13 Miss. Code. R. 3-1.9 - Periodic Payments

(a) Except as provided in this regulation, a licensee shall remit the total prizes awarded to a patron as the result of conducting any game, including a tournament, contest, or promotional activity (hereinafter collectively referred to as "gaming or promotional activity") conducted in Mississippi upon validation of the prize payout.

(b) As used in this section of the regulation:

1. "Approved funding sources" means cash, U.S. GSE securities or U.S. Treasury securities that are used for the funding of a trust pursuant to subsection (c)(2) hereof or the reserve method of funding periodic payments pursuant to subsection (c)(3) hereof.

2. "Brokerage firm" means an entity that:

i. Is both a broker-dealer and an investment adviser;

ii. Has one or more classes of its equity securities listed on the New York Stock Exchange or American Stock Exchange, or is a wholly-owned subsidiary of such an entity; and

iii. Has assets under management in an amount of $10 billion or more as reported in its most recent report on Form 10-K or Form 10-Q filed with the United States Securities and Exchange Commission, or is a wholly-owned subsidiary of such an entity.

3. "Broker-dealer" means any person engaged in the business of effecting transactions in securities for the account of others or for his own account and:

i. Is registered as a broker-dealer with the Mississippi Secretary of State pursuant to Section 75-71-301 of the Mississippi Code of 1972, as amended; or

ii. Is exempt from registration pursuant to Section 75-71-105(b) of the Mississippi Code of 1972, as amended, and is registered as a broker-dealer with the United States Securities and Exchange Commission and the National Association of Securities Dealers pursuant to Title 15 USC 78 o, as amended.

iii. "Executive Director" means the Executive Director of the Mississippi Gaming Commission or his designee.

iv. "Date of calculation" means the last day for which a discount rate was obtained prior to the conclusion of the validation period.

4. "Discount rate" means the current prime rate as published in the Wall Street Journal. For those licensees using the reserve method of funding pursuant to subsection (c)(3) hereof, "discount rate" means either:

i. The aforementioned current prime rate; or

ii. A blended rate computed from the various U.S. GSE securities or U.S. Treasury securities selected by the licensee for which quotes are obtained at least three times a month.

5. "Independent financial institution" means an institution that is not affiliated through common ownership with the licensee and is either:

i. A bank or national banking association that is authorized to do business in this state, a banking corporation formed or regulated under the laws of this state or a wholly owned subsidiary of such a banking association or corporation that is formed or regulated under the laws of this state or a national bank with an office in Mississippi; or

ii. An insurance company admitted to transact insurance in the State of Mississippi with an A.M. Best Insurance rating of at least "A+" or such other equivalent rating.

6. "Investment Adviser" means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities and:

i. Is registered as an investment adviser with the Mississippi Secretary of State pursuant to Section 75-71-303 of the Mississippi Code of 1972, as amended; or

ii. Is exempt from registration pursuant to Section 75-71-105(g) of the Mississippi Code of 1972, as amended, and is registered as an investment adviser with the United States Securities and Exchange Commission pursuant to Title 15 USC 80b-3a, as amended.

7. "Periodic payments," for purposes of this regulation only, means a series of payments that are paid at least annually for prizes awarded through gaming or promotional activity.

8. "Present value" means the current value of a future payment or series of payments, discounted using the discount rate.

9. "Qualified prize" means the sum of periodic payments, awarded to a patron as a result of any gaming or promotional activity, payable over a period of at least 10 years.

10. "Qualified prize option" means an option that entitles a patron to receive from a licensee a single cash payment in lieu of receiving a qualified prize, or any remaining portion thereof, which shall be exercised no later than 60 days after validation of the qualified prize.

11. "Reserve" means a restricted account consisting of approved funding sources used exclusively to satisfy periodic payments of prizes arising from all gaming or promotional activity conducted in Mississippi. Any existing funding methods previously approved by the Executive Director or Commission must comply with this Regulation as of its effective date. The reserve shall not be less than the sum of the following:

i. The present value of the aggregate remaining balances owed on all prizes awarded to patrons who are receiving periodic payments. For balances previously funded using U.S. GSE securities or U.S. Treasury securities, the discount rate on the date of funding shall be used for calculating the present value of this portion of the reserve.

ii. An amount sufficient to pay the single cash payments offered in Conjunction with qualified prize options for prizes previously awarded for which elections have not been made by the patrons;

iii. An amount sufficient to fully fund the present value of all prizes currently on public display for which periodic payments are offered;

iv. If cash is used as the approved funding source, an amount equal to satisfy the current liabilities to all patrons receiving periodic payments due and payable within 12 months; and

v. Any additional amounts administratively required by the Executive Director.

12. "Restricted account" means an account with an independent financial institution described in subsection (b)(5) hereof, or a brokerage firm, which is to be exclusively used for the reserve method of funding of gaming or promotional activity as provided in this regulation.

13. "Single cash payment" means a single discounted, lump-sum cash payment in the amount of the present value of the total periodic payments otherwise due and owing for a qualified prize, less the amount of any partial payment of such qualified prize previously made by the licensee to a patron.

14. "Trust" means an irrevocable fiduciary relationship in which one person is the holder of the title to the property subject to an equitable obligation to keep or use the property for the benefit of another.

15. "U.S. Government Sponsored Enterprise" or "U.S. GSE" means, for purpose of this regulation, either the Federal National Mortgage Association, also known as Fannie Mae, or the Federal Home Loan Mortgage Corporation, also known as Freddie Mac.

16. "U.S. GSE securities" means negotiable, senior, non-callable, debt obligations issued by a U.S. GSE that on the date of funding possesses an issuer credit rating equivalent to the highest investment grade rating given by Standards & Poor's Rating Services and Moody's Investors Service.

17. "U.S. Treasury securities" means a negotiable debt obligation issued and guaranteed by the U.S. Government.

18. "Validation period" means the period of time between when a patron has met the conditions required to receive a prize, and when the prize payout is validated. The validation period shall not exceed 72 hours, unless otherwise extended by the Executive Director.

(c) Periodic payments of prizes awarded to a patron as a result of conducting any gaming or promotional activity may be made if the method of funding the periodic payments provides such payments to a patron through the establishment of any one of the following funding methods:

1. An irrevocable surety bond or an irrevocable letter of credit with an independent financial institution which will provide for either the periodic payments or a single cash payment for the remaining periodic payments should the licensee default on paying the scheduled periodic payments for any reason. The form of the written agreement establishing an irrevocable surety bond or the irrevocable letter of credit, and a written commitment to execute such bond or letter from the financial institution shall be submitted to the Executive Director for written approval no less than 45 days prior to the commencement of the gaming or promotional activity.

2. An irrevocable trust with an independent financial institution in accordance with a written trust agreement, the form of which shall be submitted to the Executive Director for written approval at least 45 days prior to the commencement of any new gaming or promotional activity, and which provides periodic payments from an unallocated pool of assets to a group of patrons and which shall expressly prohibit the patron from encumbering, assigning or otherwise transferring in any way his right to receive the deferred portion of the prizes except to his estate. The assets of the trust shall consist of approved funding sources in an amount sufficient to meet the periodic payments as required.

3. A reserve maintained at all times by a licensee, together with the continuing satisfaction of and compliance with certain financial ratios and tests, and monitoring and reporting procedures related thereto. The conditions under which a reserve method may be used shall be prescribed by the Executive Director in a written notice distributed to licensees and all interested persons. The Executive Director, after whatever investigation or review he deems necessary, may grant, on a case-by-case basis, written approval of such other conditions as the Executive Director deems appropriate and consistent with this regulation. Licensees shall notify the Executive Director in writing at least 45 days prior to the commencement of any new gaming or promotional activity for which periodic payments may be used. The reserve method for funding periodic payments shall not be implemented or used until approved in writing by the Executive Director.

4. Another method of providing the periodic payments to a patron consistent with the purpose of this regulation and which is approved by the Commission prior to the commencement of the gaming or promotional activity. Proposed modifications to a periodic payment plan previously approved by the Commission shall be submitted to the Executive Director for review at least 45 days prior to the effective date of change. The Executive Director, after whatever investigation or review he deems necessary, may administratively approve in writing the modification or require the licensee to submit the requested modification to the Commission for review and approval.

(d) The funding of periodic payment plans shall be completed within 30 days of the conclusion of the validation period, or where a qualified prize option is offered for such prize payout, within 30 days of the date the patron makes an election thereunder. Where a single cash payment is elected, the licensee shall pay to the patron in cash, certified check or wire transfer the full amount less any prior payment(s) within 15 days after receiving the patron's written notification of such election.

(e) Periodic payments shall not be used for prize payouts of $100,000 or less. Periodic payments for total amounts won greater than $100,000 shall be paid as follows:

1. For amounts won greater than $100,000, but less than $200,000, payments shall be at least $10,000 annually;

2. For amounts won equal to or in excess of $200,000, payments shall be no less than 1/20th of the total amount annually;

3. For amounts won equal to or in excess of $5,000,000, payments shall be made in the manner set forth in (2), above, or in such manner as approved by the Commission upon application by the licensee; and

4. The first installment payment shall be made upon the conclusion of the validation period, notwithstanding that a qualified prize option may be offered to the patron. In the event that a qualified prize option is offered to a patron, it shall not be construed as a requirement that the patron shall receive a single cash payment instead of periodic payments. Waivers of subsections (e)(1), (2) and (3) hereof that have been previously granted by the Commission shall remain in full force and effect pursuant to the current terms and provisions of such waivers.

(f) The licensee shall provide the Executive Director with an appropriate, signed legal document, prior to the commencement of any gaming or promotional activity for which periodic payments are to be offered, that shall irrevocably and unconditionally remise, release, indemnify and forever discharge the State of Mississippi and the Commission and its members, employees, agents and representatives, including those of the Attorney General's Office, of and from any and all claims, actions, causes of actions, losses, damages, liabilities, costs, expenses and suits of any nature whatsoever, in law or equity, including reasonable attorney's fees, arising from any act or omission of the Commission and its members, employees, agents and representatives.

(g) For any gaming or promotional activity for which periodic payments are used, the licensee shall provide a notice on each gaming device or, if no gaming device is used, then in each gaming or promotional area specifically setting forth the terms of the periodic payment plan, and include in all radio, television, other electronic media, or print advertising that such prizes will be awarded using periodic payments.

(h) Notwithstanding any other regulation to the contrary, if a licensee offers a qualified prize option to a patron who is awarded a qualified prize, the licensee shall provide the option to the patron in writing within 7 days after the conclusion of the validation period. Such written option shall explain the method used to compute the single cash payment, including the discount rate on the date of calculation, and shall state that the patron is under no obligation to accept the offer of a single cash payment and may nevertheless elect to receive the periodic payments for the qualified prize.

(i) The licensee shall maintain the following amounts, as applicable, related to each gaming or promotional activity that uses periodic payments in calculating its minimum bankroll requirement for the purpose of complying with Rule 1.13:

1. For periodic payment plans approved in accordance with subsection (c)(1) hereof, the installment payments due within the next 12-month period for all amounts won or on public display for which the licensee will be making periodic payments.

2. For periodic payment plans approved in accordance with subsection (c)(2) hereof, the first installment payment, if not yet paid, and the present value of all future payments:

i. For amounts won or awarded but for which the funding has not been completed; and

ii. For all prizes which have not been won or awarded but are on public display, including a progressive meter.

3. An alternative amount and/or method required by the Executive Director to satisfy the minimum bankroll requirement for other approved funding plans used for periodic payments.

(j) At all times the licensee is responsible for the payment of all prizes resulting from any gaming or promotional activity upon conclusion of the validation period, regardless of the method used to fund the periodic payments allowed under this regulation. In the event of a default by any financial institution with which the licensee has contracted to guarantee or make periodic payments, the licensee will be liable for the periodic payments owed to patrons.

(k) At least annually, the licensee shall verify that the independent financial institution and brokerage firm being used to guarantee or remit periodic payments to patrons or hold approved funding sources related thereto continues to meet the applicable qualifications required by subsection (b) hereof. In the event that such entities are found to no longer meet the defined requirements, the licensee shall immediately notify the Executive Director of the change in status and within 30 days provide a written plan to comply with these requirements.

(l) At least 60 days prior to cessation of operations, a licensee responsible for remitting periodic payments to patrons shall submit a plan to satisfy the liability for approval. The Executive Director, after whatever investigation or review he deems necessary, may grant written approval of the plan or may require such other conditions as the Executive Director deems necessary to satisfy the licensee's liabilities.

(m) Copies of the related contracts and agreements executed pursuant to subsections (c)(1), (c)(2) and (c)(4) hereof shall be submitted to the Executive Director within 30 days after execution. For all methods of funding periodic payments, the licensee must maintain documents, executed contracts and agreements for a period of no less than the duration of the periodic payments plus five years thereafter.

(n) Where a licensee is found to be in noncompliance with the funding requirements provided in this regulation, the Executive Director may require the licensee to immediately cease offering any gaming or promotional activity for which periodic payments are used and/or he may require other or additional corrective action.

(o) Any failure of the licensee to maintain full compliance with each and every provision set forth in this regulation, including the Executive Director's requirements established pursuant to subsection (c)(3) hereof, or any failure of the licensee to immediately notify the Executive Director of any noncompliance thereof, shall constitute an unsuitable method of operation. Such noncompliance may subject the licensee to disciplinary action. Any approvals granted by the Commission and/or the Executive Director pursuant to this Regulation shall not relieve the licensee of its responsibilities and obligations to fully comply with this Regulation.

(p) The Commission may waive one or more of the requirements of this regulation if it makes a written finding that such waiver is consistent with the public policy set forth in Section 75-76-3(3) of the Mississippi Code of 1972, as amended.

Notes

13 Miss. Code. R. 3-1.9

Miss. Code Ann. § 75-76-3

Amended 5/21/2015