Exemption based on public interest
November 7, 2016
Re: Opinion Letter
Dear __________ :
Thank you for your dated August 15, 2016 letter to the Deputy Commissioner of the Money Transmitters Division, Robert Venchiarutti. As Counsel for the Legal Division, I have been asked to respond to your letter. You have asked for a no action letter, or a letter finding that __________’s online filing service, the __________ (“__________”) is exempt from the licensing requirements of the California Money Transmission Act (“MTA”). You provided additional information regarding __________ and its activities on September 16, October 6, and October 17, 2016.
BACKGROUND
__________’s membership is comprised of _____ regulators in each of the 50 states, the District of Columbia, Canada, Mexico, Puerto Rico, and the U.S. Virgin Islands. The Department of Business Oversight is a member of __________.
Since December 15, 2014, __________ has hosted on its website the __________ database. The __________ allows __________ issuers to submit __________ forms and pay related fees to state regulators.[1] __________ regulators in 45 states and U.S. territories accept forms submitted via the __________, including California. Before the __________, __________ issuers had to individually file forms with each state. The __________ allows issuers to submit forms to multiple states at once.
There are several steps that occur to transfer a filing fee from a __________ issuer to a state regulator. First, the issuer enters its bank account information into the __________ and authorizes the amount of filing fees, plus system fees, for withdrawal.[2] The funds are transferred from the issuer’s bank account to a __________-maintained automated clearinghouse account at __________ Bank (“Bank”), a Mississippi state-chartered bank. Once the Bank receives the funds, it holds the funds in the clearinghouse account for at least two full business days. Next, the state’s filing fee is sent to an intermediate bank account controlled by __________. Once a week, the funds are transferred out of the intermediate account to the state’s treasury account.
Once a form is submitted on the __________, the __________ provides an electronic receipt as proof that the __________ form was submitted and of the amount of fees paid. State regulators review the filings submitted through the __________ and can contact issuers directly if there are any issues with a specific filing. At no charge, members of the public can search all filings submitted to the __________.
MONEY TRANSMISSION ACT
Financial Code section 2030, subdivision (a) provides that a person shall not engage in the business of money transmission in California unless the person is licensed or exempt from licensure under the MTA, or is an agent of a person licensed or exempt from licensure. Section 2003, subdivision (q)(3) defines “money transmission” to include receiving money for transmission.
One exemption from the MTA’s licensing requirement is found in Financial Code section 2010, subdivision (c). This section exempts public entities including “state, county, city, or any other governmental agency or governmental subdivision of a state.”
Additionally, Financial Code section 2011 authorizes the Commissioner to exempt from the MTA any person or transaction, if the Commissioner finds such action to be in the public interest and that the regulation of such person or transaction is not necessary. To make that determination, the Commissioner can consider various factors, such as whether the person is licensed by a government agency and the risks and potential harm to persons in California.[3]
ANALYSIS
__________ receives money for transmission within the meaning of the MTA. Specifically, it receives money from issuers and transmits the money to state regulators, including the Department. Therefore, __________ must be licensed as a money transmitter in California unless an exemption applies.
While the __________ is not a subdivision or department of any government, state regulators entirely comprise its voting membership. Because __________ is composed of state regulators, the risk of not regulating __________’s money transmission activities is very low. Further, allowing __________ to transmit filing fees to state __________ regulators promotes the efficient regulation of __________, benefiting issuers as well as state governments and as a result, the public. Although __________ does not qualify for the exemption for government agencies, __________ exists to further the purposes of government agencies. Based on these factors, the Commissioner finds that, pursuant to Financial Code section 2011, it is in the public interest to exempt __________ from the MTA’s licensing requirements. An Order of Exemption for that purpose is enclosed.
This opinion is based solely on the facts as represented in your correspondence, and may change if any of the conditions or circumstances under which __________ provides services is altered.
If you have any questions, please feel free to contact the undersigned at __________.
Sincerely,
Jan Lynn Owen
Commissioner of Business Oversight
By
Julie L. Jacob
Counsel
JJ:is
cc: Robert Venchiarutti, Department of Business Oversight, San Francisco
[1] Specifically, the __________ currently accepts the __________, which is a form used to claim an exemption under __________. See ___ C.F.R. § ____, and Corp. Code, § __________.
[2] The system fee to use the __________ is $150 per form submitted. For example, if the same form is submitted to 20 states, the issuer is charged $150.
[3] Cal. Code Regs., tit. 10, § 80.3002, subdivision (b).