N.J. Admin. Code § 13:74C-3.2 - Operation of exchange wagering system by person or entity other than the exchange wagering licensee; exchange management agent; exchange services agent

(a) The exchange wagering licensee may employ an exchange management agent, subject to the following requirements:
1. In the event the exchange wagering licensee intends to enter into a written agreement with an exchange management agent, the parties to the proposed agreement shall file a joint petition with the Commission seeking approval for such. Through the petition, the parties shall specify whether the exchange management agent is to conduct or operate the exchange wagering system for the exchange wagering licensee, whether the exchange management agent will act as agent for the Authority in all matters approved by the Commission, and whether the exchange management agent will employ other persons or entities to perform any of its duties. With the prior approval of the Commission, the exchange wagering licensee and exchange managing agent may enter into such a written agreement. Notwithstanding this ability, exchange wagering shall only be conducted by the exchange wagering licensee pursuant to a valid exchange wagering license issued by the Commission, which shall at all times be held by the exchange wagering licensee.
2. The Commission shall not approve such a written agreement unless it is demonstrated, by clear and convincing evidence, that: both the written agreement and the written internal control procedures of the exchange wagering licensee set forth sufficient provisions to insure that the exchange wagering licensee maintains meaningful and adequate oversight controls with respect to both the exchange wagering system and its exchange wagering license; and that the written internal control procedures of the exchange management agent set forth procedures to be implemented, as may be appropriate considering the functions to be performed by the exchange management agent, to effectively operate the exchange wagering system; to insure that wagers placed through the exchange wagering system will be accurately processed and that all aspects of wagering integrity and wagering recordkeeping will be maintained; to effectively insure that the exchange wagering system operates with fiscal soundness and technological reliability; to effectively insure that there will be sufficient safeguards to maintain the integrity of the horse racing industry in this State; and to effectively insure compliance with this chapter. As required by 13:74C-2.1(b)8 and 2.2(d)8, the internal control procedures of the exchange wagering licensee shall include a certification that it has reviewed the internal control procedures of the exchange management agent and finds them to be sufficient.
3. The written agreement between the exchange wagering licensee and exchange management agent shall with specificity designate which functions related to the exchange wagering system shall be maintained or retained by the exchange wagering licensee, and which functions related to the exchange wagering system shall be performed by the exchange management agent.
4. The written agreement between the exchange wagering licensee and exchange management agent shall contain provisions that clearly provide for the portion of exchange wagering revenues payable to the exchange management agent as compensation.
5. Prior to acting upon a joint petition to approve such a written agreement, the Commission shall initiate and conduct an investigation into the qualifications of the person or entity subject of the exchange management agent license application, at cost to such person or entity. The Commission shall not approve any such written agreement unless the exchange management agent demonstrates, by clear and convincing evidence, that it and its employees are suitable, in terms of background and qualifications, to perform the functions subject of the written agreement, and to hold a license by the Commission to engage in such activities.
6. The Commission may prescribe such conditions and terms, as the Commission deems appropriate, in approving any written agreement pursuant to this section.
7. Unless otherwise approved by the Commission, a person or entity approved by the Commission as an exchange management agent shall be responsible for any regulatory requirements or conditions previously imposed upon the exchange wagering licensee, as concerns the particular functions assumed by such person or entity.
(b) The exchange wagering licensee may employ an exchange services agent, subject to the following requirements:
1. In the event the exchange wagering licensee intends to enter into a written agreement with an exchange services agent, the parties to the proposed agreement shall file a joint petition with the Commission seeking approval for such. Through the petition, the parties shall specify the services that the exchange services agent is to furnish. With the prior approval of the Commission, the exchange wagering licensee and exchange services agent may enter into such a written contract or written agreement. Notwithstanding this ability, exchange wagering shall only be conducted by the exchange wagering licensee pursuant to a valid exchange wagering license issued by the Commission, which shall at all times be held by the exchange wagering licensee.
2. The Commission shall not approve such a written agreement unless it is demonstrated, by clear and convincing evidence, that: the written agreement, and the written internal control procedures of the exchange wagering licensee, set forth sufficient provisions to insure that the exchange wagering licensee maintains meaningful and adequate oversight controls with respect to both the exchange wagering system and its exchange wagering license; and that the written internal control procedures of the exchange services agent set forth procedures to be implemented, as may be appropriate considering the functions to be performed by the exchange services agent, to effectively operate the exchange wagering system; to insure that wagers placed through the exchange wagering system will be accurately processed and that all aspects of wagering integrity and wagering recordkeeping will be maintained; to effectively insure that the exchange wagering system operates with fiscal soundness and technological reliability; to effectively insure that there will be sufficient safeguards to maintain the integrity of the horse racing industry in this State; and to effectively insure compliance with this chapter. As required by 13:74C-2.1(b)8 and 2.2(d)8, the internal control procedures of the exchange wagering licensee shall include a certification that it has reviewed the internal control procedures of the exchange wagering services agent and finds them to be sufficient.
3. The written agreement between the exchange wagering licensee and exchange services agent shall with specificity designate which functions related to the exchange wagering system shall be maintained or retained by the exchange wagering licensee, and which functions related to the exchange wagering system shall be performed by the exchange services agent.
4. The written agreement between the exchange wagering licensee and exchange services agent shall contain provisions that clearly provide for the portion of exchange wagering revenues payable to the exchange services agent as compensation.
5. Prior to acting upon a joint petition to approve such a written agreement, the Commission shall initiate and conduct an investigation into the qualifications of the person or entity subject of the exchange services agent license application, at cost to such person or entity. The Commission shall not approve any such written agreement unless the exchange services agent demonstrates, by clear and convincing evidence, that it and its employees are suitable, in terms of background and qualifications, to perform the functions subject of the written contract or agreement, and to hold a license by the Commission to engage in such activities.
6. The Commission may prescribe such conditions and terms, as the Commission deems appropriate, in approving any written agreement pursuant to this section.
7. Unless otherwise approved by the Commission, and in addition to the requirements imposed upon the holder of the exchange wagering license by the Act and this chapter, a person or entity approved by the Commission as an exchange services agent shall be responsible for any regulatory requirements or conditions previously imposed upon the exchange wagering licensee, as concerns the particular functions assumed by such person or entity.
(c) Where the exchange wagering licensee employs an exchange management agent, and such person or entity does not also function as an exchange services agent, nothing contained in this section shall be interpreted to prohibit the exchange management agent from entering into a written agreement with an exchange services agent, for the provision of such services in connection with the exchange wagering system, if such action is authorized as part of the agreed-to duties it performs on behalf the exchange wagering licensee. In such event, the exchange wagering licensee, exchange management agent, and exchange services agent shall participate as joint parties to the petition required to be filed with the Commission required by (b)1 above, and it must be demonstrated to the Commission that the exchange services agent is qualified to perform its proposed functions. In such event, the joint petition shall additionally include the written agreement intended to be entered into between the exchange management agent and exchange services agent, which written agreement must be approved by the Commission. The written agreement shall, with specificity, designate which functions related to the exchange wagering system shall be maintained or retained by the exchange management agent, which functions related to the exchange wagering system shall be performed by the exchange services agent, and it shall also contain provisions that clearly provide for the compensation payable to the exchange services agent. In such case, the joint petition shall additionally include: the internal control procedures of the exchange services agent; a certification of the exchange management agent that said internal control procedures have been incorporated within its own internal control procedures; and the certification of the exchange wagering licensee required by (b) above and 13:74C-2.1(b)8 and 2.2(d)8.
(d) Nothing contained in this section shall be interpreted from prohibiting an exchange management agent from also functioning as an exchange services agent, provided it demonstrates to the Commission, by clear and convincing evidence, that it is qualified to perform both the functions of an exchange management agent and exchange services agent, and provided that each aspect of this section is complied with. A person or entity approved by the Commission to provide both such services shall be licensed by the Commission as both an exchange management agent and as an exchange services agent, as required by 13:74C-6.1(d).
(e) Nothing contained in this section shall be interpreted to prohibit the exchange wagering licensee from conducting or operating the exchange itself, from acting in all exchange wagering matters approved by the Commission itself, and from providing exchange wagering service provider services itself, where the Commission finds that the exchange wagering licensee is qualified in all respects to perform such functions.

Notes

N.J. Admin. Code § 13:74C-3.2
Adopted by 47 N.J.R. 807(b), effective 4/20/2015.

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