrevocable standby letter of
credit that names the department as the stated beneficiary and that
stipulates that the beneficiary need only draw a sight draft under
the letter of credit and present it to obtain funds, up to the letter
of credit amount, subject to the following:
(A) The letter of credit must:
(i) be issued by a person that is a federally insured depository
financial institution, a foreign bank authorized under federal
law to maintain a federal agency or federal branch office in
a state or states, or a foreign bank authorized under state law
to maintain a branch in a state, and that bears an eligible
rating or whose parent company bears an eligible rating, and
that is regulated, supervised, and examined by United States
federal or state authorities having regulatory authority over
banks, credit unions, and trust companies;
(ii) be irrevocable and unconditional and indicate that it is not
subject to any condition or qualifications outside of the letter
of credit;
(iii) not contain reference to any other agreements,
documents, or entities, or otherwise provide for any security
interest in the licensee; and
(iv) contain an issue date and expiration date, and expressly
provide for automatic extension, without a written
amendment, for an additional period of one (1) year from the
current or each 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 (60) days before any expiration date, that the
irrevocable letter of credit will not be extended.
(B) In the event of any notice of expiration or nonextension of
a letter of credit described in clause (A)(iv), the licensee must
demonstrate to the satisfaction of the department, at least fifteen
(15) days before the expiration, that the licensee maintains and
will maintain permissible investments in accordance with this
subsection upon the expiration of the letter of credit. If the
licensee is not able to do so, the department 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
in accordance with this subsection. Any such draw shall be
offset against the licensee's outstanding money transmission
obligations. The drawn funds shall be held in trust by the
department or the department'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 must provide that the issuer of the letter
of credit will honor, at sight, the beneficiary's presentation, to
the issuer, of the original letter of credit, including any
amendments. The presentation under this clause must be made
not later than the expiration date of the letter of credit and must
be accompanied by a written statement from the beneficiary
stating that any of the following events has occurred, as
applicable:
(i) The filing of a petition by or against the licensee under the
federal Bankruptcy Code (11 U.S.C. 101-110) for bankruptcy
or reorganization.
(ii) 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.
(iii) The seizure of assets of the licensee by a state 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.
(iv) The beneficiary has received notice of expiration or
nonextension of a letter of credit, and the licensee failed to
demonstrate to the satisfaction of the beneficiary that the
licensee will maintain permissible investments in accordance
with this subsection upon the expiration or nonextension of
the letter of credit.
The letter of credit must stipulate that the beneficiary may
obtain funds, up to the letter of credit amount, within seven (7)
days of presentment of the original letter of credit, including
any amendments, and the statement under this clause.
(D) The director may designate an agent to serve on the
department's behalf as beneficiary to a letter of credit so long as
the agent and letter of credit meet requirements established by
the department. 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 this subdivision are assigned to the department.
(E) The department may participate in multistate processes
designed to facilitate the issuance and administration of letters
of credit, including services provided by the NMLS and the
State Regulatory Registry, LLC.
(5) The amount of the surety bond required under section 1002 of
this chapter that exceeds the licensee's average daily money
transmission liability in Indiana.
(b) Unless permitted by the department by rule or by order to exceed
the limit as set forth in this subsection, the following investments are
permissible under this section to the extent specified:
(1) Receivables that are payable to a licensee from its authorized
delegates in the ordinary course of business that are less than
seven (7) days of age, are permissible in an amount not to exceed
fifty percent (50%) of the aggregate value of the licensee's total
permissible investments.
(2) Of the receivables permissible under subdivision (1),
receivables that are payable to a licensee from a single authorized
delegate in the ordinary course of business may not exceed ten
percent (10%) of the aggregate value of the licensee's total
permissible investments.
(3) The following investments are permissible up to twenty
percent (20%) per category, and combined up to fifty percent
(50%), of the aggregate value of the licensee's total permissible
investments:
(A) A short term (up to six (6) months) investment bearing an
eligible rating.
(B) Commercial paper bearing an eligible rating.
(C) A bill, note, bond, or debenture bearing an eligible rating.
(D) A United States tri party repurchase agreement
collateralized at least one hundred percent (100%) with:
(i) United States government or agency securities;
(ii) municipal bonds; or
(iii) other securities bearing an eligible rating.
(E) Money market mutual funds rated less than "AAA" and at
least "A-" by S&P Global, or the equivalent from any other
eligible rating service.
(F) A mutual fund or other investment fund composed solely
and exclusively of one (1) or more permissible investments
listed in subsection (a)(1) through (a)(3).
(4) Cash (including demand deposits, savings deposits, and funds
in such accounts held for the benefit of the licensee's customers)
at foreign depository institutions are permissible up to ten percent
(10%) 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
federal Office of Foreign Assets Control; and
(D) is not located in a high risk or noncooperative jurisdiction
as designated by the Financial Action Task Force.

Legislative History

As added by P.L.198-2023, SEC.4.