2543. Types of permissible investments
(a) The following investments are permissible under section 2542 of this subchapter:
(1) Cash, including demand deposits, savings deposits, and funds in such accounts held for the benefit of the licensee’s customers in an entity identified as exempt under subdivision 2504(7) of this chapter, and cash equivalents, including 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 in 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 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 U.S.C. § 1813(c), as may be amended, or as defined under the federal Credit Union Act, 12 U.S.C. § 1781, as may be amended.
(3) An obligation of the United States or a commission, department, agency, or instrumentality thereof; an obligation that is guaranteed fully as to principal and interest by the United States; or an obligation of a state or a governmental subdivision, agency, or instrumentality thereof.
(4) The full drawable amount of an irrevocable standby letter of credit for which the stated beneficiary is the Commissioner 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 within seven days of presentation of the items required by subdivision (a)(4)(C) of this section.
(A) The letter of credit shall:
(i) be issued by a financial institution as defined in subdivision 11101(32) of this title with federally insured deposits, a credit union with federally insured deposits, a foreign bank that is authorized under federal law to maintain a federal agency or federal branch office in a state or states, 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; and
(II) is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks, credit unions, and trust companies;
(ii) be irrevocable, 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 year from the present or each future expiration date, unless the issuer of the letter of credit notifies the Commissioner in writing by certified or registered mail or courier mail or other receipted means, at least 60 days prior to any expiration date, that the irrevocable letter of credit will not be extended.
(B) In the event of any notice of expiration or non-extension of a letter of credit issued under subdivision (a)(4)(A) of this section, the licensee shall be required to demonstrate to the satisfaction of the Commissioner, 15 days prior to expiration, that the licensee maintains and will maintain permissible investments in accordance with subsection 2542(a) of this subchapter upon the expiration of the letter of credit. If the licensee is not able to do so, the Commissioner 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 subsection 2542(a) of this subchapter. Any such draw shall be offset against the licensee’s outstanding money transmission obligations. The drawn funds shall be held in trust by the Commissioner or the Commissioner’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 shall provide that the issuer of the letter of credit will honor, at sight, a presentation made by the beneficiary to the issuer of the following documents on or prior to the expiration date of the letter of credit:
(i) the original letter of credit, including any amendments; and
(ii) a written statement from the beneficiary stating that any of the following events have occurred:
(I) the filing of a petition by or against the licensee under the U.S. Bankruptcy Code, 11 U.S.C. §§ 101–110, as may be amended, 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 a licensee by a Commissioner pursuant to an emergency order issued in accordance with applicable law on the basis of an action, a violation, or a condition that has caused or is likely to cause the insolvency of the licensee; or
(IV) the beneficiary has received notice of expiration or non-extension 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 subsection 2542(a) of this subchapter upon the expiration or non-extension of the letter of credit.
(D) The Commissioner may designate an agent to serve on the Commissioner’s behalf as beneficiary to a letter of credit provided the agent and letter of credit meet requirements established by the Commissioner. The Commissioner’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 Commissioner.
(E) The Commissioner is authorized and encouraged to participate in multistate processes designed to facilitate the issuance and administration of letters of credit, including services provided by the NMLS and State Regulatory Registry, LLC.
(5) One hundred percent of the surety bond or deposit provided for under section 2541 of this subchapter that exceeds the average daily money transmission liability in this State.
(b) Unless permitted by the Commissioner by rule or order to exceed the limit as set forth in this subchapter, the following investments are permissible under subsection 2542(a) of this subchapter 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 days old, up to 50 percent of the aggregate value of the licensee’s total permissible investments.
(2) Of the receivables permissible under subdivision (b)(1) of this section, receivables that are payable to a licensee from a single authorized delegate in the ordinary course of business may not exceed 10 percent of the aggregate value of the licensee’s total permissible investments.
(3) The following investments are permissible up to 20 percent per category and combined up to 50 percent of the aggregate value of the licensee’s total permissible investments:
(A) a short-term investment of up to six months bearing an eligible rating;
(B) commercial paper bearing an eligible rating;
(C) a bill, note, bond, or debenture bearing an eligible rating;
(D) U.S. tri-party repurchase agreements collateralized at 100 percent or more with U.S. 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 S&P or the equivalent from any other eligible rating service; and
(F) a mutual fund or other investment fund composed solely and exclusively of one or more permissible investments listed in subdivisions (a)(1)–(3) of this section.
(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 10 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 Asset Control; and
(D) is not located in a high-risk or non-cooperative jurisdiction as designated by the Financial Action Task Force.
Added 2023, No. 110 (Adj. Sess.), § 44, eff. July 1, 2024.
