Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 6-101, Arizona Revised Statutes, is amended to read:
6-101. Definitions
In this title, unless the context otherwise requires:
1. "Automated teller machine" means an automated device that is established by a bank, savings and loan association or credit union and that facilitates customer-bank communications activities, including taking deposits and disbursing cash drawn against a customer's deposit account or a customer's preapproved loan account, at a location separate from the home office or a branch.
2. "Bank" means a corporation that holds a banking permit issued pursuant to chapter 2 of this title.
3. "Banking office" means any place of business of the bank at which deposits are received, checks are paid or money is loaned but does not include the premises used for computer operations, proofing, record keeping, accounting, storage, maintenance or other administrative or service functions.
4. "Branch" means any banking office other than the principal banking office.
5. "Department" means the department of insurance and financial institutions.
6. "Deputy director" or "superintendent" means the deputy director of the financial institutions division of the department.
7. "Director" has the same meaning prescribed in section 20-102.
8. "Division" means the financial institutions division within the department.
9. "Enterprise" means any person under the jurisdiction of the department other than a financial institution.
10. "Federal deposit insurance corporation" includes any successor to the corporation or other agency or instrumentality of the United States that undertakes to discharge the purposes of the corporation.
11. "Financial institution" means banks, trust companies, savings and loan associations, credit unions, consumer lenders, international banking facilities and financial institution holding companies under the jurisdiction of the department.
12. "Home state" means the state that has granted the bank its charter, permit or license to operate.
13. "Host state" means the state in which a financial institution is doing business and not the state that has granted the bank its charter, permit or license to operate.
14. "In-state financial institution" means a state or federal bank, savings bank, savings and loan association or holding company with its home office located in this state.
15. "International banking facility" means a facility that is represented by a set of asset and liability accounts segregated on the books and records of a commercial bank, the principal office of which is located in this state, and that is incorporated and doing business under the laws of the United States or of this state, a United States branch or agency of a foreign bank, an edge corporation organized under section 25(a) of the federal reserve act (12 United States Code sections 611 through 631) or an agreement corporation having an agreement or undertaking with the board of governors of the federal reserve system under section 25 of the federal reserve act (12 United States Code sections 601 through 604(a)) that includes only international banking facility time deposits and international banking facility extensions of credit as defined in 12 Code of Federal Regulations part 204.
16. "National credit union administration" includes any successor to the organization or other agency or instrumentality of the United States that undertakes to discharge the purposes of the organization.
17. "Out-of-state bank" means a bank, savings bank or savings and loan association that is approved by the superintendent deputy director pursuant to section 6-322 and that has a charter, a permit or any other license to operate that is issued by a state other than this state.
18. "Out-of-state financial institution" means a state or federal bank, savings bank, savings and loan association or holding company with its home office in a state other than this state.
19. "Title" includes this title, title 32, chapters 9 and 36 and title 44, chapter 2.1.
Sec. 2. Section 6-116, Arizona Revised Statutes, is amended to read:
6-116. Sale of securities; disclosure
A. A financial institution doing business in this state or any other person shall not sell or offer to sell equity securities or debt instruments to the public in a financial institution's retail office where deposits are accepted without the prior written approval of the superintendent deputy director.
B. A financial institution or any other person that receives written approval as prescribed by subsection A of this section and that sells or offers to sell equity securities or debt instruments of the financial institution or the holding company of a financial institution shall disclose to the purchaser prior to any sale that the equity security or debt instrument is not a federally insured deposit and shall provide to the purchaser a disclosure form that is approved by the superintendent deputy director. The superintendent deputy director may by rule prescribe requirements for the disclosure form.
C. A financial institution's or a holding company of the financial institution's application for approval of the disclosure form required by subsection B of this section shall include information describing the policies and procedures that the financial institution or any other person authorized to offer or sell the securities has adopted to ensure that it is marketing the securities with appropriate disclosures regarding the nature of the investment.
Sec. 3. Section 6-122, Arizona Revised Statutes, is amended to read:
6-122. Deputy director; authority; duties
A. The superintendent deputy director has the authority and responsibility for the discharge of all duties imposed by law on the division.
B. The superintendent deputy director shall:
1. Examine or cause to be examined each financial institution annually, except financial institution holding companies, banks, savings and loan associations, credit unions and consumer lenders, and more frequently if the superintendent deputy director considers it necessary.
2. Examine or cause to be examined each bank, credit union and savings and loan association at the superintendent's deputy director's discretion but at least once in every twenty-four month period.
3. Examine or cause to be examined the business and affairs of any enterprise and any consumer lender for the purpose of administering and enforcing this title at the superintendent's deputy director's discretion.
4. Examine or cause to be examined financial institution holding companies as frequently as the superintendent deputy director considers necessary to administer and enforce this title.
5. Notwithstanding paragraph 3 of this subsection, examine or cause to be examined the accounts held in trust by each escrow agent at least once in every two-year period and examine or cause to be examined each escrow agent at least once in every four-year period or more frequently if the superintendent deputy director considers it necessary.
6. Publish a consumer information brochure that includes:
(a) The finance charges permitted allowed by this state.
(b) The types of insurance that may be offered but that are not required by law to be purchased with the granting of a loan.
(c) Interest rate limitations on all lenders including amounts that may not be charged to borrowers.
(d) Consumer rights and means of recourse from unfair practitioners.
7. Make it a priority to encourage the growth of state-chartered financial institutions in this state and by February 1 of each calendar year notify the governor, the president of the senate and the speaker of the house of representatives if the total number of state-chartered banks or state-chartered credit unions decreases during the prior calendar year.
C. Notwithstanding subsection B, paragraph 5 of this section, an escrow agent shall be examined within twelve months when an escrow agent's license is transferred or assigned pursuant to section 6-813 or when control of the license is otherwise acquired.
Sec. 4. Section 6-123, Arizona Revised Statutes, is amended to read:
6-123. Deputy director; powers
In addition to the other powers, express or implied, the superintendent deputy director may:
1. Exercise all powers that are necessary for the administration and enforcement of the laws and rules relating to financial institutions and enterprises.
2. In accordance with title 41, chapter 6, adopt rules that are necessary or appropriate to administer, enforce and accomplish the purposes of this title and adopt rules and issue orders that limit transactions between financial institutions or enterprises and the directors, officers or employees of the financial institutions or enterprises.
3. Require appropriate records, documents, information and reports from any financial institution or enterprise.
4. Submit to the department of public safety, or the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor, the name and fingerprints of any applicant, licensee, active manager or responsible individual or the name and fingerprints of any organizer, director or officer of any corporate applicant or licensee for:
(a) A banking permit.
(b) Permission to organize a savings and loan association or credit union.
(c) Any license.
(d) Any certificate.
(e) Authority to engage in interstate banking and branching in this state.
The department of public safety shall report the criminal record, if any, of such applicant, licensee or organizer, director or officer of such corporate applicant or licensee within ninety days of after receipt of the deputy director's request of the superintendent.
5. Employ appraisers to appraise any property that is owned or held as security by any financial institution or enterprise. The reasonable expenses and compensation of such appraisers shall be paid by the financial institution or enterprise.
6. Hold membership in, pay dues to and attend the convention of the national and regional organizations of state officials occupying like offices or performing similar functions.
7. Cooperate with other regulatory agencies and professional associations to promote the efficient, safe and sound operation and regulation of interstate banking and branching activities, including the formulation of interstate examination policies and procedures and the drafting of model rules and agreements.
8. Participate in the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor. The superintendent deputy director may allow the system to collect licensing fees on behalf of the superintendent deputy director, to collect a processing fee for the services of the system directly from each applicant for a license or licensee and to process and maintain records on behalf of the superintendent deputy director, including information collected pursuant to this section and section 6-123.01. This paragraph does not affect the records disclosure requirements and limitations prescribed in section 6-129.01.
Sec. 5. Section 6-123.01, Arizona Revised Statutes, is amended to read:
6-123.01. Fingerprint requirements; fees
A. Before receiving and holding a license, permit, certificate or permission to organize a bank, savings and loan association or credit union, the superintendent deputy director may require an applicant, licensee, active manager or responsible individual or an organizer, director or officer of any corporate applicant or licensee to submit a full set of fingerprints and fees to the department. The department of insurance and financial institutions shall submit the fingerprints and fees to the department of public safety, or the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor, for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation.
B. The fees that the department collects under subsection A of this section shall be credited pursuant to section 35-148.
C. The applicant is responsible for providing the department with readable fingerprints. The applicant shall pay any costs that are attributable to refingerprinting due to the unreadability of any fingerprints and any fees that are required for the resubmission of fingerprints.
D. The department may issue a temporary license or certificate or grant temporary permission to organize to an original applicant before the department receives the results of a criminal records check if there is not evidence or reasonable suspicion that the applicant has a criminal history background that would be cause for denial of a license, certificate or permission to organize. The department may terminate the temporary license or certificate or permission to organize if a fingerprint card is returned as unreadable and the applicant fails to submit new fingerprints within ten days after being notified by the department that the original card was unreadable or if the results of the criminal records check reveal grounds for the denial of the license or certificate or permission to organize. The temporary license or certificate or permission to organize shall not be effective longer than one hundred eighty days.
E. The superintendent deputy director may require a current licensee, organizer, director, active manager, responsible individual or officer of any corporate licensee to submit a full set of fingerprints to the department. The department of insurance and financial institutions shall submit the fingerprints and fees to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation.
F. This section does not affect the department's authority to otherwise issue, deny, cancel, terminate, suspend or revoke a license.
Sec. 6. Section 6-124, Arizona Revised Statutes, is amended to read:
6-124. Investigations; compelling testimony and the production of documents; self-incrimination
A. The superintendent deputy director may conduct examinations and investigations within or outside this state to determine whether any person has engaged, is engaging or is about to engage in any act, practice or transaction which constitutes an unsafe or unsound practice or a violation of any law or rule applicable to persons subject to the jurisdiction of the superintendent deputy director or any order of the superintendent deputy director or to aid in the enforcement of this title or to aid in adopting rules.
B. The superintendent deputy director and any examiner or administrative law judge, in the performance of the superintendent's deputy director's, examiner's or administrative law judge's duties, may take evidence, examine on oath any person and compel the attendance of witnesses and the production of documents, books and papers. Upon On refusal to appear or produce, the superintendent deputy director may apply to the superior court in Maricopa county to compel appearance or production.
C. All financial institutions and enterprises shall, upon on request of the superintendent deputy director, make their books and records available for inspection and examination by the superintendent deputy director or the superintendent's deputy director's examiners.
Sec. 7. Section 6-125, Arizona Revised Statutes, is amended to read:
6-125. Annual examination assessment of financial institutions and enterprises; costs of foreign examination; payment
A. Before August 31 of each year the superintendent deputy director shall make the following annual assessments:
1. Upon On banks, the annual assessment set by the superintendent deputy director.
2. Upon On savings and loan associations, a charge not to exceed the annual assessment set for state banks under paragraph 1 of this subsection.
3. Upon On credit unions, the annual assessment set by the superintendent deputy director.
B. The superintendent deputy director shall assess against the institution or enterprise examined a charge at the rate set by the superintendent deputy director but not to exceed sixty-five dollars $65 per hour for each examiner employed in the following examinations:
1. Any examination of a trust company.
2. Any examination of the trust operation of a bank or a savings and loan association.
3. Any examination of a financial institution ordered by the superintendent deputy director in addition to the regular examination required under section 6-122.
4. Any examination of an enterprise ordered by the superintendent deputy director.
5. Any examination of a financial institution holding company or international banking facility.
6. Any examination of a consumer lender.
C. For a financial institution or enterprise maintaining an office outside this state, in addition to the annual assessment or examination assessment, the superintendent deputy director shall make an assessment equal to the travel and subsistence expense incurred in the examination of the office in the foreign state or country. Notwithstanding any other limitation prescribed by law, examiners engaged in examination of a foreign office shall be reimbursed for their necessary travel and subsistence expenses. Reimbursement for examiners' expenses shall be credited to the appropriation account of the department.
D. Assessments under this section are due and payable to the department within thirty days after notice of the assessment is mailed by the department. The superintendent deputy director shall assess a penalty of fifty dollars $50 for each day after the thirty-day period that the financial institution or enterprise fails to remit the assessment, unless, upon on good cause shown, a written request for an extension is approved by the superintendent deputy director prior to the expiration of the specified time. In no event shall the total penalty exceed the examination assessment.
E. The superintendent deputy director shall set the amount of the annual assessment to be charged to banks and credit unions. In setting the annual assessment upon on banks, the superintendent deputy director shall consider the annual assessment set by the comptroller of currency for national banks. In setting the annual assessment upon on credit unions the superintendent deputy director shall consider the annual assessment set by the national credit union administration for federal credit unions.
Sec. 8. Section 6-126, Arizona Revised Statutes, is amended to read:
6-126. Application fees for financial institutions and enterprises
A. The following nonrefundable fees are payable to the department with the filing of the following applications:
1. To apply for a banking permit, one thousand dollars $1,000.
2. To apply for an amendment to a banking or savings and loan association permit, one thousand dollars $1,000.
3. To establish each banking branch office, seven hundred fifty dollars $750.
4. To move a banking office to other than an established office of a bank, one thousand dollars $1,000.
5. To apply for a savings and loan association permit, five thousand dollars $5,000.
6. To establish each savings and loan association branch office, one thousand five hundred dollars $1,500.
7. To move an office of a savings and loan association to other than an established office, one thousand dollars $1,000.
8. To organize and establish a credit union, one hundred dollars $100.
9. To establish each credit union branch or to move a credit union office to other than an established office of a credit union, two hundred fifty dollars $250.
10. To organize and establish any other financial institutions for which an application or investigation fee is not otherwise provided by law, one thousand dollars $1,000.
11. To acquire control of a financial institution other than a consumer lender, five thousand dollars $5,000.
12. To apply for a trust company license, one thousand dollars $1,000.
13. To apply for a commercial mortgage banker, mortgage banker, escrow agent or consumer lender license, one thousand dollars $1,000.
14. To apply for a mortgage broker, commercial mortgage broker, sales finance company or debt management company license, five hundred dollars $500.
15. To apply for a collection agency license, one thousand five hundred dollars $1,500.
16. To apply for a deferred presentment company license, one thousand dollars.
17. 16. To apply for a branch office of an escrow agent, consumer lender, commercial mortgage banker, mortgage banker, or trust company, money transmitter, collection agency or deferred presentment company, five hundred dollars $500.
18. 17. To apply for a branch office of a mortgage broker, commercial mortgage broker, debt management company or sales finance company, two hundred fifty dollars $250.
19. To apply for approval of the articles of incorporation of a business development corporation, five hundred dollars.
20. 18. To apply for approval for the merger or consolidation of two or more financial institutions, five thousand dollars $5,000 per institution.
21. 19. To apply for approval to convert from a national bank or federal savings and loan charter to a state chartered institution, one thousand dollars $1,000.
22. 20. To apply for approval to convert from a federal credit union to a state chartered credit union, five hundred dollars $500.
23. 21. To apply for approval to merge or consolidate two or more credit unions, five hundred dollars $500 per credit union.
24. To move an established office of an enterprise to other than an established office, fifty dollars.
25. To issue a duplicate or replace a lost enterprise's license, one hundred dollars.
26. To change a responsible person on a mortgage broker's, commercial mortgage broker's, commercial mortgage banker's or a mortgage banker's license, two hundred fifty dollars.
27. To change an active manager on a collection agency license or a manager of a money transmitter branch office license, two hundred fifty dollars.
28. 22. To change the licensee name on a financial institution or enterprise license, except for a loan originator or appraiser license, not more than two hundred fifty dollars $250.
29. 23. To apply for a money transmitter license, one thousand five hundred dollars $1,500 plus twenty-five dollars $25 for each branch office and authorized delegate to a maximum of four thousand five hundred dollars $4,500.
30. 24. To acquire control of any money transmitter or controlling person pursuant to chapter 12 of this title, two thousand five hundred dollars $2,500.
31. 25. To receive the following publications:
(a) Quarterly bank and savings and loan statement of condition, not more than ten dollars $10 per copy.
(b) Monthly summary of actions report, not more than five dollars $5 per copy.
(c) A list of licensees, a monthly pending actions report and all other in-house prepared reports or listings made available to the public, not more than one dollar $1 per page.
32. 26. To apply for a loan originator license, an amount to be determined by the superintendent deputy director.
33. 27. To apply for a loan originator license transfer, an amount to be determined by the superintendent deputy director.
34. 28. To apply for a conversion from a mortgage banker license to a mortgage broker license, an amount to be determined by the superintendent deputy director.
29. For a premium finance company, $300 plus $300 for each branch office.
30. For an advance fee loan broker, $50.
B. On application for a license or permit for an enterprise or consumer lender, the applicant shall pay the first year's annual assessment listed in subsection D of this section, prorated according to the number of quarters remaining until the date of the next annual assessment or renewal. If the result of the application ends in a denial, the department shall refund the prorated annual assessment that the applicant paid. Annual renewal fees are nonrefundable.
B. C. On issuance of a license or permit for a financial institution or enterprise, the superintendent department shall collect the first year's annual assessment or renewal fee for the financial institution, or enterprise except for a consumer lender that paid on application, prorated according to the number of quarters remaining until the date of the next annual assessment or renewal.
C. D. The following annual assessments and renewal fees shall be paid each year:
1. For an escrow agent or trust company, one thousand dollars $1,000 plus two hundred fifty dollars $250 for each branch office.
2. For a debt management company or sales finance company, five hundred dollars $500 plus two hundred dollars $200 for each branch office.
3. For a collection agency, six hundred dollars plus two hundred dollars for each branch office $600.
4. For an inactive mortgage broker or commercial mortgage broker, two hundred fifty dollars $250.
5. For a mortgage banker that negotiates or closes in the aggregate one hundred loans or less in the immediately preceding calendar year, seven hundred fifty dollars $750, and for a mortgage banker that negotiates or closes in the aggregate over one hundred loans in the immediately preceding calendar year, one thousand two hundred fifty dollars $1,250. In addition, a mortgage banker shall pay two hundred fifty dollars $250 for each branch office.
6. For a commercial mortgage banker, one thousand two hundred fifty dollars $1,250. In addition, a commercial mortgage banker shall pay two hundred fifty dollars $250 for each branch office.
7. For a mortgage broker or commercial mortgage broker that negotiates or closes in the aggregate fifty loans or less in the immediately preceding calendar year, two hundred fifty dollars $250 and for a mortgage broker or commercial mortgage broker that negotiates or closes in the aggregate more than fifty loans in the immediately preceding calendar year, five hundred dollars $500. In addition, a mortgage broker or commercial mortgage broker shall pay two hundred dollars $200 for each branch office.
8. For a consumer lender, one thousand dollars $1,000 plus two hundred dollars $200 for each branch office.
9. For a money transmitter, five hundred dollars $500 plus twenty-five dollars $25 for each branch office and each authorized delegate to a maximum of two thousand five hundred dollars $2,500.
10. For a deferred presentment company, four hundred dollars. In addition, a deferred presentment company shall pay two hundred dollars for each branch office.
11. 10. For a loan originator, an amount to be determined by the superintendent deputy director.
12. 11. For an inactive status a loan originator change to inactive status, an amount to be determined by the superintendent deputy director.
D. The license, renewal or branch office permit fee for a premium finance company for each calendar year or part of a calendar year shall not be less than one hundred dollars or more than three hundred dollars as set by the superintendent. If the license is issued or the branch office is opened after June 30 in any year, the fees shall not be less than fifty dollars or more than one hundred fifty dollars for that year.
12. for a premium finance company, $300 plus $300 for each branch office.
13. For an advance fee loan broker, $25.
Sec. 9. Section 6-128, Arizona Revised Statutes, is amended to read:
6-128. Joint examinations; acceptance of federal regulatory and other authorized examinations
A. The examination of a financial institution or enterprise may be made in coordination with any authorized federal examination or an examination by another state. The superintendent deputy director in his the deputy director's discretion may accept the examination report or other information compiled or generated by a federal regulatory authority or by another state regulatory authority that has jurisdiction over the financial institution or enterprise in lieu of any examination authorized or required by the laws of this state. Acceptance of the examination reports shall not be a waiver of the examination assessments provided by law, and reports so accepted are considered for all purposes as an official report of the department.
B. The superintendent deputy director may take any reasonable and lawful action to coordinate the examination of financial institutions or enterprises, including:
1. Negotiating and entering into cooperative agreements with an agency of another state or of the federal government.
2. Sharing information and reports with persons as prescribed by section 6-129.
Sec. 10. Section 6-129.01, Arizona Revised Statutes, is amended to read:
6-129.01. Enterprise documents open to public inspection
All papers, documents, reports and other written instruments filed with the superintendent deputy director pursuant to the requirements of this title by an enterprise shall be open to public inspection, except that the superintendent deputy director may withhold from public inspection for such time as he the deputy director considers necessary any information which in his the deputy director's judgment the public welfare or the welfare of the financial enterprise requires to be so withheld.
Sec. 11. Section 6-131.01, Arizona Revised Statutes, is amended to read:
6-131.01. Appointment of deputy director as receiver; award of property, fees and costs
A. The superintendent deputy director may be appointed as a receiver of a financial institution or enterprise under his the deputy director's supervision. No bond is required of the superintendent deputy director for acting as a receiver.
B. All reasonable expenses of the department relating or apportioned to a receivership, including receiver fees and attorney fees, costs of preliminary or other examinations of the person placed into receivership and expenses relating to the management of any office or other asset of the person placed in receivership, shall be awarded by the court for payment to the department out of the assets of the receivership. The department shall assess those expenses against the receivership quarterly and shall deposit those amounts in the department receivership revolving fund, as provided in section 6-135.01. Those assessments have priority over the other creditors of the receivership. Notwithstanding the other provisions of this subsection, on request by the superintendent deputy director, the court may award personal property of the receivership to the department as partial compensation for the services rendered during the administration of the receivership.
C. The superintendent deputy director shall maintain a complete accounting of each receivership in which he the deputy director is appointed as receiver.
Sec. 12. Section 6-132, Arizona Revised Statutes, is amended to read:
6-132. Violation of title; civil penalty
The superintendent deputy director may assess a civil penalty in an amount of not more than five thousand dollars $5,000 against a person, including any officer, director, employee, agent or other person who participates in the conduct of the affairs of the person, for any knowing violation of any provision of this title or of any rule or order adopted or issued pursuant to this title. If the assessment is not paid in full within thirty days after the service of the notice of the assessment on the person, the attorney general, on request of the superintendent deputy director, shall bring an action in the superior court in the county in which a violation of this section is alleged to have occurred in the same manner as the filing of other actions. On the finding of a knowing violation of this section by the defendant in any such action, the court may enforce the civil penalty imposed by the superintendent deputy director or may impose a different civil penalty in an amount as it deems appropriate for each violation. Each day of violation constitutes a separate offense.
Sec. 13. Section 6-133, Arizona Revised Statutes, is amended to read:
6-133. Violations; classification
A. Any person who knowingly violates any provision of this title for which a different penalty is not specifically provided or knowingly violates any rule, regulation or order issued or promulgated pursuant to this title is guilty of a class 6 felony. Each day of violation shall constitute a separate offense.
B. Any person who knowingly makes any false statement, misrepresentation or false certification in any application, record, report, plan or other document filed or required to be maintained pursuant to this title or under any license, certificate, rule, regulation or order issued pursuant to this title with intent to deceive the superintendent deputy director is guilty of a class 3 felony.
C. Any person who knowingly makes any false entry or omits a material entry in any record, report or statement of a financial institution with intent to injure or defraud the financial institution or to deceive the superintendent deputy director or any agent or examiner appointed by the superintendent deputy director to examine the affairs of the financial institution is guilty of a class 3 felony.
Sec. 14. Section 6-135, Arizona Revised Statutes, is amended to read:
6-135. Department revolving fund; use of fund
A. There is established a department revolving fund to be administered by the superintendent deputy director under the conditions and for the purposes provided by this section. Monies in the fund are exempt from the provisions of section 35-190, relating to the lapsing of appropriations.
B. Any investigative costs, attorney fees or civil penalties recovered for the state by the attorney general or the superintendent deputy director as a result of actions brought pursuant to this title, whether by final judgment, settlement or otherwise, shall be deposited in the department revolving fund. If the unencumbered portion of the fund exceeds two hundred thousand dollars $200,000 at the end of the fiscal year, all unencumbered monies in excess of two hundred thousand dollars $200,000 shall be deposited in the department receivership revolving fund, pursuant to section 6-135.01.
C. The monies in the fund shall be used by the superintendent deputy director and the attorney general for investigative proceedings or for purposes of instituting and prosecuting civil actions pursuant to this title.
D. On or before the fifteenth day of February, May, August and November of each year, the superintendent deputy director shall file with the governor, with copies to the director of the department of administration, the president of the senate and the speaker of the house of representatives, a full and complete account of the receipts and disbursements from the fund in the previous calendar quarter.
Sec. 15. Section 6-135.01, Arizona Revised Statutes, is amended to read:
6-135.01. Department receivership revolving fund; use of fund
A. The department receivership revolving fund is established to be administered by the superintendent deputy director. The fund shall consist of monies from the following sources:
1. Monies awarded and received as fees and costs in receiverships in which the superintendent deputy director was the receiver, as provided in section 6-131.01.
2. Monies received from the department revolving fund, as provided in section 6-135, subsection B.
B. Monies in the fund may be used to pay any costs incurred by the division arising out of the administration of a receivership in which the superintendent deputy director is the receiver.
C. The director shall submit to the legislature with the department's annual budget request a full and complete account of the department receivership revolving fund through the end of its most recent fiscal year.
Sec. 16. Section 6-137, Arizona Revised Statutes, is amended to read:
6-137. Cease and desist orders; injunctions; public inspection
A. If it appears to the superintendent deputy director that any person has engaged, is engaging or is about to engage in any act, practice or transaction which that constitutes a violation of this title or any rule or order of the superintendent deputy director or a violation of any federal insurance regulation as determined by the appropriate federal regulatory authority in writing, the superintendent deputy director may issue an order directing the person and directors, officers, employees and agents of the person to cease and desist from engaging in the act, practice or transaction or doing any act in furtherance of the act, practice or transaction and to take appropriate affirmative action, within a reasonable period of time as prescribed by the superintendent deputy director, to correct the conditions resulting from the act, practice or transaction.
B. If it appears to the superintendent deputy director that any financial institution or enterprise or any officer, director, employee, agent or other person participating in the conduct of the affairs of the financial institution or enterprise has engaged, is engaging or is about to engage in any act, practice or transaction which that constitutes an unsafe or unsound practice or a violation of any order of the superintendent deputy director, applicable law or rule, written agreement entered into with the superintendent deputy director or condition imposed in writing by the superintendent deputy director in connection with the granting of any application or other request by the financial institution or enterprise, the superintendent deputy director may issue an order directing the financial institution or enterprise or any director, officer, employee, agent or other person participating in the conduct of the affairs of the financial institution or enterprise to cease and desist from engaging in the act, practice or transaction or doing any act in furtherance of the act, practice or transaction and to take appropriate affirmative action, within a reasonable period of time as prescribed by the superintendent deputy director, to correct the conditions resulting from the act, practice or transaction.
C. An order issued by the superintendent deputy director under this section becomes effective at the time of service and remains effective and enforceable except to the extent that it is stayed, modified, terminated or set aside by the superintendent deputy director or a reviewing court pursuant to this article.
D. A person aggrieved by an order issued by the superintendent deputy director under this section may request a hearing pursuant to title 41, chapter 6, article 10. After requesting a hearing, the person may move that the order be stayed or modified pending the hearing. If the order is not stayed or modified or the motion is not acted on within ten days, the person may apply to the superior court for an order for relief.
E. If it appears to the superintendent deputy director that a person has engaged, is engaging or is about to engage in an act, practice or transaction which that constitutes a violation of this title or any rule or order of the superintendent deputy director or a violation of any federal insurance regulation as determined by the appropriate federal regulatory authority, the superintendent deputy director may apply to the superior court in Maricopa county for any of the following:
1. An injunction enjoining the person from engaging in the act, practice or transaction or from doing any act in furtherance of the act, practice or transaction, and upon on a showing by the superintendent deputy director that the person has engaged, is engaging or is about to engage in an act, practice or transaction in violation of this title, any other applicable law or any rule or order of the superintendent deputy director the court shall grant without bond a temporary restraining order, preliminary injunction or permanent injunction.
2. An order granting additional relief as may be available under this title.
F. The court shall give an action brought pursuant to this section precedence over all other civil actions.
G. An order that is issued by the superintendent deputy director under this section to a person, financial institution or financial enterprise that has engaged or is engaging in a violation that relates to unlicensed activity shall be open to public inspection.
Sec. 17. Section 6-138, Arizona Revised Statutes, is amended to read:
6-138. Hearings
The superintendent deputy director or an administrative law judge shall conduct hearings, including hearings relating to orders of the superintendent deputy director granting, denying, revoking or suspending a permit, certificate or license provided for under this title, in accordance with title 41, chapter 6, article 10.
Sec. 18. Section 6-139, Arizona Revised Statutes, is amended to read:
6-139. Judicial review
Except as provided in section 41-1092.08, subsection H, a final decision of the superintendent deputy director is subject to judicial review pursuant to title 12, chapter 7, article 6 if the complaint seeking review is filed with the superior court in Maricopa county and served on the superintendent deputy director.
Sec. 19. Section 6-141, Arizona Revised Statutes, is amended to read:
6-141. Definitions
In this article, unless the context otherwise requires:
1. "Acquisition of control" means any transaction whereby a person obtains, directly or indirectly, control of a bank, trust company, savings and loan association or controlling person.
2. "Control" means direct or indirect ownership of or power to vote fifteen per cent twenty-five percent or more of the outstanding voting securities of a bank, trust company, savings and loan association or controlling person or to control in any manner the election of a majority of the directors of a bank, trust company, savings and loan association or controlling person. For the purposes of determining the percentage of voting securities owned, controlled or held by a person, there shall be aggregated with the voting securities attributed to such person the voting securities of any other person directly or indirectly controlling, controlled by or under common control with such other person or by any officer, partner, employee or agent of such person, or by any spouse, parent or child of such person.
3. "Controlling person" means any person directly or indirectly in control of a bank, trust company or savings and loan association.
4. "Person" means an individual, corporation, partnership, association, trust, or agency or any similar entity.
5. "Voting security" means any security presently entitling the owner or holder of such security to vote for the election of directors of a bank, trust company, savings and loan association or controlling person, excluding, in the case of a savings and loan association, votes attributable to savings accounts. A specified percentage of outstanding voting securities means such amount of the outstanding voting securities as entitles the holder or holders of such securities to cast that specified percentage of the aggregate votes which that the holders of all the outstanding voting securities are entitled to cast.
Sec. 20. Section 6-142, Arizona Revised Statutes, is amended to read:
6-142. Unlawful control
A person shall not directly or indirectly acquire control of a bank, trust company, savings bank, savings and loan association or controlling person, except with the approval of the superintendent deputy director or as otherwise permitted allowed by this article.
Sec. 21. Section 6-143, Arizona Revised Statutes, is amended to read:
6-143. Exempt persons and transactions
A. This article shall not apply to the following persons or transactions of the type specified:
1. A person who controls a bank, trust company or savings and loan association or controlling person on the date this article becomes law and who continues to control such bank, trust company, or savings and loan association.
2. A registered dealer who acts as an underwriter or member of a selling group in a public offering of the voting securities of a bank, trust company, savings and loan association or controlling person.
3. A person who acts as proxy for the sole purpose of voting at a designated meeting of the security holders of a bank, trust company, savings and loan association or controlling person.
4. A person who acquires control of a bank, trust company, savings and loan association or controlling person by devise or descent.
5. A person who acquires control of a bank, trust company, savings and loan association or controlling person as a personal representative, custodian, guardian or conservator appointed by a court or as a trustee, receiver or other officer appointed by a court.
6. A pledgee of a voting security of a bank, trust company, savings and loan association or controlling person who does not have the right, as pledgee, to vote such voting security.
7. A transaction approved pursuant to chapter 2, article 7 of this title.
B. There shall be exempted from the provisions of this article any person or transaction which that the superintendent deputy director by rule or order exempts as not being necessary or appropriate in the public interest or for the protection of a bank, trust company, savings bank or savings and loan association, or the depositors, beneficiaries, creditors or shareholders of such bank, trust company, savings bank or savings and loan association.
C. A person may, prior to filing an application for approval, may request in writing a determination from the superintendent deputy director as to whether such the person, upon on consummation of a proposed transaction, will be in control. Upon On such a request, the superintendent deputy director may enter an order that the person will not be in control, in which event the proposed transaction will be an exempt transaction under this article.
Sec. 22. Section 6-144, Arizona Revised Statutes, is amended to read:
6-144. Acquisition of control; approval of deputy director
A person shall not, directly or indirectly, make a tender offer for, request or invite a tender offer for, offer to exchange securities for or acquire in the open market or otherwise, any voting security or any security convertible into a voting security of a bank, trust company, savings and loan association or controlling person if such a transaction would result in the person acquiring control of a bank, trust company or savings and loan association or controlling person unless the superintendent deputy director has approved such acquisition of control, except that nothing in this section shall does not prohibit a person from negotiating or entering into agreements subject to the condition that the acquisition of control will not be effective until approval of the superintendent deputy director is obtained.
Sec. 23. Section 6-145, Arizona Revised Statutes, is amended to read:
6-145. Application for approval
A. An application for approval of the superintendent deputy director shall be in writing in such form as the superintendent deputy director may prescribe and shall be accompanied by such information, data and records as the superintendent deputy director may require. For such purpose the superintendent deputy director shall adopt rules prescribing the form and the information, data or records which that may be required.
B. Upon On receipt of any initial application for approval or any amendment or supplement to such the application, the superintendent deputy director shall cause copies of such the application, amendment or supplement to be given to the bank, trust company or savings and loan association concerned within three business days.
Sec. 24. Section 6-146, Arizona Revised Statutes, is amended to read:
6-146. Material change of fact; filing amended statements
If any material change occurs in the facts set forth in the application, or if for any other reason the acquiring party desires to amend such application, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the superintendent deputy director.
Sec. 25. Section 6-147, Arizona Revised Statutes, is amended to read:
6-147. Denial of application; grounds
A. With respect to the proposed acquisition of control of a bank, trust company, savings and loan association or controlling person, an application shall be denied if the superintendent deputy director finds any of the following:
1. That the financial condition of any person who would acquire control is such as may jeopardize the financial stability of the bank, trust company or savings and loan association, or prejudice the interests of the depositors, beneficiaries, creditors and shareholders of the bank, trust company or savings and loan association.
2. That a plan or proposal to liquidate the bank, trust company or savings and loan association, to merge or consolidate the bank, trust company or savings and loan association or to make any other major change in the business, corporate structure or management of the bank, trust company or savings and loan association is not fair and reasonable to the depositors, beneficiaries, creditors or shareholders of the bank, trust company or savings and loan association.
3. That the overall moral character or integrity of any person who would acquire control indicates that it would not be in the interest of the depositors, beneficiaries, creditors or shareholders of the bank, trust company or savings and loan association, or in the interest of the public, to permit allow such a person to control the bank, trust company or savings and loan association.
4. That the applicant neglects, fails or refuses to furnish to the superintendent deputy director any information required by the superintendent deputy director.
5. That it is contrary to law.
B. The superintendent deputy director may, in approving a proposal to acquire control of a bank, trust company or savings and loan association, impose such conditions as he the deputy director deems reasonable, necessary or advisable in the public interest.
Sec. 26. Section 6-148, Arizona Revised Statutes, is amended to read:
6-148. Failure to act on application as approval
A. Notwithstanding any other provision of this article, any application for approval to acquire control of a bank, trust company, savings and loan association or controlling person which that is not denied or approved by the superintendent deputy director within a period of sixty days after such application is filed with the superintendent deputy director or if the applicant consents to an extension of the period within which the superintendent deputy director may act, within such extended period, shall be deemed to be approved by the superintendent deputy director as of the first day after such period of sixty days or such extended period. If the superintendent deputy director gives notice of a hearing, the sixty-day period shall be extended to such date as may be fixed by order of the superintendent deputy director.
B. For purposes of this section, an application for approval is deemed to be filed with the superintendent deputy director at the time when the complete application, including any amendments or supplements, containing all the information in the form required by the superintendent deputy director, is received by the superintendent deputy director.
Sec. 27. Section 6-149, Arizona Revised Statutes, is amended to read:
6-149. Determination of control of one person by another; hearing; notice
Before determining whether a person controls another person or before denying or approving an application for approval to acquire control of a bank, trust company, savings and loan association or controlling person the superintendent deputy director may hold a hearing. Notice of such hearing shall be given by the superintendent deputy director to the applicant, the bank, trust company, savings and loan association or controlling person concerned and to such other persons as the superintendent deputy director determines appropriate. The date for commencement of the hearing shall not be later than thirty days after the date of the notice, unless the applicant consents to an extension of such period.
Sec. 28. Section 6-150, Arizona Revised Statutes, is amended to read:
6-150. Appointment of deputy director as agent for service of process; forwarding of process; consent to jurisdiction
Any person who is not a resident of this state, domiciled in this state or authorized to do business in this state and who files an application is deemed to have:
1. Consented to the jurisdiction of the courts of this state for all actions arising under the provisions of this article.
2. Appointed the superintendent deputy director as his the person's lawful agent for the purpose of accepting service of process in any action, suit or proceeding that may arise under this article. Copies of all such lawful process accepted by the superintendent deputy director as an agent shall be transmitted by the superintendent deputy director by registered mail to such person at his the person's last known address.
Sec. 29. Section 6-151, Arizona Revised Statutes, is amended to read:
6-151. Injunctions
If it appears to the superintendent deputy director that any person has committed or is about to commit a violation of any provision of this article or of any rule or order of the superintendent deputy director, the superintendent deputy director may apply to the superior court for an order enjoining such person from violating or continuing to violate this article or any regulation or order and for injunctive or other relief as the nature of the case or the interests of the bank, trust company or savings and loan association, the depositors, beneficiaries, creditors or shareholders of such bank, trust company or savings and loan association may require.
Sec. 30. Section 6-153, Arizona Revised Statutes, is amended to read:
6-153. Acquisition of voting securities in violation of article; limitation on rights as shareholder; injunction
A. With respect to any voting security acquired in violation of this article or any rule or order of the superintendent deputy director, a person shall not be entitled to vote or give a written proxy or consent for a period of five years after such acquisition except with the written consent of the superintendent deputy director. If a voting security of a bank, trust company, savings and loan association or controlling person is acquired in violation of this article or any rule or order, any shareholder of such bank, trust company, savings and loan association, or controlling person or the superintendent deputy director may apply to the superior court for injunctive or other equitable relief, including costs and reasonable attorney fees, to enjoin prospectively any person from voting or giving any written proxy or consent with respect to such voting security for a period of five years after such acquisition except with the written consent of the superintendent deputy director. The superintendent deputy director may apply to the superior court for injunctive or other relief, including costs, to void any vote or any giving of a written proxy or consent with respect to such security which that has occurred since such acquisition, except that no vote may be voided if the court finds that to void such vote would not be in the interest of the depositors, beneficiaries, creditors or shareholders of the bank, trust company, savings and loan association or controlling person, or in the public interest.
B. An application for consent of the superintendent deputy director may be filed with the superintendent deputy director by any person and shall be granted or denied within thirty days. In giving consent, the superintendent deputy director may require such conditions as the superintendent deputy director deems reasonable, necessary or otherwise in the public interest. Except as provided in section 41-1092.08, subsection H, the action of the superintendent deputy director shall be an order subject to judicial review pursuant to title 12, chapter 7, article 6 if the complaint seeking review is filed with the superior court in Maricopa county.
C. A civil action shall not be brought to void any vote pursuant to subsection A of this section unless commenced within one year after the transaction which constituted a violation of this article or any rule or order of the superintendent deputy director.
Sec. 31. Section 6-161, Arizona Revised Statutes, is amended to read:
6-161. Suspension, removal or prohibition; hearing; notice
A. The superintendent deputy director, subject to the requirements of this article, may remove or suspend from office or prohibit from participating in any of the affairs of a financial institution or enterprise any director, officer, employee, agent or other person participating in the conduct of the affairs of the financial institution or enterprise if he finds that the director, officer, employee, agent or other person participating in the conduct of the affairs of the financial institution or enterprise has engaged in any of the following:
1. Any act, omission or practice in any business transaction which demonstrates personal dishonesty or unfitness to continue in office or participate in the conduct of the affairs of the financial institution or enterprise.
2. A wilful violation of an order of the superintendent deputy director.
3. Refusal to testify or produce records in response to a subpoena issued by the superintendent deputy director.
4. A conviction of a crime, an essential element of which is fraud, misrepresentation or deceit.
5. Any activity described in 12 United States Code section 1818(e)(1). For the purposes of this paragraph, all references to the appropriate federal banking agency are to the superintendent deputy director.
6. Any violation of this title relative to the financial institution or enterprise.
7. Any act, practice or transaction which that in any way would jeopardize the safety and soundness of the financial institution.
B. The superintendent deputy director may issue and serve upon on the person involved, named as respondent, a written notice of the superintendent's deputy director's order of suspension or intention to remove him the person from office or to prohibit him the person from further participation in any manner in the conduct of the affairs of the financial institution or enterprise. A copy of the notice shall also be served on the financial institution or enterprise. The notice shall contain a statement of the alleged facts and fix a time and place at which a hearing shall be held. The hearing shall be fixed for a date not earlier than thirty days nor later than sixty days after the date of service of the notice, unless an earlier or a later date is set for good cause shown. If the respondent without excusable neglect fails to answer the charges, or if on the record made at the hearing the superintendent deputy director finds that any of the charges specified in the notice has been established and constitutes grounds for suspension or removal from office or prohibition from participation in the conduct of the affairs of the financial institution or enterprise, the superintendent deputy director may issue the appropriate order. The order becomes effective at the time specified in the order after service on the respondent and remains effective unless stayed, modified, terminated or set aside by action of the superintendent deputy director or a reviewing court.
C. The resignation, termination of employment or participation, or separation of the person involved does not affect the jurisdiction and authority of the superintendent deputy director to issue any notice and proceed under this section against that person.
D. Notwithstanding section 6-129, an order issued pursuant to this section which that has become final is open to public inspection, except that the superintendent deputy director may withhold from public inspection for such time as he the deputy director considers necessary any information which that in his the deputy director's judgment the public welfare or the welfare of the financial institution requires to be so withheld.
E. If a removal order has become final, a financial institution or enterprise may not employ the person against whom it was issued without the prior written approval of the superintendent deputy director.
Sec. 32. Section 6-162, Arizona Revised Statutes, is amended to read:
6-162. Temporary prohibition; injunction
A. If the superintendent deputy director determines from the available facts that the conduct of the respondent is likely to cause the financial institution or enterprise to suffer substantial financial loss before an order can be issued under section 6-161, the superintendent deputy director may issue a temporary order prohibiting the respondent from further participation in any manner in the conduct of the affairs of the financial institution or enterprise. The order shall contain a statement of the alleged facts which form the basis of the order and becomes effective on service on the respondent. A copy of the order shall also be served on the financial institution or enterprise. The order expires by its terms within such time after entry, not to exceed twenty days, as the superintendent deputy director fixes, unless the respondent consents to a longer period or within the time fixed in the order it is extended by supplemental order issued by the superintendent deputy director and served on the respondent and the financial institution or enterprise. On two days' notice to the financial institution or enterprise the respondent may move that the superintendent deputy director stay, dissolve or modify the order, and the superintendent deputy director shall proceed to hear and determine such motion as expeditiously as justice requires.
B. The respondent served with a temporary order may apply to the superior court for a stay of the order pending the completion of the administrative proceedings under section 6-161, and the court has jurisdiction to stay the order if the superintendent deputy director has refused to stay the order or to promptly consider the respondent's request for a stay.
Sec. 33. Section 6-163, Arizona Revised Statutes, is amended to read:
6-163. Judicial review
Except as provided in section 41-1092.08, subsection H, any party to a proceeding under this article may obtain judicial review of any final order pursuant to title 12, chapter 7, article 6 other than an order issued with consent of the financial institution or enterprise or other person concerned if the complaint seeking review is filed with the superior court. The commencement of proceedings for judicial review shall not, unless specifically ordered by the court, operate as a stay of the order. During the pendency of the action for review, the superintendent deputy director may not modify, terminate or set aside the order except with permission of the court.
Sec. 34. Section 6-164, Arizona Revised Statutes, is amended to read:
6-164. Attorney fees and expenses
In any proceeding instituted under this article in which a director or officer is a party, and if the superintendent deputy director or court allows such party reasonable expenses and attorney fees, the superintendent deputy director or the court may provide that such expenses and fees shall be paid by the financial institution or enterprise from its assets with priority as an expense of administration in receivership.
Sec. 35. Section 6-165, Arizona Revised Statutes, is amended to read:
6-165. Enforcement of order
The superintendent deputy director may apply to the superior court for the enforcement of any effective and outstanding order issued under this article, and the court has jurisdiction to order and require compliance with the order. Except as otherwise provided in this article, a court has jurisdiction to affect by injunction or otherwise the issuance or enforcement of any order under this article or to review, modify, suspend, terminate or set aside any such order.
Sec. 36. Section 6-181, Arizona Revised Statutes, is amended to read:
6-181. Declaration of purposes
The purposes of this chapter, which shall govern judicial and administrative interpretation and application of the provisions of this chapter, are to provide for:
1. Safe and sound conduct of banks.
2. Conservation of bank assets.
3. Maintenance of public confidence in banks.
4. Protection of the interests of depositors and fiduciary beneficiaries and of the interest of the public in the soundness and preservation of the banking system.
5. Opportunity for banks to remain competitive with each other, with financial institutions existing under other laws of this state and with banking and financial institutions existing under the laws of other states, the United States and foreign countries.
6. Opportunity for banks to serve effectively the convenience and needs of their depositors, borrowers and other customers, to participate in and promote the economic progress of Arizona this state and the United States and to improve and expand their services and facilities for those purposes.
7. Opportunity for management of banks to exercise business judgment in conducting banking affairs subject to the provisions of this chapter.
8. Simplification and modernization of the law governing banking and governing the exercise of fiduciary and other representative powers by banks.
9. Implementation and execution of the provisions of this chapter by the full utilization of the rule making rulemaking and administrative discretions of the superintendent deputy director.
Sec. 37. Section 6-184, Arizona Revised Statutes, is amended to read:
6-184. General corporate and banking powers; incidental powers; deposit insurance; federal reserve and home loan bank membership; agency relationship
A. A corporation holding a banking permit under this chapter may:
1. Except as prohibited by law, exercise the powers derived from its existence as an Arizona corporation.
2. Except as prohibited by law, exercise any power and engage in any activity which it could exercise or engage in if it were a national banking association with a banking office in this state.
3. Directly or through a bank subsidiary engage in any lawful activity which that is reasonably related or incidental to banking. All activities in which any bank was lawfully engaged directly or through a subsidiary on December 31, 1971 are declared to be incidental and related to banking for the purposes of this paragraph.
4. Do the acts necessary to obtain and maintain insurance of its deposits by the federal deposit insurance corporation.
5. Do the acts necessary to acquire and hold membership in the federal reserve system or the federal home loan bank.
6. Except as prohibited by law, directly or through a bank subsidiary, make any loan or investment, offer accounts or engage in any business activity authorized for national banking associations, federal savings banks, or state or federally chartered or licensed savings and loan associations doing business in this state. This paragraph is subject to section 33-1571.
7. Except as prohibited by law and subject to such rules as the superintendent deputy director may adopt, through a bank subsidiary, invest in real estate in the state or interests therein, including corporations, partnerships, and joint ventures which that acquire, develop, improve, hold, lease, operate and sell real estate. This paragraph is subject to section 33-1571.
B. An in-state financial institution or an out-of-state financial institution may act as an agent of any other in-state financial institution or out-of-state financial institution that is a subsidiary of the same holding company for purposes of conducting the activities authorized by this subsection. This subsection applies regardless of whether the affiliated entities share the same home state. An in-state financial institution or an out-of-state financial institution entering into an agency relationship shall notify the superintendent deputy director of that agency relationship at least ten days before the effective date of that agency relationship. Agency relationships among affiliates shall be consistent with safe and sound business practices and shall comply with all applicable laws and rules. An in-state financial institution or an out-of-state financial institution acting as an agent is not deemed to be a branch of the affiliate solely because of activities lawfully conducted pursuant to this subsection. An in-state financial institution or an out-of-state financial institution that is acting as an agent for an affiliated entity may do any of the following:
1. Receive deposits.
2. Renew time deposits.
3. Service loans.
4. Receive payments on loans and other obligations.
5. Perform other customary banking services with the prior approval of the superintendent deputy director.
C. An in-state financial institution or an out-of-state financial institution acting as an agent as prescribed by subsection B of this section on behalf of an affiliated financial institution may not do any of the following:
1. Open demand, savings or time accounts.
2. Evaluate or approve loans.
3. Disburse loan monies.
4. Conduct any activity as an agent that it is prohibited from conducting as a principal under any applicable law or rule.
D. An in-state financial institution or an out-of-state financial institution that is acting as a principal as prescribed by subsection B of this section may not have its affiliated entity act as an agent on its behalf in conducting any of the following:
1. Any activity that is prohibited to the principal.
2. Any activity that is prohibited to the agent.
Sec. 38. Section 6-185, Arizona Revised Statutes, is amended to read:
6-185. Board of directors' meetings; review; report of failure of quorum to meet
A meeting of the board of directors of a bank shall be called each month or each quarter. The superintendent deputy director shall designate for each bank whether the board shall meet monthly or quarterly. The superintendent deputy director may change the designation at any time without providing the bank advanced advance notice. At the meetings, the board shall review the loans and investments and other material activities of the bank or review a report thereof prepared under the direction of the board as a regular item of business. The board shall keep minutes of all meetings including a record of attendance. If at any required meeting a majority of the members are not present, the bank shall notify the superintendent deputy director in writing of that fact.
Sec. 39. Section 6-186, Arizona Revised Statutes, is amended to read:
6-186. Annual audit and report
A. An audit of the affairs of the bank including an out-of-state bank shall be made annually as of the end of its fiscal year by or under the direction of the board of directors. The superintendent deputy director may prescribe certain minimum requirements of the audit and shall require the filing of a copy of the report covering the audit with the superintendent deputy director. The audit shall be filed with the superintendent deputy director not more than one hundred twenty days after the end of the bank's or out-of-state bank's fiscal year, unless the superintendent deputy director extends the time period for good cause shown. The audit is not a substitute for or in lieu of the examination by the superintendent deputy director required by section 6-122.
B. An out-of-state bank may satisfy an audit requirement by filing with the superintendent deputy director a copy of the audit report that is required by its home state regulator within fifteen days after filing that report with the home state.
Sec. 40. Section 6-187, Arizona Revised Statutes, is amended to read:
6-187. Authority to declare dividends; limitation
The board of directors of a bank may declare dividends as permitted allowed by the general laws governing Arizona corporations, except that dividends payable other than in the bank's own stock may be paid out of capital surplus only with the approval of the superintendent deputy director.
Sec. 41. Section 6-189, Arizona Revised Statutes, is amended to read:
6-189. Capital obligations; approval; convertibility
A. A capital obligation is an unsecured indebtedness of the bank subordinate to the claims of depositors and all other creditors of the bank regardless of whether the claims arose before or after the issuance of the note or debenture representing the capital obligation. In the event of liquidation all depositors and other creditors of the bank are to be paid in full before any payment of principal or interest is made on capital obligations.
B. No capital obligations shall be incurred without the prior order of approval of the superintendent deputy director. Capital obligations authorized by such order may be retired in accordance with the mandatory payment provisions of the obligation without further authorization. No payment shall be made under an optional right of payment reserved to the bank without the separate authorization of the superintendent deputy director, which may be granted in his the deputy director's initial order of approval or by subsequent order.
C. Capital obligations may be convertible into shares of any class of stock in accordance with their terms approved by the superintendent deputy director. No shareholder has any preemptive right to purchase capital obligations or to purchase stock issued upon conversion of capital obligations unless provided by the articles of incorporation or specified in the corporate authority to incur the obligation.
Sec. 42. Section 6-190, Arizona Revised Statutes, is amended to read:
6-190. Bank offices; standards and term of approval; closing; automated teller machines
A. A bank may establish banking offices anywhere in the world with the authorization of the superintendent deputy director and upon on such conditions as he the deputy director may prescribe. An application for a banking office shall be in writing in such form as the superintendent deputy director prescribes supported by such information, data and records as the superintendent deputy director may require to make the findings necessary for approval.
B. In granting the application for a banking office, the superintendent deputy director shall be guided by the standards prescribed for the issuance of a banking permit insofar as such standards are reasonably applicable.
C. The failure of a bank to open and operate a banking office within one year after the superintendent deputy director approves the application shall automatically terminate the approval, except that the superintendent deputy director, for good cause shown in writing made before the expiration of the one year one-year period, may extend for additional periods not in excess of six months each the time in which the banking office may be opened.
D. A bank may permanently close less than all of its banking offices on compliance with such requirements of notice as have been prescribed by the superintendent deputy director and such closing shall terminate the authority to maintain the office which is closed.
E. A bank may establish or maintain an automated teller machine at locations other than its places of business. The bank must send a notification letter to the superintendent deputy director at least thirty days before the automated teller machine is established pursuant to this subsection.
F. A bank may, without the approval of the superintendent deputy director and through contractual agreement with one or more other banks or automated teller machine providers, join in the operation of automated teller machine networks.
Sec. 43. Section 6-191, Arizona Revised Statutes, is amended to read:
6-191. Foreign banking offices; additional powers; separate accounts; additional offices; definition
A. In addition to its other powers, a bank may through any foreign banking office act as fiscal agent of the United States and, except as prohibited or limited by regulations of the superintendent deputy director, exercise such powers as are usual in connection with the business of banking in the places where such foreign banking office transacts its business.
B. The accounts of each foreign banking office shall be maintained independently of the accounts of all other banking offices and the profit or loss of the office for each fiscal year shall be recorded as a separate item in the general ledger of the bank.
C. A bank having a foreign banking office may, on thirty days' notice to the superintendent deputy director, or such shorter notice as may be approved by him the deputy director in individual cases, may establish such additional banking office or offices as specified in the notice in the same country without filing an application for approval, unless otherwise ordered by the superintendent deputy director,.
D. For the purposes of this section, the term "foreign banking office" means a banking office in a foreign country or in a dependency or insular possession of the United States.
Sec. 44. Section 6-192, Arizona Revised Statutes, is amended to read:
6-192. Investments in international and foreign banking and financing corporations; limitation; consent; exceptions
A. No bank may, without the consent of the superintendent deputy director, may invest in stock or other evidence of ownership in any of the following:
1. Corporations organized under the laws of the United States or any state and principally engaged in international or foreign banking or in other international or foreign financial operations, or in banking or other financial operations in a dependency or insular possession of the United States, either directly or through the agency, ownership or control of local institutions in foreign countries, or in such dependencies or insular possessions.
2. Banks organized under the laws of a foreign country or a dependency or insular possession of the United States. No investment shall be made in a foreign bank if it is engaged directly or indirectly in any activity in the United States unless the activity is in the judgment of the superintendent deputy director, incidental to the international or foreign business of such bank.
B. The aggregate amount invested in all banks and corporations described in subsection A of this section shall not exceed, at the time any such investment is made, twenty-five per cent percent of the capital account of the bank as defined in section 6-351.
C. The consent of the superintendent deputy director, for any investment under subsection A of this section shall be subject to such conditions as he the deputy director prescribes in his the deputy director's order of approval and the investment shall be subject to his regulations.
D. The provisions of subsections A and B of this section shall not apply to shares or evidences of ownership acquired by a bank in the regular course of securing or collecting a debt contracted in good faith but shares or evidence of ownership acquired in collecting a debt shall be disposed of within a reasonable time unless otherwise lawfully held under subsections A and B of this section.
Sec. 45. Section 6-202, Arizona Revised Statutes, is amended to read:
6-202. Existing banks
The authority under which an existing bank is engaged in the banking business or the banking and trust business under the laws of this state prior to the effective date of this article before August 8, 1973 shall continue in full force and effect. The superintendent deputy director, may, and shall upon on request, issue a banking permit to such bank to evidence such authority without any further act on the part of the bank or the payment of any fee.
Sec. 46. Section 6-203, Arizona Revised Statutes, is amended to read:
6-203. Application for banking permit; organizational application; final application
A. Except as otherwise provided in this section, an application for a banking permit or amendment to a banking permit shall be in writing, in such form as the superintendent deputy director may prescribe, and shall be supported by such information, data and records as the superintendent deputy director may require to make the findings necessary for the issuance or amendment of the permit.
B. The superintendent deputy director shall establish an organizational application process and a final application process for new banking permit applications. The organizational application must include:
1. The historical description of the organizing group.
2. The proposed type of regulatory filing for the bank.
3. The proposed committee structure and its membership.
4. The completed biographical and financial report for each organizer.
5. The completed background permission form for each organizer.
6. The business plan summary.
7. The financial plan reflecting both the objectives of the strategic plan and the bank's capital adequacy under the current capital guidelines.
8. The projected organizational budget for the project.
9. The articles of incorporation and the bylaws of the organizing corporation.
10. The proposed offering circular, escrow account information and stock certificate.
C. The department may accept an organizational application for a new banking permit without simultaneously filing with the federal deposit insurance corporation.
D. The final application for a new banking permit may begin at any time during the organizational phase. The required capital must be raised during the final application process.
Sec. 47. Section 6-204, Arizona Revised Statutes, is amended to read:
6-204. Issuance of banking permit; trust business; conditional approval; hearing; banker's bank; definitions
A. Upon On the filing of an application for a banking permit, the superintendent deputy director shall make or cause to be made an investigation and examination of the facts concerning the applicant. Except as provided in subsection F of this section, the superintendent deputy director shall issue the permit if, but only if, he the deputy director finds:
1. The applicant is a corporation organized under the laws of this state having powers and purposes to engage in the banking business.
2. The deposits of the bank will be insured by the federal deposit insurance corporation when the bank commences business.
3. The ability and integrity of the persons involved in the organization and management of the proposed bank are such as to demonstrate that it will be operated in a sound and lawful manner.
4. The applicant has paid in capital which is adequate for its prospective business.
5. The need for the bank in the community or area where the bank will be located is such as to demonstrate the favorable prospect for a sound banking operation.
B. An application which that is not denied or approved by the superintendent deputy director within ninety days after the application is filed with the superintendent deputy director is deemed to be approved by the superintendent deputy director as of the first day after the period.
C. A banking permit may initially or by amendment include the authority of a bank to engage in the trust business.
D. The superintendent deputy director may approve the application conditioned upon on specific requirements being met, but a permit shall not be issued unless such conditions have been met within the time specified in the order or any extension.
E. The permit may be granted or denied without a hearing, but the superintendent deputy director may, and shall at the request of the applicant, fix a date for a hearing on the application. At the hearing any person may be heard with reference to the facts to be investigated.
F. The superintendent deputy director shall not issue a banking permit pursuant to subsection A of this section for a banker's bank unless all of the following apply:
1. The stock of the applicant is owned exclusively by one or more state or nationally chartered banks or, if the stock is owned by a holding company, the holding company's stock is owned exclusively by one or more state or nationally chartered banks.
2. The applicant engages in or will engage exclusively in providing banking services to or for other depository institutions or their holding companies and the directors, officers or employees of the depository institutions.
3. The applicant offers or will offer correspondent banking services for other depository institutions or their holding companies.
4. The applicant is fully insured by the federal deposit insurance corporation.
5. No single entity acquires or retains at any time ownership, control or power to vote more than ten per cent percent of any class of voting securities of the banker's bank.
G. For purposes of this section:
1. "Banker's bank" means an entity that is owned exclusively by one or more state or nationally chartered banks or bank holding companies and that exclusively provides banking services to or for other depository institutions and their holding companies.
2. "Nationally chartered bank" means a bank or savings bank chartered by the office of the comptroller of the currency or the office of thrift supervision.
Sec. 48. Section 6-205, Arizona Revised Statutes, is amended to read:
6-205. Term of permit; surrender; revocation
A. A banking permit shall be valid until surrendered to the superintendent deputy director or revoked by him the deputy director.
B. No A banking permit may not be surrendered to the superintendent deputy director until such time as the superintendent deputy director finds that all of the deposit liabilities of the bank have been satisfied in full or assumed by another bank.
C. A banking permit expires automatically when a bank is placed in receivership.
Sec. 49. Section 6-212, Arizona Revised Statutes, is amended to read:
6-212. Resulting national bank
Nothing in the law of this state shall restrict the right of a state bank to merge with or convert into a national bank. The action to be taken by such merging or converting state bank and its rights and liabilities and those of its stockholders shall be as prescribed at the time of the action by the law of the United States, but the state bank shall give notice to the superintendent deputy director of the adoption by its board of directors of any plan of merger or conversion.
Sec. 50. Section 6-215, Arizona Revised Statutes, is amended to read:
6-215. Retention of nonconforming assets; permission; maximum value
If a merging or converting bank has assets which that do not conform to the requirements of law for a state bank or if assets acquired by a state bank in the transaction of its assuming deposit liabilities of another bank do not conform to such legal requirements, the superintendent deputy director may permit allow the resulting bank to retain such assets for a reasonable time, but shall fix the maximum value at which the assets may be carried by the resulting or assuming bank.
Sec. 51. Section 6-217, Arizona Revised Statutes, is amended to read:
6-217. Emergency acquisition of in-state financial institution
A. Notwithstanding any other provisions of law, an in-state financial institution or out-of-state financial institution may acquire an in-state financial institution if the superintendent deputy director determines that both of the following exist:
1. The in-state financial institution proposed to be acquired is in danger of being placed in receivership by the superintendent deputy director or the relevant federal agency.
2. The acquisition is necessary to protect the financial interests of the in-state financial institution's depositors and creditors.
B. The superintendent deputy director shall make his the deputy director's final determination under this section in writing.
Sec. 52. Section 6-234, Arizona Revised Statutes, is amended to read:
6-234. Deposit of minor; school saving plan
A. A bank may operate a deposit account in the name of a minor or in the name of two or more persons, one or more of whom are minors, and all rights and liabilities of the bank and any depositor arising out of such account and any act of the parties in relation thereto shall be of the same legal effect as if the minor is of full legal age.
B. Subject to such regulations as the superintendent deputy director may prescribe for the protection of depositors, a bank may contract with the proper authorities of any elementary or secondary school, or of any institution caring for minors, for the participation by the bank in any school or institutional thrift or savings plan, and it may accept deposits at such a school or institution, either by its own collector or by any representative of the school or institution who becomes the agent of the bank for such purpose.
Sec. 53. Section 6-241, Arizona Revised Statutes, is amended to read:
6-241. Banking days; notice; closing
A. A bank is authorized to fix from time to time the days and hours when each of its banking offices that are located in this state will be open to the public for its banking business. The days and hours need not be the same for each office. The bank shall notify the superintendent deputy director of the days and hours of each banking office and of any change in the scheduled days and hours of each office. The bank shall give further notice by whatever means it selects as best calculated to advise the public of any change.
B. In an emergency or threat of an emergency or other circumstances beyond the control of the bank which that would imperil persons or property or impede normal operations, all or any of its banking offices that are located in this state may be or remain closed. Notice of the closing shall be given to the superintendent deputy director as promptly as conditions will permit allow. The superintendent deputy director may order the reopening of any office on his the deputy director's finding that conditions justifying the closing under this subsection do not then exist.
C. Any day on which a bank shall pursuant to this section be or remain closed shall with respect to the bank be deemed a legal holiday.
D. Any office of a bank may be closed under subsection A or B of this section, even though other offices of the bank are open, but any day of such closing shall not be a legal holiday in respect to any acts to be performed by or at the bank on such day unless the act is to be performed only by or at the office which is closed.
E. Where pursuant to agreement or law any act is to be performed by or at a bank on any day when such bank shall pursuant to this section be or remain closed, the act may be performed on the next succeeding banking day with the effect as though performed on the appointed day.
F. Nothing in any law of this state shall in any manner whatsoever affect the validity of or render void or voidable the payment, satisfaction or acceptance of any check or other negotiable instrument or any other transaction by a bank because done or performed on any holiday or partial holiday or during any time other than regular banking hours, but nothing in this subsection shall be construed to does not compel a bank to perform any of the acts or transactions aforesaid except at its own option.
G. This section applies to out-of-state banks.
Sec. 54. Section 6-242, Arizona Revised Statutes, is amended to read:
6-242. Preservation of bank records; regulations; disposal
A. Every bank shall retain its corporate and business records in accordance with regulations of the superintendent deputy director. The regulations shall classify the records, establish permissible allowable methods for effective and economical preservation of information contained in the records if the originals are destroyed pursuant to regulation, and prescribe the minimum periods of time each record or permitted allowed substitute shall be preserved.
B. In issuing his the regulations under subsection A of this section, the superintendent deputy director shall consider:
1. Actions at law and administrative proceedings in which the production of bank records might be necessary or desirable.
2. Statutes of limitation applicable to such action or proceedings.
3. The availability of information contained in bank records from other sources.
4. Such other matters as he shall deem the deputy director deems pertinent in order that his the deputy director's regulations will require banks to retain records for as short a period of time as is commensurate with the interests of bank customers and shareholders and of the people of this state in having bank records available.
C. A bank may dispose of any record or permitted allowed substitute which that has been retained for the applicable record prescribed in accordance with the terms of this section, and shall thereafter be under no duty to produce such a record in any action or proceeding.
Sec. 55. Section 6-245, Arizona Revised Statutes, is amended to read:
6-245. Pledge of assets; rediscount; exception to requirement of security
A. A bank may pledge, mortgage or otherwise hypothecate its assets:
1. To qualify the bank to act as a fiscal agent for any governmental entity.
2. To secure deposits which are required by law to be secured.
3. To secure borrowings from one business day to the next from another bank.
4. To secure borrowings from a federal reserve bank or any federal agency.
5. To secure other obligations, exclusive of deposits, provided the aggregate value of the assets as carried on the books of the bank encumbered for purposes other than those specified in paragraphs 1 through 4 of this subsection shall not exceed the capital account of the bank except with the approval of the superintendent deputy director.
B. The provisions of Subsection A shall of this section does not prohibit or limit the sale or rediscount of commercial paper or securities with endorsement, guarantee or agreement to repurchase.
C. Whenever If, by the law of this state, a bank is required to provide security for deposits in the form of collateral, surety bond or any other form, such security is not required to the extent such deposits are insured by the federal deposit insurance corporation. For the purposes of this subsection, acceptable security for deposits includes:
1. Certificates of deposit insured by an agent or instrumentality of the United States.
2. Interest bearing savings deposits in banks and savings and loan associations doing business in this state whose accounts are federally insured.
3. United States government obligations.
4. Municipal bonds and bonds issued by a state, county or school district.
5. Obligations for which the payment of principal and interest is guaranteed by the United States or by an agency or instrumentality of the United States.
6. Registered warrants if offered as security for monies of the county by which they are issued.
7. First mortgages and trust deeds together with the promissory notes or other evidences of indebtedness described in the instruments on improved, otherwise unencumbered real estate located in this state if no single mortgage or trust deed represents more than ten per cent percent of the total collateral security and the promissory note or other evidence of indebtedness secured by the mortgage or trust deed has been in existence for at least three years and no default with respect to the promissory note or other evidence of indebtedness has occurred during its existence.
Sec. 56. Section 6-271, Arizona Revised Statutes, is amended to read:
6-271. Reserves against deposits; rule; limitations
Banks which that are not members of the federal reserve system shall maintain such legal reserves as are from time to time fixed by rule of the superintendent deputy director, not to exceed fourteen per cent percent of demand deposits or seven per cent percent of time and savings deposits.
Sec. 57. Section 6-273, Arizona Revised Statutes, is amended to read:
6-273. Form of reserves; limitations
Legal reserves shall consist of:
1. Cash.
2. Cash items in the process of collection payable immediately upon on presentation in the United States.
3. Unpledged obligations of the United States maturing not more than six months from after the date such the obligation is used for reserve purposes at par.
4. Net deposit balances with each reserve depository in this state, exclusive of deposits not payable on demand unless evidenced by a negotiable certificate of deposit maturing not more than six months from the date the certificate is used for reserve purposes.
5. Net deposit balances with each out-of-state reserve depository, exclusive of deposits not payable on demand unless evidenced by a negotiable certificate of deposit maturing not more than six months from after the date the certificate is used for reserve purposes, in an amount either approved by the superintendent deputy director in writing or not more than the amount fully insured by the federal deposit insurance corporation or the national credit union administration or any successor agency.
Sec. 58. Section 6-321, Arizona Revised Statutes, is amended to read:
6-321. Definitions
In this article, unless the context otherwise requires:
1. "Acquire" as applied to an in-state financial institution means any of the following actions or transactions:
(a) The merger or consolidation of an in-state financial institution with an out-of-state financial institution.
(b) The acquisition by an out-of-state financial institution of the direct or indirect ownership or control of voting shares of an in-state financial institution if, after the acquisition, the out-of-state financial institution will directly or indirectly own or control more than fifteen per cent twenty-five percent of the outstanding voting shares of the acquired in-state financial institution.
(c) The direct or indirect acquisition of all or substantially all of the assets of an in-state financial institution.
(d) The taking of any other action that would result in the direct or indirect control of an in-state financial institution.
2. "Control" means direct or indirect ownership of or power to vote fifteen per cent twenty-five percent or more of the outstanding voting shares of an in-state financial institution or to control in any manner the election of a majority of the directors of an in-state financial institution.
3. "De novo entry" means a newly established bank or savings and loan association which is not created through the acquisition of or merger with an in-state financial institution and control is through an out-of-state financial institution.
4. "Filed with the superintendent division" means when the complete application including any amendments or supplements containing all the information in the form required by the superintendent division is received by the superintendent division.
5. "In-state financial institution" means a state or federal bank, savings bank or savings and loan association with its home office in this state, or holding company with its home office in this state.
6. "Out-of-state financial institution" means a state or federal bank, savings bank or savings and loan association with its home office in a state other than this state, or holding company with its home office in a state other than this state.
Sec. 59. Section 6-322, Arizona Revised Statutes, is amended to read:
6-322. Interstate acquisitions; approval of deputy director; exception
A. Except as otherwise expressly permitted allowed by federal law, an out-of-state financial institution shall not acquire an in-state financial institution unless the superintendent deputy director has approved the acquisition. The superintendent deputy director shall not approve an acquisition unless the superintendent deputy director has determined that deposits held in this state will be insured by the federal deposit insurance corporation when business in this state is commenced.
B. For those out-of-state financial institutions required to obtain approval from the superintendent deputy director as prescribed by subsection A of this section, the acquiring financial institution shall submit to the superintendent deputy director a written application for approval in the form the superintendent deputy director prescribes. The acquiring financial institution shall accompany the application with such information, data and records as the superintendent deputy director may require in order to make the determination. In an interstate transaction, the superintendent deputy director may accept an application that is in the form and manner prescribed by the state or federal agency that is the primary regulator of the applicant and that is supplemented as necessary to allow the superintendent deputy director to determine whether to deny or approve the application. The superintendent deputy director shall adopt rules prescribing the form and the information, data or records that the superintendent deputy director requires. In evaluating applications for acquisition pursuant to subsection F of this section, the superintendent deputy director may give consideration to the potential impact of the acquisition on the financial stability of the acquiring institution.
C. A newly established in-state financial institution created for the purpose of acquiring all or substantially all the assets of a former in-state financial institution from an out-of-state financial institution shall not constitute a de novo entry if the acquisition by the newly established in-state financial institution is completed within ninety days of after the date on which the out-of-state financial institution acquired all or substantially all of the assets of the former in-state financial institution.
D. In the case of an out-of-state financial institution that is not required to obtain the approval of the superintendent deputy director, the out-of-state financial institution shall give written notice of the acquisition to the superintendent deputy director ten days before the effective date of the acquisition, unless a shorter time is prescribed by federal law.
E. From and after August 31, 2001, An out-of-state financial institution may acquire a branch of an in-state financial institution for operation as a branch without acquiring the entire in-state financial institution or its permit. A branch of an in-state financial institution is not eligible to be acquired unless it has been in continuous operation five or more years.
F. Notwithstanding subsection E of this section, an out-of-state financial institution may acquire a branch of an in-state financial institution without acquiring the entire institution if all of the following apply:
1. The financial institution proposed to be acquired is in danger of being placed in receivership.
2. The acquisition is necessary to protect the financial interests of the in-state financial institution's depositors and creditors.
3. The terms of the acquisition are acceptable to the relevant federal agency.
4. The superintendent deputy director approves the acquisition pursuant to this section in writing.
Sec. 60. Section 6-325, Arizona Revised Statutes, is amended to read:
6-325. Failure to act on application as approval
The superintendent deputy director shall rule on any application submitted under section 6-322 not later than sixty days following the date the application is filed with the superintendent division. If the superintendent deputy director fails to rule on the application within the required sixty day sixty-day period, the failure to rule shall be deemed a final decision of the superintendent deputy director approving the application.
Sec. 61. Section 6-326, Arizona Revised Statutes, is amended to read:
6-326. Denial of application; grounds
The superintendent deputy director shall deny an application for acquisition of an in-state financial institution if the superintendent deputy director finds any of the following:
1. The financial condition of the acquiring out-of-state financial institution is such that it may jeopardize the financial stability of the in-state financial institution or prejudice the interests of the depositors, beneficiaries, creditors or shareholders of the in-state financial institution.
2. Any plan or proposal to liquidate the in-state financial institution, to merge or consolidate the in-state financial institution or to make any other major change in the business, corporate structure or management of the in-state financial institution is not fair and reasonable to the depositors, beneficiaries, creditors or shareholders of the in-state financial institution.
3. The applicant has exhibited, or has acquired a reputation for, such a lack of honesty or integrity to indicate that it would not be in the interest of the depositors, beneficiaries, creditors or shareholders of the in-state financial institution or in the interest of the public to permit allow such an applicant to control the in-state financial institution.
4. The applicant neglects, fails or refuses to furnish to the superintendent deputy director any information requested by the superintendent deputy director.
5. The applicant fails to obtain any required approval from a federal or state agency with authority over any of the financial institutions that are participating in the transaction.
6. The acquisition is contrary to law.
Sec. 62. Section 6-327, Arizona Revised Statutes, is amended to read:
6-327. Applicable laws and rules; cooperative agreements; contracting exemption
A. Any bank, savings and loan association, out-of-state financial institution or holding company doing business as such in this state is subject to the applicable laws of this state and all the rules adopted pursuant to such laws, including examination and supervision by the superintendent deputy director.
B. In the case of an acquisition to create a branch in this state, the acquisition is prohibited unless the home state of the out-of-state financial institution permits allows reciprocal acquisitions for the same purposes.
C. An out-of-state financial institution that acquires an in-state financial institution or an out-of-state financial institution that is the result of a merger with an in-state financial institution may do either of the following subject to applicable state and federal laws:
1. Continue to operate the in-state financial institution.
2. Convert any existing principal banking office or any or all branches in this state into a branch of the out-of-state financial institution.
D. An in-state branch of an out-of-state financial institution shall comply with the laws of the institution's home state, or shall comply with federal law in the case of a federally chartered institution. The laws of the institution's home state apply, except as follows:
1. The laws of this state apply if necessary to preserve the safety and sound operation of a branch in this state or to otherwise protect the citizens of this state.
2. Any laws of this state regarding community reinvestment, consumer protection, fair lending and intrastate branching apply to a branch in this state of an out-of-state financial institution to the same extent that those laws apply to an in-state financial institution.
3. An out-of-state financial institution that is authorized to operate a branch in this state may engage in activity only to the extent permissible the activity is allowed for an in-state financial institution.
E. Subsection D of this section does not limit the jurisdiction or authority of the superintendent deputy director to examine, supervise and regulate an out-of-state financial institution that is operating or seeking to operate a branch in this state or to take any action or issue any order with respect to that branch.
F. An out-of-state bank that operates a branch in this state shall do both of the following:
1. Obtain a grant of authority to transact business in this state and comply with all other applicable filing requirements prescribed by title 10 to the same extent as any other entity transacting business in this state.
2. Provide written notice to the superintendent deputy director of the out-of-state bank's grant of authority to transact business in this state.
G. The superintendent deputy director may adopt rules, including the imposition of reasonable application and examination fees, to implement and administer this article.
H. The superintendent deputy director may do any of the following:
1. Examine, supervise and regulate a branch operated in this state by an out-of-state bank and take any action or issue any order with respect to that branch.
2. Examine, supervise and regulate a branch operated in another state by a bank and take any action or issue any order with respect to that branch.
3. Coordinate these activities with any other state or federal agency that shares jurisdiction over that financial institution.
4. Coordinate the examination, supervision and regulation of any in-state financial institution with the examination, supervision and regulation of a branch or affiliated financial institution that is operating in another state by doing any of the following:
(a) Contracting with an agency that shares jurisdiction over the financial institution to retain its examiners at a reasonable rate of compensation.
(b) Offering the services of the department's examiners at a reasonable rate of compensation to an agency that shares jurisdiction over the financial institution.
(c) Collecting fees on behalf of or receiving payment of fees through an agency that has jurisdiction over the financial institution.
5. Enter into cooperative agreements with federal and state regulatory authorities for the examination and supervision of any acquired or de novo entry bank, savings and loan association or holding company and may accept reports of examination and other records from those authorities instead of conducting an examination.
I. The department is exempt from title 41, chapter 23 in contracting for examiners pursuant to subsection H, paragraph 4, subdivision (a) of this section.
Sec. 63. Section 6-328, Arizona Revised Statutes, is amended to read:
6-328. Deposit concentration limits
A. Neither an out-of-state financial institution nor an in-state financial institution shall acquire another out-of-state financial institution or in-state financial institution if either of the following conditions exist:
1. The resulting out-of-state financial institution, in-state financial institution or affiliation would control thirty per cent percent or more of the bank deposits held in this state.
2. One of the out-of-state financial institutions or in-state financial institutions in the acquisition already controls thirty per cent percent or more of the bank deposits held in this state.
B. Subsection A of this section does not apply to any interstate acquisition involving only already affiliated entities.
C. The superintendent deputy director, by order and on findings of fact and conclusions of law, may waive the deposit concentration limit prescribed by subsection A of this section. In determining whether to waive the deposit concentration limit, the superintendent deputy director shall not discriminate against out-of-state financial institutions and shall not grant a waiver unless the superintendent deputy director finds that the waiver will promote any of the following:
1. The availability of financial services.
2. The marketability of in-state financial institutions.
3. Another public interest.
Sec. 64. Section 6-329, Arizona Revised Statutes, is amended to read:
6-329. Deposit production offices
A. Except as prescribed by subsection B of this section, a person shall not establish or operate a deposit production office or similar office in this state for the purpose of soliciting deposits or similar evidence of indebtedness or participation interests in indebtedness.
B. This section does not apply to activities conducted at the main office or a branch of an affiliated financial institution that is acting as an agent as prescribed by section 6-184.
C. In determining whether an activity is prohibited by this section, the superintendent deputy director shall consider the factors specified in the Riegle-Neal interstate banking and branching efficiency act of 1994, section 109 (c)(2) (P.L. 103-328; 108 Stat. 2338; 12 United States Code section 1835a(c)(2)).
Sec. 65. Section 6-331, Arizona Revised Statutes, is amended to read:
6-331. Enforcement
A. If the superintendent deputy director determines that a branch that is maintained in this state by an out-of-state bank is being operated in violation of any law of this state or any rule adopted by this state or that the branch is being operated in an unsafe or unsound manner, the superintendent deputy director has authority to take all enforcement actions against that branch as if the branch were regulated pursuant to section 6-201.
B. The superintendent deputy director shall promptly notify the regulatory agency of the out-of-state bank's home state of each enforcement action taken against the out-of-state bank and to the extent practicable shall consult and cooperate with the regulatory agencies of the out-of-state bank in pursuing and resolving any enforcement actions.
Sec. 66. Section 6-352, Arizona Revised Statutes, is amended to read:
6-352. Limitations of obligations to a bank; exceptions; definitions
A. A bank may lend to a single borrower an amount equal to not more than twenty per cent percent of its capital, plus an amount equal to an additional ten per cent percent of its capital if the additional amounts are fully secured by readily marketable collateral that has a market value, as determined by reliable and continuously available price quotations, at least equal to the amount of the loan. The calculation of the total amount of all loans to a person pursuant to this subsection must include any credit exposure to a person arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction or securities borrowing transaction between the bank and the person.
B. A bank shall notify the department the first time it makes a loan in an amount in excess of fifteen per cent percent of its capital. The notification to the department shall be made in writing and submitted to the department within a reasonable period of time.
C. Each bank shall institute adequate procedures to ensure compliance with subsection A of this section.
D. The limitations of subsection A of this section do not apply to:
1. Obligations incurred by the assignment, endorsement or guarantee of the obligation of a third person, including an agreement to purchase the third person's obligation or the collateral therefor, if the bank has evaluated the financial condition and responsibility of the third person and as a result of such evaluation accepts the obligation in reliance primarily on the third person for payment. In such case the obligations of the third person to the bank shall be the sole applicable limitation.
2. Obligations, whether general obligations or payable from revenues or special assessment, of the United States or any agency or instrumentality thereof of the United states, a federal reserve bank, a state of the United States or a subdivision, instrumentality or public authority organized under the laws of such state.
3. Obligations to the extent they are secured by the guarantee, insurance or other like commitment of the United States, an agency or instrumentality of the United States, a federal reserve bank, a state of the United States or a subdivision, instrumentality or public authority organized under the laws of such state, whether the commitment provides for payment in cash or in obligations described in paragraph 2 of this subsection.
4. Obligations to the extent they are secured by any obligation described in paragraphs 2 and 3 of this subsection at the value thereof, not exceeding face value, at the time the obligation to the bank is created.
5. Obligations to the extent they are secured by deposits in the bank.
6. Obligations that are outstanding in the regular process of bank collection or clearing transactions.
7. Obligations of a qualified reserve depository of the bank, unless the superintendent deputy director has by specific order excluded or limited the obligations of such depository from the exemption of this paragraph.
8. Any obligation created in the sale by the bank of any of its property where the bank retains title, lien or security interest in the property sold to secure the obligation.
9. Any obligation under the lease by the bank of any personal property acquired by the bank in collecting an obligation to it or the lease of any of its real property or banking equipment.
10. That portion of the obligations of a person to the bank that exceeds the aggregate funds paid and the value of property delivered by the bank in creating the obligation.
11. Any obligation exempt by rule of the superintendent deputy director or arising from the sale of any assets of the bank in a transaction that has been approved by the superintendent deputy director.
E. If the bank participates in an obligation with another obligee, the limitations of this section shall be applicable only to the extent of the bank's participation.
F. If the value of collateral for a loan that is required to be fully secured under subsection A of this section falls below one hundred per cent percent of the outstanding loan, the loan must be brought into conformance within five business days, except if judicial proceedings, regulatory actions or other extraordinary occurrences prevent the bank from taking action.
G. A renewal of a loan or a modification and extension of original repayment terms are not deemed to be a new loan or an extension of credit except in instances in which interest on the renewed loan or extension of credit is capitalized or additional money is advanced.
H. Financial instruments may be denominated in foreign currencies that are freely convertible to United States dollars. If denominated and payable in a currency other than that of the loan or extension of credit that it secures, the bank's procedures adopted pursuant to subsection C of this section shall require that the collateral be revalued at least monthly using appropriate foreign exchange rates in addition to being valued at current market value.
I. For the purposes of this section:
1. "Derivative transaction" includes a transaction that is a contract, agreement, swap, warrant, note or option that is based on, in whole or in part, the value of, any interest in or any quantitative measure or the occurrence of any event relating to one or more commodities, securities, currencies, interest or other rates, indices or other assets.
2. "Financial instruments" includes stocks, bonds and debentures traded on a national securities exchange, over-the-counter margin stocks as defined in regulation U of the federal reserve board, commercial paper, notes, negotiable certificates of deposit, banker's acceptance and shares in money market and mutual funds of the type in which banks may perfect a security interest.
3. "Readily marketable collateral" means financial instruments or bullion that are saleable under ordinary circumstances with reasonable promptness at a fair market value determined by quotations based on actual transactions of an auction or a similarly available daily bid and asked price market.
Sec. 67. Section 6-353, Arizona Revised Statutes, is amended to read:
6-353. Obligations of directors, officers and employees; reports
A. No bank shall make any loan to any of its own directors, officers or employees which that shall cause the outstanding loans of the bank to such person to exceed one per cent percent of the capital account of the bank unless the loan is expressly authorized by the board of directors with any interested director taking no part in such vote. Any loan in violation of this subsection shall be payable on demand to the extent required to bring the loan into compliance with this subsection.
B. Each bank shall include with but not as a part of each report of condition to the superintendent deputy director a report of the obligations to the bank of each director and officer outstanding at the date of the report of condition, if the aggregate obligations of such person, exclusive of obligations outstanding in the regular process of bank collection transactions, exceeds the lesser of fifty thousand dollars $50,000 or one per cent percent of the capital account of the bank.
Sec. 68. Section 6-384, Arizona Revised Statutes, is amended to read:
6-384. Deposit of fiduciary funds
Cash held by a bank as fiduciary may be deposited to the credit of the bank as such fiduciary on time or demand account with itself or with any other bank the deposits of which are insured by the federal deposit insurance corporation. Unless otherwise provided by the writing creating the trust, if such funds are deposited with itself the bank shall secure such deposits with securities described in section 6-352, subsection A d, paragraph 2, or other security approved by the superintendent deputy director for the purpose, in the amount of the deposit, subject to subsection C of section 6-245, subsection c.
Sec. 69. Section 6-385, Arizona Revised Statutes, is amended to read:
6-385. Substitution of corporate fiduciary
Any fiduciary capacity of a trust company, a bank or a savings and loan association as trustee, executor, administrator, guardian, conservator, registrar of stocks and bonds, assignee, receiver or any other fiduciary capacity may be transferred to and assumed by a bank authorized under its banking permit to conduct trust business in this state or a savings and loan association authorized to conduct trust business in this state, without any order or other action on the part of any court or interested person, with the approval of the superintendent deputy director to the extent the substitution is specified in the order of approval. The superintendent's deputy director's order of approval shall be conclusive evidence of the authority of the assuming bank or savings and loan association to hold and enjoy all rights of property, franchises and interests, including appointments, designations and nominations, and all other rights and interests in each such fiduciary capacity in the same manner and to the same extent as such rights, franchises and interests were held or enjoyed by the bank, savings and loan association or trust company for which the assuming bank or savings and loan association has been substituted. The substitution of fiduciary provided in this section is to assure a continuity of fiduciary administration and is supplemental to other rights and powers of substitution which require no approval by the superintendent deputy director. Substitution by order of the superintendent deputy director shall not affect the authority of the court having jurisdiction over the trust to determine the right of any other person to succeed to the fiduciary capacity of the assuming bank or savings and loan association.
Sec. 70. Section 6-395, Arizona Revised Statutes, is amended to read:
6-395. Possession by deputy director and receivership
If the status of a bank as an insured bank is terminated by the federal deposit insurance corporation or the superintendent deputy director finds that a bank is in such an unsafe or unsound condition that it is or will become unable to meet the anticipated demands of its depositors and that the condition cannot be corrected by the procedures of chapter 1, article 5 of this title or section 6-137, the superintendent deputy director may immediately take possession and control of the bank and in such event shall, through the attorney general, apply to the superior court for the appointment of a receiver for the bank. The court may act upon on the application forthwith and without notice to any person. If at any time the court finds that no ground for receivership exists, the receivership shall be dissolved and the superintendent's deputy director's possession terminated.
Sec. 71. Section 6-395.01, Arizona Revised Statutes, is amended to read:
6-395.01. Powers of deputy director in possession
When the superintendent deputy director has taken possession of a bank and until the appointment and qualification of the receiver, or the adjudication that no ground for the receivership exists, the superintendent deputy director shall be vested with the full and exclusive power of management and control. The superintendent deputy director shall immediately close the bank for the acceptance and withdrawal of deposits, but shall otherwise have the power to continue or to discontinue the business, to stop or to limit the payment of its obligations, to employ any necessary assistants, to execute any instrument in the name of the bank, to commence, defend and conduct in its name any action or proceeding in which the bank may be a party.
Sec. 72. Section 6-395.02, Arizona Revised Statutes, is amended to read:
6-395.02. Federal deposit insurance corporation as receiver
If the court grants the application for receivership of a bank it shall first tender the appointment as receiver to the federal deposit insurance corporation, which is authorized to qualify and act without bond. If the corporation accepts the appointment it shall have all of the powers, privileges and duties as such receiver provided by the laws of this state except insofar as such powers, privileges and duties are in conflict with the provisions of the federal deposit insurance act as amended, which act shall control. If the corporation does not accept the appointment, the superintendent deputy director shall be appointed receiver.
Sec. 73. Section 6-395.03, Arizona Revised Statutes, is amended to read:
6-395.03. Federal deposit insurance corporation power pending judicial proceedings
The federal deposit insurance corporation may pay out and acquire the insured deposit liabilities of a bank notwithstanding the possession by the superintendent deputy director or the pendency of receivership proceedings and for such purposes shall have the use of the facilities and records of the bank. The federal deposit insurance corporation and its directors, officers, agents and employees, the superintendent deputy director and the receiver and the respective agents and employees of each, shall be free from liability to the bank, its directors, stockholders and creditors, for or on account of any action authorized by this section.
Sec. 74. Section 6-395.11, Arizona Revised Statutes, is amended to read:
6-395.11. Priority of claims; interest
A. Claims allowed in a proceeding under this article shall be paid in the following order:
1. Costs and expenses of the administration of the receivership and liquidation.
2. Taxes due to this state.
3. Claims with priority under the laws of this state and under federal law.
4. Claims of creditors that are fully secured including contract claims for interest to the date of payment.
5. Claims of depositors.
6. Claims of general creditors.
7. Claims on obligations that are subordinated to the claims of general creditors.
B. Claims that are approved shall bear interest calculated as provided by law or by judgment from the date that the court grants the superintendent's deputy director's application for the appointment of a receiver for that bank to the extent that monies are available to pay that interest. If monies are not available to pay interest, the interest shall be prorated. Interest owed shall receive the same priority as the claim on which it accrues, but interest on a claim shall not be paid until all claims within that same class have received payment of the full principal amount of the claim.
C. Any monies remaining after the payment of claims as provided in this section shall be returned to the stockholders of the bank as prescribed by this article.
Sec. 75. Section 6-395.13, Arizona Revised Statutes, is amended to read:
6-395.13. Voluntary liquidation and dissolution
A bank may voluntarily dissolve and wind up its affairs as any other corporation under the provisions of title 10, but no a plan of liquidation or dissolution shall not be submitted to the stockholders until the superintendent upon deputy director on application by the bank finds that the bank has assets of such a form and amount as to permit allow the satisfaction in full of the claims of all depositors in accordance with their rights and that the plan contains proper provision for such the satisfaction.
Sec. 76. Section 6-395.14, Arizona Revised Statutes, is amended to read:
6-395.14. Voidable transactions
A transaction that occurs within six months of after the date on which the superintendent deputy director takes possession of a bank is voidable by the receiver if the transaction has the effect of enabling a creditor, affiliate, officer, director, stockholder or employee, or a relative of any of those persons, to obtain a preference over any other creditor of the bank.
Sec. 77. Section 6-401, Arizona Revised Statutes, is amended to read:
6-401. Definitions
In this chapter, unless the context otherwise requires:
1. "Account" means withdrawable capital deposited with or invested in an association in accordance with any plan authorized by the provisions of this chapter unless such term is otherwise designated or qualified.
2. "Aggregate withdrawal value" means the sum of all payments made on all accounts of the association, all dividends and bonuses credited or allocated to such accounts and all dividends credited to "divided profits" for subsequent crediting to accounts upon on maturity, less all withdrawals, retirements and other proper deductions from accounts and all unpaid charges on the accounts.
3. "Association" means every association to which this chapter applies as defined in the section concerning scope of chapter.
4. "Community" means a city, incorporated town, unincorporated town, community or village.
5. "Continuing association" means the association which that continues to exist after a merger of associations has been effected.
6. "Federal association" means a savings and loan association or savings association operating under the laws and regulations of the United States.
7. "Impaired" or "impairment", with respect to capital, means a condition in which the value of the association's assets is less than the aggregate amount of the association's liabilities to creditors, the aggregate value of its accounts and the aggregate par value of its guaranty capital.
8. "Improved real estate" means real estate which is, or which from the proceeds of the loan will become, a home, combination of home and business property or other improved real estate.
9. "Insurance corporation" means the federal deposit insurance corporation or such other instrumentality of, or corporation chartered by, the United States as may be established for the purpose of insuring the accounts of savings and loan associations or any other equivalent deposit insurer approved by the superintendent deputy director.
10. "Insured association" means an association, the accounts of which are insured wholly or in part by an insurance corporation.
11. "Investment" means to put funds to use in order to secure profits.
12. "Mail" or "mailed" means, with respect to a writing or notice, deposit in a United States post-office mailing facility in this state with postage prepaid and correctly addressed to the proper person at his the person's address stated on the association's records or otherwise agreed upon on or if no address has been so established then to the last known address.
13. "Merger" includes consolidation.
14. "Merging association" means an association which that plans or effects a merger with one or more other associations in accordance with the provisions of this chapter concerning merger.
15. "Other improved real estate" means real estate other than a home or combination home and business property which that, because of its state of improvement, or improvement from the proceeds of the loan, will produce sufficient income to maintain the property and retire the loan in accordance with the terms of the loan.
16. "Participating interests" means the purchase or acquisition of an interest in an existing permanent mortgage loan.
17. "Prior act" means any statute of this state which that, before June 25, 1960, has governed the formation or operation of associations of the type described in the section of this chapter concerning scope of the chapter.
18. "Profits" means, as determined by the application of proper accounting principles, gross income less the aggregate of operating and other expenses, losses actually sustained and not charged to reserves under the provisions of this chapter and interest paid or accrued on borrowings and non-recurring charges.
19. "Publication", "publish" or "published" means printed in the English language in a newspaper of general circulation published in the community in which the association's business office is located or if no such newspaper exists in said community then in the county in which such business office is located. Unless otherwise specified in this chapter publication shall be made once each week for two successive weeks.
20. "Total assets" means the total value of all loan contracts without deduction for the withdrawal value of any accounts of the association held as collateral for loans and the total value of all other assets of the association as determined by the application of proper accounting principles.
21. "Withdrawal value" of an account means the sum of all payments made by the holder on the account and all dividends and bonuses credited or allocated to such account less all withdrawals, retirements and other proper deductions from the account and all unpaid charges on the account.
Sec. 78. Section 6-405, Arizona Revised Statutes, is amended to read:
6-405. Power to borrow
A. No insured institution shall borrow an aggregate amount exceeding one half one-half the amount paid in and credited on accounts, except that with prior approval of the superintendent deputy director, any such association may borrow without limitation upon on such terms and conditions as may be required by the lender. No action of an insured institution in obtaining funds through borrowing, in accordance with the provisions of this section, shall be deemed a violation hereof if its aggregate borrowings exceed the limitation of this section because of a subsequent reduction in the amounts paid in and credited on accounts.
B. A debt incurred by the association in violation of this section is not invalid or illegal as to the rights of the lender.
Sec. 79. Section 6-405.01, Arizona Revised Statutes, is amended to read:
6-405.01. Capital notes and debentures
A. With prior approval of the superintendent deputy director, an association may issue and sell its capital notes or debentures.
B. Capital notes and debentures legally issued by an association may be converted into shares of guaranty capital in accordance with such provision therefor as may be made in such capital notes and debentures with prior approval of the superintendent deputy director.
C. Capital notes and debentures shall be an unsecured indebtedness of the association and shall be subordinate to the claims of depositors, account holders and all other creditors of the association, regardless of whether the claims of depositors, account holders or other creditors arose before or after the issuance of such debentures or capital notes. In the event of liquidation, all depositors, account holders and other creditors of the association shall be entitled to be paid in full before any payment shall be made on account of principal or interest on such capital notes or debentures. No payment shall at any time be made on account of the principal thereof if the payment is prohibited by regulation of the insurance corporation.
D. Subject to a requirement in the articles of incorporation of the association, or an amendment thereto, and if authorized by the superintendent deputy director, convertible capital notes and debentures may be issued without offer thereof to existing stockholders.
E. The amounts of outstanding capital notes and debentures legally issued by any association shall be treated as if guaranty capital.
Sec. 80. Section 6-407, Arizona Revised Statutes, is amended to read:
6-407. Applicants and initial capital
A. Any five or more adult individuals, residents of this state, may apply for a permit to organize an association under this article. The minimum initial capital which an association must have shall be determined by the superintendent deputy director, but in no event shall it be less than the amount determined by the following table, based upon on the population of the community in which the association's business office is to be located:
Population Minimum
More than Not more than capital
00 10,000 $ 50,000.00
10,000 50,000 100,000.00
50,000 ------ 200,000.00
B. If the association's business office is to be located in an unincorporated area more than five miles from the limits of any community, then the required minimum capital shall be that for a community of ten thousand population or less; otherwise, the required capital shall be that of the community to which it is adjacent, or if near several communities, that of the community with the highest population classification in the above schedule. Minimum capital to be paid in may consist of withdrawable capital and guaranty capital as provided in this chapter. If the capital of the association to be organized includes guaranty capital, the amount of minimum initial guaranty capital shall not be less than fifty thousand dollars $50,000, and not less than one hundred thousand dollars $100,000 if the association is to be located in a county with more than seventy-five thousand population.
Sec. 81. Section 6-408, Arizona Revised Statutes, is amended to read:
6-408. Application for permit to organize
The application for a permit to organize an association shall be addressed to the superintendent deputy director in such form as he the deputy director shall provide, ; shall be in duplicate, be personally signed by each applicant and be verified under oath by each applicant. The applicants shall submit with their application statements, exhibits, maps, and other data, which data shall be sufficiently detailed and comprehensive to enable the superintendent deputy director to pass upon on the application.
Sec. 82. Section 6-409, Arizona Revised Statutes, is amended to read:
6-409. Findings and hearings
If the superintendent deputy director does not deny the application on the basis of the data submitted by the applicants and any other information in his the deputy director's possession, the applicants shall publish a notice of intention to organize in such form as the superintendent deputy director shall prescribe. The superintendent deputy director may hear evidence to determine his the deputy director's findings at any time prior to the issuance of a permit to organize.
Sec. 83. Section 6-410, Arizona Revised Statutes, is amended to read:
6-410. Deputy director's approval and issuance of permit to organize
The superintendent deputy director shall not approve the application and issue a permit to organize unless he shall find the deputy director finds:
1. A need exists for an association, and that the public convenience and advantage will be promoted by the proposed association, in the community or area of operation stated in the application.
2. The proposed capital meets the requirements of this chapter.
3. The general character of the proposed management is such as to assure reasonable probability of the success of the association.
4. The name of the proposed association is not the same as, or deceptively similar to, the name of any other association or bank in the community or area of operation.
5. Such association can be established without undue injury to properly conducted existing associations.
Sec. 84. Section 6-411, Arizona Revised Statutes, is amended to read:
6-411. Subscription to capital and temporary organization
Upon On receipt of the permit to organize an association, the applicants shall constitute the organization committee and shall perfect a temporary organization by electing a chairman, vice chairman, and a secretary, who shall act as the temporary officers of such association until their successors are duly elected and qualified. Such temporary officers thereupon shall proceed to:
1. Secure subscriptions for the required amount of capital in form and manner approved by the superintendent deputy director.
2. Call a meeting of subscribers, who shall adopt articles of incorporation and elect directors to serve until the first annual meeting of the association and until their successors are elected and qualified.
3. The directors so elected shall proceed to:
(a) Organize as a board and qualify as directors.
(b) Adopt by-laws.
(c) Elect officers pursuant to the by-laws.
(d) Collect subscriptions to the required capital, but only after the persons designated to collect such subscriptions have been bonded as provided in section 6-420.
(e) Take such other action as may be necessary to complete the organization.
(f) Report the completion of the organization to the superintendent deputy director. Unless such report is made to the superintendent deputy director within six months after the date of the permit to organize, the permit shall be deemed revoked and any subscriptions collected shall be refunded unless the superintendent deputy director, upon on good cause shown, shall extend the time for filing such report for a fixed period which shall not exceed three months.
Sec. 85. Section 6-412, Arizona Revised Statutes, is amended to read:
6-412. Completion of organization
A. When If the board of directors has organized as provided in this chapter and the report of such organization has been filed with the superintendent deputy director, he the deputy director shall make a thorough examination into the affairs of the proposed association, and if he the deputy director approves the articles of incorporation and is satisfied that all the requirements of this chapter have been complied with, and that no intervening circumstance has occurred to change the superintendent's deputy director's findings made pursuant to this chapter, upon on payment into the superintendent's deputy director's office of the fees for such examination, he the deputy director shall issue a certificate authorizing the filing of the articles of incorporation with the corporation commission and the taking of the other steps required by title 10, to complete the formation of a corporation. Upon On the appointment of a statutory agent and the issuance of a certificate of incorporation by the corporation commission and the payment into escrow with a responsible corporate escrow agent approved by the superintendent deputy director of the amount of the initial capital required by this chapter, the superintendent deputy director shall issue a permit conditioned upon on the association securing within twelve months from after the date of such the permit insurance of its insurable accounts by an insurance corporation and the rules and regulations of such the corporation.
B. Unless such insurance is secured within such the period the permit shall be deemed revoked unless the superintendent deputy director, upon on good cause shown, shall extend the time for securing such insurance for a single fixed period which that shall not exceed six months. The association shall not operate as a savings and loan association under the laws of this state or transact any other business than that necessary to secure such insurance until it has secured such insurance. If such insurance is not secured within the time provided by this chapter or as extended by the superintendent deputy director, all amounts collected as subscriptions to the required capital shall be returned to the subscribers without reduction.
Sec. 86. Section 6-413, Arizona Revised Statutes, is amended to read:
6-413. Contents of articles of incorporation
A. The articles of incorporation shall set forth:
1. The name of the association.
2. The location of the principal place of business.
3. The general nature of the business to be transacted.
4. The authorization, if any, to issue withdrawable shares, the aggregate amount of which may be unlimited.
5. The authorization, if any, to issue guaranty shares, the aggregate number thereof, and the par value per share, if any.
6. The date of the annual meeting of the members, which shall not be more than one hundred fifty days after the close of the association's fiscal year.
7. The quorum required for action of members if a quorum other than specified in this chapter is desired.
8. The names, residences and post-office addresses of the incorporators, who shall be the individuals who made and filed with the superintendent deputy director the application for a permit to organize.
9. The time of commencement and termination of the association, which shall be governed by the general corporation laws of the state, with the right of renewal of existence.
10. By what officers the affairs of the association are to be conducted and the time of their election. The number of directors shall not be less than five nor more than twenty-five.
11. The highest amount of indebtedness or liability, direct or contingent, to which the association may at any time subject itself which shall not exceed one-half of the accounts and paid-in guaranty stock without prior approval of the superintendent deputy director.
12. That the private property of the shareholders is exempt from the debts and obligations of the association.
13. Any other provision not inconsistent with law, which the subscribers may desire for the internal regulation of the affairs of the association.
14. The articles need not set forth any of the powers which that this chapter confers.
B. The articles of incorporation may:
1. Provide that the guaranty shares be divided into different kinds or classes.
2. Define the designations, preferences, rights and limitations of each kind or class.
3. Define the voting rights of the different types of members.
4. Restrict the power to vote to holders of guaranty shares or to one or more kinds or classes of guaranty shares.
Sec. 87. Section 6-417, Arizona Revised Statutes, is amended to read:
6-417. Directors
The business affairs of the association shall be exercised by its board of directors, which shall be elected, and shall exercise its powers, as follows:
1. The board of directors shall consist of the number of directors fixed by the articles of incorporation but shall be not less than five nor more than twenty-five. ; All directors shall be bona fide members of the association, and at all times at least two-thirds of the directors shall be residents of this state.
2. Directors shall be elected as provided in the by-laws bylaws of the association and shall serve until their successors are elected and qualified. In all elections of directors cumulative voting shall be permitted allowed as provided in the Constitution of Arizona.
3. In the event of a vacancy on the board of directors from any cause, the remaining directors shall have full power and authority to continue the management of the association, and to fill any such vacancy.
4. The board of directors shall hold regular meetings as provided in the by-laws bylaws. Special meetings may be held as provided in the by-laws bylaws, and also upon on call by the superintendent deputy director after not less than twelve hours' notice by personal or mail service to each director.
5. A majority of the board of directors shall constitute a quorum for the transaction of business unless a greater number is required in the by-laws bylaws. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by law, the articles of incorporation, or the by-laws bylaws.
6. The board of directors shall have all powers which that are necessary and proper to enable the association to accomplish its purpose.
7. The board of directors may adopt or amend by-laws bylaws, but no by-laws bylaws shall not be effective until it has they have been submitted to and approved by the superintendent deputy director as being in conformity with this chapter. Each adopted amendment shall be subject to the same inquiry by the superintendent deputy director as the corresponding provision in the original by-laws bylaws of the association. The superintendent deputy director may require approval by a majority vote of the members for an amendment changing the location of the business office of the association.
Sec. 88. Section 6-420, Arizona Revised Statutes, is amended to read:
6-420. Bonds of officers and employees
A. Every person appointed or elected to any position requiring the receipt, payment, management or use of money belonging to an association, or whose duties permit him allow the person to have access to or custody of any of its the association's money or securities or whose duties permit him allow the person regularly to make entries in the books or other records of the association, before assuming his the person's duties, shall become bonded in some fidelity insurance company licensed to do business in this state and approved by the superintendent deputy director. Each such bond shall be on a form or forms as the superintendent deputy director shall require and in such amount as the board of directors shall fix and approve.
B. Nothing contained herein shall preclude the superintendent deputy director from proceeding against an association as provided in this chapter should he the deputy director believe that it the association is being conducted in an unsafe manner in that the form or amount of bonds so fixed and approved by the board of directors is inadequate to give reasonable protection to the association.
Sec. 89. Section 6-421, Arizona Revised Statutes, is amended to read:
6-421. Access to books and records; communication with members
A. Every member or holder of capital shall have the right to inspect such books and records of the association as pertain to his the member's or holder's account. Otherwise, the right of inspection and examination of the books and records shall be limited to the superintendent deputy director, as provided in this chapter, and to any federal instrumentality or agency authorized to inspect or examine the books and records of an insured association, and no other person shall have access to the books and records or shall be entitled to a list of the members, except upon on express authority of the board of directors.
B. If any member desires to communicate with the other members of the association with reference to any question pending or to be presented at a meeting of the members, the association shall give him upon request the member, on request, a statement of the approximate number of members entitled to vote at such the meeting and an estimate of the cost of preparing and mailing such the communication. The requesting member then shall submit the communication to the superintendent deputy director who, if he the deputy director finds it to be appropriate and truthful, shall direct that it be prepared and mailed to the members, upon on the requesting member's payment or adequate provision for payment of the expenses of such the preparation and mailing.
Sec. 90. Section 6-423, Arizona Revised Statutes, is amended to read:
6-423. Accounts
A. An association may maintain all types of deposit accounts and prescribe those terms and conditions relating to the accounts as are permissible allowable for the association to maintain the insurance of its deposits by an insurance corporation.
B. Accounts are:
1. Withdrawable and subject to enforced retirement as provided in this article. This chapter does not prevent the withdrawal of funds from an association by negotiable or nonnegotiable order.
2. Entitled to dividends as provided in this article.
3. Nonassessable for either debts or losses of the association.
4. Issued on such plan or plans of payment and in such series or classes as the bylaws may provide, which plan or plans of payment may include:
(a) Regular installment plan with agreed weekly or monthly payments, with dividends credited to or in behalf of the account until the ultimate value agreed upon on in the subscription is reached.
(b) Full paid plan with one single payment of one hundred dollars $100 per unit and dividends payable in cash unless by agreement credited to the account.
(c) Prepaid plan with one single payment in such amount per unit as is set forth in the bylaws and dividends credited to such account until the ultimate value of one hundred dollars $100 per unit is reached.
(d) Optional plan with payments in such amount or amounts and at such times as the holder may elect and dividends credited to such account unless by agreement payable in cash.
(e) Any other plan of payment which the superintendent deputy director may approve as conforming to sound savings and loan practice.
Sec. 91. Section 6-425, Arizona Revised Statutes, is amended to read:
6-425. Shares of guaranty capital; authorization of issuance; minimum amount
A. An association may provide for the issuance of shares of guaranty capital, either by its original articles of incorporation or by an amendment thereto to the articles of incorporation.
B. The aggregate initial guaranty capital of an association being organized under this chapter shall be not less than the minimum initial guaranty capital required under the provisions of section 6-407.
C. In the case of an association which that shall at any time be operating and its original articles of incorporation authorize the issuance of guaranty shares but the association has issued no guaranty shares, or in the case of an association already in operation which that amends its articles to authorize the issuance of guaranty shares, the aggregate initial guaranty capital shall be not less than either:
1. The initial guaranty capital required under the provisions of section 6-407.
2. An amount which that, together with the amount of surplus and all reserves required or designated as available for losses, equals in the aggregate not less than the required capital and reserves necessary to obtain and maintain insurance of accounts by the insurance corporation, whichever shall be is greater.
D. In the case of an association already in operation and having issued and outstanding guaranty shares, the aggregate guaranty capital shall be an amount not less than an amount which that, together with the amount of surplus, amount of outstanding capital notes and debentures, and all reserves required or designated for use for losses, equals in the aggregate not less than the required capital and reserves necessary to obtain and maintain insurance of accounts by the insurance corporation.
E. Any plan for the issuance of shares of guaranty capital shall be subject to the approval of the superintendent deputy director as being in conformity with the provisions of this chapter, and the rules and regulations of the superintendent deputy director pertaining thereto.
Sec. 92. Section 6-427, Arizona Revised Statutes, is amended to read:
6-427. Shares of guaranty capital; advertisement; sales; collection of subscription
A. All prospectae and advertising matter regarding the subscription for shares of guaranty capital shall include a statement to the effect that such shares of guaranty capital are not insured.
B. No association shall pay to any person any commission or other compensation for obtaining any subscription to or sale of shares of guaranty capital without the prior approval of the superintendent deputy director.
C. The board of directors shall establish a separate account to receive all funds paid in for shares of guaranty capital, and shall maintain such account until further action is authorized as follows:
1. When the aggregate amount of such funds equals or exceeds the amount of the minimum initial guaranty capital which that the association must obtain, and either the board of directors has decided by resolution to proceed under the guaranty capital plan, or one year has elapsed from after the date on which the issuance of shares of guaranty capital was authorized and the board has taken no action, then the separate account may be terminated and the funds may be transferred to the association's general account.
2. If the aggregate amount of such funds fails to reach the amount of the minimum initial guaranty capital which that the association must obtain and one year has elapsed from after the date on which the issuance of shares of guaranty capital was authorized; or if the board of directors, within such one-year period, has decided by resolution to abandon the guaranty capital plan, then the funds in the separate account shall be returned to the respective subscribers and shall not become a liability of the association or its officers or directors.
Sec. 93. Section 6-428, Arizona Revised Statutes, is amended to read:
6-428. Retirement or reduction of shares of guaranty capital
A. The board of directors of an association operating with guaranty capital may propose an amendment to the articles of incorporation providing for the retirement of all of the guaranty capital, and a detailed plan for effectuating such an amendment. The resulting capital of the association shall be not less than the minimum initial capital which that the association, if it were being organized, would be required to have under the provisions of this chapter concerning applicants and initial capital. The proposal shall be submitted to the superintendent deputy director for his the deputy director's approval.
B. If the superintendent deputy director approves the proposal, the association's board of directors may request in writing an appraisal of the value of the shares of guaranty capital. ; and The superintendent deputy director then shall cause such an appraisal to be made and receive therefor the fees for a special examination as provided by section 6-125, allowing proper credit to such shares from the association's segregated surplus, if any exists, and from other reserves and undivided profits. The value of the shares of guaranty capital so determined may be considered in the further proceedings under this section.
C. The proposal then may be submitted to the members at an annual or special meeting. It The proposal shall be adopted upon on receiving in the affirmative the votes of the holders of two-thirds or more of the outstanding shares of guaranty capital, and also two-thirds or more of the total number of votes which that all other members of the association are entitled to cast thereon. The proposal shall become effective upon on completion of the procedure provided in this chapter for the amendment of articles of incorporation.
D. An association may amend its articles of incorporation, in accordance with the procedure provided in this chapter for such amendments, to reduce its shares of guaranty capital, but in no event to an amount which that is less than the minimum guaranty capital which that the association would be required by this chapter to issue if it were newly authorized to issue guaranty capital.
Sec. 94. Section 6-434, Arizona Revised Statutes, is amended to read:
6-434. Shares and accounts of certain associations as legal investments; deposit of fiduciary monies
A. All accounts of a federal savings and loan association and all accounts of a savings and loan association operating under the provisions of this chapter, whose accounts are insured by the federal deposit insurance corporation, as provided in title IV of the national housing act, as now or hereafter amended, are legal investments for the funds of executors, administrators, guardians, receivers and trustees of every kind and nature and insurance companies, and such associations are qualified to act as trustee or custodian within the provisions of the federal self-employed individual's tax retirement act of 1962, as amended.
B. Monies held by a savings and loan association as fiduciary may be deposited to the credit of the savings and loan association on time or demand account with itself or with any bank or other savings and loan association the deposits of which are insured by instrumentalities of, or corporations chartered by, the United States for the purpose of insuring the accounts of banks or savings and loan associations. Unless otherwise provided by the writing creating the trust, if the monies are deposited with itself the savings and loan association shall secure the deposits with securities described in section 6-446, subsection A, paragraphs 1 and 2 or other security approved by the superintendent deputy director for such a purpose, in the amount of the deposit, less the amount by which the deposits are insured by the federal deposit insurance corporation or such other instrumentality of, or corporation chartered by, the United States as may be established for the purpose of insuring the accounts of savings and loan associations.
Sec. 95. Section 6-435, Arizona Revised Statutes, is amended to read:
6-435. Voluntary withdrawal of accounts
A. A holder of an account may make application for withdrawal of, and the association may pay, all or any part of the withdrawal value thereof at any time.
B. If the association has insufficient funds in the treasury and from current receipts to pay all matured accounts and applications for withdrawal within thirty days after such accounts mature or payment is requested, then the board of directors shall provide by resolution:
1. The amount of money available in each calendar month to pay maturities and withdrawals, in accordance with safe and required operating procedure, ; but after making provision for expenses, debts, obligations, and cash dividends on accounts, due or to become due, not less than fifty per cent percent of the remainder of such treasury funds and current receipts shall be made available for the payment of withdrawals and maturities.
2. For a list of matured accounts in order of maturity, and if in the same series, in order of issuance in such series; and also of applications for withdrawals in chronological order of filing. Separate lists may be established for such purposes, in which event the resolution shall provide the proportion of available money which that shall be applied to each list.
3. For a maximum sum, which that shall not exceed one thousand dollars $1,000, which that may be paid to any one holder at any one time; and if any holder's application for withdrawal or for payment of matured shares exceeds the sum so fixed, then he the holder shall be paid in his turn the sum so fixed, and his the holder's application, reduced by such payment, shall be deemed refiled in its order as if filed on the date of such payment. Such limited payment may be made on a fixed date in each month and such refiling and renumbering, as the case may be, may take place on the same date in each subsequent month as long as any applications remain unpaid.
4. For a maximum sum, which that shall not exceed two hundred dollars $200, which may be paid on any application for withdrawal or to any one holder of matured shares in any calendar month, regardless of the order of application.
C. Accounts pledged as sole security for a loan shall be subject to the withdrawal provisions of this section, but amounts available for payment on the application for withdrawal shall be applied first to the repayment of the loan balance.
D. Accounts may be accepted by the association in payment or part payment for any real estate or other assets owned by the association, ; but if the association has a list of withdrawals, or withdrawals and maturities, such sale of assets shall be to the highest bidder, and at least ten days' notice of the proposed sale shall be given by mail to all holders of accounts whose names appear on the withdrawal or maturity list.
E. No A holder shall not have more than one application for withdrawal in effect at any one time, ; but a holder may cancel his the application or reduce the amount thereof at any time as to any amount not yet paid.
F. The holder of accounts for which application for withdrawal has been made does not become a creditor by reason of such application.
G. The board of directors of any association operating on the serial plan or with regular installment or prepaid shares on which dividends have not been credited directly to the share accounts, may determine by resolution the portion of profits which that may be paid to withdrawing members.
H. Notwithstanding any other provision of this chapter, a savings and loan association may offer payment order accounts, approved for federal associations doing business in this state, and authorizing withdrawals therefrom by written drafts payable to third parties, subject to conditions, limitations and restrictions as the superintendent deputy director may by rule prescribe.
Sec. 96. Section 6-440, Arizona Revised Statutes, is amended to read:
6-440. Apportionment of profits
The board of directors may apportion the profits of the association as the bylaws may prescribe, and each apportionment shall be made in accordance with the following procedure:
1. Proper allocation first shall be made to accrued interest on accounts.
2. Proper allocation then shall be made to any reserves required by law or the superintendent deputy director.
3. Additional allocations then may be made to such special reserves as the board of directors may have established.
4. Dividends then may be declared if the bylaws so provide on shares of guaranty capital, in accordance with the provisions of this chapter.
5. The residue of such profits may be held as undivided profits.
Sec. 97. Section 6-442, Arizona Revised Statutes, is amended to read:
6-442. Dividends and interest
A. Subject to the restrictions set forth in this section and the association's bylaws, an association from time to time may determine the term, rate and amount of interest to be paid on accounts, and for that purpose may establish reasonable classifications of accounts, based on any of the following:
1. The types or classes of such accounts.
2. The length of time accounts are continued in effect.
3. The size of initial payments on accounts.
4. The minimum balances of accounts during apportionment periods.
5. The frequency and extent of the activity of accounts.
6. Such other classifications as the superintendent deputy director may approve, and the superintendent deputy director is authorized to prepare model plans of classifications for adoption by associations.
B. An association shall determine the method of calculating the amount of interest on accounts, and the date on which the interest is to be declared or credited, but no a payment or credit shall not be made more than ten days before the end of any apportionment period, except upon on a matured bonus plan account or as approved by rules of the superintendent deputy director.
C. Dividends may be declared and paid on shares of guaranty capital as permitted allowed from time to time by the laws governing corporations organized in this state, except that dividends payable other than in the association's own stock may be paid out as a distribution, as defined in section 10-140, only with the approval of the superintendent deputy director or as approved by rules of the superintendent deputy director.
Sec. 98. Section 6-444, Arizona Revised Statutes, is amended to read:
6-444. Promotional activities prohibited; definitions
A. After the effective date hereof, an association shall not give for the opening of, or increasing the amount of, any account, any give-away giveaway that has a monetary value in excess of the sum fixed for specified classes of accounts by rule of the superintendent deputy director. The monetary value of any give-away giveaway so given shall be the cost thereof of the giveaway to the association and the association shall keep in its records for a period of at least two years suitable evidence of such cost. If the give-away giveaway is purchased or obtained by the association together with, in connection with, or at the same time as another item or other items from the same supplier, not identical therewith, such value shall be deemed to be the then current regular selling price or charge of the supplier on separate sales or dispositions thereof in the quantity included, and the association shall in such case obtain, and keep in its records for a period of at least two years, a signed statement by such supplier of such regular selling price or charge. As used in the foregoing provisions
B. For the purposes of this section:
1. "Account" means shares of an association of whatsoever class or designation, accounts, share account, investment certificate, share subscription, and credit to the account of the maker thereof other than credit on account of a loan by the association. , the term
2. "Give" means to give, to sell or dispose of for less than full monetary value as hereinbefore defined, or with any agreement or undertaking, contingent or otherwise, for repurchase or redemption, whether total or partial, or to offer, promise, or agree to do any of the foregoing. The term "give-away"
3. "Giveaway" means any money, property, service, or other thing of value, whether tangible or intangible. The term
Sec. 99. Section 6-446, Arizona Revised Statutes, is amended to read:
6-446. Other investments and powers
A. An association may invest funds as follows:
1. In an account of any state or federal association, the accounts of which are insured by an insurance corporation.
2. In obligations of or fully guaranteed by the United States, in stock or obligations of federal home loan banks or in stocks or obligations of the federal national mortgage association or other agencies of the United States approved by rule of the superintendent deputy director.
3. In any of the following where the aggregate amount invested in all such investments does not exceed twenty per cent percent of the association's total assets:
(a) Bonds or other direct obligations of or guaranteed as to principal and interest by this state.
(b) Obligations which that by the laws of this state are made legal investments for savings and loan associations.
(c) Bonds or other evidences of indebtedness which that are direct general obligations of any county, incorporated city or town, school district, improvement district or other political subdivision or municipal corporation of this state and, subject to such rules as the superintendent deputy director may adopt, readily marketable corporate debt securities of the type commonly regarded as investment securities which that were publicly distributed when issued and which that are publicly traded at the time of acquisition by the association and loans or securities, which meet standards of sound lending practices.
4. In certificates of deposit issued by any bank which that is a member of the federal deposit insurance corporation, provided that the purchase or renewal of certificates issued by banks which that do not have their principal offices in this state are governed by such rules as the superintendent deputy director may prescribe.
5. In accordance with the provisions of this paragraph and any rules of the superintendent deputy director, any Arizona association may invest in the capital stock, obligations or other securities of any service corporation, under whatever laws organized, if the entire corporate stock of such the service corporation is available for purchase only by savings and loan associations of this state and federal savings and loan associations having their home office in this state, but no an association may not make any investment under this section if its aggregate outstanding investment under this section, determined as prescribed by the rules of the superintendent deputy director, would thereupon exceed six per cent percent of its assets and provided that any investment in excess of five per cent percent of its assets serves primarily community, inner-city or community development purposes. The superintendent deputy director shall prescribe rules under this authority to effectuate the intent of section 6-402, subsection B. If a service corporation engages in an activity which that is not permissible prohibited under this section for a service corporation in which an association may invest, an association having an investment in such a service corporation shall dispose of such an investment promptly unless, within ninety days following notice to such an association, the impermissible prohibited activity is discontinued. The service corporation shall file a certified audit as provided in section 6-477, and the superintendent deputy director may examine service corporations as provided in section 6-476.
6. With or without security, make loans, advance credit and purchase obligations representing loans and advances of credit for the payment of expenses of community college, college or university education, but no association may have loans under this paragraph, exclusive of any loan which that is or which that at the time of its making was otherwise authorized, aggregating at any one time more than five per cent percent of its total assets. An association making a loan under this paragraph may require a comaker or comakers, insurance, guaranty under a government student loan guarantee plan or other protection against contingencies. The borrower shall certify to the association that the proceeds of the loan are to be used by a full-time student solely for the payment of expenses of community college, college or university education at an institution which that provides an education program for which it awards a bachelor's degree or provides not less than a two-year program which that is acceptable for full credit toward such a degree.
7. Notwithstanding any other provision of this article, but subject to such prohibitions, limitations, conditions and restrictions as the superintendent deputy director may prescribe, an association may do any of the following:
(a) Invest in primarily residential real property, including interests in such real property, located within this state.
(b) Acquire, develop and improve such property or interests in the property for primarily residential usage.
(c) Hold, sell or otherwise dispose of, lease, improve and operate any such property or any interest in the property. An association shall not make any investment under this paragraph if its aggregate outstanding investment would exceed ten per cent percent of its assets. As used in For the purposes of this paragraph, "improve" shall include includes any type of improvement other than the construction of residential housing.
8. Subject to chapter 1, article 4 of this title, in any class of capital stock of any bank or savings and loan association, under whatever laws organized, or any corporation which directly or indirectly acting through one or more persons owns or has the power to vote twenty-five per cent percent or more of any class of voting stock of any such bank or savings and loan association.
9. In an amount not exceeding ten per cent percent of the association's assets, in any other investments not prohibited by rules adopted by the superintendent deputy director. No investment made under the authority of this paragraph may be made in a service corporation referred to in paragraph 5 of this subsection. An investment made under the authority of this paragraph may be made or continued for the purpose of creating or acquiring, directly or through any affiliate or subsidiary, any obligation of a purchaser of consumer goods created in the acquisition of such goods or any monetary obligation of a member of the association.
B. Notwithstanding any other provision of law, but except as provided in subsection A, paragraphs 5 and 7 of this section, an association shall have the following powers:
1. To offer and accept savings accounts or other accounts for fixed, minimum or indefinite periods of time or in the form of demand or transaction accounts including overdraft privileges incident thereto to any person or entity.
2. To make, invest in or acquire loans or participating interests in loans, secured or unsecured, of any type and for any purpose to any person or entity.
3. To make, invest in or acquire loans upon on the security of any residential or nonresidential property interest, of any priority, whether fee or leasehold to any person or entity.
4. To make or acquire loans upon on the security of, or invest in, commercial paper, securities and other corporate debt obligations of any type.
5. To issue debt or equity securities for cash or other consideration.
6. To acquire, invest in or hold real or personal property for rental or sale, which at the time of such acquisition or investment would not exceed twenty per cent percent of an association's assets, and to enter into or create lease financing arrangements with respect to such property.
7. To act as trustee, executor, administrator, personal representative, conservator, guardian or custodian, or in any other fiduciary capacity, to offer trust or fiduciary services incident thereto and to receive reasonable compensation therefor.
C. The association in the exercise of such powers provided herein may do so without regard to geographic limitations and on terms and provisions in accordance with this section unless restricted by rules of the superintendent deputy director.
D. An association shall not invest in or acquire a loan or a participating interest in a loan originated or acquired by an affiliate or by a subsidiary of a related holding company or companies other than a service corporation qualified as provided in this section. Before making an investment in or acquiring a loan or a participating interest in a loan the association shall evaluate the creditworthiness of the obligor in the same manner as though the association were originating the loan. The association shall document and retain the credit review in the loan file.
E. All of the provisions of this section are subject to section 33-1571.
Sec. 100. Section 6-449, Arizona Revised Statutes, is amended to read:
6-449. General loan contract provisions
A. Each loan, and any agreement for securing the same, shall be evidenced by one or more written instruments, consistent with sound lending practices in the locality, and whenever recording of such an agreement is necessary to establish priority over the claim of any third party, the agreement shall be recorded.
B. The loan contract terms shall afford full protection to the association and shall include, among other things, provisions for:
1. The payment of taxes, assessments, other governmental levies, maintenance and repairs, granting the association the right to make payments thereon or for any other item which, if unpaid, would create a lien prior to that of the loan contract.
2. Adequate insurance to cover the usual risks on the property offered as security for the loan, and in such form, coverage and amounts and in such company or companies as the board of directors may approve.
3. The right to repay the loan in whole or in part at any time, but the association may require payment of not more than six months' advance interest on that part of the aggregate amount of all prepayments on a loan in one year which that exceeds the amount otherwise payable in such year under the terms of the loan.
C. The loan contract may provide for:
1. An assignment of rents.
2. Additional or future advances to be made at the option of the parties up to a total amount stated in the recorded security instrument.
3. Regular periodical payments to create a separate trust fund in the association to pay when due all taxes, assessments, insurance premiums, ground rents, and other current charges against the real estate security, and the application or crediting of such payments. All such funds so collected shall be promptly deposited in a separate trust bank account.
4. The payment or deduction of a premium charge for property insurance, life insurance or health and accident insurance assigned as collateral, mortgage guaranty insurance or insurance of mortgages by the United States or any instrumentality thereof, actual costs of title examination or title insurance, appraisal, credit report, survey, drawing of papers, closing of loan, and other necessary incidental services in such reasonable amounts as are actually charged and as may be fixed by the board of directors, all of which shall be itemized on a loan settlement sheet delivered to the borrower at the time of closing the loan. ; but No person regularly serving the association shall receive from the association or other source any fee or compensation of any kind in connection with procuring a particular loan from or by such association.
5. A single initial service charge, premium or discount and a charge or penalty for nonpayment when due of agreed payments upon on any loan, but no such the charges, penalties or discount shall, when added to the interest charge of such the loan, over the contractual term of the loan, shall not exceed in the aggregate the applicable interest rate of this state, and no such the charge or penalty shall not be either compounded or cumulated. All such charges and penalties shall be accounted for as a part of the receipts of the association.
6. Any other covenant or agreement which that the association may deem necessary or which that is customary in the locality.
7. The charges herein authorized to be made shall be in addition to interest authorized by law and shall not be deemed as included therein, except as prohibited by section 44-1205 and subsection C, paragraph 5 of this section.
D. If any payment required to be made by the borrower to discharge the performance of any obligation under the loan contract is not made, or if any fund created for such payment is insufficient to discharge the obligation completely, the association may advance the same and add the required amount to the unpaid balance of the loan as of the first day of the month during which such advance was made, and the advance and interest thereon shall be secured by the security instrument.
E. The first payment on any regular installment loan, a construction loan, insured loan, or guaranteed loan shall begin at such time as fixed by rules and regulations of the superintendent deputy director.
Sec. 101. Section 6-451, Arizona Revised Statutes, is amended to read:
6-451. Servicing of loans
An association may contract to service a loan in any manner unless restricted by regulations prescribed by the superintendent deputy director and shall require sufficient compensation to reimburse the association for all expenses incurred under such contract.
Sec. 102. Section 6-453, Arizona Revised Statutes, is amended to read:
6-453. Purchase of real estate for office and rental purposes
An association may invest in land upon on which to erect an office building, an office building or buildings and appurtenances, for the transaction of such association's business, or for the transaction of such business and for rental, but no such investment may be made if the total amount of all investments of the association in such building or buildings exceeds the aggregate amount of the association's outstanding shares of guaranty capital, reserves available for losses and surplus, unless the superintendent deputy director, upon on a proper showing, shall approve a larger amount consistent with the needs of the association's business and its immediate expansion. An association shall not purchase an office building, or any part thereof of an office building, or land upon on which to erect an office building, from an affiliated institution, from an officer, director or employee of such association, or from a corporation or association in which any officer, director or employee is a stockholder or is an officer, director or employee, or from a partnership in which any officer, director or employee is a partner, without the prior written approval of the superintendent deputy director.
Sec. 103. Section 6-457, Arizona Revised Statutes, is amended to read:
6-457. Appraisals
Every appraisal or reappraisal of property which that an association is required to make shall be made as follows:
1. In accordance with the superintendent's deputy director's rules and regulations on appraisals. Each appraisal shall be filed and preserved by the association during the life of the loan.
2. In the case of an insured or guaranteed loan, by any appraiser appointed by any lending, insuring or guaranteeing agency of the United States or of the this state of Arizona which that shall insure or guarantee such loan, wholly or in part. A copy of any appraisal or of the commitment or certificate of the insuring or guaranteeing agency shall be filed and preserved by the association during the life of the loan.
3. The superintendent may deputy director, when good cause exists, may cause an independent appraisal to be made of any property upon on which a loan has been made. The reasonable travel and subsistence expenses and compensation to such appraisers not in excess of comparable fees paid for the same or similar appraisals in the same area shall be paid by the association owning or holding such property as mortgagee.
Sec. 104. Section 6-460, Arizona Revised Statutes, is amended to read:
6-460. Procedure to amend articles of incorporation
The procedure to effect an amendment of articles of incorporation shall be as follows:
1. The board of directors shall adopt a resolution setting forth the proposed amendment and directing that it be submitted to a vote at a meeting of the members, which may be an annual or a special meeting.
2. The proposed amendment, or a summary of the changes to be effected thereby, shall be set forth in the notice of meeting as prescribed in section 6-415.
3. The proposed amendment will be adopted upon on receiving, in the affirmative, a majority or more of the total number of votes which that all members of the association are entitled to cast, except that an amendment effecting a retirement of all shares of guaranty capital must receive the vote specified in section 6-428. A report of proceedings, verified by the president or a vice president and attested by the secretary and setting forth the notice given, the amendment adopted, the vote thereon, and the total number of votes which that all members of the association were entitled to cast thereon, shall be filed promptly with the superintendent deputy director.
4. Each adopted amendment shall be subject to the same inquiry by the superintendent deputy director as the corresponding provision in the original articles of incorporation, including, but not limited to, the availability of a proposed new name of the association. If the superintendent deputy director approves an amendment, he the deputy director shall issue to the association a certificate setting forth the amendment and his the deputy director's approval thereof, which shall then be filed with the corporation commission and a certified copy thereof recorded in the office of the county recorder of the county where the principal office of the association is located. When so filed and recorded the amendment shall become effective.
5. No amendment of articles of incorporation shall affect any existing cause of action either in favor of or against the association, or any pending action in which the association shall be a party, or the existing rights of persons other than members of the association. ; and If the amendment has changed the name of the association, no action brought by or against the association under its former name shall be abated for that reason.
Sec. 105. Section 6-462, Arizona Revised Statutes, is amended to read:
6-462. Conversion from state to federal association
Any association operating under this chapter may become a federal association pursuant to the laws and regulations of the United States and in accordance with the following procedure:
1. The board of directors shall approve a plan of conversion by resolution adopted by majority vote of all of the directors. The plan shall set forth, among other terms:
(a) A financial statement of the association as of the last business day of the month preceding the adoption of the plan.
(b) The disposition of withdrawable capital and guaranty capital, if any.
(c) Adjustments, if any, in the value of accounts when exchanged for comparable accounts in the federal association.
(d) The disposition of any segregated surplus established under the provisions of section 6-426.
(e) The disposition of any obligations or liabilities.
2. Such plan and resolution shall be submitted to the superintendent deputy director at least fifteen days prior to the members' meeting at which action of members is to be taken.
3. If the plan of conversion provides for no adjustment in the accounts of members and all obligations and liabilities are to be assumed by the federal association, the superintendent's deputy director's approval of the plan of conversion shall not be required.
4. If the plan of conversion adjusts values of any type of capital, or if the association has a segregated surplus, such plan of conversion shall be subject to the approval of the superintendent deputy director. Approval shall be given in such case if the superintendent deputy director finds that the plan is equitable and protects the rights of all persons affected, including such contingent interests as theretofore may have been created in the segregated surplus, if any.
5. After receipt of such approval from the superintendent deputy director, if required, the plan of conversion may be submitted at an annual or special meeting of the members. The plan will be adopted upon on receiving, in the affirmative, fifty-one per cent percent or more of the total number of votes which that all members of the association are entitled to cast. A report of proceedings at such the meeting, certified by the president or a vice president and attested by the secretary, shall be filed promptly with the superintendent deputy director.
6. Within ninety days after the date of such the meeting, the association shall take the action prescribed and authorized by the laws and regulations of the United States to complete its conversion to a federal association.
7. Upon On receipt of a federal charter, the association shall file promptly with the superintendent deputy director and the corporation commission either a copy of said charter or a certificate of the appropriate federal officer setting forth the facts concerning the issuance of such charter and upon on recording said charter in the same manner as is required for the association's articles of incorporation, the association shall cease to be a state chartered association.
Sec. 106. Section 6-463, Arizona Revised Statutes, is amended to read:
6-463. Conversion from federal to state association
A. Any federal association may become an association operating under this chapter, pursuant to the laws and regulations of the United States and in accordance with the following procedure:
1. The board of directors shall by a majority vote of all the directors adopt by resolution a plan of conversion which shall set forth among other terms:
(a) A financial statement of the association as of the last business day of the month preceding the adoption of the plan.
(b) The disposition of the withdrawable value of all accounts, general and other reserves and surplus.
(c) The disposition of any obligation or liabilities.
(d) The disposition of the assets of the association.
2. Such plan and resolution shall be submitted to the superintendent deputy director at least fifteen days prior to the members' meeting at which action of the members is to be taken. If the superintendent deputy director, after appropriate examination, shall find finds that the association complies sufficiently with the requirements of this chapter to entitle it to become an association operating under this chapter, he the deputy director shall approve the plan of conversion. He the deputy director may prescribe terms and conditions, to be fulfilled either prior to or after the conversion, to cause the association to conform with the requirements of this chapter.
3. After receipt of the superintendent's deputy director's approval, the plan of conversion may be submitted at an annual or special meeting of the members. ; and The plan will be adopted upon on receiving, in the affirmative, fifty-one per cent percent or more of the total number of votes which that all members of the association are entitled to cast. Thereupon, such action shall be taken by the members to adopt articles of incorporation, to elect directors, to adopt by-laws bylaws, and to elect officers, as is prescribed for a new association in article 2 of this chapter. A report of proceedings at such meeting, certified by the president or a vice-president vice president and attested by the secretary, shall be filed promptly with the superintendent deputy director.
4. If the superintendent deputy director finds that such proceedings have been in accordance with the provisions of this section, he the deputy director shall issue a certificate authorizing the filing of the articles of incorporation with the corporation commission and the taking of the other steps required by title 10, to complete the formation of a corporation. Upon On the issuance of a certificate of incorporation by the corporation commission, the superintendent deputy director shall issue a certificate of conversion.
5. The expenses of any examination made by or at the direction of the superintendent deputy director in connection with such the conversion shall be paid by the converting association as a fee for special examination as authorized by section 6-125.
B. The conversion shall be effective upon on the compliance with the laws and regulations of the United States and the provisions of this section.
Sec. 107. Section 6-465, Arizona Revised Statutes, is amended to read:
6-465. Merger of associations or corporations
A. An association operating under this chapter may merge into or with one or more associations, whether operating under this chapter or otherwise, or into or with any other corporation, except a corporation or association operating an insurance business, other than title insurance, pursuant to title 20. The board of directors of each merging association or corporation, by resolution adopted by a majority vote of all members of such board, must approve the plan of merger, which shall set forth:
1. The name of each merging association or corporation, and the name of the continuing association or corporation and the location of its principal office.
2. The amount of capital, reserves, and undivided profits of the continuing association or corporation, and the kinds of shares and other types of capital to be issued thereby.
3. The articles of incorporation of the continuing association or corporation.
4. A detailed pro forma financial statement of the assets and liabilities of the continuing association or corporation.
5. The manner and basis of converting the capital of each merging association or corporation into capital of the continuing association or corporation.
6. The other terms and conditions of the merger and the method of effectuating the same.
7. Such other provisions with respect to the merger as appear necessary or desirable, or as the superintendent deputy director may reasonably require to enable him the deputy director to discharge his the deputy director's duties with respect to such merger.
B. The plan of merger adopted shall be submitted to the superintendent deputy director for approval, together with a certified copy of the authorizing resolution of each board of directors, showing approval by a majority of the entire board of each merging association operating under this chapter and evidence of proper action by the board of any other merging association or corporation. The superintendent deputy director may make or cause to be made an examination of the affairs of each of the merging associations or corporations. The superintendent deputy director may approve the plan of merger if, after appropriate inquiry into the affairs of each of the merging associations or corporations, he the deputy director finds that:
1. If the resulting association or corporation is an association operating under this chapter, the continuing association meets the requirements of this chapter as to the organization of a new association.
2. The plan provides an adequate capital structure.
3. The plan is fair to all persons affected.
4. The plan meets the approval of the insurance corporation, if such approval is required.
C. If the superintendent deputy director disapproves the plan of merger, he the deputy director shall state his the deputy director's objections in writing and give the merging associations or corporations an opportunity to amend the plan of merger to eliminate such objections.
D. Except as provided by subsection F of this section, after approval by the superintendent deputy director, the plan of merger shall be submitted to a vote of the members of each merging association operating under this chapter and to the members or stockholders of any other merging association or corporation to the extent required by the laws and rules applicable to the other merging association or corporation. Each meeting of the members of an association operating under this chapter shall be called and held in accordance with section 6-415. The plan shall be approved by the members of an association operating under this chapter if the plan receives, in the affirmative, a majority of the total number of votes which that all members of the association are entitled to cast or such greater percentage of the votes as the articles of incorporation of the association require. Each meeting of any other association or corporation shall be called and held, and the required majority must be obtained, in accordance with the law and regulations applicable to such association or corporation.
E. A report of proceedings at the meeting of the members or stockholders of each association or corporation, certified by the president or a vice-president Vice president and attested by the secretary thereof, and setting forth the notice given and time of mailing thereof, the vote on the plan of merger, and the total number of votes which that all members or stockholders of the association or corporation were entitled to cast thereon, shall be filed in duplicate with the superintendent deputy director, except that if no member or stockholder vote is required by an association or corporation, the association or corporation shall file a report to that effect, in duplicate, certified by the president or vice-president Vice president and attested by the secretary of the association or corporation. Any report filed under this subsection shall be accompanied by the plan of merger, duly executed by each merging association or corporation. The superintendent deputy director thereupon shall issue to the continuing association or corporation a certificate of merger, setting forth the name of each merging association or corporation and the name of the continuing association or corporation, and the articles of incorporation of the continuing association or corporation.
F. Unless required by its articles of incorporation, a vote of the members of the continuing association or corporation is not necessary to authorize a merger if either:
1. No shares of common stock are to be issued by the continuing association or corporation and no shares, securities or obligations convertible into such stock are to be issued or delivered under the plan of merger.
2. The authorized but unissued shares or the treasury shares of common stock of the continuing association or corporation to be issued or delivered under the plan of merger plus those initially issuable on conversion of any other shares, securities and obligations to be issued or delivered under the plan do not exceed twenty per cent percent of the shares of common stock of the association or corporation outstanding immediately before the effective date of the merger. If a plan of merger is adopted pursuant to this subsection, a statement that the plan has been so adopted and that, as of the date of the statement, the outstanding shares of the continuing association or corporation were such as to render this subsection applicable shall be certified by the president or vice-president Vice president and attested by the secretary and shall be attached to the plan of merger. The plan so approved and the statement described in this subsection shall be filed in duplicate with the superintendent deputy director.
G. The merger shall become effective upon on the filing with the corporation commission of the certificate of merger in the same manner as articles of incorporation, and the recording of a copy thereof certified by the corporation commission in each county in this state in which the business office of any of the merging associations or corporations was located, and in the county in which the business office of the continuing association or corporation is located, if any.
H. The expenses of any examination made by or at the direction of the superintendent deputy director in connection with a proposed merger shall be paid by the merging association or corporation in accordance with the fees fixed for special examination by section 6-125.
I. If the continuing association or corporation is to be governed by the laws of any jurisdiction other than this state, it shall comply with the applicable provisions of the laws under which it is organized and shall comply with the laws of this state with respect to foreign corporations if it is to transact business in this state.
Sec. 108. Section 6-468, Arizona Revised Statutes, is amended to read:
6-468. Decision to liquidate; adoption of plan
A. At any annual or special meeting of the members, the members may vote to liquidate the association, and may adopt a plan of liquidation which that has been approved by the board of directors, or proposed by one or more shareholders, or submitted by the superintendent; deputy director or may elect a committee of three persons to prepare and submit a plan, and thereafter may adopt such plan. No plan except one submitted by the superintendent deputy director shall be adopted unless it has been filed with the superintendent deputy director at least ten days before the vote of the members is taken thereon.
B. A plan will be adopted upon on receiving in the affirmative two-thirds or more of the total number of votes which that all members of the association are entitled to cast.
C. The plan of voluntary liquidation shall provide for the full liquidation of the association, setting forth the powers, duties, manner of filling vacancies, and succession of the liquidators and authorizing them to:
1. Advance funds of the association to preserve, protect, or purchase at any sale any asset in which the association has an interest.
2. Sell, convey, lease, mortgage, or exchange any assets for other assets.
3. Sell and dispose of any assets at public sale to the highest and best bidder or at private sale for the highest price obtainable.
4. Accept withdrawable capital of the association to apply upon on the purchase price of any assets, but only for such relative values as may be approved by the superintendent deputy director from time to time. Notice by single publication or by mailing, stating the time, place and terms of the sale, shall be given to all holders of withdrawable capital prior to the sale.
5. Pay out of the proceeds of liquidation all expenses and services necessary to the liquidation, and also compensation of the liquidators. ; but such Compensation of the liquidators, exclusive of compensation for legal services and other specialized employment, shall not exceed in the aggregate three per cent percent of the proceeds of liquidation.
Sec. 109. Section 6-469, Arizona Revised Statutes, is amended to read:
6-469. Election of liquidators; report; supervision
A. Upon On adoption of a plan of voluntary liquidation, the members shall proceed to elect, with cumulative voting permitted allowed as in elections of directors, not more than three liquidators, who shall have full power to execute the plan. The procedure thereafter shall be as follows:
1. A report of proceedings at the meeting of members, certified by the presiding officer of the meeting and attested by the secretary of the meeting, and setting forth the notice given and time of mailing thereof, the vote on the plan of voluntary liquidation, the total number of votes which that all members of the association were entitled to cast thereon, and the names of the liquidators elected, shall be filed in triplicate with the superintendent deputy director, together with the plan.
2. If the superintendent deputy director finds that the plan and proceedings are in accordance with this article, that the bonds of the liquidators are sufficient, and that the plan is not unfair to any person affected, he the deputy director shall attach his the deputy director's certificate of approval to the plan and shall forward one copy to the liquidators, and in the case of an insured association, one copy to the insurance corporation.
3. The expenses of any examination made by or at the direction of the superintendent deputy director in connection with any voluntary dissolution shall be paid as a claim by the liquidators in accordance with the fees fixed for special examinations by section 6-125.
4. The plan shall become effective upon on filing with the corporation commission of the superintendent's deputy director's certificate of approval.
B. The liquidation of the association shall be subject to the supervision and examination of the superintendent deputy director.
Sec. 110. Section 6-472, Arizona Revised Statutes, is amended to read:
6-472. Final distribution and dissolution
When all assets have been liquidated and all expenses, claims and holders of withdrawable capital have been paid, dissolution of the association shall be accomplished in the following manner:
1. The liquidators shall file with the superintendent deputy director the duly verified final report of their acts and proposed final distribution.
2. Upon On the superintendent's deputy director's approval of the final report, the liquidators shall publish notice of the proposed final distribution and shall allow any holder of shares of guaranty capital to examine the records of the association to ascertain his the holder's proper share of such distribution. Any such shareholder who fails to commence, before the date fixed for final distribution, appropriate judicial proceedings to contest such distribution, shall be barred from contesting the same thereafter. The liquidators shall proceed to make final distribution on the date fixed therefor, except that such distribution shall be deferred until final disposition of any pending judicial action affecting the distribution, and payment, of any judgment entered therein.
3. When final distribution has been made, except as to any money due to, but unclaimed by, any creditor, member, or other person, the liquidators shall deposit such unclaimed money with the superintendent deputy director, for payment to the person or persons entitled thereto upon on application and proof of right as provided by law.
4. The liquidators also shall deliver to the superintendent deputy director all books of account and other records of the association, for preservation for at least two years and destruction thereafter as provided by law.
5. Upon On completion of the foregoing procedure, the liquidators shall be discharged. The superintendent deputy director thereupon shall issue a certificate of dissolution of the association and shall file a copy thereof with the corporation commission and record a copy in the office of the county recorder of each county in which the original articles of incorporation were recorded. Upon On such filing and recording, the dissolution shall be effective. No fees shall be required for such filing and recording.
Sec. 111. Section 6-474, Arizona Revised Statutes, is amended to read:
6-474. Accounting practices and records
A. Every association shall maintain in this state a detailed record of all transactions of the association at its home office, or at a branch office or at a central accounting or computer center servicing one or more associations, provided that general accounting records and their maintenance shall not be transferred by an association from its home office to a branch office, or from a branch office to its home office or to another branch office or to a central accounting or computer center, unless and until:
1. The board of directors of the association has by resolution authorized such transfer and maintenance.
2. The association has sent a certified copy of the resolution required by paragraph 1 of this subsection to the superintendent deputy director.
B. Each branch office shall keep detailed records of all transactions at such branch office and shall furnish full control records to the home office, or such branch office or central accounting or computer center as has been designated by appropriate resolution of the board of directors adopted and filed as provided in subsection A of this section.
C. Every association shall observe such generally accepted accounting principles and practices as are approved by the superintendent deputy director.
D. No An association by any system of accounting or any device of bookkeeping shall, either directly or indirectly, shall not enter any of its assets upon on its books in the name of any other person, partnership, association or corporation, or under any title or designation that is not truly descriptive of such the assets.
E. The superintendent deputy director may order that assets in the aggregate, to the extent that such the assets have depreciated in value, be charged off or that a special reserve or reserves equal to such depreciation in value be set up by transfers from undivided profits.
F. Except notes secured by first lien mortgages insured or guaranteed, wholly or in part, by an agency of the United States government, all bonds or other interest bearing obligations purchased by the association shall be carried at par with provision for amortization of premiums and discounts.
Sec. 112. Section 6-475, Arizona Revised Statutes, is amended to read:
6-475. Branch office
A. A branch office is a legally established place of business of the association, other than the home office, authorized by the board of directors and approved by the superintendent deputy director, at which payments on, and withdrawal from, accounts and loan payments may be accepted and applications for loans may be received, and at which account books and membership certificates may be issued and loans may be closed.
B. Each association shall be operated from the home office, which shall be the association's principal place of business. All branch offices shall be subject to direction from the home office.
C. An association may establish or acquire a branch office in any location, whether within or outside this state, with the approval of the superintendent deputy director. An association shall make an application for establishment or acquisition of a branch office in writing in the form the superintendent deputy director prescribes and supported by the information, data and records the superintendent deputy director requires to make the findings necessary for approval. Each application for approval of the establishment and maintenance of a branch office shall state the proposed location of the branch office, the need for the branch office, the functions to be performed in the branch office, the estimated annual expense of the branch office, and the mode of payment for the branch office. Each such application shall be accompanied by a budget of the association for the current dividend period and for the next succeeding semiannual period, which reflects the estimated additional expense of the maintenance of such a branch office. The superintendent deputy director shall approve the application if the superintendent deputy director finds that the prospects for a successful operation of the branch office are favorable.
D. An association shall not establish or maintain an automated teller machine without the prior written approval of the superintendent deputy director. An association shall accompany each application for approval of the establishment and maintenance of an automated teller machine with the fee prescribed by section 6-126. The application shall state the proposed location of the automated teller machine, the need for the automated teller machine, the functions to be performed by the automated teller machine, the estimated annual expense of the automated teller machine and the mode of payment by the automated teller machine. The superintendent deputy director shall approve the application if the superintendent deputy director finds that the prospects for a successful operation of the automated teller machine are favorable.
Sec. 113. Section 6-476, Arizona Revised Statutes, is amended to read:
6-476. Examination
The superintendent deputy director shall make a report of each examination to the board of directors of the association examined, and if the affairs of the association are not being conducted in accordance with this chapter, he the deputy director may require the directors, officers, or employees to take any necessary corrective action. In the interests of the members of the association, the superintendent deputy director may prepare a statement of the condition of the association, and may mail the same to the members or may require a single publication thereof.
Sec. 114. Section 6-477, Arizona Revised Statutes, is amended to read:
6-477. Audit by public accountant
An audit of the affairs of the association shall be made annually as of the end of its fiscal year by or under the direction of the board of directors. The superintendent deputy director may prescribe certain minimum requirements of the audit and shall require the filing of a copy of the report covering the audit with the superintendent deputy director. The audit shall be filed with the superintendent deputy director not more than one hundred twenty days after the end of the association's fiscal year, unless the superintendent deputy director extends the time period for good cause shown. The audit is not a substitute for or in lieu of the examination by the superintendent deputy director required by section 6-122.
Sec. 115. Section 6-478, Arizona Revised Statutes, is amended to read:
6-478. Reports to deputy director and members
A. Every association operating under this chapter shall file with the superintendent deputy director within sixty days following the close of each fiscal year of such association, a statement showing its financial condition at the close of the fiscal year and its operations for the year then ended. Each such statement shall be on forms prescribed by the superintendent deputy director and in conformity with generally accepted accounting principles, and shall be verified under oath by the secretary and certified by a committee of three or more members who are not officers of the association, or by a licensed certified public accountant appointed by the board of directors, or by two officers of the association.
B. Every association shall file also such other reports as the superintendent deputy director may require from time to time.
C. Within sixty days after the date of such statement, the association either shall mail to each member the annual statement of condition, or a condensed form thereof approved by the superintendent deputy director, or shall publish the same at least once.
Sec. 116. Section 6-479, Arizona Revised Statutes, is amended to read:
6-479. Information to federal authorities
The superintendent deputy director may give copies of reports of his the deputy director's examinations of an association, and copies of the association's reports to him the deputy director, and any other information which he that the deputy director has concerning the association, to the federal home loan bank, or its successor instrumentality, of which the association is a member, or to the insurance corporation which that has insured the association's capital. No such action by the superintendent deputy director shall relieve the association from compliance with any requirements of such federal instrumentality concerning examinations or reports, or limit the superintendent's deputy director's powers to examine or to require reports from the association.
Sec. 117. Section 6-482, Arizona Revised Statutes, is amended to read:
6-482. Receiver; appointment; transfer of assets; powers; liability
A. If the court grants a petition for receivership filed by the superintendent deputy director, the superintendent deputy director shall be appointed as receiver and may forthwith take possession of the property and business of the association and retain possession until the association resumes business or its affairs are finally liquidated, but if the association has the insurance protection provided by title IV of the national housing act, as now or hereinafter amended, the court may tender to the federal deposit insurance corporation the appointment as receiver, or as co-receiver with the superintendent deputy director.
B. Upon On the acceptance by the insurance corporation of the appointment as receiver or co-receiver, possession of and title to all the assets, property and business of the insured association shall automatically pass to and be vested in the insurance corporation as receiver, or in the insurance corporation and the superintendent deputy director jointly as co-receivers, as the case may be. Thereupon The insurance corporation, if it is receiver, or the insurance corporation and the superintendent deputy director equally and jointly, if the insurance corporation is co-receiver, shall have and possess, and may exercise:
1. All the powers and privileges provided by the laws of this state or otherwise with respect to the superintendent deputy director as receiver of a savings and loan association.
2. Accumulatively and additionally to each of the foregoing, all of the rights, powers, privileges and authority which that were held or possessed by the association and its officers, directors, members and creditors.
3. All the rights, privileges, powers and authority conferred upon on or vested in it, or intended so to be, by federal statutes.
C. The receiver or receivers may also make loans on the security of, or may purchase at public or private sale or otherwise, bid at any receiver's or liquidator's sale, and liquidate or sell, all or any part of the assets of the insured association, and, in the event of the purchase of any assets of an association of which it is receiver or co-receiver, it shall bid for and pay a fair and reasonable price.
D. Except as otherwise in writing specifically agreed by the receiver or receivers, no transaction, contract, undertaking or agreement, and no exercise by the receiver or receivers, or either of them, of any of the rights, powers, privileges or authority by this article or otherwise vested in them as receivers, or with respect to any receivership or liquidation, shall constitute a personal debt, obligation or liability of or on the part of the receiver or receivers or either of them.
Sec. 118. Section 6-486, Arizona Revised Statutes, is amended to read:
6-486. Rehabilitation of associations; definition
A. When If the business, property and affairs of any association are in the possession of the superintendent deputy director for liquidation, or when if an association is in an unsafe or unsound condition, the association may be rehabilitated, readjusted or reorganized in accordance with any plan proposed and approved as provided in this article.
C. B. Without limiting the generality of the foregoing provisions of this article, a plan may provide in respect to all or any part of the business, property or affairs of the association for any one or more of the following:
1. The retention thereof by the superintendent deputy director as a conservator, if the business, property or affairs are in his the deputy director's possession for liquidation.
2. The delivery thereof to the superintendent deputy director as a conservator, or for liquidation.
3. The transfer thereof to any person or to a trustee.
B. C. The term For the purposes of this article, "plan" as used in this article means a plan for the rehabilitation, readjustment or reorganization of an association or for the readjustment, modification or reorganization of the rights or interests of any or all of the investors and creditors of, or other persons, interested in the association.
Sec. 119. Section 6-487, Arizona Revised Statutes, is amended to read:
6-487. Proposal of plan; petition; notice of hearing
A. A plan may be proposed by the superintendent deputy director or by an association subject to the approval of the superintendent deputy director. If proposed by an association, the proposal shall be through its board of directors, or by the holders of accounts equal in amount to not less than fifty per cent percent of the total accounts of the association, or by the holders of not less than a majority of the outstanding shares of guaranty capital of the association, if any.
B. The plan shall be presented by the proponents to the superior court of the county in which the principal place of business of the association is located, with a petition that the court determine the fairness of the plan and the conditions requisite to the plan becoming operative. The petition shall set forth the plan and the fact that it has been proposed or approved by the superintendent deputy director and any other facts which that are deemed material to a consideration of the fairness of the plan.
C. Upon On filing the petition, the court shall fix the time and place for hearing it, and shall direct the association to deliver to the proponents, or, in the discretion of the court, to the superintendent deputy director, a list of the names and addresses of the holders of accounts, holders of shares of guaranty capital, if any, creditors of the association, and of all other persons affected by the plan, and the association shall comply with the direction.
D. Thereafter the proponents of the plan, not less than twenty days before the date fixed for the hearing, shall mail or cause to be mailed to each of the persons shown on the list furnished pursuant to direction of the court and to all other persons affected by the plan, notice of the time and place fixed by the court for the hearing and either a copy of the plan or a summary thereof. Any summary shall be prepared or approved by the superintendent deputy director. The notices shall be mailed, postage prepaid, to the respective addresses as shown on the list, or if no address is there shown, to the last known available address. The proponents of the plan shall also post notice of the time and place fixed for the hearing in three public places in the county not less than twenty days before the day fixed for the hearing and shall publish the notice at least once in a newspaper of general circulation published in the county not less than twenty nor more than thirty days prior to the day fixed for the hearing.
E. A copy of the plan shall be kept by the superintendent deputy director available for public inspection, and he the deputy director shall take other steps as he the deputy director deems necessary for making the plan and all notices and facts in connection therewith available to the interested parties.
Sec. 120. Section 6-488, Arizona Revised Statutes, is amended to read:
6-488. Hearing; fairness of plan
A. At the time and place fixed for the hearing, or at the time and place to which the hearing may be continued by the court, the court shall hear the parties interested therein and, if it deems it necessary, may take testimony relative thereto and may accept proof in affidavit form as to any fact or circumstance material thereto. The hearing shall be conducted, among other things, upon on the fairness of the terms and conditions of the issuance of all securities to be issued pursuant to the plan and of the exchange thereof for outstanding shares of guaranty capital, accounts, claims or property interests, or partly in such the exchange and partly for cash. All persons to whom it is proposed to issue securities in the exchange shall have the right to appear and be heard at the hearing.
B. No plan shall be approved by The superintendent deputy director or by the court shall not approve a plan unless the superintendent deputy director or the court is satisfied that the plan is feasible, fair and equitable and does not discriminate in favor of any class of holders of accounts or of shares of guaranty capital, creditors or other persons affected thereby.
Sec. 121. Section 6-489, Arizona Revised Statutes, is amended to read:
6-489. Consents required for plan to operate; exceptions
A. After completion of the hearing provided by section 6-488, the court shall approve, modify or disapprove the plan. The plan shall not become operative unless and until it has been approved in its original or modified form by the court, nor unless and until the plan has been consented to, either in person or by a duly appointed agent, attorney or committee of the following persons:
1. If the association has shares of guaranty capital outstanding, then by the holders of a majority of the outstanding shares of guaranty capital.
2. By the holders of two-thirds in amount of the total accounts of all classes of the association.
3. If the association has creditors, then by two-thirds of each class of creditors of the association.
4. By two-thirds in amount of each class of other persons, if any, affected by the plan.
B. Consents required by subsection A of this section are not required:
1. In the case of the holder of an account, creditor or other person affected, or of any class of holders of accounts, creditors or other persons affected, if the rights of the person or class are not materially affected by the plan, or if the plan provides for the payment in cash of the amount of the right or interest of such person or class.
2. From holders of shares of guaranty capital of an association if the value of the assets of the association is less than the liabilities thereof, including the total amount of all outstanding accounts but excluding the amount of the outstanding shares of guaranty capital, or if the business property and affairs of the association are then in the possession of the superintendent deputy director.
Sec. 122. Section 6-490, Arizona Revised Statutes, is amended to read:
6-490. Time of giving consents; jurisdiction of court
A. The consents required by section 6-489 may be given before the plan is presented to the court, or after the presentation and before the court has approved it, or after approval. If, at the time the plan is approved by the court, the required consents have not been given, the order of court may provide that upon on satisfactory proof of the fact that the required consents have been given, a further order may be entered ex parte providing that the plan shall become operative which shall be binding upon on the superintendent deputy director, the association, all holders of accounts and of shares of guaranty capital, creditors, and all other persons affected thereby.
B. The superior court in which the petition is pending is given jurisdiction to determine all questions required to be determined in respect to any plan including, without limiting the generality of the foregoing, the following:
1. Whether a plan, either in its original or modified form, is fair and equitable.
2. Whether it discriminates in favor of any class of holders of accounts, creditors or other persons affected thereby.
3. Whether it is feasible.
4. Whether the terms and conditions of the proposed issuance and exchange of securities thereunder are fair and to approve or disapprove the terms and conditions.
5. The total liabilities of the association.
6. The conditions requisite to the plan becoming operative, including jurisdiction to determine, for the purposes of the plan and the consents, the division of the creditors and other persons affected by the plan into classes according to the nature of their respective claims and interests.
Sec. 123. Section 6-491, Arizona Revised Statutes, is amended to read:
6-491. Effect of approval and consents
A. When a plan has been approved by the court and the required consents given, the plan shall be binding upon on the superintendent deputy director, the association, the holders of accounts and shares of guaranty capital, and creditors of the association and all other persons affected thereby, and the association and such persons shall be conclusively deemed to have consented to the terms and conditions of the plan whether or not all of the persons have actually consented thereto and whether or not all of them have received notice of the plan or the hearing. Such steps shall be taken by the superintendent deputy director, the association and all other persons affected by the plan, and all acts shall be done, all instruments executed and all securities issued, as may be required by the plan so approved and as may be necessary or desirable for consummation of the plan.
B. The superintendent deputy director shall supervise and direct, subject to the order of the court, the consummation of the plan. He the deputy director shall have and may exercise the same authority and power with respect to the business, property or affairs of an association retained by or delivered to him the deputy director pursuant to any plan which he that the deputy director may have with respect to the business, property and affairs of any association of which he the deputy director has taken possession. The superintendent deputy director shall have and may exercise the same authority and power with respect to an association formed pursuant to any plan, or to which the business, property or affairs may be returned or transferred pursuant to any plan, as he the deputy director would have of the association if it had been formed or had acquired its business, property and affairs by means other than a plan.
Sec. 124. Section 6-501, Arizona Revised Statutes, is amended to read:
6-501. Definitions
A. In this chapter, unless the context otherwise requires:
1. "Branch office" means a place of business of a credit union, other than a principal office, at which deposits are received and checks are paid, but does not include premises used for computer operations, record keeping recordkeeping, accounting, storage, maintenance or other administrative or service functions.
2. "Capital" means share accounts, reserves and undivided earnings.
3. "Corporate credit union" means a credit union whose field of membership consists of other credit unions and organizations or associations owned by or composed of credit unions and corporations or associations which that primarily serve credit unions.
4. "Credit union" means a cooperative nonprofit association which that is incorporated under this chapter for the purposes of encouraging thrift among its members and creating a source of credit and other financial services at fair and reasonable cost.
5. "Deposit account" means a balance other than a share account held by a credit union including balances designated as special investment accounts, deposits, certificates of deposit, certificates of indebtedness, demand deposit accounts or other similar names.
6. "Fixed asset" means land, buildings and major equipment used by a credit union in the provision of services.
7. "Governmental unit" means a board, agency, department, authority, instrumentality or other unit or organization of the federal, state, county, municipal or other level of government.
8. "Immediate family" means persons related by blood or marriage and includes foster and adopted children.
9. "Insolvent" means that the value of a credit union's assets is less than its liabilities.
10. "Insuring organization" means the national credit union administration or successor organization or any other equivalent insurer approved by the superintendent deputy director.
11. "Membership share" means a balance held by a credit union and established by a member according to the standards prescribed by the credit union.
12. "Organization" means any corporation, association, partnership, society, firm, syndicate, trust or other legal entity.
13. "Reserves" means allocations of retained income and includes regular and special reserves and any allowances for loan losses and investment losses.
14. "Risk assets" includes all assets of the credit union except the following:
(a) Cash on hand.
(b) Deposits or shares in federally or state insured banks, savings and loan associations and credit unions which that have a remaining maturity of five years or less or if the maturity is greater than five years, the asset is being carried on the credit union's records at the lower of cost or market or is being marked to market value monthly.
(c) Assets which that have a remaining maturity of five years or less and are insured by, fully guaranteed as to principal and interest by or due from the United States government, its agencies, the federal national mortgage association, the federal home loan mortgage corporation or the government national mortgage association including collateralized mortgage obligations which that are comprised of government guaranteed mortgage loans or if the maturity is greater than five years, the asset is being carried on the credit union's records at the lower of cost or market or is being marked to market value monthly.
(d) Loans to other credit unions which that have a remaining maturity of five years or less or if the maturity is greater than five years, the asset is being carried on the credit union's records at the lower of cost or market or is being marked to market value monthly.
(e) Student loans insured under the provisions of title IV, part B of the higher education act of 1965 (20 United States Code section 1071, et seq.) or similar state insurance programs which that have a remaining maturity of five years or less or if the maturity is greater than five years, the asset is being carried on the credit union's records at the lower of cost or market or is being marked to market value monthly.
(f) Loans which that have a remaining maturity of five years or less and are fully insured or guaranteed by the federal or state government or an agency of either or if the maturity is greater than five years, the asset is being carried on the credit union's records at the lower of cost or market or is being marked to market value monthly.
(g) Shares or deposits in a central or corporate credit union which that have a remaining maturity of five years or less or if the maturity is greater than five years, the asset is being carried on the credit union's records at the lower of cost or market or is being marked to market value monthly.
(h) Common trust investments, including mutual funds, which that deal exclusively in investments authorized by the federal credit union act and are either carried at the lower cost or market or are marked to the market value monthly.
(i) Prepaid expenses.
(j) Accrued interest on nonrisk investments.
(k) Loans fully secured by a pledge of shares in the lending federal credit union equal to and maintained to at least the amount of the loan outstanding.
(l) Loans that are purchased from liquidating credit unions and guaranteed by the national credit union administration.
(m) National credit union share insurance fund guaranty accounts established with the authorization of the national credit union administration under the authority of section 208(a)(1) of the federal credit union act.
(n) Investments in shares of the national credit union administration central liquidity facility.
(o) Fixed assets as defined in section 701.36(b) of the federal credit union act.
(p) Deposits in the national credit union share insurance fund representing a federally insured credit union's capitalization account balance of one per cent percent of insured shares.
15. "Share account" means a balance held by a credit union and established by a member according to this chapter, including balances designated as shares, share certificates, share draft accounts and membership shares. Ownership of a share account confers membership and voting rights and represents an interest in the capital of the credit union.
B. For the purposes of subsection A, paragraph 14, subdivision (g) of this section, a "central or corporate credit union" means a credit union whose membership primarily consists of either:
1. Other credit unions organized under state or federal law.
2. Officials, committee members and employees of any credit union organized under state or federal law.
3. Any combination of the categories described in paragraphs 1 and 2 of this subsection.
Sec. 125. Section 6-502, Arizona Revised Statutes, is amended to read:
6-502. Reports and examinations
A. The superintendent deputy director shall examine or cause to be examined each credit union at periodic intervals as provided by section 6-122. The superintendent deputy director shall forward a report of the examination to the board of directors of the credit union examined within thirty days after completion of the report. Within thirty days after the receipt of the report the directors shall meet to consider matters contained in the report.
B. In lieu of the examination required by subsection A of this section, the superintendent deputy director may accept an examination or audit report of the condition of a credit union made by the national credit union administration or by a certified public accountant who is licensed in this state or who has a limited reciprocity privilege pursuant to section 32-725 or other qualified person or organization approved by the superintendent deputy director. The credit union shall bear the cost of any such examination or audit. A certified public accountant or other qualified person or organization making an audit to be submitted in lieu of an examination by the superintendent deputy director shall obtain prior approval from the superintendent deputy director before conducting such an audit. In approving such an audit the superintendent deputy director may prescribe minimum requirements for the audit, including the date by which the audit must be completed and a copy filed with the superintendent deputy director.
C. Within thirty days after the end of each calendar quarter a credit union shall report to the superintendent deputy director, on forms supplied by the superintendent deputy director for that purpose, its financial condition and the results of its operation for the quarter.
D. Unless excused for cause before or after the due date, a credit union that fails to file a report when due shall pay the department, as assessed, up to one hundred dollars $100 for each day of delinquency.
Sec. 126. Section 6-503, Arizona Revised Statutes, is amended to read:
6-503. Accounting and records
A. A credit union shall keep and use in its business those books, accounts and records that will enable the superintendent deputy director to readily ascertain the true financial condition of the credit union and whether the credit union is complying with the provisions of this chapter.
B. A credit union and any of its officers, directors, employees and agents shall give the superintendent deputy director full access to all books, papers, securities, records and other sources of information under their control. All books and records of the credit union shall be maintained at the address of the credit union as filed with the superintendent deputy director.
Sec. 127. Section 6-506, Arizona Revised Statutes, is amended to read:
6-506. Organization procedure
A. Any seven or more residents of this state who are of legal age and who have a common bond of interest or association may apply to the superintendent deputy director for permission to organize a credit union under this chapter.
B. The incorporators shall prepare, adopt and execute a certificate of organization and shall agree to comply with the requirements of the certificate and with all of the laws and rules applicable to credit unions. The certificate shall state:
1. The credit union's name and the location of the proposed principal place of business.
2. That the existence of the credit union is perpetual.
3. The names and addresses of the incorporators and the number of shares subscribed to by each.
4. The purpose for which the credit union is formed.
C. The incorporators shall prepare, adopt and execute bylaws consistent with this chapter for the general governance of the credit union. The bylaws, among other things, shall provide:
1. The proposed field of membership which that shall be limited to groups having a common bond of interest, occupation or association or to groups within a well-defined neighborhood, community or rural district consistent with the purposes of the credit union.
2. The par value of shares.
3. The number of directors of the credit union, which shall not be fewer than five, all of whom shall be members, together with the titles of the officers and the number of members of the supervisory committee, which shall not be fewer than three.
4. The conditions under which shares may be issued, transferred or withdrawn, loans may be made and repaid and monies may be otherwise invested.
5. The number of members of the credit committee, which shall not be fewer than three, or the authorization of a credit manager.
D. The incorporators shall select at least five persons who are eligible for membership and who agree to become members and serve on the board of directors, and at least three persons who are eligible for membership and who agree to become members and serve on the supervisory committee. The persons selected to serve on the board of directors and the supervisory committee shall execute an agreement to serve in those capacities until the first annual meeting or until the election of their respective successors, whichever is later.
E. The incorporators shall forward to the superintendent deputy director such application as is required by the superintendent deputy director, along with the application fee provided for in section 6-126, the certificate of organization, the bylaws and the agreements to serve and any additional information which the superintendent deputy director may request.
F. The incorporators shall not transact any business in the name of the credit union until the certificate of incorporation has been issued by the corporation commission and the application and the bylaws have been approved by the superintendent deputy director.
Sec. 128. Section 6-507, Arizona Revised Statutes, is amended to read:
6-507. Certificate of approval; filing with corporation commission; certificate of incorporation
A. The superintendent deputy director shall act on the completed application within sixty days. The superintendent deputy director shall issue a certificate of approval if the certificate of organization and the bylaws are in conformity with this chapter and the superintendent deputy director is satisfied that all of the following are true:
1. The field of membership, the bylaws and the business plan are favorable to the economic viability of the proposed credit union.
2. The reputation, character and financial experience of the initial board of directors and supervisory committee provide assurance that the credit union's affairs will be properly administered.
3. The share and deposit accounts of the credit union will be insured by an insuring organization when the credit union commences business.
B. On receipt of the superintendent's deputy director's certificate of approval the incorporators shall file the certificate of organization, with the certificate of approval attached, with the corporation commission and record a certified copy of the filing under the seal of the commission with the county recorder of the county or counties in which the credit union is to do business. On proof of the recording, the corporation commission shall issue a certificate of incorporation to the credit union. The credit union shall forward a certified copy of the certificate of incorporation showing the filing and recording to the superintendent deputy director.
C. The credit union shall also file with the corporation commission the appointment of an agent on whom service of process may be made. The incorporators shall then be deemed a credit union, incorporated in accordance with this chapter.
D. If a certificate of approval is denied, the superintendent deputy director shall notify the incorporators and set forth the reasons for the denial.
Sec. 129. Section 6-508, Arizona Revised Statutes, is amended to read:
6-508. Certificate of organization and bylaws
A. The superintendent deputy director shall prepare standard forms of the certificate of organization and bylaws, consistent with this chapter, which may be used by credit union incorporators.
B. The board of directors may adopt proposed amendments to the certificate of organization at a duly held meeting. The board of directors shall submit the proposed amendments to the members for ratification at a regular or special meeting, after which they shall be submitted to the superintendent deputy director for his the deputy director's approval or disapproval. If approved by the superintendent deputy director, the board of directors shall follow the procedure for organization prescribed in section 6-507, subsection B.
C. The board of directors may adopt proposed amendments to the bylaws at any duly held meeting by a three-fourths majority vote. After proposed amendments have been approved, the board shall submit the proposed amendments to the superintendent deputy director for his the deputy director's approval. The amendments are effective on approval of the superintendent deputy director. At the next regular or special meeting of the membership the board shall submit all amendments to the bylaws to the members for ratification.
Sec. 130. Section 6-509, Arizona Revised Statutes, is amended to read:
6-509. Exclusive use of name; exception
A. The name of every credit union organized under this chapter shall include the words "credit union". A credit union shall not adopt a name either identical to the name of any other credit union doing business in this state or so similar as to be misleading or cause confusion.
B. It is unlawful for any person to engage in this state in the business of a credit union or to make use of the words "credit union" or any other words in a manner reasonably calculated to convey the impression that the person is engaged in the business of a credit union in this state, unless the act is done by or on behalf of a person having authority under this chapter, except an association of credit unions, or an organization, corporation or association whose membership or ownership consists primarily of credit unions or credit union organizations, may use a name or title containing the words "credit union".
C. A credit union may change its name only on the written authorization of the superintendent deputy director.
Sec. 131. Section 6-510, Arizona Revised Statutes, is amended to read:
6-510. Principal place of business; branch office; automated teller machines
A. A credit union may change its principal place of business or branch within this state with the prior approval of the superintendent deputy director and the payment of the fee provided in section 6-126.
B. A credit union may establish a branch office with the prior approval of the superintendent deputy director.
C. A credit union may establish or maintain automated teller machines at locations other than its places of business. The credit union must send a notification letter to the superintendent deputy director at least thirty days before the automated teller machine is established pursuant to this subsection. A credit union may join through contractual agreement with one or more other credit unions or other financial organizations in the operation of automated teller machine networks.
D. A credit union organized under this chapter may conduct business outside of this state in other states or territories of the United States where it is permitted allowed to do so on approval of the superintendent deputy director, if it is reasonably necessary to service its members.
Sec. 132. Section 6-511, Arizona Revised Statutes, is amended to read:
6-511. Out-of-state credit union
A. A credit union organized under the laws of another state or territory of the United States may conduct business as a credit union in this state, subject to all laws and rules governing the operation of credit unions under this title, with the prior approval of the superintendent deputy director if credit unions organized under this chapter are allowed to do business in such other state or territory under conditions substantially similar to the provisions of this section. Before granting approval, the superintendent deputy director must find that the out-of-state credit union:
1. Is organized under laws substantially similar to this chapter.
2. Is financially solvent.
3. Has account insurance equivalent to that required for credit unions organized under this chapter.
4. Is examined and supervised by a regulatory agency of the state in which it is organized.
5. Needs to conduct business in this state to furnish services to its members in this state.
6. Furnishes the superintendent deputy director with a copy of the most recent audit or examination conducted by its regulatory agency.
B. In addition to any other powers provided by law, the superintendent deputy director may revoke the approval of such a credit union to conduct business in this state if the superintendent deputy director finds that the credit union no longer meets the requirements of subsection A of this section or has violated the laws of this state or rules or orders issued by the superintendent deputy director.
Sec. 133. Section 6-516, Arizona Revised Statutes, is amended to read:
6-516. General powers
A. In addition to the powers prescribed elsewhere in this chapter and except as prohibited by law, a credit union may:
1. Enter into contracts of any nature.
2. Sue or be sued.
3. Adopt, use and display a corporate seal.
4. Acquire, lease, hold, assign, pledge, hypothecate, sell, discount or otherwise dispose of property or assets, either in whole or in part, necessary or incidental to its operations.
5. Borrow money from any source, except that a credit union shall obtain the prior written approval of the superintendent deputy director to borrow in excess of an aggregate of fifty per cent percent of its capital.
6. Purchase the assets of another credit union.
7. Offer financial services incidental to the business of a credit union, including electronic fund transfers, safe deposit boxes and leasing and correspondent arrangements with other financial institutions.
8. Hold membership in other credit unions organized under this chapter or other laws, in the Arizona credit union league or in other associations and organizations controlled by or fostering the interests of credit unions.
9. Engage in activities and programs offered by any governmental unit that are incidental or reasonably related to credit union activities.
10. Act as fiscal agent for and receive payments on share and deposit accounts from a governmental unit.
11. Make contributions to any nonprofit civic, charitable or service organizations.
B. A credit union may exercise all incidental powers that are convenient, suitable or necessary to enable it to promote or carry out its purposes.
C. A credit union shall not delegate the management of a credit union or the exercise of any power set forth in this section to any person who is not an officer, director or employee of the credit union without the prior written approval of the superintendent deputy director. The superintendent deputy director may examine the books, records and business affairs of any person or entity to whom the credit union proposes to delegate any such authority.
Sec. 134. Section 6-532, Arizona Revised Statutes, is amended to read:
6-532. Election of board
A. The board shall consist of at least five directors, to be elected by and from the members. Elections shall be held at the annual meeting or in such other manner as the bylaws provide. All members of the board are entitled to hold office for the terms the bylaws provide, except that terms shall be staggered so that an approximately equal number expire each year, over a three year three-year period.
B. At a meeting held within thirty days after each annual election, the board of directors shall appoint a supervisory committee of not fewer than three persons for such terms as the bylaws provide. At the same meeting, the board of directors shall appoint a credit committee, unless the bylaws provide for a credit manager in place of a credit committee. The credit committee shall consist of not fewer than three persons whose terms shall be as the bylaws provide. Within twenty days after the meeting, the credit union shall file with the superintendent deputy director a record of the names and addresses of the members of the board and such other committees and officials as required by the superintendent deputy director. Within sixty days of after any vacancies occurring in the board or supervisory or credit committee, the board shall fill the vacancies in accordance with the bylaws. A record of the names and addresses of members filling any vacancies on the board or the supervisory or credit committee shall be filed with the superintendent deputy director within twenty days after their appointment.
Sec. 135. Section 6-541, Arizona Revised Statutes, is amended to read:
6-541. Audits
A. The supervisory committee shall make or cause to be made a comprehensive annual audit of the books and affairs of the credit union. The supervisory committee shall also make those supplementary examinations, audits and verifications of members' accounts as it deems necessary or as required by the superintendent deputy director or the board of directors. The supervisory committee shall submit a report of each annual audit to the board of directors at its next meeting, and to the superintendent deputy director, and shall include a summary of that report to the members at the next annual meeting of the credit union.
B. The audit shall be made using generally accepted accounting procedures and standards. Each audit at a minimum shall test the credit union's assets, liabilities, equity, income, expenses and internal controls.
C. The supervisory committee shall ensure that adequate work papers are prepared and maintained to support each audit. These work papers shall be made available for review during examinations by the superintendent deputy director.
Sec. 136. Section 6-558, Arizona Revised Statutes, is amended to read:
6-558. Member account insurance
A. Before the incorporators of a credit union forward the organization documents to the superintendent deputy director, as required by section 6-506, they shall apply for insurance on share and deposit accounts from an insuring organization.
B. The superintendent deputy director shall not grant an approved a certificate of organization approval to form a credit union unless the proposed credit union has obtained a commitment for insurance on member accounts.
C. A credit union may not begin operations as a credit union or continue operations without share and deposit account insurance acceptable to the superintendent deputy director.
Sec. 137. Section 6-564, Arizona Revised Statutes, is amended to read:
6-564. Loans to officials
A. A credit union may make loans to an officer, director or member of its supervisory and credit committees if both of the following conditions are met:
1. The loan complies with all requirements of this chapter and is not on terms more favorable than those extended to other borrowers.
2. The aggregate of loans to all such officials, excepting those fully secured by share or deposit accounts, does not exceed twenty per cent percent of the credit union's capital.
B. A credit union may permit allow officers, directors and members of its supervisory and credit committees to act as comakers, guarantors or endorsers of loans to other members, subject to the requirements of subsection A of this section.
C. All applications for loans in the aggregate of twenty thousand dollars $20,000 or a greater amount as determined by the superintendent deputy director on which an official will be either a direct obligor or an endorser, cosigner or guarantor shall be initially acted on by the board of directors as provided in the bylaws.
Sec. 138. Section 6-577, Arizona Revised Statutes, is amended to read:
6-577. Authorized investments
A. Monies not used in loans to members may be invested in:
1. Securities, obligations or other instruments of or issued by or fully guaranteed as to principal and interest by the United States or any agency or instrumentality of the United States or in any trust or mutual fund established for investing directly or collectively in the same.
2. Securities, obligations or other instruments, whose payment is guaranteed by the general taxing authority of the issuer, of any state of the United States or any political subdivision of a state of the United States, and on approval of the superintendent deputy director, the District of Columbia, the Commonwealth of Puerto Rico and the several territories organized by Congress or any political subdivision thereof.
3. Deposits of federally insured financial institutions organized under state or federal law.
4. Loans to or share accounts or deposit accounts of other credit unions or corporate credit unions organized under state or federal law.
5. Deposits in, loans to or shares of any federal reserve bank, federal home loan bank or central liquidity facility established under state or federal law.
6. Shares, obligations or preferred stock issues of any agency or association organized either as a stock company, mutual association or membership corporation, if the membership or stock holdings of such agency or association are primarily confined or restricted to credit unions or organizations of credit unions and the purpose for which such agency or association is organized is to service or otherwise assist credit union operations.
7. Stocks, bonds or other obligations of corporations organized in any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico and the several territories organized by Congress and in securities, obligations or other instruments of any state of the United States or any political subdivision thereof, the District of Columbia, the Commonwealth of Puerto Rico and the several territories organized by congress, but not in the aggregate to exceed three percent of the credit union's capital and not to exceed one percent of the credit union's capital in any one corporation's stock, bonds and obligations. These investments are limited to the three highest ratings established by one or more national rating services of corporate securities designated by the superintendent deputy director.
8. Pools of participation loans with other credit unions, credit union organizations or other financial institutions, not to exceed five percent of the credit union's capital.
9. Other investments as approved by the superintendent deputy director.
10. Fixed assets.
B. Investments authorized under subsection A, paragraph 6 of this section shall not exceed five percent of the credit union's capital, without the prior written approval of the superintendent deputy director. The action of a credit union in investing monies in accordance with subsection A, paragraph 6 of this section shall not be deemed a violation of this section if the aggregate investments exceed the limitation of subsection A, paragraph 6 of this section because of a subsequent reduction in the amount of the credit union's capital.
Sec. 139. Section 6-582, Arizona Revised Statutes, is amended to read:
6-582. Use of regular reserve
Losses on risk assets, but not operating losses, shall be promptly charged against the regular reserve when those losses occur. The credit union shall not distribute the regular reserve except on liquidation of the credit union or in accordance with a plan approved by the superintendent deputy director.
Sec. 140. Section 6-583, Arizona Revised Statutes, is amended to read:
6-583. Special reserves
In addition to the regular reserve, special reserves for losses shall be established if required by rule or if the superintendent deputy director or the board of directors finds it necessary. Special reserves may include allowances for loan losses or investment losses.
Sec. 141. Section 6-584, Arizona Revised Statutes, is amended to read:
6-584. Voluntary dissolution
A. A credit union may elect to dissolve voluntarily and terminate its affairs in the following manner:
1. The board of directors shall adopt a resolution recommending that the credit union be dissolved voluntarily, naming a liquidating agent adequately bondable, and directing that the question of a dissolution be submitted to a regular or special meeting of the members.
2. At a regular or special meeting called for such purpose where the notice of such purpose is contained in the call, the affirmative vote of a majority of the members of the credit union present shall be required to dissolve the credit union.
3. Upon On the adoption of a resolution to dissolve, a statement of intent to dissolve shall be executed in triplicate by the president or vice-president vice president, and attested by its secretary, which shall set forth:
(a) The name of the corporation.
(b) Names and addresses of the officers and directors of the corporation.
(c) A copy of the resolution authorizing the voluntary dissolution and the name and address of the liquidating agent.
(d) Names and addresses of the members and the amount of the shares and loan balances of members outstanding.
(e) A financial and statistical report as of the date the resolution to dissolve is adopted.
B. Immediately upon on the adoption of the resolution to dissolve, the credit union shall furnish to the superintendent deputy director duplicate copies of the statement of intent to dissolve and the superintendent deputy director shall then determine whether or not the credit union is solvent. If it is solvent, he the deputy director shall issue to the credit union in quadruplicate a certificate to the effect that this section has been complied with. The certificate shall be filed by the credit union with the corporation commission and a duplicate copy recorded in the office of the county recorder of the county in which the credit union is located, whereupon the credit union shall be deemed dissolved and shall cease carrying on business except for the purpose of liquidation.
C. The credit union shall continue in existence for the purpose of discharging its debts, collecting and distributing its assets and doing all other acts required to completely dissolve the credit union, and may sue and be sued for the purpose of enforcing such debts and obligations until its affairs are fully terminated, but an action may not be filed by or against such credit union more than two years after this certificate of dissolution is recorded.
D. The credit union shall during the dissolution period furnish to the superintendent deputy director regular monthly progress reports of the affairs of the credit union until the final dissolution of the credit union.
E. After the expiration of two years from after the date of final dissolution, the superintendent deputy director may destroy all books and records of such credit union in his the deputy director's possession.
Sec. 142. Section 6-585, Arizona Revised Statutes, is amended to read:
6-585. Involuntary dissolution
A. The superintendent deputy director may forthwith take possession and control of the business and property of any credit union to which this chapter is applicable whenever he the deputy director finds upon on examination or investigation that such credit union has committed one or more of the following violations:
1. Is in violation of an order issued pursuant to section 6-137.
2. Is conducting its business in an unauthorized or unsafe manner or in violation of the bylaws of the credit union.
3. Is insolvent.
4. Has an impairment of its capital.
5. Cannot with safety and expediency continue business.
6. Has suspended payment of its obligations.
7. Is, through its officers, refusing to submit its books, papers and records of affairs for inspection to any examiner.
8. Is, through its officers, refusing to be examined regarding its affairs.
9. Has been examined by its own supervisory committee and the majority of the committee requested in writing that the superintendent deputy director take possession and control.
10. In a proceeding for voluntary dissolution has, through its liquidating agent, failed to make reasonable progress in the liquidation of its affairs and distribution of its assets.
B. The superintendent upon deputy director on taking possession and control of the credit union, its business and operation, together with the furniture, fixtures, books, records and assets of every description, shall determine whether it is practicable and feasible to reorganize the credit union to continue in business or merge the credit union with another operating credit union. If the superintendent deputy director determines that the credit union cannot be reorganized, or merged with another operating credit union, he the deputy director may permit allow the credit union to operate under his the deputy director's direction and control, or if he the deputy director determines that the credit union should be liquidated through receivership, he the deputy director shall petition the superior court for authority to liquidate such credit union, and the superior court shall immediately appoint the superintendent deputy director as the receiver of the credit union without bond, and shall make such other orders, judgments and decrees as is are necessary to liquidate such credit union. The receiver shall take possession of and, for the purpose of receivership, title to the books, records and assets of every description of such credit union, shall proceed to collect all debts, dues and claims belonging to it, may sell or compound all bad or doubtful debts and may sell the real and personal property of such credit union, on such terms as the court may direct.
C. Such receiver may sue and defend in his the receiver's own name with respect to the affairs, assets, claims, debts, and choses in action of such credit union.
D. The receiver shall hold all records of such receivership for a period of two years after the close of the receivership, and at the termination of the two years, the records may then be destroyed.
E. All expenses of such receivership, including reasonable receiver and attorney fees, shall be paid out of the assets of such credit union, and all expenses of any preliminary or other examinations into the condition of any such credit union or receivership, and all expenses incident to and in connection with the possession and control of any credit union office, furniture and fixtures, books, records and assets of every description of such credit union by the receiver for the purpose of reorganization or liquidation through receivership, shall be paid out of the assets of such credit union.
F. Notwithstanding the provisions of subsections A, B, C and D of this section, when if such credit union is a federally insured state credit union, the court shall first tender the appointment as receiver to the national credit union administration, or any succeeding organization, which is authorized to qualify and act without bond. If the national credit union administration or succeeding organization accepts the appointment, it shall have all of the powers, privileges and duties as such receiver provided by the laws of this state.
Sec. 143. Section 6-586, Arizona Revised Statutes, is amended to read:
6-586. Distribution of assets of liquidating credit union
If there is either a voluntary or involuntary liquidation of a credit union the assets of the credit union or the proceeds from any disposition of the assets shall be applied and distributed in the following order:
1. Taxes owed to the United States, this state or any other governmental unit.
2. Secured creditors up to the fair market value of their collateral, not to exceed the amount of their debt.
3. Costs and expenses of liquidation.
4. Wages due the employees of the credit union.
5. Costs and expenses incurred by creditors in successfully opposing the release of the credit union from certain debts as allowed by the superintendent deputy director.
6. Debts owed to the United States or this state.
7. General creditors, secured creditors, to the extent their claims exceed the fair market value of their collateral, and owners of deposit accounts, to the extent the accounts are uninsured.
8. Members, to the extent of uninsured accounts, and the insuring organization that insured the accounts of the credit union.
Sec. 144. Section 6-587, Arizona Revised Statutes, is amended to read:
6-587. Merger or consolidation of credit unions
A. Any two or more credit unions may merge or consolidate into a single credit union. The merger or consolidation may be with a credit union organized under the laws of this state, the laws of any other state or territory of the United States or the laws of the United States.
B. If two or more credit unions merge, they shall either designate one of them as the continuing credit union or they shall structure a totally new credit union and designate it as the new credit union. All participating credit unions other than the continuing or new credit union shall be designated as merging credit unions.
C. Any merger of credit unions shall be done according to a plan of merger. After approval by the boards of directors of all participating credit unions, the plan shall be submitted to the superintendent deputy director for preliminary approval. If the plan includes the creation of a new credit union, all documents required by section 6-506 shall be submitted as part of the plan. In addition, each participating credit union shall submit the following:
1. The time and place of the meeting of the board of directors at which the plan was agreed on.
2. The vote of the directors in favor of the adoption of the plan.
3. A copy of the resolution or other action by which the plan was agreed on.
D. The superintendent deputy director shall grant preliminary approval if the plan has been approved properly by each board of directors, if the documentation required to form a new credit union, if any, complies with section 6-506 and if the superintendent deputy director is of the opinion that the merged or continuing credit union should be approved.
E. After the superintendent deputy director grants preliminary approval, each merging credit union shall conduct a membership vote on its participation in the plan. The credit union shall conduct the vote either at a special membership meeting called for that purpose or by mail ballot. If a majority of the members voting approves the plan, the credit union shall submit a record of that fact to the superintendent deputy director indicating the vote by which the members approved the plan and either the time and place of the membership meeting or the mailing date and closing date of the mail ballot.
F. The superintendent deputy director shall grant final approval of the plan of merger after determining that the requirements of subsection E of this section in the case of each merging credit union have been met and if proof of insurance of accounts, as required by section 6-558, has been furnished. The superintendent deputy director shall notify all participating credit unions of his the deputy director's action on the plan. If approved, the continuing credit union shall file copies of the certificate showing the approval of the superintendent deputy director with the corporation commission and a certified copy of the filing under the seal of the commission recorded with the county recorder of the county in which each credit union participating in the merger has its principal place of business with a copy filed with the superintendent deputy director. When the copies have been filed the merged credit union terminates as a legal entity, and the continuing credit union remains and continues in operation.
G. On final approval of the plan by the superintendent deputy director, all property, property rights and members' interests in each merging credit union vest in the continuing or new credit union as applicable without deed, endorsement or other instrument of transfer, and all debts, obligations and liabilities of each merging credit union are deemed to have been assumed by the continuing or new credit union. The rights and privileges of the members of each participating credit union remain intact, except that if a person is a member of more than one of the participating credit unions that person is entitled to only a single set of membership rights in the continuing or new credit union.
H. If the continuing or new credit union is chartered by another state or territory of the United States, it is subject to the requirements of section 6-511.
I. Notwithstanding any other law, the superintendent deputy director may authorize a merger or consolidation of a credit union which that is insolvent or is in danger of insolvency with any other credit union or may authorize a credit union to purchase any of the assets or assume any of the liabilities of any other credit union which that is insolvent or in danger of insolvency if the superintendent deputy director is satisfied that:
1. An emergency requiring expeditious action exists with respect to the other credit union.
2. Other alternatives are not reasonably available.
3. The public interest would best be served by approval of the merger, consolidation, purchase or assumption.
Sec. 145. Section 6-588, Arizona Revised Statutes, is amended to read:
6-588. Conversion of credit union
A. A credit union incorporated under the laws of this state may be converted to a credit union organized under the laws of the United States, or it may be converted to a credit union organized under the laws of another state if the principal office has relocated to another state or jurisdiction, in the following manner:
1. On recommendations of the board of directors, the members of a credit union incorporated under the laws of this state, by an affirmative majority vote of all members voting in a meeting called for that purpose or by written ballot filed within fifteen days, may resolve to convert the credit union into a federal credit union or a credit union organized under the laws of another state.
2. Within twenty days after the meeting at which the members determine to so convert, the credit union shall file with the superintendent deputy director a certificate verified by the affidavit of the president or the chairman and the secretary of the credit union. The certificate shall contain a copy of the minutes of the meeting and a statement that the members have approved the determination to convert the credit union into a federal credit union or a credit union organized under the laws of another state.
3. The filing of the certificate required in paragraph 2 of this subsection with the superintendent deputy director is presumptive proof or evidence of the holding of the meeting and the action taken.
4. After the meeting of the members, the credit union shall take such action as is necessary under the federal law or the state law to which it is converting as a credit union. It shall also liquidate in a manner approved by the superintendent deputy director any assets or liabilities which that are not by reason of law capable of being transferred to the converted credit union. Within ten days after the receipt of the new charter or certificate of incorporation, the credit union shall file with the superintendent deputy director and the corporation commission a copy of the instrument. On this filing, the credit union ceases to be a credit union incorporated under the laws of this state and is converted to one under its new jurisdiction.
5. At the time the conversion becomes effective, the credit union ceases to be supervised by this state and all of the property of the credit union, including all of its right, title and interest in and to all property of every kind and character, immediately by operation of law and without any conveyance or transfer and without any further act or deed is vested in the converted credit union under its new name and structure and under its new jurisdiction.
6. The converted credit union shall have, hold and enjoy the property prescribed in paragraph 5 of this subsection in its own right as fully and to the same extent as the property was possessed, held and enjoyed by it as a credit union under the laws of this state. The converted credit union continues to be responsible for all of the obligations of the former credit union to the same extent as though the conversion had not taken place. The converted credit union is merely a continuation of the former credit union under a new name and new jurisdiction and the revision of its corporate structure as is necessary for its proper operation under the new jurisdiction.
B. A credit union organized under the laws of the United States or of any other state may convert to a credit union incorporated under the laws of this state in the following manner:
1. To effect such a conversion a credit union shall first comply with all of the requirements of the jurisdiction under which it is organized and file proof of the compliance with the superintendent deputy director.
2. The converting credit union through its proper officers and officials shall sign and acknowledge in quintuplicate a certificate of organization as required in sections 6-506 and 6-507 in which they bind themselves to comply with the requirements of the certificate and with all the laws and rules applicable to a state credit union. The application for a certificate of organization in quintuplicate, the bylaws in duplicate and the required charter fee and examination assessment shall be submitted to the superintendent deputy director who shall make or cause to be made an appropriate investigation for the purpose of determining the advisability of such a conversion. On receipt of the superintendent's deputy director's certificate of organization in quadruplicate, with the certificate of approval, the applicants shall file the certificate of approval attached in quadruplicate with the corporation commission and record a certified copy of the filing under the seal of the commission with the county recorder of the county or counties in which the credit union is to do business. On proof of the recording, the corporation commission shall issue a certificate of incorporation to the credit union. The credit union shall forward a certified copy of the certificate of organization showing the filing and recording to the superintendent deputy director. The credit union shall also file with the corporation commission the appointment of an agent on whom service of process may be made.
3. Within ten days after the receipt of the certified copy of the certificate of incorporation by the credit union, the credit union shall file two certified copies of the certificate with its present supervisory agency and a copy of the transmittal letter with the superintendent deputy director.
4. On filing the certified copy of the certificate of organization with the superintendent deputy director, the converting credit union ceases to be a credit union under its former jurisdiction and is a credit union under the laws of this state. All of the property of the credit union, including all of its right, title and interest in and to all property of every kind and character, immediately, by operation of law and without any conveyance or transfer and without any further act or deed, is vested in the credit union under its new name and style as a state credit union and under its new jurisdiction.
5. The converted credit union shall have, hold and enjoy the property prescribed in paragraph 4 of this subsection in its own right as fully and to the same extent as the property was possessed, held and enjoyed by it as a credit union under its former jurisdiction and the converted credit union continues to be responsible for all of the obligations of the former credit union to the same extent as though conversion had not taken place. The converted credit union is merely a continuation of the former credit union under a new name and new jurisdiction and the revision of its corporate structure as is considered necessary for its proper operation under the new jurisdiction.
C. A credit union incorporated under the laws of this state may be converted into an association, as defined in section 6-401, that is incorporated under the laws of this state or of the United States if the credit union complies with both of the following:
1. The provisions established by the national credit union administration as prescribed by 12 Code of Federal Regulations part 708a.
2. Any rules that the superintendent deputy director adopts to implement this subsection.
Sec. 146. Section 6-595, Arizona Revised Statutes, is amended to read:
6-595. Reserves
A. A corporate credit union shall establish and maintain a corporate reserve in accordance with the reserve requirements of the national credit union administration for federal corporate credit unions.
B. A corporate credit union may make charges to the corporate reserve for losses on risk assets and to meet such other classes of losses as approved by the superintendent deputy director. A corporate credit union shall not distribute the corporate reserve except on liquidation of the credit union or in accordance with a plan approved by the superintendent deputy director.
Sec. 147. Section 6-601, Arizona Revised Statutes, is amended to read:
6-601. Definitions
In this chapter, unless the context otherwise requires:
1. "Actuarial method" means the method of allocating each payment between finance charges and principal pursuant to which the payment is applied first to finance charges computed on the unpaid balance of principal for the time the balance is outstanding, and the remainder of the payment is subtracted from the unpaid principal amount.
2. "Amount financed" means the amount of credit extended to a consumer on a consumer loan determined in accordance with the truth in lending act.
3. "Annual percentage rate" means the measure of the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made, determined in accordance with the truth in lending act.
4. "Consumer" means an individual who obtains a consumer lender loan for personal, family or household purposes.
5. "Consumer lender" means a person that advertises to make or procure, solicits or holds itself out to make or procure, or makes or procures consumer lender loans to consumers in this state.
6. "Consumer lender loans" means consumer loans, consumer revolving loans and home equity revolving loans.
7. "Consumer loan" means the direct closed end loan of money, whether unsecured or secured by personal or real property, in an amount of ten thousand dollars $10,000 or less that is subject to a finance charge. For the purpose of determining whether a consumer loan is ten thousand dollars or less in which only the principal amount of the loan shall be is considered, and not any finance charges or other fees allowed pursuant to section 6-635, for the purpose of determining whether the consumer loan is $10,000 or less.
8. "Consumer loan rate" means the periodic rate of finance charges that applies to the outstanding principal balance of a consumer loan and that remains unpaid. Consumer loan rate does not include any prepaid finance charges pursuant to section 6-632, subsection E or any fees pursuant to section 6-635.
9. "Consumer revolving loan" means an open end revolving loan that is established pursuant to an agreement with an agreed on credit limit that does not exceed ten thousand dollars $10,000, that the consumer may pay in full at any time but has the privilege of paying in installments and that contemplates or provides that advances may be obtained from time to time by the consumer, through checks, drafts, items, credit access devices, orders for the payment of money, evidences of debt or similar means, whether or not negotiable.
10. "Educational loan" means any loan or other aid or assistance for the purpose of furthering the education of a consumer or a relative of a consumer at an accredited or approved university, college, community college, junior college, technical, vocational or professional school, or similar institution.
11. "Finance charge" means the amount payable by a consumer incident to or as a condition of the extension of a consumer lender loan but does not include other fees allowed pursuant to section 6-635.
12. "Home equity revolving loan" means an open end revolving loan that is made pursuant to an agreement with an agreed on credit limit that is not more than ten thousand dollars $10,000, that is secured by the consumer's principal residence and that provides that advances may be obtained from time to time by the consumer through checks, drafts, items, credit access devices, orders for the payment of money, evidences of debt or similar means, whether or not negotiable.
13. "License" means a license issued under the authority of this chapter to make consumer lender loans in accordance with this chapter.
14. "Licensee" means a person licensed pursuant to this chapter.
15. "Precomputed consumer loan" means a consumer loan that is payable in substantially equal, consecutive monthly installments that are applied to the unpaid balance of the principal and precomputed finance charges combined, subject to provisions for refund or credit in the event of prepayment and for deferral or default charges in the event of deferral or default.
16. "Regularly engaged in the business" means either:
(a) Advertising to or any other solicitation of a resident of this state that offers a consumer loan and that occurs within this state.
(b) Making three or more consumer loans within a calendar year to residents of this state.
17. "Truth in lending act" means title I of the consumer credit protection act (15 United States Code sections 1601 through 1666j), as amended, and the regulations promulgated under that act (12 Code of Federal Regulations part 226), as amended.
Sec. 148. Section 6-602, Arizona Revised Statutes, is amended to read:
6-602. Exemptions
A. This chapter does not apply to:
1. A person who does business under any other law of this state, or any other state while regulated by a state agency of that other state, or of the United States, relating to banks, savings banks, trust companies, savings and loan associations, profit sharing and pension trusts, credit unions, insurance companies or receiverships if the consumer lender loan transactions are regulated by the other law or are under the jurisdiction of a court.
2. A person who is licensed as a pawnbroker pursuant to title 44, chapter 11, article 3 to the extent that the person's activities are governed by that article.
3. A person who is not regularly engaged in the business of making consumer lender loans.
4. A person who is licensed pursuant to chapter 9 of this title to the extent that the person's activities are governed by that chapter.
B. The requirements of this chapter do not apply to:
1. Closed end loans of more than ten thousand dollars $10,000.
2. Advances on open end revolving loans that are not secured by the consumer's principal residence with an agreed on credit limit of more than ten thousand dollars $10,000, regardless of the amount of any advances on these revolving loans.
3. Advances on open end revolving loans that are secured by the consumer's principal residence with an agreed on credit limit of more than ten thousand dollars $10,000, regardless of the amount of any advances on these revolving loans.
4. Consumer lender loans that are lawfully made to nonresidents of the state in any other state under and in accordance with a regulatory consumer lender law similar in principle to this chapter.
5. Educational loans that are either:
(a) Made, insured or guaranteed pursuant to a program authorized by the United States, this state or any other state.
(b) Made by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the internal revenue code to students who attend postsecondary educational institutions in this state.
C. A consumer loan made pursuant to a consumer lender license is not a secondary motor vehicle finance transaction as defined in section 44-281.
Sec. 149. Section 6-603, Arizona Revised Statutes, is amended to read:
6-603. License; contents of application; fees; nontransferable
A. Unless exempt under section 6-602, a person, whether located in this state or in another state, shall not engage in the business of a consumer lender without first being licensed as a consumer lender by the superintendent deputy director.
B. This chapter applies to any person who seeks to avoid its application by any device, subterfuge or pretense.
C. Each applicant for a license shall submit an application in writing, under oath and in the form prescribed by the superintendent deputy director. The superintendent deputy director may require as part of an application any other information that the superintendent deputy director deems necessary.
D. At the time of filing an application for a license, an applicant shall pay to the superintendent deputy director the fee prescribed in section 6-126.
E. Before June 30 of each year, each licensee may obtain a renewal of a license by filing an application in the form prescribed by the superintendent deputy director and paying the fee prescribed in section 6-126.
F. The superintendent deputy director may deny a license to a person if the superintendent deputy director finds that an applicant:
1. Is insolvent as defined in section 47-1201.
2. Has failed to demonstrate the financial responsibility, experience, character and general fitness to command the confidence of the public and to warrant the belief that the business will be operated lawfully, honestly, fairly and efficiently within the purposes of this chapter.
3. Has failed to pay the license fee.
4. Has failed to have at least twenty-five thousand dollars $25,000 in assets readily available for use in the conduct of the business of each licensed office and branch office.
G. A consumer lender license is not transferable or assignable, and no person may acquire control of a licensee through stock purchase or other device without the prior written consent of the superintendent deputy director. The superintendent deputy director may refuse consent if the superintendent deputy director finds that any of the grounds for denial of renewal, revocation or suspension of a license prescribed in section 6-605 are applicable to the acquiring person. For purposes of this subsection, "control" means the power to vote more than twenty per cent percent of the outstanding voting shares of a licensed corporation, limited liability company, partnership, association or trust.
Sec. 150. Section 6-604, Arizona Revised Statutes, is amended to read:
6-604. Issuance of license; license year; requirements
A. If the superintendent deputy director finds no grounds for denial of a license, within one hundred twenty days after receiving a complete application, the superintendent deputy director shall grant the application and issue a license to the applicant.
B. The license year for a licensee begins on July 1 and ends on June 30 of each year.
C. All licenses issued remain in full force until surrendered, revoked or suspended.
D. A license remains the property of this state. On termination at the request of the licensee or revocation by the superintendent deputy director, the licensee shall immediately deliver the license to the superintendent deputy director. Termination of the license does not affect any other liability of the licensee.
E. The licensee shall designate the principal location of the licensed office within or outside this state. If a licensee wishes to maintain more than one office location the licensee shall first obtain a branch office license for each branch office from the superintendent deputy director. The licensee shall submit an application in the form prescribed by the superintendent deputy director and pay the fee prescribed in section 6-126 for each branch office license. If the superintendent deputy director determines that the applicant is qualified, the superintendent deputy director shall issue a branch office license indicating the address of the branch office.
F. A licensee shall prominently display the consumer lender license in the office of the consumer lender and any branch office license in that branch office.
Sec. 151. Section 6-605, Arizona Revised Statutes, is amended to read:
6-605. Denial of renewal; suspension; revocation
A. The superintendent deputy director may deny renewal of a license or suspend or revoke a license if the superintendent deputy director finds that a licensee:
1. Is insolvent as defined in section 47-1201.
2. Has shown that the licensee is not a person of honesty, truthfulness and good character.
3. Has failed to pay the annual renewal fees.
4. Has failed to file an annual report when due or within any extension of time granted by the superintendent deputy director for good cause.
5. Has failed to have or maintain at least twenty-five thousand dollars $25,000 in assets used or readily available for use in the conduct of the business of each licensed office and branch office.
6. Either knowingly or without the exercise of due care to prevent a violation, has violated any provision of this title or any rule or order adopted or made pursuant to this title.
7. Has failed to operate the business of making consumer lender loans for a continuous period of twelve months or more, except that the superintendent deputy director, on good cause shown, may extend the time for operating that business for a single fixed period of not more than twelve months.
B. The superintendent deputy director may also deny renewal of a license or suspend or revoke a license if the superintendent deputy director finds that any fact or condition exists that, if it had existed at the time of the original application for the license, would have clearly warranted the superintendent deputy director to refuse to issue the license.
Sec. 152. Section 6-606, Arizona Revised Statutes, is amended to read:
6-606. Business limited to licensed locations; restrictions
A. Except as provided in subsection B of this section, no licensee may conduct the business of making consumer lender loans pursuant to this chapter under any name or at any place of business in this state other than the name and place stated in the licensee's consumer lender license or branch office license.
B. Subsection A of this section does not prohibit a licensee from:
1. Making consumer lender loans by mail or electronic means.
2. On request, making accommodations to consumers at any location requested by the consumer.
3. Conducting any administrative, loan servicing or record keeping activity at any other location not open to the public, if the superintendent deputy director is notified in advance of that activity.
4. Closing a consumer lender loan secured by real property at an office of a financial institution, title company, licensed escrow agent, licensed mortgage broker or licensed mortgage banker.
5. Giving a consumer an advance on a consumer revolving loan or home equity revolving loan from any location.
C. On approval by the superintendent deputy director, the licensee may conduct any of the activities listed in subsection B of this section outside of this state.
D. A licensee may change the location of its licensed office or licensed branch office by giving written notice to the superintendent deputy director, who shall amend the license accordingly.
E. All consumer lender loans that are made at the location of a licensed office or branch office are subject to the requirements of article 2 of this chapter, whether made by a licensee, any person otherwise exempt from this chapter pursuant to section 6-602 or any other person.
F. No licensee may conduct the business of making consumer lender loans pursuant to this chapter from within any licensed office or branch office in which any other business not licensed pursuant to this title is solicited or engaged in, or in association or conjunction with any other business not licensed pursuant to this title, without giving prior notice to the superintendent deputy director. If it appears to the superintendent deputy director that the other business is of such a nature or is being conducted in such a manner as to conceal an evasion of this chapter or is contrary to the public interest or otherwise being conducted in an unlawful manner, the superintendent deputy director may act pursuant to section 6-137 to restrict the licensee from conducting its business in conjunction with that other business. For the purposes of this subsection, "public interest" means the laws of this state or of the United States or rules adopted by the superintendent deputy director.
Sec. 153. Section 6-607, Arizona Revised Statutes, is amended to read:
6-607. Books; accounts; records; access
A. A licensee shall maintain books, accounts and records that enable the superintendent deputy director to determine whether the licensee is in compliance with this chapter.
B. A licensee shall preserve its books, accounts and records of consumer lender loans for at least two years after making the final entry for any consumer lender loan. A licensee that uses an electronic record keeping system is not required to keep a written copy of the accounts and records if the licensee is able to generate all of the information required by this section in a timely manner for examination or other purposes.
C. Every licensee shall observe generally accepted accounting principles and practices.
D. A licensee shall make any books, accounts and records that are kept outside of this state available to the superintendent deputy director in this state not more than three business days after demand is made by the superintendent deputy director, or the superintendent deputy director may choose to perform the examination or investigation at the office of the licensee located outside this state.
E. For the purposes of this chapter, the superintendent deputy director or the superintendent's deputy director's duly authorized representatives shall have access during normal business hours to the offices and places of business, files, safes and vaults of all licensees regarding that business or the subject matter of any examination, investigation or hearing.
Sec. 154. Section 6-608, Arizona Revised Statutes, is amended to read:
6-608. Annual report of licensee; civil penalty for failure to file
A. On or before October 1 of each year, the licensee shall file a report under oath and in the form prescribed by the superintendent deputy director concerning the business and operations during the twelve month twelve-month period ending the preceding June 30. On good cause shown by a licensee, the superintendent deputy director may extend the time for filing the report for a period of not more than sixty days.
B. If a licensee fails to file the annual report, the superintendent deputy director or any person designated by the superintendent deputy director may examine the books, accounts and records of the licensee, prepare the annual report and charge the licensee an examination fee as prescribed in section 6-125.
C. If a licensee fails to file the annual report within the specified time, the superintendent deputy director may assess a civil penalty for the failure to file the annual report unless an extension of time is granted by the superintendent deputy director in writing before the due date of the annual report. The superintendent deputy director shall not assess a penalty of more than five dollars $5 per day. The licensee shall pay the penalty to the superintendent deputy director within thirty days of the assessment.
Sec. 155. Section 6-609, Arizona Revised Statutes, is amended to read:
6-609. Reporting rates; change in rates; quarterly report of deputy director
A. At the time of making its annual report to the superintendent deputy director, each licensee shall report the licensee's standard annual percentage rate or range of annual percentage rates in effect at that time on the following types of loans:
1. A five hundred dollar $500 unsecured consumer loan, payable in twelve equal monthly installments.
2. A two thousand five hundred dollar $2,500 consumer loan secured by a motor vehicle, payable in thirty-six equal monthly installments.
3. A nine thousand dollar $9,000 consumer loan secured in full by real property, payable in one hundred twenty equal monthly installments.
4. A consumer revolving loan with an agreed on credit limit of three thousand dollars $3,000.
5. A home equity revolving loan with an agreed on credit limit of fifteen thousand dollars $15,000.
B. The amount of each of the consumer loans described in subsection A of this section refers to the amount financed as computed in accordance with the truth in lending act. The licensee shall also report the range of the percentage amount of any prepaid finance charges charged in connection with a home equity revolving loan described in subsection A, paragraph 5 of this section.
C. Within thirty days after effectuating a change in the standard rate of charge for any of the types of loans described in subsection A of this section, the licensee shall report that change to the superintendent deputy director.
D. On at least a quarterly basis the superintendent deputy director shall compile a report of the standard annual percentage rate or range of annual percentage rates of each licensee for the types of loans described in subsection A of this section. The superintendent deputy director shall disseminate this report in a manner deemed appropriate by the superintendent deputy director, and the superintendent deputy director shall make the report available to the public for inspection and copying.
Sec. 156. Section 6-612, Arizona Revised Statutes, is amended to read:
6-612. Rules
The superintendent deputy director may adopt rules that are necessary to regulate the proper conduct of a licensee.
Sec. 157. Section 6-631, Arizona Revised Statutes, is amended to read:
6-631. Disclosures; penalty
A. To the extent applicable, a licensee shall comply with the disclosure requirements of the truth in lending act.
B. Each note or agreement evidencing a consumer lender loan shall contain the following disclosure statement in at least ten point ten-point type that is in English and in Spanish and in close proximity to the consumer's signature line:
Notice: You may request that the initial disclosures prescribed in the truth in lending act (15 United States Code sections 1601 through 1666j) be provided in Spanish before signing any loan documents.
C. A licensee shall continuously and conspicuously display a sign printed in at least twelve point twelve-point bold type containing the notice prescribed by subsection B of this section and the following notice at each desk in each licensed office or branch office at which consumer lender loans are usually and normally closed:
Notice
Before signing any loan documents or otherwise committing to a loan, you may take copies of those documents away from the consumer lender's place of business for review.
D. A licensee shall give to the consumer a receipt or another written record of the amount of any payment made in currency on any consumer lender loan, either at the time the payment is made or within ten days after the payment is made, or the licensee may reflect the payment on the periodic statement sent to the consumer for the billing period that includes the date of that payment.
E. A licensee shall mail periodic statements for consumer revolving loans and home equity revolving loans to the consumer within fourteen days after the end of each monthly billing cycle period. A billing cycle period is considered monthly if the closing date of the billing cycle period is the same day each month or does not vary by more than four days from that day.
F. If the licensee fails to make the disclosure statement prescribed in subsection B of this section, the superintendent deputy director shall assess the licensee a one-time penalty of up to three hundred dollars $300 for every violation.
Sec. 158. Section 6-635, Arizona Revised Statutes, is amended to read:
6-635. Other allowable fees; annual reporting
A. In addition to the finance charges authorized by section 6-632, a licensee may contract for and receive, and collect finance charges on, the following fees:
1. A delinquency charge in an amount equal to five per cent percent of the amount of any installment not paid in full within seven days after its due date.
2. The actual costs of charges that are paid to a third party who is not an employee of the licensee and that are incurred in making consumer lender loans secured in whole or in part by real property, including the charges for a preliminary title search, title examination and report, title insurance premiums, property survey and appraisal fees.
3. Lawful fees for the acknowledging, filing and recording, continuing or releasing in any public office of any instrument or financing statement evidencing or perfecting a lien or security interest in real or personal property securing a consumer lender loan or the premiums paid for insurance in lieu of filing or recording that shall not exceed the filing or recording fee.
4. A loan origination fee of not more than five per cent percent of a closed end consumer loan or the agreed credit limit of a consumer revolving loan but in no event in an amount that is more than one hundred fifty dollars $150. A licensee shall not charge a loan origination fee:
(a) For the refinancing of a closed end consumer loan or the renegotiating of an agreed credit limit of a consumer revolving loan if the refinancing or renegotiating occurs within one year of the collection of a prior loan origination fee.
(b) If the licensee charges prepaid finance charges pursuant to section 6-632, subsection E, paragraph 1.
5. Deferral fees authorized in section 6-634 for precomputed consumer loans.
6. Insurance premiums as provided in section 6-636.
7. Court costs.
8. Reasonable attorney fees if the consumer lender loan is referred for collection to an attorney other than a salaried employee of the licensee.
9. Costs, expenses and fees authorized in section 33-813, subsection B for reinstatement of a deed of trust encumbering real property that secures a consumer lender loan.
10. Costs and expenses of exercising the power of sale in a deed of trust encumbering real property that secures a consumer lender loan and costs and expenses of a sale that are included in a credit bid or that are applied from the proceeds of a trustee's sale pursuant to section 33-812, including the payment of trustee fees and reasonable attorney fees actually incurred.
11. Costs and expenses of retaking, holding, preparing for sale and selling any personal property in accordance with title 47, chapter 9, article 6.
B. If a licensee receives a check, draft, negotiable order of withdrawal or similar instrument drawn on a depository institution that is offered by a consumer in full or partial payment on a consumer lender loan and the instrument is not paid or is dishonored by the depository institution, the licensee may charge and collect from the consumer a dishonored check service fee pursuant to section 44-6852.
C. In addition to the finance charges and fees provided in this article, the licensee shall not directly or indirectly charge, contract for or receive any further or other amount in connection with a consumer lender loan.
D. In conjunction with the reporting requirements prescribed in section 6-609, on or before October 1 each year, a licensee shall report to the superintendent deputy director the number of closed end consumer loans and consumer revolving loans under one thousand dollars $1,000 made in the prior two years.
Sec. 159. Section 6-701, Arizona Revised Statutes, is amended to read:
6-701. Definitions
In this chapter, unless the context otherwise requires:
1. "Agency" means any business serving the public, which as part of its services accepts money for and on behalf of a licensee.
2. "Branch office" means any office operated solely for the purpose of accepting money and performing other services for a licensee.
3. "Creditor" means a person for whose benefit monies are being collected and disbursed by a licensee.
4. "Debt management company" means a corporation, company, firm, partnership, association or society, as well as a natural person, that for compensation engages in the business of receiving money, or evidences thereof, in this state or from a resident of this state as agent of a debtor for the purpose of distributing the same to his creditors in payment or partial payment of his obligations.
5. "Debtor" means a person from whom monies are being accepted for disbursement to creditors.
6. "License" means a license issued under the provisions of this chapter.
7. "Licensee" means a corporation, company, firm, partnership, association or society, as well as a natural person, licensed by the superintendent deputy director to engage in the business of a debt management company pursuant to the provisions of this chapter.
8. "Nonprofit religious, fraternal or cooperative organizations" means religious, fraternal or cooperative organizations or entities whose primary functions or purposes are not the provision of debt management services.
Sec. 160. Section 6-703, Arizona Revised Statutes, is amended to read:
6-703. License required
No person shall engage in the business for compensation of receiving money as agent of a debtor for the purpose of distributing the same that money to his the debtor's creditors in payment or partial payment of his the debtor's obligations without first obtaining a license from the superintendent deputy director.
Sec. 161. Section 6-704, Arizona Revised Statutes, is amended to read:
6-704. Application for license; bonds; contract
A. An application for a license shall be in writing, under oath and in a form prescribed by the superintendent deputy director, and shall contain the name and address, both of the residence and place of business, of the applicant and if the applicant is an association or society, of every member thereof, and if a corporation or partnership, of every officer and director thereof and a copy of the articles of incorporation, and the specific address or addresses at which the business is to be conducted. The superintendent deputy director may require as part of the application a credit report and such other information as he the deputy director deems necessary.
B. At the time of filing the application the applicant shall furnish a cash or surety bond payable to the people of the state in the sum of not less than five thousand dollars $5,000 for licensees disbursing less than one hundred thousand dollars $100,000 each year and for the following amounts based on the amounts disbursed by the licensee in the previous license year:
Yearly disbursements Amount of bond
$100,000 - $250,000 $10,000.00
$250,001 - $500,000 $15,000.00
$500,001 - $1,000,000 $20,000.00
More than $1,000,000 $25,000.00
C. Each bond prescribed in subsection B of this section shall be conditioned upon on the faithful accounting of all monies collected upon on accounts entrusted to such person engaged in debt management, and their employees and agents, and upon on the faithful observance of the provisions of this article and the contract between the licensee and the debtor. The bond shall be approved by the superintendent deputy director and filed in the office of the superintendent deputy director. The bond shall remain in force and effect until the surety is released from liability by the superintendent deputy director, or until the surety bond is canceled by the surety. The surety may cancel the surety bond and be relieved of further liability by delivering thirty days' written notice to the superintendent deputy director. The cancellation does not affect any liability incurred or accrued prior to the termination of the thirty-day period. Any person who suffers any loss or damage by reason of the neglect or default of a licensee or his employees or agents or by the licensee's violation of any of the provisions of this article or of the contract between him the licensee and the debtor shall have a right of action against the licensee and the sureties on his bond. No An action may not be brought on the bond by any person after the expiration of two years from after the time when the act or default occurred. When an action is commenced on the bond of a licensee, the superintendent deputy director may require the filing of a new bond, and immediately upon on the recovery of any action on the bond the licensee shall file a new bond. Failure to file a new bond within ten days of after the recovery on a bond, or within ten days after notification that a bond is required, constitutes sufficient grounds for the suspension or revocation of a license.
D. In addition to the bond provided in subsection B of this section, the superintendent deputy director may require an applicant to obtain an adequate fidelity bond for each officer, employee, or agent having access to funds collected by or for the licensee or having authority to draw against such funds. The fidelity bond required to be filed in accordance with this section shall remain in force and effect until the surety is released from liability by the superintendent deputy director, or until the bond is canceled by the surety. The surety may cancel the bond and be relieved of further liability by delivering thirty days' written notice to the superintendent deputy director. The cancellation shall not affect any liability incurred or accrued prior to the termination of the thirty-day period.
E. Each applicant for a license shall file with his application a blank copy of the contract intended to be used between the licensee and the debtor and shall file with the superintendent deputy director a copy of all changes and amendments thereto.
Sec. 162. Section 6-705, Arizona Revised Statutes, is amended to read:
6-705. Branch offices and agencies
A licensee may establish branch offices or agencies only if it expressly assumes responsibility for the acts of any person accepting money in its name or on its behalf at such places of business. An application for a branch office or agency license shall be in writing, under oath, in a form prescribed by the superintendent deputy director, and shall contain the name and address of the principal place of business of the licensee and a statement that it is a branch office.
Sec. 163. Section 6-706, Arizona Revised Statutes, is amended to read:
6-706. Fees
A. An applicant at the time of filing an application for a license under the terms of this article shall pay to the superintendent deputy director the fee prescribed in section 6-126. The fee for an agency license is the same as that prescribed for a branch.
B. Prior to June 15 of each year, each licensee may obtain a renewal of each license without investigation by payment of the fee prescribed in section 6-126. The fee for renewal of an agency license is the same as that prescribed for a branch.
Sec. 164. Section 6-707, Arizona Revised Statutes, is amended to read:
6-707. Issuance of license; display; cancellation on termination
A. Upon On the filing of the application and the payment of the fees and the approval of the bond, or bonds, the superintendent deputy director shall investigate the facts, and if he the deputy director finds that the financial responsibility, experience, character and general fitness of the applicant are such as to command the confidence of the community to warrant belief that the business will be operated fairly and honestly and within the purposes of this article, the superintendent deputy director shall issue the applicant a license to do business as a debt management company.
B. The license shall be kept conspicuously posted in the business office of the licensee. The license shall not be transferable or assignable.
C. Licenses shall expire on June 30 following the date of the issuance unless sooner surrendered, revoked or suspended, but may be renewed by filing an application with the superintendent deputy director on or before June 15 each year. The application for renewal shall be in the form prescribed by the superintendent deputy director and shall be accompanied by the fee prescribed in section 6-126. A separate application shall be made for each initial license of a principal place of business, agency or branch office.
Sec. 165. Section 6-708, Arizona Revised Statutes, is amended to read:
6-708. Denial; revocation or suspension of license
A. If the superintendent deputy director finds that the applicant fails to meet any of the conditions set forth in this article, he the deputy director shall deny the application for a license. If an application is denied or withdrawn, the superintendent deputy director shall retain the investigation fee to cover the costs of investigating the applicant and return the license fee to the applicant.
B. The superintendent deputy director may revoke or suspend any license issued under this article for the following causes:
1. Conviction in any state of a felony or any crime involving breach of trust or dishonesty.
2. Violating any of the provisions of this article or rules of the department.
3. Fraud or deceit in procuring the issuance of the license.
4. Insolvency, filing in bankruptcy, receivership, or assigning for the benefit of creditors by any licensee or applicant for a license.
5. Failure to pay the annual license fee.
6. Entry of an order against the licensee by an administrative agency of this state, the federal government or any other state or territory of the United States that involves fraud, deceit or misrepresentation by the licensee and the facts relating to the order indicate that it would be contrary to the interests of the public to permit allow that person to be licensed or to control or manage a licensee.
Sec. 166. Section 6-709, Arizona Revised Statutes, is amended to read:
6-709. Requirements
A. A licensee at all times shall maintain minimum liquid assets of at least two thousand five hundred dollars $2,500 in excess of his the licensee's business liabilities and of his the licensee's liabilities on account of monies received in the business of a debt management company. The superintendent deputy director may determine by general rule what assets are liquid assets within the meaning of this section and may determine by specific ruling or demand that a particular asset is or is not a liquid asset within the meaning of this section.
B. A licensee shall make a written contract between himself the licensee and a debtor and immediately furnish the debtor with a copy of the completed contract. The licensee shall concurrently furnish the debtor with a list of the creditors, as of the time of the signing of the contract, with whom he the licensee agrees to manage the debtor's obligations. All contracts shall contain a provision allowing the termination of the contract by either party at any time. Such termination shall be without penalty, except that the licensee shall retain the retainer fee if the termination is by the debtor. Termination shall only be upon on a five-day notice to the other party.
C. The basis of fees charged to a debtor by a licensee for assuming the responsibility of debt management shall be agreed upon on in advance and clearly stated in the contract. The fees charged to a debtor shall not exceed:
1. A retainer fee of thirty-nine dollars $39.
2. Three-quarters of one per cent percent of the total indebtedness or fifty dollars $50, whichever is less, may be charged monthly and shall be due and payable at the time such deposited funds are remitted to the creditors. Unusual and necessary "out of pocket" expense items by the licensee may be charged to the debtor's account if the incurrence of the expense has advance written approval of the debtor and superintendent deputy director.
D. The total debt shall be calculated not less often than annually and the charges adjusted based on the new total debt. Any fees charged by the licensee shall not be based on a total debt which includes a mortgage on the residence or a rent payment as a liability or a debt.
E. A licensee shall not be entitled to any fee until he the licensee has given notice of the debt management contract to all creditors listed in the application form.
F. A licensee shall make remittances to creditors within seven days after receipt of any funds, unless the reasonable payment of one or more of the debtor's obligations requires that such funds be held for a longer period so as to accumulate a certain sum.
G. A licensee shall upon on request furnish the debtor with a written statement of his the debtor's account each month or a verbal accounting at any time the debtor may request it during normal business hours.
H. A licensee shall, if a compromise of a debt is arranged by the licensee with any one or more creditors, allow the debtor the full benefit of that compromise.
I. A licensee shall maintain a trustee checking account in a bank in this state for the benefit of debtors in which all payments received from the debtors shall be deposited and in which all payments shall remain until disbursed by the licensee in accordance with the terms of the contract.
J. A licensee shall keep and use in his the licensee's business books, accounts and records which that will enable the superintendent deputy director to determine whether such licensee is complying with the provisions of this article and with the rules of the department. Each licensee shall preserve such books, accounts and records for at least three years after making the final entry on any transaction recorded in the books, accounts or records.
K. If a licensee desires to change his the licensee's place of business or the name of the company under which the license is issued, he the licensee shall give written notice of the change within fifteen days to the superintendent deputy director and shall submit the license to the superintendent deputy director who shall enter an order permitting allowing the change and who shall amend the license accordingly.
L. A licensee shall, within fifteen days after termination of a debt management company, a branch office or an agency, inform the superintendent deputy director of the name and address of such company, branch office or agency and shall surrender the license to the superintendent deputy director.
M. A licensee shall annually on or before August 15 file a report with the superintendent deputy director giving such relevant information as the superintendent deputy director may require concerning the business and operations of each place of business during the preceding year beginning July 1 and ending June 30. The superintendent deputy director may assess a penalty of five dollars $5 for each day the licensee fails to file such report.
Sec. 167. Section 6-710, Arizona Revised Statutes, is amended to read:
6-710. Prohibitions
It is unlawful for a licensee to:
1. Accept an account unless it appears on the basis of a reasonable budget analysis, reduced to writing, that the debtor can reasonably meet the payments agreed upon on by the licensee and the debtor and that the agreed upon on payment is sufficient to pay the service charges to the licensee and the full amount of the proposed payments to creditors as agreed upon on by the licensee and debtor. The licensee shall retain the written budget analysis for at least three years after the termination of the contract in the files of the licensee. The licensee shall make the analysis available for inspection by the superintendent deputy director, except that such a budget analysis is not deemed unreasonable if facts which that would prove it to be such were not furnished to the licensee by the debtor upon on request.
2. Unless agreed upon on by the debtor, attempt to alter any scheduled payment listed on the original application from the debtor to any figure other than the amount agreed upon on by the debtor and creditors in those cases when a contractual installment exists. Acceptance of the proposed payment by the creditor shall not alter any rights the creditor has under his the creditor's original contract with the debtor.
3. Purchase from a creditor any obligation of a debtor.
4. Operate as a collection agent and as a licensee as to the same debtor's account.
5. Execute any contract or agreement to be signed by the debtor unless the contract or agreement is fully and completely filled in.
6. Receive or charge any fee in the form of a promissory note or other promise to pay or receive or accept any mortgage or other security for any fee either as to real or personal property.
7. Pay any bonus or other consideration to any person for the referral of a debtor to his the person's business, nor accept or receive any bonus, commission or other consideration for referring any debtor to any person for any reason.
8. Advertise his the licensee's services, display, distribute, broadcast or televise or permit allow to be displayed, advertised, distributed, broadcasted or televised his the licensee's services in any manner whatsoever in which any false, misleading or deceptive statement or representation is made with regard to the services to be performed by the licensee or the charges to be made for those services.
Sec. 168. Section 6-714, Arizona Revised Statutes, is amended to read:
6-714. Advertising
The rules and regulations of the superintendent deputy director shall include standards and criteria for proper advertising and may include specific prohibitions as to improper advertising by a licensee.
Sec. 169. Section 6-802, Arizona Revised Statutes, is amended to read:
6-802. Acknowledgment of report of examination; penalty
A. The superintendent deputy director shall examine or cause to be examined each escrow agent as prescribed by section 6-122. The superintendent deputy director shall forward a report of the examination to the board of directors of the escrow agent within thirty days after the report is completed. Within thirty days after the report is received, the directors shall meet to consider its contents. Within ten days after the directors' meeting, the chairman of the board of directors shall notify the superintendent deputy director of its meeting, shall acknowledge that each director has reviewed the report and shall describe the board's responses to the recommendations of the examiners, including any remedies for violations of this title. In each case, the superintendent deputy director may extend the time period in this subsection for a period not to exceed one hundred twenty days applicable to actions by the board of directors and its chairman.
B. Unless excused by the superintendent deputy director for cause before or after the date the response is due, an escrow agent who fails to file a timely response to the report of examination shall pay the department up to one hundred dollars $100 for each day of delinquency, as assessed by the department.
Sec. 170. Section 6-813, Arizona Revised Statutes, is amended to read:
6-813. License of agent; nontransferable; posting
A. A person, except those exempt under section 6-811, shall not engage in or carry on, or hold himself out as engaging in or carrying on, the escrow business or act in the capacity of an escrow agent in this state without first obtaining a license.
B. An escrow agent's license is not transferable or assignable and control of a license shall not be acquired through stock purchase or other devices without the prior written consent of the superintendent deputy director.
C. A license shall be kept conspicuously posted in all licensed places of business of the licensee.
Sec. 171. Section 6-814, Arizona Revised Statutes, is amended to read:
6-814. Procedure for licensing; surety bond
A. Every escrow agent before engaging in the escrow business shall file with the superintendent deputy director an application for a license, in writing, verified by oath and in the form prescribed by the superintendent deputy director. It shall state the location of the principal office and all branch offices in this state, the name or style of doing business, the names and residence and business addresses of all persons holding an interest in the business as principals, partners, officers, trustees and directors, specifying as to each his capacity and title, the general plan and character of operation and the length of time they have been engaged in the escrow business.
B. The superintendent deputy director may require additional information he the deputy director considers necessary in connection with any application for a license under this article.
C. At the time of filing an application for a license and at all times while holding the license, the applicant shall deposit and maintain with the superintendent deputy director a corporate surety bond in the amount of one hundred thousand dollars $100,000 payable to any person injured by the failure of the licensee to comply with the requirements of this chapter or for the wrongful act, default, fraud or misrepresentation of the licensee or his the licensee's employees and to this state for the benefit of the person injured and executed by a surety company qualified to do business in this state.
D. Notwithstanding section 35-155, in lieu of the total corporate surety bond required by this section, an applicant or licensee may deposit with the superintendent deputy director a deposit in the form of cash or alternatives to cash in the amount of one hundred thousand dollars $100,000. The superintendent deputy director may accept as an alternative to cash any of the following:
1. Certificates of deposit or investment certificates which that are payable or assigned to the state treasurer, issued by banks doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.
2. Certificates of deposit, investment certificates or share accounts which that are payable or assigned to the state treasurer, issued by a savings and loan association doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.
3. Certificates of deposit, investment certificates or share accounts which that are payable or assigned to the state treasurer, issued by a credit union doing business in this state and fully insured by the national credit union administration or any successor institution.
E. The superintendent deputy director shall deposit the cash or alternatives to cash received under this section with the state treasurer. The state treasurer shall hold the cash or alternatives to cash in the name of this state to guarantee the faithful performance of all legal obligations of the person required to post the bond. The person is entitled to receive any accrued interest earned from the alternatives to cash. The state treasurer may impose a fee to reimburse the state treasurer for administrative expenses. The fee shall not exceed ten dollars $10 for each cash or alternatives to cash deposit and shall be paid by the licensee. The state treasurer may prescribe rules relating to the terms and conditions of each type of security provided by this section.
F. A deposit of cash or an assignment of an alternative to cash shall contain an affirmative statement by the assignor that the monies assigned are not derived from any escrow deposit. In addition to such other terms and conditions as the superintendent deputy director prescribes by rule, the principal amount of the deposit shall be released only on written authorization of the superintendent deputy director or on the order of a court of competent jurisdiction, but in any event the principal amount of the deposit shall not be released before the expiration of three years from after the date of substitution of a bond for a cash alternative, the surrender of the license pursuant to section 6-838 or the revocation or expiration of the license, whichever occurs first.
G. No suit may be commenced on a bond or cash or alternative to cash after the expiration of three years following after the act or acts on which the suit is based, except that time for purposes of claims for fraud shall be measured as provided in section 12-543, paragraph 3. If an injured person commences an action for a judgement to collect from the bond or cash alternative deposited in lieu of a bond, the injured person shall notify the superintendent deputy director of the action in writing at the time of commencement of the action and shall provide copies of all documents relating to the action to the superintendent upon deputy director on request.
H. The superintendent deputy director shall examine the application for a license and if he the deputy director is satisfied that the applicant should not be refused a license under section 6-817, he the deputy director shall issue the license.
Sec. 172. Section 6-815, Arizona Revised Statutes, is amended to read:
6-815. Renewal of license
A licensee shall make application for renewal as prescribed by the superintendent deputy director and pay the renewal fee prescribed in section 6-126 not later than September 30 of each year. For each day after September 30 that the renewal application is not received by the superintendent deputy director the applicant shall pay twenty-five dollars $25 in addition to the fee prescribed by section 6-126. Licenses for which renewal applications are not received by the superintendent deputy director by September 30 are suspended, and the licensee shall not act as an escrow agent until the license is renewed or a new license is issued pursuant to this article. A license of a licensee that has not filed its renewal application and paid the renewal fee by October 31 expires. A license shall not be granted to the holder of an expired license except as provided in this article for the issuance of an original license.
Sec. 173. Section 6-816, Arizona Revised Statutes, is amended to read:
6-816. Fees
A. Each application for a new license or a renewal license shall be accompanied by the fee prescribed in section 6-126.
B. For each day a report required by section 6-832 is not received by the department, a licensee shall pay a fee of twenty-five dollars $25. The superintendent deputy director may excuse the fee for good cause if the cause is presented before the due date of the report.
Sec. 174. Section 6-817, Arizona Revised Statutes, is amended to read:
6-817. Refusal to license; suspension; revocation
A. The superintendent may upon deputy director on investigation may refuse to license any applicant, or may suspend or revoke any license pursuant to title 41, chapter 6, article 10 by entering an order to that effect, together with findings in respect to the order and by notifying the applicant or escrow agent either personally or by certified mail, return receipt requested sent to the agent's stated address, upon on the determination by the superintendent deputy director that the applicant or escrow agent:
1. Is unable to pay debts as they fall due in the regular course of business.
2. Has not conducted the applicant's or agent's business in accordance with law or has violated this chapter or the rules relating to this chapter.
3. Is in such financial condition that the applicant or agent cannot continue in business with safety to the applicant's or agent's customers or the public.
4. Has been found guilty of fraud in a legal or administrative proceeding in this jurisdiction or any other jurisdiction.
5. Has made any material misrepresentations or false statements to, or concealed any essential or material fact from, any person in the course of the escrow business.
6. Has knowingly made or caused to be made to the superintendent deputy director any false representation of a material fact, or has suppressed or withheld from the superintendent deputy director any information which that the applicant or agent possesses, and which that if submitted by the applicant or agent would have caused the issuance of a license to be withheld or be grounds for the suspension or revocation of a license.
7. Has failed to account properly for escrow property as required by the terms of the escrow.
8. Refuses to permit allow an examination or investigation by the superintendent deputy director of the applicant's or agent's books and affairs, or has refused or failed within a reasonable time to furnish any information or make any report required by the superintendent deputy director under this chapter or rules relating to this chapter.
9. Has been convicted of any criminal offense involving moral turpitude within the last fifteen years.
10. Does not have the financial resources, experience, character or competence to adequately serve the public or to warrant the belief that the business will be operated lawfully, honestly, fairly and efficiently pursuant to this chapter.
11. Has disbursed monies in violation of escrow instructions.
12. Has failed to maintain an adequate internal control structure as prescribed by section 6-841.
13. Has caused or allowed any overdraft or returned check for insufficient funds on any of the escrow agent's trust or fiduciary accounts.
14. Has failed to authorize each financial institution with which it has deposited trust or fiduciary funds to notify the superintendent deputy director of any overdraft or check returned for insufficient funds on any trust or fiduciary accounts of the escrow agent.
B. It is sufficient cause for refusal, suspension or revocation of a license, in case of a partnership, a corporation or any other group or association, if any member of such persons, or officer or director thereof, has been guilty of any act or omission which that would be cause for refusing a license or suspending or revoking the license of an individual agent.
Sec. 175. Section 6-832, Arizona Revised Statutes, is amended to read:
6-832. Annual audit; report
A. The records of each escrow agent shall be audited at least once each fiscal year by a certified public accountant. The audit shall include an audit of the escrow, account servicing and subdivision trust activities of the escrow agent and shall follow generally accepted accounting principles. A copy of the audit report shall be filed with the superintendent deputy director not more than one hundred twenty days after the end of the escrow agent's fiscal year. The audit requirement may be satisfied by filing a copy of the audit report, which is prepared by a certified public accountant, of the parent of the escrow agent including an audit of the escrow, account servicing and subdivision trust activities of the escrow agent within the prescribed time period. The superintendent deputy director may extend the time period in this subsection up to ninety days for good cause shown.
B. At the time required by the superintendent deputy director, every escrow agent shall make and file in the office of the superintendent deputy director a true and correct report, in the form and containing the data the superintendent deputy director may require, of the business of the agent, including the agent's escrow, account servicing and subdivision trust activities. Every agent shall reply promptly in writing to an inquiry from the superintendent deputy director concerning the escrow agent's business.
C. The scope of the audit shall include consideration of the escrow agent's internal control structure AS DEFINED IN SECTION 6-841 in accordance with generally accepted auditing standards. A separate report shall be submitted to the superintendent deputy director if reportable conditions are identified that indicate significant deficiencies in the design or operation of the internal control structure of the escrow agent which that would adversely affect the agent's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. If reportable conditions are identified, the report on reportable conditions shall recommend specific measures to improve the escrow agent's internal control structure.
Sec. 176. Section 6-833, Arizona Revised Statutes, is amended to read:
6-833. Seizure of property of impaired escrow agent
A. When the superintendent deputy director ascertains by examination or otherwise that the assets or capital of any agent are impaired, or that the agent's affairs are in an unsafe condition, he the deputy director may immediately take possession of all the property, business and assets of the agent which that are located in this state and retain possession of them pending the further proceedings specified in this section. If the board of directors or any officer or person in charge of the offices of such the agent refuses to permit allow the superintendent deputy director to take possession as prescribed by this subsection, the superintendent deputy director shall communicate such fact to the attorney general, whereupon the attorney general shall immediately institute such proceedings as may be necessary to place the superintendent deputy director in immediate possession of the property of the agent. The superintendent thereupon deputy director shall make or have made an inventory of the assets and known liabilities of the agent. The superintendent deputy director shall file one copy of the inventory in his the deputy director's office and one copy in the office of the clerk of the superior court of the county in which the principal office of the agent is located. The clerk of the superior court shall mail one copy to each stockholder of the agent at his eACH STOCKHOLDER's last known address, if by the exercise of reasonable diligence it can be determined. The clerk of the court with whom the copy of the inventory is filed shall file it as any other case or proceeding pending in the court.
B. The officers, directors or stockholders of the agent may have sixty days from after the date when the superintendent deputy director takes possession of the property, business and assets to make good any deficit which that may exist or to remedy the unsafe condition of its affairs. At the expiration of this time, if the deficiency in assets or capital has not been made good or the unsafe condition remedied, the superintendent deputy director may apply to the court to be appointed receiver and proceed to liquidate the assets of the agent which that are located in this state in the same manner as provided by law for liquidation of a private corporation in receivership. The inventory made by the superintendent deputy director and all claims filed by creditors shall be open at all reasonable times for inspection and any action taken by the receiver upon on any of the claims shall be subject to the approval of the court before whom the cause is pending. The expenses of the receiver and compensation of counsel, as well as expenditures required in the liquidation proceedings, shall be fixed by the superintendent deputy director, subject to the approval of the court, and upon on certification of the superintendent deputy director shall be paid out of the funds in his the deputy director's hands as such receiver.
Sec. 177. Section 6-837, Arizona Revised Statutes, is amended to read:
6-837. Duty of escrow agent to produce escrow records for inspection; violation; classification
A. Any escrow agent shall produce for inspection any escrow records concerning the assets, existence, condition, management and administration and the names of the parties, including any or all beneficiaries, of any escrow of which he or she the person is the escrow agent to any peace officer or local, state or federal law enforcement agency, provided such person requesting information signs and submits a sworn statement to the escrow agent that the request is made in the lawful performance of such person's duties. The peace officer or local, state or federal law enforcement agency shall be prohibited from using or releasing said information except in the proper performance of his or her the person's duties.
B. Any escrow agent shall produce for inspection required by law any escrow records of any escrow of which he or she is the escrow agent to the superintendent deputy director or to any state or federal administrative agency lawfully requiring such disclosure. The superintendent deputy director or any state or federal administrative agency shall be prohibited from using or releasing said information except in the proper performance of his or her the deputy director's or agency's duties.
C. Any person who knowingly fails to produce records pursuant to this section or who obtains information under subsection A or B of this section and is prohibited from releasing such information but does release such information is guilty of a class 2 misdemeanor.
Sec. 178. Section 6-838, Arizona Revised Statutes, is amended to read:
6-838. Surrender of license
A licensee that desires to surrender its license shall file with the superintendent deputy director a certified copy of the resolution of its board of directors or a verified statement of intent signifying this desire, and thereafter shall not accept additional escrow business. Upon On receipt of the resolution or statement of intent, the superintendent deputy director shall make an investigation, and if he THE deputy director determines that the licensee has been discharged from all duties which that it has undertaken as an escrow agent, he THE deputy director shall issue an order to the licensee certifying that it is no longer authorized to exercise the powers of an escrow agent and the licensee shall immediately surrender its license.
Sec. 179. Section 6-841.01, Arizona Revised Statutes, is amended to read:
6-841.01. Fiduciary duty; notice of returned check
A. An escrow agent is the trustee of all monies received or collected and held in escrow. An agent shall not knowingly or negligently commingle trust monies with the escrow agent's own monies or with monies held in any other capacity. Every escrow agent and every officer, director and employee of an escrow agent who has actual knowledge of fraud or dishonesty in the application of escrow monies, owes a fiduciary duty as trustee to the owner of the monies held in escrow.
B. An escrow agent shall notify the superintendent deputy director of any returned check for insufficient funds or overdraft on any of the escrow agent's trust or fiduciary accounts. The superintendent deputy director may revoke, suspend or refuse to renew the escrow agent's license for failure to comply with this subsection.
Sec. 180. Section 6-841.03, Arizona Revised Statutes, is amended to read:
6-841.03. Notice of uninsured monies; rules
When an escrow is established and not later than three business days after an escrow agent receives any escrow monies, the escrow agent shall provide a complete and accurate disclosure to each buyer and seller of a residential dwelling as defined in section 6-841.02 that monies deposited in an escrow account are not insured against loss from fraud or theft by this state or the United States government. The superintendent deputy director by rule may prescribe requirements for the disclosure form.
Sec. 181. Section 6-846.01, Arizona Revised Statutes, is amended to read:
6-846.01. Filing of escrow rates
A. Every escrow agent who is required to make escrow rates under section 6-846 shall file with the superintendent his deputy director THE ESCROW AGENT'S schedules of fees, every manual of classifications, the rules and plans pertaining to the manual and every modification of any of the foregoing. The filing shall state the proposed effective date and shall indicate the character and extent of the contemplated service.
B. The superintendent deputy director shall review the filings as necessary to carry out the provisions of this article.
C. Subject to subsection E of this section, each filing does not become effective until fifteen days after the date of filing. On written notice to the escrow agent making the filing, the superintendent deputy director may extend the waiting period for up to an additional fifteen days. The waiting period may be extended further with the consent of the escrow agent making the filing. On written application by the escrow agent making the filing, the superintendent deputy director may authorize part or all of a filing to become effective before the expiration of the waiting period or any extension.
D. Except in the case of rates filed under subsection E of this section, a filing that has become effective is deemed to meet the requirements of this article.
E. If the superintendent deputy director finds that a rate for a particular kind or class of escrow service cannot practicably be filed before it is used or a kind of escrow service, by reason of rarity or peculiar circumstances, does not lend itself to advance determination and filing of rates, the superintendent deputy director pursuant to rules adopted by the superintendent deputy director may permit allow the rate to be used without a previous filing and waiting period.
Sec. 182. Section 6-846.03, Arizona Revised Statutes, is amended to read:
6-846.03. Disapproval of escrow filings
A. Before issuing an order of disapproval and not less than twenty days after written notice, the superintendent deputy director shall hold a hearing on an escrow rate filing. The notice shall specify in reasonable detail the matters to be considered at the hearing and shall be sent to every escrow agent who made the filing. If after the hearing the superintendent deputy director finds that all or part of the filing does not satisfy the provisions of this article, the superintendent deputy director shall issue an order that specifies what part of the filing failed and, if the filing has become effective under section 6-846.01, when all or part of the filing will be deemed no longer effective. At any time an escrow agent may withdraw all or part of a filing. The superintendent deputy director shall send copies of the order to each escrow agent affected. The order does not affect any escrow that was contracted before the expiration of the period set forth in the order.
B. On written application to the superintendent deputy director, a person or organization other than the escrow agent who made the filing that is aggrieved with respect to any rate filing that is in effect may request a hearing. The application shall specify in reasonable detail the grounds on which the applicant is relying. If within thirty days after receipt of the application the superintendent deputy director finds that the application was made in good faith, that the applicant would be aggrieved if his the applicant's grounds are established and that the grounds justify a hearing, the superintendent deputy director, not less than twenty days after written notice to the applicant and every escrow agent who made the filing, shall hold a hearing. If after the hearing the superintendent deputy director finds that all or part of the filing does not satisfy the provisions of this article, the superintendent deputy director shall issue an order that specifies what part of the filing failed and, if the filing has become effective under section 6-846.01, when all or part of the filing will be deemed no longer effective. The superintendent deputy director shall send copies of the order to the applicant and to each escrow agent affected. The order does not affect any escrow that was contracted before the expiration of the period set forth in the order.
C. A filing or modification shall not be disapproved if the rates satisfy the requirements of this article.
Sec. 183. Section 6-846.04, Arizona Revised Statutes, is amended to read:
6-846.04. Deviations in escrow rates; civil penalty
A. An escrow agent may not deviate from his escrow rates that are in effect pursuant to section 6-846.01.
B. If the superintendent deputy director finds that an escrow rate has been charged that deviates from the escrow rate in effect pursuant to section 6-846.01, the escrow agent may be subject to a penalty that is equal to the difference between the rate charged and the allowable rate in effect pursuant to section 6-846.01.
C. If the superintendent deputy director finds that an escrow agent knowingly or with such frequency as to indicate a general business practice violated subsection A of this section with respect to a particular provision of the applicable escrow rate, the superintendent deputy director, in addition to the penalty imposed under subsection B of this section, may:
1. For each violation, impose an additional penalty of not more than two times the penalty imposed under subsection B of this section.
2. Revoke the escrow agent's license.
D. In addition to penalties imposed under subsection B or C of this section, the superintendent deputy director may impose civil penalties pursuant to section 6-132 if the superintendent deputy director finds that an escrow agent knowingly violated subsection A of this section with respect to a particular provision of the applicable escrow rate by charging rates that are greater than the rates allowable pursuant to section 6-846.01.
Sec. 184. Section 6-853, Arizona Revised Statutes, is amended to read:
6-853. Certificate required; exceptions
A. A person shall not engage in the trust business without first obtaining a certificate from the superintendent deputy director except as provided by subsection B or C of this section, or by section 6-852, subsection C.
B. A bank, if a member of the federal deposit insurance corporation and otherwise authorized under the laws of the United States, this state or any other state to engage in the trust business in this state, may engage in that business as a bank without obtaining a certificate under this chapter, and shall not be subject to this article, except for section 6-859, subsection A and section 6-860.
C. If a savings and loan association or savings bank is a member of the federal deposit insurance corporation and is authorized under the laws of the United States, this state or any other state to engage in the trust business in this state, the savings and loan association or savings bank may engage in that business as a savings and loan association or savings bank without obtaining a certificate under this chapter and is not subject to this article, except for section 6-859, subsection A and section 6-860.
Sec. 185. Section 6-854, Arizona Revised Statutes, is amended to read:
6-854. Application for certificate
A. An application for a certificate shall be in writing, in such form as the superintendent deputy director shall prescribe, verified under oath and supported by such information, data and records as the superintendent deputy director may require.
B. An application for a certificate shall include the applicant's executed articles of incorporation and the fee prescribed in section 6-126.
Sec. 186. Section 6-854.01, Arizona Revised Statutes, is amended to read:
6-854.01. Articles of incorporation; approval; changes
A. Notwithstanding title 10, chapter 2, the articles of incorporation shall include:
1. The name of the proposed trust company.
2. A description of the general nature of the business to be transacted and a statement authorizing the company to engage in any activity or business permitted allowed by law.
3. The amount of authorized capital stock, the maximum number of shares of par value common stock and preferred stock, and the kind, class, series, distinguishing characteristics and par value of all shares.
4. The amount of capital, which is at least the amount required by section 6-856, the applicant will use to begin the trust company.
5. A statement that the company will have perpetual existence unless the company is terminated pursuant to this article.
6. The initial street address of the main office of the trust company.
7. The number of directors and the directors' names and addresses.
8. If applicable, a statement allowing preemptive rights.
9. A statement authorizing the board of directors to appoint additional directors when necessary.
B. Within thirty days after receiving the executed articles of incorporation, the superintendent deputy director shall approve or disapprove the articles. If the superintendent deputy director disapproves the articles, the superintendent deputy director shall notify the applicant of the articles' deficiencies. AFTER APPROVAL OR after addressing the deficiencies, the applicant shall file the APPROVED OR revised articles of incorporation with the corporation commission.
C. The corporate existence of a trust company begins on the date the trust company files the approved or revised articles of incorporation with the corporation commission. After the trust company files the articles with the corporation commission, the company may perform all acts necessary to perfect the organization and obtain and equip a place of business.
D. Within seven days after proposing a change to the articles of incorporation at a meeting of the board of directors, a trust company shall report the proposed changes to the superintendent deputy director for approval. The superintendent deputy director shall approve the proposed changes as long as the proposed changes are consistent with this chapter. The superintendent deputy director shall notify the trust company of any inconsistencies within thirty days after receiving the proposed changes. The trust company shall have thirty days, after receiving the superintendent's deputy director'S notice, to correct any inconsistencies and submit revised proposed changes to the superintendent deputy director.
Sec. 187. Section 6-854.02, Arizona Revised Statutes, is amended to read:
6-854.02. Board of directors; number; bylaws
A. A trust company shall have at least three directors. The shareholders of the company shall elect all of the directors.
B. Unless the articles of incorporation provide otherwise, the board of directors may adopt or amend the bylaws as long as the bylaws adopted or amended by the board do not conflict with the bylaws adopted by the shareholders. The board of directors shall file a current copy of the bylaws with the superintendent deputy director.
Sec. 188. Section 6-856, Arizona Revised Statutes, is amended to read:
6-856. Minimum capital; dividends; other requirements
A. In order to obtain a certificate, a trust company shall have not less than five hundred thousand dollars $500,000 of liquid capital. The trust company shall have additional capital in the following amounts:
1. For each seven hundred fifty million dollars $750,000,000 of nondiscretionary assets, an additional two hundred fifty thousand dollars $250,000 of capital.
2. For each two hundred fifty million dollars $250,000,000 of discretionary assets, an additional two hundred fifty thousand dollars $250,000 of capital.
3. For a trust company whose most recent composite rating from the superintendent deputy director was four as defined in the revised uniform interagency trust rating system as published in the federal register volume 63, number 197, October 13, 1998, pages 54704 through 54711, an additional two hundred fifty thousand dollars $250,000 of capital.
4. For a trust company whose most recent composite rating from the superintendent deputy director was five as defined in the revised uniform interagency trust rating system as published in the federal register volume 63, number 197, October 13, 1998, pages 54704 through 54711, an additional five hundred thousand dollars $500,000 of capital.
B. A minimum of one-half of the additional capital required under subsection A, paragraphs 1 and 2 of this section shall consist of liquid capital. All of the additional capital required under subsection A, paragraph 3 or 4 of this section shall consist of liquid capital.
C. The trust company shall notify the superintendent deputy director of the form in which and location where the liquid capital is held and its date of maturity.
D. A trust company that has a certificate issued before June 30, 2001 has until December 31, 2002 to comply with the additional capital requirements prescribed in subsection A of this section.
E. The superintendent deputy director may reduce the amount of the additional capital requirement prescribed in subsection A of this section if the superintendent deputy director determines that the trust company is a subsidiary of a financial institution or financial holding company that is capable of providing sufficient support.
F. A trust company that has been issued a certificate by the superintendent deputy director shall maintain capital in the amount required under subsection A of this section.
G. A trust company may declare a dividend to be paid from net profits. A dividend shall not be declared, credited or paid if there is an impairment of the liquid capital. A trust company that proposes dividends in a calendar year that are more than the net profit for the same calendar year shall obtain the superintendent's deputy director'S approval before declaring the dividends.
H. Notwithstanding subsection A of this section, a trust company that accepts monies to be held in a savings account or time deposit prescribed in section 6-882 shall comply with all of the rules and requirements necessary to obtain and maintain insurance issued by the federal deposit insurance corporation or its successor.
Sec. 189. Section 6-857, Arizona Revised Statutes, is amended to read:
6-857. Issuance of certificate; hearing
A. Upon On the filing of an application for a certificate the superintendent deputy director shall make or cause to be made an investigation and examination of the facts concerning the truth of the statements and the background of the management, controlling shareholder or shareholders, directors and executive officers and shall issue a certificate if the superintendent deputy director finds:
1. The applicant is a corporation having powers and purposes to engage in the trust business organized under the laws of this state or authorized to do business in this state as a foreign corporation.
2. The applicant has complied with all of the applicable provisions of this article.
3. The general character, reputation, financial standing, business qualifications, ability and integrity of the persons involved in the management of the applicant's business are such as to demonstrate that the trust company will be operated in a safe, sound and lawful manner.
4. The proposed capital meets the requirements of section 6-856.
5. The applicant has submitted a business plan demonstrating a knowledge of potential markets and the ability to generate business.
6. The applicant has procured a fidelity bond as prescribed in section 6-868.
7. The applicant has procured insurance as prescribed in section 6-859, subsections E and F.
B. The superintendent deputy director may conditionally accept the application upon on specific requirements being met, but a certificate shall not be issued until such conditions have been met.
C. The certificate may be granted or denied without a hearing, but the superintendent deputy director may, and shall at the request of the applicant, fix a date for a hearing on the application. At the hearing any person may be heard with reference to the facts to be investigated.
Sec. 190. Section 6-859, Arizona Revised Statutes, is amended to read:
6-859. Records; audits; preservation of records; protection; insurance; bond; contingency plan
A. A bank, savings and loan association or trust company shall keep and use in its business any books, accounts and records which will enable the superintendent deputy director to determine whether the bank, savings and loan association or trust company is complying with the provisions of this article and the rules of the superintendent deputy director. The superintendent deputy director by rule may provide the periods of time and the manner in which such books, accounts and records shall be preserved.
B. A certified public accountant shall audit the corporate records and trust business of each trust company at least once each fiscal year. The trust company shall file a copy of the audit report with the superintendent deputy director not more than one hundred twenty days after the end of the trust company's fiscal year. The audit requirement may be satisfied by filing a copy of the audit report of the parent of the trust company if the audit report is prepared by a certified public accountant and includes a detailed examination of the trust company's assets and liabilities and trust business. If the trust company shows good cause the superintendent deputy director may extend the time to file the audit report by not more than ninety days.
C. The audit shall include an examination of the trust company's internal control structure over the financial reporting and accounting of the trust business plus any reportable conditions of the trust company's internal control structure. For purposes of this subsection, "reportable conditions" means significant deficiencies in the design or operation of the internal control structure that would adversely affect the trust company's ability to perform its business activities and carry out its fiduciary duties and responsibilities consistent with the safe, sound and lawful operation of the trust business.
D. The board of directors of a trust company shall require protection and indemnity for the trust company, pursuant to section 6-868, against dishonesty, fraud, defalcation, forgery, theft, embezzlement, and other similar insurable losses, with corporate insurance or surety companies authorized to do business in this state. Coverage against such losses shall include all agents who do not otherwise provide protection and indemnity for the trust company, directors, officers and employees of the trust company acting independently or in collusion or combination with any person or persons whether or not they draw salary or compensation.
E. The board of directors shall require suitable insurance to protect the trust company against burglary, robbery, theft and other insurable hazards to which it may be exposed in the operation of the business.
F. The board of directors shall procure errors and omissions insurance of at least five hundred thousand dollars $500,000.
G. At least once each year the board of directors shall review the fidelity bond and the errors and omissions insurance to determine the adequacy of coverage in relation to the exposure. The minimum amount of insurance required in this chapter does not automatically represent adequate bond and insurance coverage in relation to the exposure. The actions by the board of directors shall be recorded in the minutes of the board. Immediately after procuring the bonds, the board of directors shall file them with the superintendent deputy director.
H. The board of directors and senior management shall:
1. Establish policies, procedures and responsibilities for comprehensive contingency planning.
2. Annually review and approve the trust company's contingency plans and record the actions in the minutes of the board of directors.
I. If the trust company receives information processing from a service bureau the board of directors and senior management shall:
1. Evaluate the adequacy of contingency plans for its service bureau.
2. Ensure that the trust company's contingency plan is compatible with its service bureau's plan.
Sec. 191. Section 6-860, Arizona Revised Statutes, is amended to read:
6-860. Duty of trustee, escrow officer or agent to produce trust or escrow records for inspection; violation; classification
A. Any trustee, escrow officer or agent shall produce for inspection any trust or escrow records concerning the assets, existence, condition, management and administration and the names of the parties, including any or all beneficiaries, of any trust or escrow of which he or she the person is the trustee, escrow officer or agent, to any peace officer or local, state or federal law enforcement agency, provided such person requesting information signs and submits a sworn statement to the trustee, escrow officer or agent that the request is made in the lawful performance of such person's duties. The peace officer or local, state or federal law enforcement agency shall be prohibited from using or releasing said information except in the proper performance of his or her the person's duties.
B. Any trustee, escrow officer or agent shall produce for inspection required by law any trust or escrow records of any trust or escrow of which he or she the person is the trustee, escrow officer or agent to the superintendent deputy director or to any state or federal administrative agency lawfully requiring such disclosure. The superintendent deputy director or any state or federal administrative agency shall be prohibited from using or releasing said information except in the proper performance of his or her the deputy director's or agency's duties.
C. Any person who knowingly fails to produce records pursuant to this section or who obtains information under subsection A or B of this section and is prohibited from releasing such information but does release such information is guilty of a class 2 misdemeanor.
Sec. 192. Section 6-861, Arizona Revised Statutes, is amended to read:
6-861. Reports
A. The superintendent deputy director may require reports of financial condition and relevant information concerning the business operations of each trust company, shall fix and extend the time for the filing of such reports and shall assess a penalty of fifty dollars $50 for each day the trust company is delinquent.
B. The president, chief executive officer or chief operating officer shall examine the books and accounts of the trust company for the purpose of making the report and shall verify the report by providing an affidavit stating that the information contained in the report is accurate to the best of the president's or officer's knowledge or belief.
C. The report shall contain statements and information regarding the affairs, business conditions, resources and implementation of internal controls as safeguards for the protection of fiduciary beneficiaries, creditors, shareholders and the public.
D. Excluding weekends and holidays, within forty-eight hours after the date of discovery, a trust company that is the victim of a robbery, the shortage of funds of more than five thousand dollars $5,000 or the apparent misapplication of trust funds by an officer, director, agent or employee shall issue a written report to the superintendent deputy director explaining the loss.
E. Within thirty days after the service of the complaint, the trust company shall issue a written report to the superintendent deputy director stating any adverse legal actions involving allegations of fraud, breach of fiduciary duty, breach of contract or misapplication or commingling of trust funds, including complaints that are dismissed within thirty days of after service.
Sec. 193. Section 6-863, Arizona Revised Statutes, is amended to read:
6-863. Suspension or revocation of certificate
A. The superintendent deputy director may suspend or revoke the certificate of a trust company pursuant to title 41, chapter 6, article 10 if the superintendent deputy director determines that:
1. The trust company has failed or refused to comply with any order issued pursuant to section 6-137.
2. The application for a certificate or for renewal of a certificate or any report submitted to the superintendent deputy director contained a false representation or omission of a material fact.
3. Any officer or agent of the trust company, in connection with the submission of any report or information to the superintendent deputy director or an application for a certificate or for renewal of a certificate, knowingly made a false representation of a material fact or failed to disclose a material fact to the superintendent deputy director or the duly authorized agent of the superintendent deputy director.
4. The trust company has violated any applicable law, rule or order.
5. The trust company is impaired or insolvent and the trust company is unable to pay debts as they become due in the regular course of its business.
6. The trust company refuses to permit allow an examination or investigation by the superintendent deputy director of its books and affairs or has failed or refused to furnish within thirty days any information or to make any report that may be required by the superintendent deputy director.
7. The trust company is unable to maintain the amount of capital required by law.
8. The trust company failed to conduct business in a safe, sound and lawful manner.
9. Any officer, director, employee or agent of the trust company has been convicted in any state of a felony or a crime of moral turpitude, breach of trust, fraud, theft or dishonesty.
10. Any officer, director, employee or agent of the trust company is not honest or truthful and does not demonstrate good character.
11. The trust company's certificate or authorization to engage in trust business in any state or country has been revoked, suspended or denied.
12. A final judgment has been entered in a civil action against any officer, director, employee or agent of the trust company involving fraud, deceit or misrepresentation and the conduct is contrary to the interest of the public to permit allow the person to engage in a trust business, to control or manage a trust company or to work for a trust company handling trust funds.
13. An order by an administrative agency of this state, another state, the federal government, a territory of the United States or another country has been entered against any officer, director, employee or agent of the trust company involving fraud, deceit or misrepresentation and the conduct is contrary to the interest of the public to permit allow the person to engage in a trust business, to control or manage a trust company or to work for a trust company handling trust funds.
B. The superintendent deputy director may suspend the certificate if an indictment or information is issued against any officer, director, employee or agent of the trust company for forgery, embezzlement, retaining monies under false pretenses, extortion, criminal conspiracy to defraud or a like offense and a certified copy of the indictment or information or other proper evidence of the indictment or information is filed with the superintendent deputy director.
C. Pursuant to subsection A of this section, the superintendent deputy director may suspend or revoke the certificate for the acts and omissions of:
1. Any officer, director, employee or agent of the trust company while acting in the course of the trust business.
2. A person entitled to vote more than fifteen per cent PERCENT of the outstanding voting shares of the trust company.
Sec. 194. Section 6-865, Arizona Revised Statutes, is amended to read:
6-865. Unsafe condition; receivership
If the deficiency in capital has not been made good or the trust company is in an unsafe or unsound condition that is not remedied within the time prescribed under an order of the superintendent deputy director issued pursuant to section 6-137, the superintendent deputy director may apply to the superior court to be appointed receiver for the liquidation or rehabilitation of the company. The expense of such receivership shall be paid out of the assets of the trust company.
Sec. 195. Section 6-868, Arizona Revised Statutes, is amended to read:
6-868. Fidelity bond; requirements
A. A trust company doing business under this chapter shall obtain and maintain a fidelity bond, naming the trust company as obligee, in the following amounts:
Trust Assets Fidelity
(market value) Bond Amounts
less than $3,000,000 $500,000
$3,000,000 to $4,999,999 $525,000
$5,000,000 to $7,499,999 $550,000
$7,500,000 to $9,999,999 $575,000
$10,000,000 to $14,999,999 $600,000
$15,000,000 to $19,999,999 $650,000
$20,000,000 to $24,999,999 $700,000
$25,000,000 to $34,999,999 $750,000
$35,000,000 to $49,999,999 $850,000
$50,000,000 to $74,999,999 $950,000
$75,000,000 to $99,999,999 $1,000,000
$100,000,000 to $149,999,999 $1,250,000
$150,000,000 to $249,999,999 $1,600,000
$250,000,000 to $499,999,999 $2,100,000
$500,000,000 to $999,999,999 $2,400,000
$1,000,000,000 to $2,000,000,000 $4,400,000
$2,000,000,001 to $3,000,000,000 $6,000,000
for every $1,000,000,000 over $3,000,000,000 $1,000,000
B. The trust company shall file a signed copy of its bond with the superintendent deputy director, and the bond remains a part of the department's records. The bond company shall not cancel the bond for failure to pay the premium unless the bond company files a written notice with the department at least thirty days before canceling the bond. The bond company shall not cancel the bond for any other reason unless the bond company files a written notice with the department at least forty-five days before canceling the bond.
C. The bond may contain a deductible clause not to exceed fifteen per cent percent of the face amount of the bond. If the deductible exceeds fifteen per cent percent of the face amount of the bond, the deductible clause must be approved by the superintendent deputy director.
Sec. 196. Section 6-869, Arizona Revised Statutes, is amended to read:
6-869. Meetings; reports; report of examination; response; penalties
A. The board of directors of a trust company shall meet at least once every three months. The superintendent deputy director or any director may call a special meeting. A majority of the board constitutes a quorum. The board shall keep minutes of each meeting, including a record of attendance and a record of all votes pertaining to the trust business, any officer or any shareholder.
B. At least once every three months the board of directors of a trust company shall review written reports prepared by the president, other officers of the trust company or the trust committee as prescribed in section 6-870. The reports shall include the accounts that have been opened or closed during the calendar quarter before the meeting and the trust accounts subject to annual review during the calendar quarter before the meeting.
C. Within thirty days after the trust company receives a report of examination from the superintendent deputy director, the directors shall meet to consider the contents of the report. Within ten days after the meeting, the chairman or the president of the board of directors shall notify the superintendent deputy director of the meeting and shall acknowledge, on the declaration of each director attending the meeting, that each director reviewed the report and the chairman or the president shall file a response to the report that describes the board's responses to the examiners' recommendations, including any remedies for violations of this title.
D. Unless the superintendent deputy director excuses a trust company from filing a response, the trust company shall file a response to the report of examination within forty days after the trust company receives the report. A trust company that fails to file a timely response or that is not excused from filing a timely response shall pay a penalty to the department. The department shall assess a penalty of one hundred dollars $100 or less for each day of the delinquency.
Sec. 197. Section 6-870.01, Arizona Revised Statutes, is amended to read:
6-870.01. Acceptance of other examinations; cooperative agreements
A. Instead of an examination prescribed by section 6-122, the superintendent deputy director may accept the examination report of a federal or state agency that has regulatory or supervisory authority over the trust company. The superintendent's deputy director'S acceptance of the examination report does not constitute a waiver of the licensing fees and assessments provided by law. An accepted examination report becomes an official report of the department.
B. The superintendent deputy director may enter into cooperative agreements and take joint action with other regulatory or supervisory authorities that have concurrent jurisdiction over a trust company.
Sec. 198. Section 6-870.02, Arizona Revised Statutes, is amended to read:
6-870.02. Prohibited acts
A. A trust company shall not permit allow a person, other than a director, officer, agent or employee of the trust company or the legal or beneficial owner of the trust funds or the authorized representative of the owner, to access, examine or inspect the fiduciary records of the trust company.
B. A trust company shall not make a loan to or make other use of monies from a fiduciary account to or for the benefit of another fiduciary account unless the transaction is authorized by a court order or a governing instrument of the fiduciary account or its amendments from which the loan or use of monies is made.
C. A director, officer, agent or employee of a trust company shall not:
1. Knowingly make or publish, or concur in making or publishing, a written report, exhibit or statement of the trust company's affairs or financial condition containing any material statement that is false.
2. Wilfully refuse or neglect to make a proper entry in the trust company's books, wilfully refuse or neglect to exhibit the trust company's books to the department or allow the department to inspect or extract the trust company's books.
3. Knowingly make a material false promise or statement or a material misrepresentation to the department or to a legal or beneficial owner of trust funds or an authorized representative of the owner in the course of the trust business.
4. Knowingly conceal an essential or material fact from the department or a legal or beneficial owner of the trust funds or an authorized representative of the owner in the course of the trust business.
D. A trust company shall not directly or indirectly use funds from a fiduciary account for the benefit of any officer, director or employee of the trust company or any individual with whom there exists a connection, or organization in which there exists an interest, as might affect the exercise of the best judgment of the trust company in performing its fiduciary duties, unless the transaction is authorized by a court order or a governing instrument of the fiduciary account.
E. A trust company shall not charge a fee except in accordance with a governing instrument or its amendments, a court order or a written communication.
F. A trust company shall not refuse to disclose to the public a general statement of the trust company's financial condition and its assets and liabilities or the last report of financial condition submitted to the superintendent deputy director pursuant to section 6-861.
G. A person shall not receive compensation for engaging in the trust business if the person is not licensed or exempt from licensing pursuant to this article.
H. A director, officer, agent or employee of the trust company who knowingly violates this article is liable for the damages the trust company or the legal or beneficial owners of the trust funds sustain because of the violation. A director, officer, agent or employee is individually liable for the amount of a loss of trust funds if the director, officer, agent or employee knowingly participates in an illegal activity which that results in a loss of trust funds. A director or officer of a trust company who meets the standards of conduct prescribed by section 10-830 or 10-842 shall not be liable for any loss to the company or to the legal or beneficial owners of the trust funds and shall be entitled to indemnification to the extent permitted allowed by sections 10-850 through 10-858 title 10, chapter 8, article 5.
Sec. 199. Section 6-882, Arizona Revised Statutes, is amended to read:
6-882. Savings accounts and time deposits; insurance; withdrawal; notice
A. If authorized by the articles of incorporation and bylaws and if approved by the superintendent deputy director, a trust company may receive monies for the purpose of maintaining savings accounts and time deposits. The trust company may pay interest on the savings accounts and time deposits and may prescribe terms and conditions that are consistent with the requirements of the federal deposit insurance corporation.
B. Before offering savings accounts and time deposits the board of directors shall approve the action by a written resolution that specifies the written documents to be issued representing the savings accounts and time deposits. The board shall submit:
1. A certified copy of the approving resolution to the superintendent deputy director.
2. Copies of the written documents to the superintendent deputy director for approval by the superintendent deputy director.
C. The federal deposit insurance corporation or its successor shall insure all savings accounts and time deposits held by a trust company. A trust company shall immediately notify the superintendent deputy director when the trust company applies to the federal deposit insurance corporation or its successor for deposit insurance. Until final disposition of the application for deposit insurance, the trust company shall submit monthly reports to the superintendent deputy director specifying the status of the application.
D. A trust company may require the holder of a savings account to give the trust company written notice at least seven days before an intended withdrawal that is not payable on a specified date or at the expiration of a specified time after the date of deposit.
E. A trust company may issue a transferable, nontransferable, negotiable or nonnegotiable certificate, instrument, passbook or statement representing a time deposit or savings account.
Sec. 200. Section 6-903, Arizona Revised Statutes, is amended to read:
6-903. Licensing of mortgage brokers required; qualifications; application; bond; fees; renewal
A. A person shall not act as a mortgage broker if the person is not licensed under this article. A person who brokers only commercial mortgage loans shall obtain either a mortgage broker license or a commercial mortgage broker license. A person who brokers residential mortgage loans shall obtain a mortgage broker license.
B. The superintendent deputy director shall not grant a mortgage broker's license or a commercial mortgage broker's license to a person, other than a natural person, who is not registered to do business in this state on the date of granting the license.
C. An applicant for an original mortgage broker's license shall:
1. Have not less than three years' experience as a mortgage broker or loan originator or equivalent lending experience in a related business during the five years immediately preceding the time of application.
2. Have satisfactorily completed a course of study approved by the superintendent deputy director during the three years immediately preceding the time of application.
3. Have passed a mortgage broker's test, pursuant to section 6-908.
D. An applicant for an original commercial mortgage broker's license shall:
1. Have not less than three years' experience in the commercial mortgage broker business or equivalent lending experience in a related business during the five years immediately preceding the time of application.
2. Have made in the past or intend to make or negotiate or offer to make or negotiate commercial mortgage loans.
3. Provide the superintendent deputy director with the following:
(a) A balance sheet prepared within the immediately preceding six months and certified by the licensee. The superintendent deputy director may require a more recent balance sheet.
(b) If the applicant has begun operations, a statement of operations and retained earnings and a statement of changes in financial position.
(c) Notes to the financial statement if applicable.
E. Notwithstanding subsection D, paragraph 3 of this section, commercial mortgage broker licensees and commercial mortgage broker license applicants whose own resources are derived exclusively from correspondent contracts with institutional investors shall provide the superintendent deputy director with a current financial statement or that of its parent company prepared according to generally accepted accounting principles, including:
1. A balance sheet prepared within the immediately preceding six months and certified by the licensee. The superintendent deputy director may require a more recent balance sheet.
2. If the applicant has begun operations, a statement of operations and retained earnings and a statement of changes in financial position.
3. Notes to the financial statement if applicable.
F. A person shall make an application for a license or for a renewal of a license in writing on the forms, in the manner and accompanied by the information prescribed by the superintendent deputy director. The superintendent deputy director may require additional information on the experience, background, honesty, truthfulness, integrity and competency of the applicant and any responsible individual designated by the applicant. If the applicant is a person other than a natural person, the superintendent deputy director may require information as to the honesty, truthfulness, integrity and competency of any officer, director, shareholder or other interested party of the association, corporation or group.
G. The nonrefundable application fee and annual renewal fee are as prescribed in section 6-126. The nonrefundable application fee shall accompany each application for an original license only. The superintendent deputy director shall deposit, pursuant to sections 35-146 and 35-147, the monies in the state general fund.
H. If a licensee is a person other than a natural person, the license issued to it entitles all officers, directors, members, partners, trustees and employees of the licensed corporation, partnership, association or trust to engage in the mortgage business if one officer, director, member, partner, employee or trustee of the person is designated in the license as the individual responsible for the person under this article. If a licensee is a natural person, the license entitles all employees of the licensee to engage in the mortgage business. If the natural person is not a resident of this state, an employee of the licensee shall be designated in the license as the individual responsible for the licensee under the provisions of this article. For the purposes of this subsection, an employee does not include an independent contractor. A responsible individual shall be a resident of this state, shall be in active management of the activities of the licensee governed by this article and shall meet the qualifications set forth in subsection C or D of this section for a licensee.
I. A licensee shall notify the superintendent deputy director that its responsible individual will cease to be in active management of the activities of the licensee within ten days of after learning that fact. The licensee has ninety days after the notification is received by the superintendent deputy director within which to replace the responsible individual with a qualified replacement and to so notify the superintendent deputy director. If the license is not placed under active management of a qualified responsible individual and if notice is not given to the superintendent deputy director within the ninety day NINETY-DAY period, the license of the licensee expires.
J. Every person licensed as a mortgage broker or a commercial mortgage broker shall deposit with the superintendent deputy director, before doing business as a mortgage broker or a commercial mortgage broker, a bond executed by the licensee as principal and a surety company authorized to do business in this state as surety. The bond shall be conditioned on the faithful compliance of the licensee, including the licensee's directors, officers, members, partners, trustees and employees, with this article. The bond is payable to any person injured by the wrongful act, default, fraud or misrepresentation of the licensee or the licensee's employees and to this state for the benefit of the person injured. Only one bond is required for any person, firm, association or corporation irrespective of the number of officers, directors, members, partners or trustees who are employed by or are members of such firm, association or corporation. No suit may be commenced on the bond after the expiration of one year following the commission of the act on which the suit is based, except that claims for fraud or mistake are limited to the limitation period provided in section 12-543, paragraph 3. If an injured person commences an action for a judgment to collect from the bond, the injured person shall notify the superintendent deputy director of the action in writing at the time of the commencement of the action and shall provide copies of all documents relating to the action to the superintendent deputy director on request.
K. The bond required by this section shall be ten thousand dollars $10,000 for licensees whose investors are limited solely to institutional investors, and fifteen thousand dollars $15,000 for licensees whose investors include any noninstitutional investors.
L. For the purposes of subsection K of this section:
1. "Institutional investor" means a state or national bank, a state or federal savings and loan association, a state or federal savings bank, a state or federal credit union, a federal government agency or instrumentality, a quasi-federal government agency, a financial enterprise, a licensed real estate broker or salesman, a profit sharing or pension trust, or an insurance company.
2. "Investor" means any person who directly or indirectly provides to a mortgage broker funds that are, or are intended to be, used in the making of a loan, and any person who purchases a loan, or any interest therein, from a mortgage broker or in a transaction that has been directly or indirectly arranged or negotiated by a mortgage broker.
M. Notwithstanding section 35-155, in lieu of the bond described in this section, an applicant for a license or a licensee may deposit with the superintendent deputy director a deposit in the form of cash or alternatives to cash in the same amount as the bond required under subsection J of this section. The superintendent deputy director may accept any of the following as an alternative to cash:
1. Certificates of deposits or investment certificates that are payable or assigned to the state treasurer, issued by banks or savings banks doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.
2. Certificates of deposit, investment certificates or share accounts that are payable or assigned to the state treasurer, issued by a savings and loan association doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.
3. Certificates of deposit, investment certificates or share accounts that are payable or assigned to the state treasurer, issued by a credit union doing business in this state and fully insured by the national credit union administration or any successor institution.
N. The superintendent deputy director shall deposit the cash or alternatives to cash received under this section with the state treasurer. The state treasurer shall hold the cash or alternatives to cash in the name of this state to guarantee the faithful performance of all legal obligations of the person required to post bond pursuant to this section. The person is entitled to receive any accrued interest earned from the alternatives to cash. The state treasurer may impose a fee to reimburse the state treasurer for administrative expenses. The fee shall not exceed ten dollars $10 for each cash or alternatives to cash deposit and shall be paid by the applicant or licensee. The state treasurer may prescribe rules relating to the terms and conditions of each type of security provided by this section.
O. In addition to such other terms and conditions as the superintendent deputy director prescribes by rule or order, the principal amount of the deposit shall be released only on written authorization of the superintendent deputy director or on the order of a court of competent jurisdiction. The principal amount of the deposit shall not be released before the expiration of three years from the first to occur of any of the following:
1. The date of substitution of a bond for a cash alternative.
2. The surrender of the license.
3. The revocation of the license.
4. The expiration of the license.
P. A licensee or an employee of the licensee shall not advertise for or solicit mortgage business in any manner without using the name and license number as issued on the mortgage broker's principal place of business license, except that a licensee may employ or refer to the commonly used name and any trademarks or service marks of any affiliate. If a license is issued in the name of a natural person, nothing in the advertising or solicitation may imply the license is in the name of another person or entity. For the purposes of this subsection, "advertise" does not include business cards, radio and television advertising directed at national or regional markets and promotional items except if those items contain rates or terms on which a mortgage loan may be obtained.
Q. A licensee shall not employ any person unless the licensee:
1. Conducts a reasonable investigation of the background, honesty, truthfulness, integrity and competency of the employee before hiring.
2. Keeps a record of the investigation for not less than two years after termination.
R. A license is not transferable or assignable and control of a licensee may not be acquired through a stock purchase or other device without the prior written consent of the superintendent deputy director. Written consent shall not be given if the superintendent deputy director finds that any of the grounds for denial, revocation or suspension of a license as set forth in section 6-905 are applicable to the acquiring person. For the purposes of this subsection, "control" means the power to vote more than twenty per cent percent of outstanding voting shares of a licensed corporation, partnership, association or trust.
S. The licensee is liable for any damage caused by any of the licensee's employees while acting as an employee of the licensee.
T. A licensee shall comply with the requirements of section 6-114 relating to balloon payments.
U. The examination and course of study requirements of this section shall be waived by the superintendent deputy director for any person applying for a license who, within the six months immediately prior to the submission of the application, has been a licensee or a responsible person pursuant to this chapter.
V. If the applicant for renewal of a mortgage broker license is a natural person, the applicant shall have satisfactorily completed twelve continuing education units by a continuing education provider approved by the superintendent deputy director before submitting the renewal application. If the applicant is other than a natural person, the designated responsible individual shall have satisfactorily completed twelve continuing education units by a continuing education provider approved by the superintendent deputy director before submitting the renewal application. An applicant for renewal of a commercial mortgage broker license is not subject to the continuing education requirements prescribed by this article.
W. A licensee who employs a loan originator shall comply with section 6-991.03.
Sec. 201. Section 6-904, Arizona Revised Statutes, is amended to read:
6-904. Issuance of license; renewal; inactive status; branch office license; application; fee
A. The superintendent deputy director, on determining that the applicant is qualified and has paid the fees, shall issue a mortgage broker's license or a commercial mortgage broker's license to the applicant which is evidenced by a continuous certificate. The superintendent deputy director shall grant or deny a license within one hundred twenty days after receipt of the completed application and fees. An applicant who has been denied a license may not reapply for such a license before one year from the date of the previous application.
B. For licenses approved on or before September 30, 2008, a licensee shall pay the renewal fee on or before September 30, 2008 and on or before December 31 for subsequent years beginning on or before December 31, 2009. Licenses not renewed by September 30, 2008 are suspended, and the licensee shall not act as a mortgage broker or a commercial mortgage broker until the license is renewed or a new license is issued pursuant to this article. A person may renew a suspended license by paying the renewal fee plus twenty-five dollars $25 for each day after September 30, 2008 that a license renewal fee is not received by the superintendent deputy director and making application for renewal as prescribed by the superintendent deputy director. Licenses which are not renewed by October 31, 2008 expire. A license shall not be granted to the holder of an expired license except as provided in this article for the issuance of an original license.
C. For licenses approved on or before September 30, 2008, a licensee may request inactive status on or before September 30, 2008 for the following license year, and the license shall be placed on inactive status after payment to the superintendent deputy director of the inactive status renewal fee prescribed in section 6-126, subsection C and the surrender of the license to the superintendent deputy director. During inactive status, an inactive licensee is not required to maintain a bond and shall not act as a mortgage broker or a commercial mortgage broker. A licensee may not be on inactive status for more than two consecutive years, nor for more than four years in any ten year TEN-YEAR period. The license is deemed expired on violation of any of the limitations of this subsection.
D. For licenses approved after or renewed on September 30, 2008, a licensee shall pay the renewal fee on or before December 31, 2009 and on or before December 31 of each subsequent year. Licenses not renewed by December 31 are suspended, and the licensee shall not act as a mortgage broker or a commercial mortgage broker until the license is renewed or a new license is issued pursuant to this article. A person may renew a suspended license by paying the renewal fee plus twenty-five dollars $25 for each day after December 31 that a license renewal fee is not received by the superintendent deputy director and applying for renewal as prescribed by the superintendent deputy director. A license that is not renewed by January 31 expires. A license shall not be granted to the holder of an expired license except as provided in this article for the issuance of an original license.
E. For licenses approved after or renewed on September 30, 2008, beginning in 2009 and each subsequent year, a licensee may request inactive status for the following license year if the licensee makes the request on or before December 31. The license shall be placed on inactive status after the licensee pays to the superintendent deputy director the inactive status renewal fee prescribed in section 6-126, subsection C and surrenders the license to the superintendent deputy director. During inactive status, an inactive licensee is not required to maintain a bond and shall not act as a mortgage broker or a commercial mortgage broker. A licensee may not be on inactive status for more than two consecutive years or for more than four years in any ten year TEN-YEAR period. The license expires on violation of this subsection.
F. An inactive licensee may return to active status notwithstanding the requirements of section 6-903, subsections C and D by making a written request to the superintendent deputy director for reactivation and paying the prorated portion of the annual assessment that would have been charged to the licensee. The licensee shall also provide the superintendent deputy director with proof that the licensee meets all of the other requirements for acting as a mortgage broker or a commercial mortgage broker, including required bond coverage or the deposit of a cash alternative.
G. A licensee shall prominently display the mortgage broker license or commercial mortgage broker license in the office of the mortgage broker or commercial mortgage broker.
H. Every licensed mortgage broker and licensed commercial mortgage broker shall designate and maintain a principal place of business in this state for the transaction of business. The license shall specify the address of the licensee's principal place of business. If a licensee wishes to maintain one or more locations in addition to a principal place of business, the licensee shall first obtain a branch office license from the superintendent deputy director and designate a person for each branch office to oversee the operations of that office. The licensee shall submit a fee as set forth in section 6-126 for each branch office license. If the superintendent deputy director determines that the applicant is qualified, the superintendent deputy director shall issue a branch office license indicating the address of the branch office. The licensee shall conspicuously display the branch office license in the branch office. If the address of the principal place of business or of any branch office is changed, the licensee shall immediately notify the superintendent deputy director of the change and the superintendent deputy director shall endorse the change of address on the license for a fee as prescribed in section 6-126.
Sec. 202. Section 6-905, Arizona Revised Statutes, is amended to read:
6-905. Denial, suspension or revocation of licenses
A. The superintendent deputy director may deny a license to a person or suspend or revoke a license if the superintendent deputy director finds that an applicant or licensee:
1. Is insolvent as defined in section 47-1201.
2. Has shown that he the applicant or licensee is not a person of honesty, truthfulness and good character.
3. Has violated any applicable law, rule or order.
4. Refuses to permit allow an examination by the superintendent deputy director of the licensee's books and affairs or refuses or fails, within a reasonable time, to furnish any information or make any report that may be required by the superintendent deputy director.
5. Has been convicted in any state of a felony or any crime of involving breach of trust or dishonesty.
6. Has had a final judgment entered against him the applicant or licensee in a civil action upon on grounds of fraud, deceit or misrepresentation and the conduct on which the judgment is based indicates that it would be contrary to the interest of the public to permit allow such a person to be licensed or to control or manage a licensee.
7. Has had an order entered against him the applicant or licensee involving fraud, deceit or misrepresentation by an administrative agency of this state, the federal government or any other state or territory of the United States and that the facts relating to the order indicate that it would be contrary to the interest of the public to permit allow such a person to be licensed or to control or manage a licensee.
8. Has made a material misstatement or suppressed or withheld information on the application for a license or any document required to be filed with the superintendent deputy director.
B. If a person to whom a license is issued or who has applied for a license under this article is indicted or informed against for forgery, embezzlement, obtaining money under false pretenses, extortion, criminal conspiracy to defraud or a like offense or offenses, and a certified copy of the indictment or information or other proper evidence of the indictment or information is filed with the superintendent deputy director, the superintendent deputy director may suspend the license issued to the licensee or refuse to grant a license to an applicant pending trial on the indictment.
C. If a licensee is other than a natural person, it is sufficient cause for the suspension or revocation of the license if an officer, director, member, partner, trustee, employee, while acting in the course of the mortgage broker business, or person entitled to vote more than twenty per cent percent of the outstanding voting shares of the licensed corporation, partnership, association or trust has acted or failed to act in the same manner as would be cause for suspending or revoking a license of the party as an individual. If a licensee is a natural person, it is sufficient cause for the suspension or revocation of the license if an employee of the person, while acting as an employee, has acted or failed to act in the course of the mortgage broker business of the licensee in the same manner as would be cause for suspending or revoking a license of the party as an owner.
Sec. 203. Section 6-906, Arizona Revised Statutes, is amended to read:
6-906. Required accounting practices and records; escrow of monies; disclosure
A. Every mortgage broker shall keep and maintain at all times correct and complete records as prescribed by the superintendent which deputy director that will enable him THE deputy director to determine whether the licensee is conducting his THE LICENSEE'S business in accordance with this article. If the mortgage broker operates two or more licensed places of business in this state, after notifying the superintendent deputy director, he THE MORTGAGE BROKER may maintain such records at his THE MORTGAGE BROKER'S principal place of business in this state, except that a mortgage broker, with the approval of the superintendent deputy director, may maintain the records outside of this state. For records kept outside this state, a mortgage broker shall make the records available to the superintendent deputy director in this state not more than three business days after demand and provide for the acceptance of collect calls or provide a toll free telephone number to borrowers to obtain information from the records if the licensed place of business in this state cannot readily provide the information requested by the borrowers. Every mortgage broker shall maintain original documents or clearly legible copies of all mortgage loan transactions for not fewer than five years from after the date of the mortgage loan closing.
B. Every mortgage broker shall observe generally accepted accounting principles and practices.
C. A mortgage broker shall immediately deposit all monies received by the mortgage broker in an escrow account with an escrow agent licensed pursuant to chapter 7 of this title. Withdrawals shall only be disbursed according to the terms of the escrow instructions. The escrow agent shall not be the mortgage broker. A mortgage broker, however, may accept an appraisal fee, which the mortgage broker shall only use to obtain an appraisal, a credit investigation fee and a fee in connection with an application for a mortgage loan. The mortgage broker shall not commingle the appraisal fee or credit investigation fee with other monies of the mortgage broker. A mortgage broker shall not accept any monies or documents in connection with an application for a mortgage loan in an amount of two hundred thousand dollars $200,000 or less, except as provided in this section and pursuant to a written agreement. The parties shall sign the written agreement and the agreement shall contain terms pertaining to the disposition of the monies and documents, whether the loan is finally consummated or not, the term for which the agreement is to remain in force before return of the monies and documents for nonperformance can be required and an itemized list of all estimated costs to the borrower of obtaining the mortgage loan including all costs charged by third parties. The licensee shall preserve all agreements between the parties involved in the transaction and all contracts, agreements and escrow instructions to or with the depository. All documents provided by the borrower or at the expense of the borrower to the mortgage broker, including any appraisals, are the property of the borrower and shall, at the borrower's request, be returned to the borrower or transferred to any person designated by the borrower without further expense to the borrower if the loan is not consummated, provided that any such document is not prohibited by law from being transferred or returned.
D. Before a mortgage loan closing on residential real property designed principally for the occupancy of from one to four families, a licensee shall fully comply, to the extent applicable, with the real estate lending disclosure requirements of title I of the consumer credit protection act (15 United States Code sections 1601 through 1666j), the real estate settlement procedures act (12 United States Code sections 2601 through 2617) and the regulations promulgated under those acts.
Sec. 204. Section 6-907, Arizona Revised Statutes, is amended to read:
6-907. Required disclosure to investors
A. Before payment of any money by an investor in connection with a mortgage loan, a licensee shall provide to an investor that is not a financial institution, state or national bank, state or federal savings and loan association, state or federal savings bank, state or federal credit union, financial enterprise, licensed real estate broker or salesman, profit sharing or pension trust or insurance company:
1. An opinion from an independent source stating the value of the property subject to the mortgage loan being made or sold. The opinion shall state the value of the property as it exists on the date of the opinion.
2. A copy of the preliminary title report that states the condition of title and discloses any encumbrances, assessments and liens of record on the property securing the mortgage loan being made or sold.
3. A disclosure statement which that includes the following information:
(a) The name and address of the fee owner of the property securing the mortgage loan being made or sold.
(b) Information relative to the ability of the borrower to meet the obligations of the mortgage loan.
(c) A legal description or address of the property securing the mortgage loan being made or sold.
(d) The existence of any improvements on the property or any utilities on or adjacent to the property which that will serve the property.
(e) The terms and conditions of the mortgage loan being made or sold, including the principal balance owed and the status of principal and interest payments thereon.
(f) The terms and conditions of all liens on the property securing the mortgage loan being made or sold.
(g) A statement as to whether the mortgage broker is acting as principal or agent in the transaction.
(h) Any additional information prescribed by the superintendent deputy director.
B. After using his THE LICENSEE'S best efforts to verify all of the information required by this section, the licensee shall sign the statement attesting to the validity of the information to the best of his THE LICENSEE'S knowledge and belief. The licensee shall maintain a record of acknowledgment from the lender of the receipt of this information for not less than two years from the date of the mortgage loan closing.
Sec. 205. Section 6-908, Arizona Revised Statutes, is amended to read:
6-908. Testing committee; testing of applicants; approval by deputy director; definition
A. The superintendent deputy director shall establish a testing committee to create, periodically update and establish standards for passing a test for mortgage brokers. The committee shall consist of five members appointed by the superintendent deputy director once every two years. Four of the members shall be licensees appointed from nominations submitted by licensees and one of the members shall be an employee of the department. Licensees who serve as members of the committee shall serve without expense to this state. The test is subject to the approval of the superintendent deputy director.
B. Each applicant for an original license, before issuance of the license, shall personally take and pass the written test given under the supervision of the department. The test must reasonably examine the applicant's knowledge of:
1. The obligations between principal and agent, the applicable canons of business ethics, the provisions of this article and the rules adopted under this article.
2. The arithmetical computations common to mortgage brokerage.
3. The principles of real estate lending.
4. The general purposes and legal effect of mortgages, deeds of trust and security agreements.
C. The department shall administer the test to applicants for licenses not less than once every six months. The deputy director may contract for the testing of applicants. The department or the department's contractor shall reasonably prescribe the time, place and conduct of testing and collect a fee for administration of the test to be assessed to all persons taking the test. The fee is fifty dollars $50 per testing. If the deputy director contracts for the testing of applicants, the testing fee pursuant to this section is payable directly by the applicant to the contractor. The deputy director may allow a contractor to charge a reasonable testing fee that is more than the fee prescribed in this subsection. An applicant may not take the test more than two times within a twelve month twelve-month period.
D. All tests shall be given, conducted and graded in a fair and impartial manner and without unfair discrimination between individuals tested. The committee shall inform the applicant of the result of the test within thirty days.
E. For testing purposes the department shall prepare a handbook for mortgage brokers and distribute it to all applicants for a fee of not to exceed the actual cost of producing and distributing the handbook.
F. For the purposes of this section "applicant" means a person who has submitted a completed application in the form prescribed by law, accompanied by a letter of inquiry to a surety company authorized to do business in this state regarding the procurement of a bond pursuant to section 6-903, to be issued upon on completion of all requirements for the granting of a license.
Sec. 206. Section 6-912, Arizona Revised Statutes, is amended to read:
6-912. Certificate of exemption
A. A person who is exempt from licensure pursuant to this article and articles 1, 2 and 3 of this chapter as a federally chartered savings bank that is registered with the nationwide mortgage licensing system and registry may file a written application with the department for a certificate of exemption for the following purposes:
1. Registering with the department except that the registration shall not affect the exempt status of the applicant.
2. Sponsoring one or more mortgage loan originators.
3. Fulfilling any reporting requirements.
4. Reasonably supervising the activities of a mortgage loan originator who is licensed pursuant to article 4 of this chapter and who is employed by or under exclusive contract with the applicant.
B. A person shall make an application for a certificate of exemption or renewal of a certificate of exemption in writing on the forms, in the manner and accompanied by the information prescribed by the superintendent deputy director. The superintendent deputy director may require additional information on the experience, background, honesty, truthfulness, integrity and competency of the applicant and the responsible individual designated by the applicant.
C. The department may charge a fee for processing the original or renewal application for a certificate of exemption and for other costs incurred by the department.
D. An exempt person shall notify the superintendent deputy director that the person has designated a responsible individual to actively manage the activities of the mortgage loan originator licensees. The responsible individual may be located in this state or in the state where the primary business of the bank is conducted and shall have at least three years of experience in the business of making mortgage loans or equivalent experience in a related business. The responsible individual may supervise one or more licensed mortgage loan originators in this state.
E. Within ten days after learning that a responsible individual will cease managing the licensees' activities, an exempt person must notify the superintendent deputy director. Within ninety days after the notification is received by the superintendent deputy director, the exempt person must replace the responsible individual with a person who meets the qualifications prescribed by subsection D of this section and must notify the superintendent deputy director of the replacement. A certificate of exemption expires if either of the following occurs:
1. The exempt person is not placed under active management of a qualified responsible individual.
2. The exempt person does not provide notice of replacement of the responsible individual to the superintendent deputy director as prescribed by this section.
F. After reviewing the application for a certificate of exemption and after verifying the submitted information, the department shall issue the certificate of exemption.
G. An exempt person who sponsors a loan originator on an exclusive contract shall comply with section 6-991.03.
H. The superintendent deputy director may deny a certificate of exemption to a person or suspend or revoke a certificate of exemption if the superintendent deputy director finds that an applicant or certificate holder has done any of the following:
1. Shown that the applicant or certificate holder is not a person of honesty, truthfulness and good character.
2. Violated any applicable law, rule or order.
3. Refused or failed to furnish, within a reasonable time, any information or make any report that may be required by the superintendent deputy director.
4. Had a final judgment entered against the applicant or certificate holder in a civil action on grounds of fraud, deceit or misrepresentation and the conduct on which the judgment is based indicates that it would be contrary to the interest of the public to permit allow the applicant or certificate holder to manage a loan originator.
5. Had an order entered against the applicant or certificate holder involving fraud, deceit or misrepresentation by an administrative agency of this state, the federal government or any other state or territory of the United States and the facts relating to the order indicate that it would be contrary to the interest of the public to permit allow the applicant or certificate holder to manage a loan originator.
6. Made a material misstatement or suppressed or withheld information on the application for a certificate of exemption or any document required to be filed with the superintendent deputy director.
I. If a person to whom a certificate of exemption is issued or who has applied for a certificate of exemption under this article is indicted or informed against for forgery, embezzlement, obtaining money under false pretenses, extortion, criminal conspiracy to defraud or a like offense, and a certified copy of the indictment or information or other proper evidence of the indictment or information is filed with the superintendent deputy director, the superintendent deputy director may suspend the certificate of exemption issued to the exempt person or refuse to grant a certificate of exemption to an applicant pending trial on the indictment or information.
J. Every person licensed as an exempt person to whom a certification of exemption is issued pursuant to this section shall deposit with the superintendent deputy director, before doing business as a registered exempt person, a bond executed by the registered exempt person as principal and a surety company authorized to do business in this state as surety. The bond shall be conditioned on the faithful compliance of the registered exempt person, including the registered exempt persons, person's directors, officers, members, partners, trustees and employees, with this article. The bond is payable to any person injured by the wrongful act, default, fraud or misrepresentation of the registered exempt person, or the registered exempt person's directors, officers, members, partners, trustees and employees and to this state for the benefit of the person injured. Only one bond is required for any person, firm, association or corporation irrespective of the number of officers, directors, members, partners or trustees who are employed by or are members of such firm, association or corporation. No suit may be commenced on the bond after the expiration of one year following the commission of the act on which the suit is based, except that claims for fraud or mistake are limited to the limitation provided in section 12-543, paragraph 3. If an injured person commences an action for a judgment to collect from the bond, the injured person shall notify the superintendent deputy director of the action in writing at the time of the commencement of the action and shall provide copies of all documents relating to the action to the superintendent deputy director on request. The bond required by this section shall be two hundred thousand dollars $200,000.
Sec. 207. Section 6-913, Arizona Revised Statutes, is amended to read:
6-913. Conversion to commercial mortgage broker license
Notwithstanding section 6-903, a person who holds a mortgage broker license may convert it to a commercial mortgage broker license by applying in a manner prescribed by the superintendent deputy director by rule. The approval of the conversion is at the discretion of the superintendent deputy director.
Sec. 208. Section 6-943, Arizona Revised Statutes, is amended to read:
6-943. Licensing of mortgage bankers required; qualifications; application; bond; fees; renewal
A. A person shall not act as a mortgage banker if he the person is not licensed under this article.
B. The superintendent deputy director shall not grant a mortgage banker's license to a person, other than a natural person, who is not registered to do business in this state on the date of application for a license. The superintendent deputy director shall not issue a mortgage banker's license or a renewal of a license to an applicant unless the applicant meets all of the requirements prescribed in subsection C of this section. The superintendent deputy director shall determine whether the applicant meets the requirements based on the application and evidence presented at a hearing, if any, or any other evidence that the superintendent deputy director may have regarding qualifications of the applicant.
C. In order to qualify for a mortgage banker license or a renewal of a license, an applicant shall:
1. Have not fewer than three years' experience in the business of making mortgage banking loans or equivalent lending experience in a related business. If the applicant is a person other than a natural person, the responsible individual shall meet this requirement.
2. Have engaged or intend to engage in the business of making mortgage loans or mortgage banking loans.
3. Either:
(a) Be authorized to do business with any of the following:
(i) The federal housing administration.
(ii) The United States department of veterans affairs.
(iii) The federal national mortgage association.
(iv) The federal home loan mortgage corporation.
(b) Notwithstanding paragraph 5 of this subsection, at all times have and maintain a net worth of not less than one hundred thousand dollars $100,000.
4. Provide the superintendent deputy director with a current audited financial statement or that of its parent company prepared by an independent certified public accountant in accordance with generally accepted accounting principles including:
(a) The certified public accountant's opinion as to the fairness of the presentation in conformity with generally accepted accounting principles.
(b) A balance sheet prepared within the previous six months and certified by the licensee. The superintendent deputy director may require a more recent balance sheet.
(c) A statement of operations and retained earnings and a statement of changes in financial position provided the applicant has commenced operations.
(d) Notes to the financial statement if applicable.
5. At all times have and maintain a net worth of not less than one hundred thousand dollars $100,000.
D. A person shall make an application for a license or for a renewal of a license in writing on the forms, in the manner and accompanied by the information prescribed by the superintendent deputy director including the requirements prescribed in subsection C of this section. The superintendent deputy director may require additional information on the experience, background, honesty, truthfulness, integrity and competency of the applicant and any responsible individual designated by the applicant. If the applicant is a person other than a natural person, the superintendent deputy director may require information as to the honesty, truthfulness, integrity and competency of any officer, director, shareholder, member, partner, trustee, employee or other interested party of the association, corporation or group.
E. The nonrefundable application fee and annual renewal fee shall be as prescribed in section 6-126. The nonrefundable application fee shall accompany each application for an original license only.
F. If a licensee is a person other than a natural person, the license issued to it entitles all officers, directors, members, partners, trustees and employees of the licensed corporation, partnership, association or trust to engage in the mortgage banking business if one officer, director, member, partner, employee or trustee of the person is designated in the license as the individual responsible for the person under this article. If a licensee is a natural person, the license entitles all employees of the licensee to engage in the mortgage banking business. If the natural person is not a resident of this state, an employee of the licensee shall be designated in the license as the individual responsible for the licensee under this article. For the purposes of this article, an employee does not include an independent contractor. For the purposes of this article, a responsible individual shall be a resident of this state, shall be in active management of the activities of the licensee governed by this article and shall have not less than three years' experience in the business of making mortgage banking loans or equivalent experience in a related business.
G. A licensee shall notify the superintendent deputy director that its responsible individual will cease to be in active management of the licensee within ten days of after learning that fact. Not more than ninety days after the superintendent deputy director receives the notice, the licensee shall place itself under the active management of a qualified responsible person and notify the superintendent deputy director. If the licensee is not placed under active management of a qualified responsible individual and if notice is not received by the superintendent deputy director within the ninety day ninety-day period, the license of the licensee expires.
H. Every person licensed as a mortgage banker shall deposit with the superintendent deputy director, before doing business as a mortgage banker, a bond executed by the licensee as principal and a surety company authorized to do business in this state as surety. The bond shall be conditioned on the faithful compliance of the licensee, including his directors, officers, members, partners, trustees and employees, with this article. Only one bond is required for a person, firm, association or corporation irrespective of the number of officers, directors, members, partners or trustees who are employed by or are members of the firm, association or corporation. The bond is payable to any person injured by the wrongful act, default, fraud or misrepresentation of the licensee and to this state for the benefit of any injured person. The coverage shall be maintained in the minimum amount prescribed in this subsection, computed on a base consisting of the total assets of the licensee plus the unpaid balance of loans it has contracted to service for others as of the end of the licensee's fiscal year.
Base Minimum Bond
Not over $1,000,000 $25,000 for the first $500,000 plus
$5,000 for each $100,000 or fraction
thereof over $500,000
$1,000,001 to $10,000,000 $50,000 plus $5,000 for each $1,800,000
or fraction thereof over $1,000,000
$10,000,001 to $100,000,000 $75,000 plus $5,000 for each $18,000,000
or fraction thereof over $10,000,000
$100,000,001 and over $100,000
No suit may be commenced on the bond after the expiration of one year following the commission of the act on which the suit is based, except that claims for fraud or mistake are limited to the limitation period provided in section 12-543, paragraph 3. If any injured person commences an action for a judgment to collect on the bond, the injured person shall notify the superintendent deputy director of the action in writing at the time of the commencement of the action and shall provide copies of all documents relating to the action to the superintendent deputy director on request.
I. Notwithstanding subsection H of this section, the bond required shall be twenty-five thousand dollars $25,000 for licensees whose investors are limited solely to institutional investors.
J. For the purposes of subsection I of this section:
1. "Institutional investor" means a state or national bank, a state or federal savings and loan association, a state or federal savings bank, a state or federal credit union, a federal government agency or instrumentality, a quasi-federal government agency, a financial enterprise, a licensed real estate broker or salesman, a profit sharing or pension trust, or an insurance company.
2. "Investor" means any person who directly or indirectly provides to a mortgage banker funds that are, or are intended to be, used in the making of a loan, and any person who purchases a loan, or any interest therein, from a mortgage banker or in a transaction that has been directly or indirectly arranged or negotiated by a mortgage banker.
K. Notwithstanding section 35-155, in lieu of the bond described in this section, an applicant for a license or a licensee may deposit with the superintendent deputy director a deposit in the form of cash or alternatives to cash in the amount prescribed in subsection H or I of this section, as applicable. The superintendent deputy director may accept any of the following as an alternative to cash:
1. Certificates of deposit or investment certificates that are payable or assigned to the state treasurer, issued by banks or savings banks doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.
2. Certificates of deposit, investment certificates or share accounts that are payable or assigned to the state treasurer, issued by a savings and loan association doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.
3. Certificates of deposit, investment certificates or share accounts that are payable or assigned to the state treasurer, issued by a credit union doing business in this state and fully insured by the national credit union administration or any successor institution.
L. The superintendent deputy director shall deposit the cash or alternatives to cash received under this section with the state treasurer. The state treasurer shall hold the cash or alternatives to cash in the name of this state to guarantee the faithful performance of all legal obligations of the person required to post bond pursuant to this section. The person is entitled to receive any accrued interest earned from the alternatives to cash. The state treasurer may impose a fee to reimburse the state treasurer for administrative expenses. The fee shall not exceed ten dollars $10 for each cash or alternatives to cash deposit and shall be paid by the applicant or licensee. The state treasurer may prescribe rules relating to the terms and conditions of each type of security provided by this section.
M. In addition to such other terms and conditions as the superintendent deputy director prescribes by rule or order, the principal amount of the deposit shall be released only on written authorization of the superintendent deputy director or on the order of a court of competent jurisdiction. The principal amount of the deposit shall not be released before the expiration of three years from the first to occur of any of the following:
1. The date of substitution of a bond for a cash alternative.
2. The surrender of the license.
3. The revocation of the license.
4. The expiration of the license.
N. A licensee or an employee of the licensee shall not advertise for or solicit mortgage banking business in any manner without using the name and license number as issued on the mortgage banker's principal place of business license, except that a licensee may also employ or refer to the commonly used name and any trademarks or service marks of any affiliate. If a license is issued in the name of a natural person, nothing in the advertising or solicitation may imply that the license is in the name of another person or entity. For the purposes of this subsection, advertise does not include business cards, radio and television advertising directed at national or regional markets and promotional items except if those items contain rates or terms on which a mortgage loan or mortgage banking loan may be obtained.
O. A licensee shall not employ any person unless the licensee:
1. Conducts a reasonable investigation of the background, honesty, truthfulness, integrity and competency of the employee before hiring.
2. Keeps a record of the investigation for not less than two years after termination.
P. The licensee is liable for any damage caused by any of his employees while engaged in the business of making mortgage loans or mortgage banking loans.
Q. A licensee shall comply with the requirements of section 6-114 relating to balloon payments.
R. Notwithstanding subsection C, paragraph 4 of this section, licensees and applicants whose own resources are derived exclusively from correspondent contracts between mortgage bankers and banks, savings banks, trust companies, savings and loan associations, credit unions, profit sharing or pension trusts, consumer lenders or insurance companies shall provide the superintendent deputy director with a current financial statement or that of its parent company prepared in accordance with generally accepted accounting principles including:
1. A balance sheet prepared within the previous six months and certified by the licensee. The superintendent deputy director may require a more recent balance sheet.
2. A statement of operations and retained earnings and a statement of changes in financial position provided the applicant has commenced operations.
3. Notes to the financial statement if applicable.
S. In addition to the grounds specified in section 6-945, subsection A, failure of a licensee to operate the business of making mortgage loans or mortgage banking loans for a continuous period of twelve months or more shall constitute grounds for revocation of such license. The superintendent deputy director, on good cause shown, may extend the time for operating such business for a single fixed period, which shall not exceed twelve months.
T. If the applicant for renewal of a mortgage banker license is a natural person, the applicant shall have satisfactorily completed twelve continuing education units by a continuing education provider approved by the superintendent deputy director before submitting the renewal application. If the applicant is other than a natural person, the designated responsible individual shall have satisfactorily completed twelve continuing education units by a continuing education provider approved by the superintendent deputy director before submitting the renewal application.
U. A licensee who employs a loan originator shall comply with section 6-991.03.
Sec. 209. Section 6-944, Arizona Revised Statutes, is amended to read:
6-944. Issuance of license; renewal; branch office license; application; fee
A. If the superintendent deputy director determines that the applicant has met the requirements set forth in section 6-943, subsection C, is qualified and has paid the fees, the superintendent deputy director shall issue a mortgage banker's license to the applicant evidenced by a continuous certificate. The license is not transferable or assignable. An applicant who has been denied a license may not reapply for such a license before one year from the date of the previous application. A person may not acquire control of a licensee through a stock purchase or other device without the prior written consent of the superintendent deputy director. Written consent shall not be given if the superintendent deputy director finds that any of the grounds for denial, revocation or suspension of a license as set forth in section 6-945 are applicable to the acquiring person. For the purposes of this subsection, "control" means the power to vote more than twenty per cent percent of outstanding voting shares of a licensed corporation, partnership, association or trust.
B. For licenses approved on or before March 31, 2009, a licensee shall make an application and pay the renewal fee set forth in section 6-126 on or before March 31, 2009 but not sooner than February 1, 2009 and on or before December 31 for subsequent years beginning in 2009. Licenses not renewed by March 31, 2009 are suspended, and the licensee shall not act as a mortgage banker until the license is renewed or a new license is issued pursuant to this article. A person may renew a suspended license by paying the renewal fee plus twenty-five dollars $25 for each day after March 31, 2009 that a license renewal fee is not received by the department and making application for renewal as prescribed by the superintendent deputy director. Licenses which are not renewed by April 30, 2009 expire. A license shall not be granted to the holder of an expired license except as provided in this article for the issuance of an original license.
C. For licenses approved after or renewed on March 31, 2009, a licensee shall pay the renewal fee on or before December 31, beginning in 2009. Licenses not renewed by December 31 are suspended, and the licensee shall not act as a mortgage banker until the license is renewed or a new license is issued pursuant to this article. A person may renew a suspended license by paying the renewal fee plus twenty-five dollars $25 for each day after December 31 that a license renewal fee is not received by the superintendent deputy director and applying for renewal as prescribed by the superintendent deputy director. Licenses that are not renewed by January 31 expire. A license shall not be granted to the holder of an expired license except as provided in this article for the issuance of an original license.
D. A licensee shall prominently display the mortgage banker license in the office of the mortgage banker.
E. Every licensed mortgage banker shall designate and maintain a principal place of business in this state for the transaction of business. The license shall specify the address of the principal place of business. If a licensee wishes to maintain one or more locations in addition to a principal place of business, the licensee shall first obtain a branch office license from the superintendent deputy director and designate a person for each branch office to oversee the operations of that office. The licensee shall submit a fee as prescribed in section 6-126 for each branch office license. If the superintendent deputy director determines that the applicant is qualified, the superintendent deputy director shall issue a branch office license indicating the address of the branch office. The licensee shall conspicuously display the branch office license in the branch office. If the address of the principal place of business or of any branch office is changed, the licensee shall notify the superintendent deputy director before the change and the superintendent deputy director shall endorse the change of address on the license for a fee as prescribed in section 6-126.
Sec. 210. Section 6-945, Arizona Revised Statutes, is amended to read:
6-945. Denial, suspension or revocation of licenses
A. The superintendent deputy director may deny a license to a person or suspend or revoke a license if the superintendent deputy director finds that an applicant or licensee:
1. Is insolvent as defined in section 47-1201.
2. Has shown that he the applicant or licensee is not a person of honesty, truthfulness and good character.
3. Refuses to permit allow an examination by the superintendent deputy director of the licensee's books and affairs or refuses or fails, within a reasonable time, to furnish any information or make any report that may be required by the superintendent deputy director.
4. Has been convicted in any state of a felony or any crime involving breach of trust or dishonesty.
5. Has had a final judgment entered against the applicant or licensee in a civil action on grounds of fraud, deceit or misrepresentation and the conduct on which the judgment is based indicates that it would be contrary to the interest of the public to permit such allow the person to be licensed or to control or manage a licensee.
6. Has had an order entered against the applicant or licensee involving fraud, deceit or misrepresentation by any administrative agency of this state, the federal government or any other state or territory of the United States and that the facts relating to the order indicate that it would be contrary to the interest of the public to permit allow the person to be licensed or to control or manage a licensee.
7. Has violated any applicable law, rule or order.
B. If any person to whom a license is issued or who has applied for a license under this article is indicted or informed against for forgery, embezzlement, obtaining money under false pretenses, extortion, criminal conspiracy to defraud, or a like offense or offenses, and a certified copy of the indictment or information or other proper evidence of such indictment or information is filed with the superintendent deputy director, the superintendent deputy director may suspend the license issued to the licensee or refuse to grant a license to an applicant pending trial on the indictment or information.
C. If a licensee is other than a natural person, it is sufficient cause for the denial, suspension or revocation of the license if an officer, director, member, partner, trustee, employee, while acting in the course of the mortgage banker business, or person entitled to vote more than twenty per cent percent of the outstanding voting shares of the licensed corporation, partnership, association or trust has acted or failed to act in the same manner as would be cause for suspending or revoking a license of the party as an individual. If a licensee is a natural person, it is sufficient cause for the suspension or revocation of the license if an employee of the person has acted or failed to act in the course of the mortgage banker business of the licensee in the same manner as would be cause for suspending or revoking a license of the party as an owner.
D. The superintendent deputy director shall grant or deny a license within one hundred twenty days after receipt of the completed application and fees.
Sec. 211. Section 6-946, Arizona Revised Statutes, is amended to read:
6-946. Required accounting practices and records; refundable deposits; periodic impoundment payments; disclosure
A. Every mortgage banker shall keep and maintain at all times correct and complete records clearly reflecting the financial condition of the business as prescribed by the superintendent deputy director that will enable him The deputy director to determine whether the licensee is conducting his the licensee's business in accordance with this article. If the mortgage banker operates two or more licensed places of business in this state, after notifying the superintendent deputy director, he the mortgage banker may maintain the records at his the mortgage banker's principal place of business in this state, except that a mortgage banker, with the approval of the superintendent deputy director, may maintain the records outside of this state. A mortgage banker shall, for records kept outside of this state, make the records available to the superintendent deputy director in this state not more than three business days after demand and provide for the acceptance of collect calls or provide a toll free telephone number to borrowers to obtain information from the records if the licensed places of business in this state cannot readily provide the information requested by the borrowers. Every mortgage banker shall maintain original documents, or clearly legible copies, of all mortgage banking loan transactions and mortgage loan transactions, unless the mortgage banking loan or mortgage loan is paid in full or the mortgage banking loan or mortgage loan and its servicing are sold, for not fewer than two years after the date of the mortgage banking loan closing or the date of the last disbursement of monies by the licensee, whichever occurs last. With the approval of the superintendent deputy director, a licensee that uses a computer or mechanical record keeping system is not required to keep a written copy of the records if the licensee is able to generate all information required by this section in a timely manner for examination or for other purposes.
B. Every mortgage banker shall observe generally accepted accounting principles and practices.
C. If a mortgage banker requires an advance or fee to be paid in connection with an application for a mortgage banking loan or mortgage loan, there shall be a written agreement. The parties shall sign the written agreement, and the agreement shall contain terms pertaining to the payment of the fee or disposition of the advance or fee, whether the loan is finally consummated or not, and the term for which the agreement is to remain in force before return of the advance or fee for nonperformance can be required. Advances or fees shall be immediately deposited in a trust account in a bank, savings bank or savings and loan association that is fully insured by the federal deposit insurance corporation or any successor agency and shall not be commingled with other monies. The trust account shall designate the licensee as trustee and shall provide for withdrawal of the monies without previous notice. Withdrawals shall only be disbursed according to the terms of the agreement. A licensee who receives advances or fees shall preserve and on request make available to the superintendent deputy director all deposits, withdrawal receipts and statements of account rendered by the bank or savings and loan association. The licensee shall further preserve all agreements between the parties involved in the transaction and all contracts, agreements and instructions to or with the depository and shall keep an accurate accounting of each separate bank account in which the trust funds have been deposited. If the loan is declined by or on behalf of the lender or cancelled by the applicant, all documents provided by or at the expense of the applicant, including any appraisal, are the property of the applicant. At the applicant's discretion, said documents shall be returned or transferred to any financial institution or enterprise so designated without additional consideration except for fees for which the applicant has previously contracted, provided that any such document is not prohibited by law from being transferred or returned.
D. If periodic payments are to be collected from the mortgagor to provide for payments by the mortgagee of taxes, assessments, insurance premiums, ground rents or other current charges against the real estate security, the estimated payment amount stated to the mortgagor by the mortgage banker shall be such that the total of these payments collected for each category during the tax or other period will approximate the actual tax or other payment when due. All such periodic payments of taxes, assessments, insurance premiums, ground rents and other current charges shall be accounted for annually to the borrower and, to the extent monies have been collected for payment, shall be paid promptly by the mortgage banker.
E. Before a mortgage banking loan closing on residential real property designed principally for the occupancy of from one to four families, a licensee shall fully comply, to the extent they apply, with the real estate lending disclosure requirements of title I of the consumer credit protection act (15 United States Code sections 1601 through 1666j), the real estate settlement procedures act (12 United States Code sections 2601 through 2617) and the regulations promulgated under those acts.
Sec. 212. Section 6-949, Arizona Revised Statutes, is amended to read:
6-949. Conversion to mortgage broker license
Notwithstanding any other law, a licensee who funds in the aggregate one hundred fifty or fewer loans in the immediately preceding calendar year may apply at the time of license renewal to the department for a conversion to a mortgage broker license issued pursuant to article 1 of this chapter. The conversion application shall be in a manner prescribed by the superintendent deputy director by rule. The approval of the conversion is at the discretion of the superintendent deputy director.
Sec. 213. Section 6-973, Arizona Revised Statutes, is amended to read:
6-973. Licensing commercial mortgage bankers required; qualifications
A. A person shall not act as a commercial mortgage banker without a license issued under this article.
B. A person who engages in commercial mortgage banking need not be licensed under article 1 or 2 of this chapter or chapter 7 of this title if the person is licensed under this article.
C. The superintendent deputy director shall not grant a commercial mortgage banker's license to a person, other than a natural person, who is not registered to do business in this state on the date the license is granted. The superintendent deputy director shall not issue to or renew a commercial mortgage banker's license of an applicant unless the applicant meets all of the requirements prescribed in subsection D of this section. The superintendent deputy director shall determine whether the applicant meets the requirements based on the application, and evidence presented at a hearing, if any, or any other evidence that the superintendent deputy director may have regarding the applicant's qualifications.
D. In order to qualify for a commercial mortgage banker's license or a renewal of such a license an applicant shall:
1. Have at least three years' experience in the commercial mortgage business or equivalent experience in a related business. If the applicant is not a natural person, the responsible individual as prescribed by section 6-976 shall meet this requirement.
2. Have made in the past or intend to make or negotiate or offer to make or negotiate commercial mortgage loans.
3. Provide the superintendent deputy director with a current audited financial statement or that of its parent company prepared by an independent certified public accountant according to generally accepted accounting principles including:
(a) The certified public accountant's opinion as to the fairness of the presentation according to generally accepted accounting principles.
(b) A balance sheet prepared within the immediately preceding six months and certified by the licensee. The superintendent deputy director may require a more recent balance sheet.
(c) If the applicant has begun operations, a statement of operations and retained earnings and a statement of changes in financial position.
(d) Notes to the financial statement if applicable.
4. Have and maintain at all times a net worth of at least one hundred thousand dollars $100,000.
E. Notwithstanding subsection D, paragraph 3 of this section, licensees and applicants whose own resources are derived exclusively from correspondent contracts with institutional investors shall provide the superintendent deputy director with a current financial statement or that of its parent company prepared according to generally accepted accounting principles including:
1. A balance sheet prepared within the immediately preceding six months and certified by the licensee. The superintendent deputy director may require a more recent balance sheet.
2. If the applicant has begun operations, a statement of operations and retained earnings and a statement of changes in financial position.
3. Notes to the financial statement if applicable.
Sec. 214. Section 6-974, Arizona Revised Statutes, is amended to read:
6-974. Application for license; issuance or denial; fees
A. A person shall apply for a license or for a renewal of a license in writing on the forms, in the manner and accompanied by the information prescribed by the superintendent deputy director. The superintendent deputy director may require additional information on the experience, background, honesty, truthfulness, integrity and competency of the applicant and any responsible individual designated by the applicant. If the applicant is a person other than a natural person, the superintendent deputy director may require this information as to the honesty, truthfulness, integrity and competency of any officer, director, shareholder, member, partner, trustee, employee or other interested party of the firm, association or corporation.
B. The superintendent deputy director, on determining that the applicant is qualified, shall issue a commercial mortgage banker's license to the applicant that is evidenced by a continuous certificate. The superintendent deputy director shall grant or deny a license within one hundred twenty days after receiving the completed application. An applicant who has been denied a license may not reapply for a license before one year after the date of the previous application.
C. The nonrefundable application fee and annual renewal fee are as prescribed by the superintendent deputy director. Application fees and annual renewal fees shall be based upon on the cost to the department to process the application and regulate licensees. The nonrefundable application fee shall accompany each application for an original license only. The superintendent deputy director shall deposit, pursuant to sections 35-146 and 35-147, the monies in the state general fund.
Sec. 215. Section 6-975, Arizona Revised Statutes, is amended to read:
6-975. Bond or other security
A. Each licensed commercial mortgage banker shall deposit with the superintendent deputy director, before doing business as a commercial mortgage banker, a bond executed by the licensee as principal and a surety company authorized to do business in this state as surety. The bond shall be conditioned on the licensee's faithful compliance, including the directors, officers, members, partners, trustees and employees, with this article. Only one bond is required for any person, firm, association or corporation regardless of the number of officers, directors, members, partners or trustees who are employed by or are members of the firm, association or corporation.
B. The bond is payable to any person who is injured by the wrongful act, default, fraud or misrepresentation of the licensee or the licensee's employees and to this state for the benefit of the person injured. No suit may be commenced on the bond after the expiration of one year following the commission of the act on which the suit is based, except that claims for fraud or mistake are limited to the limitation period prescribed in section 12-543, paragraph 3. If an injured person commences an action for a judgment to collect on the bond, the injured person shall notify the superintendent deputy director of the action in writing when the action is commenced and shall provide copies of all documents relating to the action to the superintendent deputy director on request.
C. The bond required by this section is twenty-five thousand dollars $25,000 for licensees whose investors are limited solely to institutional investors and one hundred thousand dollars $100,000 for licensees whose investors include any other investors.
D. Notwithstanding section 35-155, in lieu of the bond described in this section, an applicant for a license or a licensee may deposit with the superintendent deputy director a deposit in the form of cash or alternatives to cash in the same amount as the bond required under subsection C of this section. The superintendent deputy director may accept any of the following as an alternative to cash:
1. Certificates of deposit, investment certificates or share accounts that are payable or assigned to the state treasurer, issued by banks, savings banks or savings and loan associations doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.
2. Certificates of deposit, investment certificates or share accounts that are payable or assigned to the state treasurer, issued by a credit union doing business in this state and fully insured by the national credit union administration or any successor institution.
E. The superintendent deputy director shall deposit the cash or alternatives to cash received under this section with the state treasurer. The state treasurer shall hold the cash or alternatives to cash in the name of this state to guarantee the faithful performance of all legal obligations of the person required to post bond pursuant to this section. The person is entitled to receive any accrued interest earned from the alternatives to cash. The state treasurer may impose a fee to reimburse the state treasurer for administrative expenses. The fee shall be paid by the applicant or licensee. The state treasurer may prescribe rules relating to the terms and conditions of each type of security provided by this section.
F. In addition to such other terms and conditions as the superintendent deputy director prescribes by rule or order, the principal amount of the deposit shall be released only on written authorization of the superintendent deputy director or on the order of a court of competent jurisdiction. The principal amount of the deposit shall not be released before the expiration of three years after the first to occur of any of the following:
1. The date of substitution of a bond for a cash alternative.
2. The surrender of the license.
3. The revocation of the license.
4. The expiration of the license.
Sec. 216. Section 6-976, Arizona Revised Statutes, is amended to read:
6-976. Responsible individual; employees
A. A license entitles the licensee and all officers, directors, members, partners, trustees and employees of the licensee to engage in commercial mortgage banking if one officer, director, member, partner, employee or trustee of the person is designated in the license as the individual responsible for the licensee under this article. If the natural person is not a resident of this state, an employee of the licensee shall be designated in the license as the individual responsible for the licensee under this article. For purposes of this subsection "employee" does not include an independent contractor.
B. A responsible individual shall be a resident of this state, shall be active in managing the activities of the licensee governed by this article and shall meet the qualifications prescribed by section 6-973, subsection D, paragraph 1 for a licensee. A licensee shall notify the superintendent deputy director that its responsible individual will cease to be active in managing the activities of the licensee within ten days of learning of that fact. Within ninety days after the notification is received by the superintendent deputy director the licensee shall replace the responsible individual with a qualified replacement and notify the superintendent deputy director. If the license is not placed under active management of a qualified responsible individual and if notice is not given to the superintendent deputy director within the ninety day ninety-day period, the license of the licensee expires.
C. A licensee shall not employ any person unless the licensee:
1. Conducts a reasonable investigation of the background, honesty, truthfulness, integrity and competency of the employee before hiring.
2. Keeps a record of the investigation for at least two years after termination.
D. The licensee is liable for any damages caused by any employee while acting as an employee of the licensee.
Sec. 217. Section 6-978, Arizona Revised Statutes, is amended to read:
6-978. Consent of deputy director for transferring, assigning or acquiring control of licensee; definition
A license is not transferable or assignable and control of a licensee may not be acquired through a stock purchase or any other device without the prior written consent of the superintendent deputy director. The superintendent deputy director shall not give written consent if he the deputy director finds that any of the grounds for denial, revocation or suspension of a license as set forth in section 6-982 apply to the acquiring person. For the purpose of this section, "control" means the power to vote more than twenty per cent percent of the outstanding voting shares of a licensed corporation, partnership, association or trust.
Sec. 218. Section 6-979, Arizona Revised Statutes, is amended to read:
6-979. Principal place of business; branch office license; change of address
A. Each licensed commercial mortgage banker shall designate and maintain a principal place of business in this state to transact business. The license shall specify the address of his the licensee's principal place of business.
B. If a licensee wishes to maintain one or more locations in addition to a principal place of business, the licensee shall first obtain a branch office license from the superintendent deputy director and designate a person for each branch office to oversee the operations of that office.
C. If the superintendent deputy director determines that the licensee is qualified, the superintendent deputy director shall issue a branch office license indicating the address of the branch office. The licensee shall conspicuously display the branch office license in the branch office.
D. If the address of the principal place of business or of any branch office is changed, the licensee shall immediately notify the superintendent deputy director of the change and the superintendent deputy director shall endorse the change of address on the license.
Sec. 219. Section 6-980, Arizona Revised Statutes, is amended to read:
6-980. Annual renewal; expiration on failure to renew
A. For licenses approved on or before March 31, 2009:
1. Licenses that are not renewed by March 31, 2009 are suspended, and the licensee shall not act as a commercial mortgage banker until the license is renewed or a new license is issued pursuant to this article.
2. A person may renew a suspended license by making an application for renewal as prescribed by the superintendent deputy director.
3. Licenses that are not renewed by April 30, 2009 expire. A license shall not be granted to the holder of an expired license except as provided in this article for issuing an original license.
B. For licenses approved after or renewed on March 31, 2009:
1. If a license is not renewed by December 31, 2009 and by December 31 of each subsequent year, the license is suspended. The licensee shall not act as a commercial mortgage banker until the license is renewed or a new license is issued pursuant to this article.
2. A person may renew a suspended license by applying for renewal as prescribed by the superintendent deputy director.
3. Licenses that are not renewed by January 31 expire. A license shall not be granted to the holder of an expired license except as provided in this article for issuing an original license.
Sec. 220. Section 6-981, Arizona Revised Statutes, is amended to read:
6-981. Inactive status
A. For licenses approved on or before March 31, 2009, a licensee may request inactive status for the following license year, and the license shall be placed on inactive status after surrendering the license to the superintendent deputy director.
B. For licenses approved after or renewed on March 31, 2009, a licensee may request inactive status on or before December 31 of each year for the following license year, and the license shall be placed on inactive status after surrendering the license to the superintendent deputy director.
C. During inactive status, an inactive licensee is not required to maintain a bond and shall not act as a commercial mortgage banker.
D. A licensee may not be on inactive status for more than two consecutive years or for more than four years in any ten year ten-year period. The license is deemed expired on violation of any of the limitations of this subsection.
E. An inactive licensee may return to active status notwithstanding section 6-973, subsection D by making a written request to the superintendent deputy director for reactivation. The licensee shall also provide the superintendent deputy director with proof that the licensee meets all of the other requirements for acting as a commercial mortgage banker, including required bond coverage or the deposit of a cash alternative.
Sec. 221. Section 6-982, Arizona Revised Statutes, is amended to read:
6-982. Denial, suspension or revocation of licenses
A. The superintendent deputy director may deny a license to a person or suspend or revoke a license if the superintendent deputy director finds that an applicant or licensee:
1. Is insolvent as defined in section 47-1201.
2. Has shown that the licensee or any person acting under the license is not a person of honesty, truthfulness and good character.
3. Refuses to permit allow an examination by the superintendent deputy director of the licensee's books and affairs or refuses or fails, within a reasonable time, to furnish any information or make any report that may be required by the superintendent deputy director.
4. Has been convicted in any state of a felony or any crime of breach of trust or dishonesty.
5. Has had a final judgment entered against the licensee in a civil action upon on grounds of fraud, deceit or misrepresentation and the conduct on which the judgment is based indicates that it would be contrary to the interest of the public to permit allow the person to be licensed or to control or manage a licensee.
6. Has had an order entered against the licensee involving fraud, deceit or misrepresentation by any administrative agency of this state, the federal government or any other state or territory of the United States and that the facts relating to the order indicate that it would be contrary to the interest of the public to permit allow the person to be licensed or to control or manage a licensee.
7. Has violated any applicable law, rule or order.
B. If a person to whom a license is issued or who has applied for a license under this article is indicted or informed against for forgery, embezzlement, obtaining money under false pretenses, extortion, criminal conspiracy to defraud or a similar offense or offenses, and a certified copy of the indictment or information is filed with the superintendent deputy director, the superintendent deputy director may suspend the license issued to the licensee or deny a license to an applicant pending trial on the indictment or information.
C. If a licensee is other than a natural person, it is sufficient cause to suspend or revoke the license if an officer, director, member, partner, trustee, or employee, while acting in the course of the commercial mortgage banker business, or a person entitled to vote more than twenty per cent percent of the outstanding voting shares of the licensed corporation, partnership, association or trust has acted or failed to act in the same manner as would be cause to suspend or revoke a license of the party as an individual. If a licensee is a natural person, it is sufficient cause to suspend or revoke the license if an employee of the person, while acting as an employee, has acted or failed to act in the course of the commercial mortgage banker business of the licensee in the same manner as would be cause to suspend or revoke a license of the party as an owner.
Sec. 222. Section 6-983, Arizona Revised Statutes, is amended to read:
6-983. Required accounting practices and records; escrow of monies; disclosure
A. A commercial mortgage banker shall keep and maintain at all times correct and complete records as prescribed by the superintendent deputy director that will enable the superintendent deputy director to determine whether the licensee is complying with this article. If the commercial mortgage banker operates two or more licensed places of business in this state, after notifying the superintendent deputy director, he the commercial mortgage banker may maintain such records at his the commercial mortgage banker's principal place of business in this state, except that a commercial mortgage banker, with the approval of the superintendent deputy director, may maintain the records outside of this state. For records kept outside this state, a commercial mortgage banker shall make the records available to the superintendent deputy director in this state not more than three business days after demand and shall provide for the acceptance of collect calls or provide a toll free telephone number to borrowers to obtain information from the records if the licensed place of business in this state cannot readily provide the information requested by the borrowers. A commercial mortgage banker shall maintain original documents or clearly legible copies of all commercial mortgage loan transactions for at least two years from after the date of the commercial mortgage loan closing.
B. A commercial mortgage banker shall observe generally accepted accounting principles and practices.
C. If a commercial mortgage banker requires an advance or fee to be paid in connection with an application for a commercial mortgage loan there shall be a written agreement. The parties shall sign the written agreement, and the agreement shall contain terms pertaining to the payment of the fee or disposition of the advance or fee, whether the loan is finally consummated or not, and a term for which the agreement is to remain in force before return of the advance or fee for nonperformance can be required. The licensee shall immediately deposit advances or fees in a trust account in a bank, savings bank or savings and loan association that is fully insured by the federal deposit insurance corporation or any successor agency, and the advances or fees shall not be commingled with other monies. The trust account shall designate the licensee as trustee and shall provide for withdrawing the monies without previous notice. Withdrawals shall only be disbursed according to the terms of the agreement. A licensee who receives advances or fees shall preserve and on request make available to the superintendent deputy director all deposits, withdrawal receipts and statements of account rendered by the bank, savings bank or savings and loan association. The licensee shall further preserve all agreements between the parties involved in the transaction and all contracts, agreements and instructions to or with the depository and shall keep an accurate accounting of each separate bank account in which the trust monies have been deposited. If the loan is declined by or on behalf of the lender or canceled by the applicant, all documents provided by or at the expense of the applicant, including any appraisal, are the property of the applicant. At the applicant's discretion, the documents shall be returned or transferred to any designated financial institution or enterprise without additional consideration except for fees for which the applicant has previously contracted, if the document is not prohibited by law from being transferred or returned.
D. If periodic payments are to be collected from the mortgagor to provide for payments by the mortgagee of taxes, assessments, insurance premiums, ground rents or other current charges against the real estate security, the estimated payment amount stated to the mortgagor by the commercial mortgage banker shall be such that the total of these payments collected for each category during the tax or other period will approximate the actual tax or other payment when due. The licensee shall annually account to the borrower for all such periodic payments of taxes, assessments, insurance premiums, ground rents and other current charges and, to the extent monies have been collected for payment, shall pay them promptly.
Sec. 223. Section 6-991.01, Arizona Revised Statutes, is amended to read:
6-991.01. Exemptions
This article does not apply to:
1. Registered loan originators.
2. An individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual's residence.
3. A person who is a responsible individual as described in section 6-903, 6-943 or 6-973 and who does not act as a loan originator pursuant to article 1, 2 or 3 of this chapter.
4. An employee of a commercial mortgage banker licensed pursuant to article 3 of this chapter.
5. An employee of a person licensed pursuant to this chapter if the licensee affirms in writing to the superintendent deputy director that the licensee will not originate or negotiate a mortgage loan that has security in the form of a residential dwelling of one to four units.
6. A person who, as seller of real property, receives one or more mortgages or deeds of trust as security for a purchase money obligation.
7. A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a lender, a mortgage broker or any other loan originator or by any agent of the lender, mortgage broker or other loan originator.
8. An individual who offers to negotiate terms of a residential mortgage loan with or on behalf of the individual's immediate family member and who does not otherwise engage in the business of a loan originator.
9. A manufactured home retailer and its employees if performing only clerical or support duties in connection with the sale or lease of a manufactured home and the manufactured home retailer and its employees receive no compensation or other gain from a mortgage banker or a mortgage broker for the performance of the clerical or support duties.
10. An individual who is employed by a residential mortgage loan servicer if the individual is involved solely in loss mitigation efforts, unless the United States department of housing and urban development determines that the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) requires the individual to be licensed as a mortgage loan originator. For the purposes of this paragraph, "loss mitigation efforts" means a residential mortgage loan borrower is in default or default is reasonably foreseeable and an individual works with the borrower on behalf of the residential mortgage loan servicer to modify either temporarily or permanently the obligation or to otherwise mitigate loss on an existing residential mortgage loan.
11. An employee or the person who is the responsible individual of a financial institution who is licensed pursuant to article 1, 2 or 3 of this chapter if the responsible individual certifies in writing to the superintendent deputy director that the employee or the responsible individual, or both the employee and the responsible individual, will only originate commercial mortgage loans as defined in section 6-901.
Sec. 224. Section 6-991.02, Arizona Revised Statutes, is amended to read:
6-991.02. Prohibited acts
A. A loan originator acting on the loan originator's own behalf shall not accept any monies or documents in connection with an application for a mortgage loan.
B. An individual is not entitled to receive compensation in connection with arranging for or negotiating a mortgage loan if the individual is not licensed pursuant to this chapter. An individual who is not specifically exempted from licensure pursuant to this article shall not engage in the business of a loan originator with respect to any dwelling in this state without first obtaining and maintaining annually a license pursuant to this article. Each licensed loan originator must register with and maintain a valid unique identifier issued by the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor.
C. A loan originator acting on the loan originator's own behalf shall not advertise, display, distribute, broadcast or televise, or cause or permit allow to be advertised, displayed, distributed, broadcast or televised, in any manner, any solicitation of mortgage business.
D. A loan originator shall not make, negotiate or offer to make or negotiate for compensation, either directly or indirectly, a loan that is either:
1. Less than the minimum amount that the loan originator's employer is allowed to make.
2. Not secured by a mortgage or deed of trust or other lien interest in real property unless employed by a consumer lender.
E. A loan originator who is employed by a mortgage broker or mortgage banker to act in the capacity of the mortgage broker or mortgage banker shall not be employed concurrently by any other mortgage broker or mortgage banker.
F. A loan originator shall not collect compensation for rendering services as a real estate broker or real estate salesperson licensed pursuant to title 32, chapter 20 unless both of the following apply:
1. The loan originator is licensed pursuant to title 32, chapter 20.
2. The employing mortgage broker or mortgage banker has disclosed to the person from whom the compensation is collected at the time a mortgage loan application is received that the loan originator is receiving compensation both for mortgage broker or mortgage banker services, if applicable, and for real estate broker or real estate salesperson services.
G. A loan originator shall not accept any assignment of the borrower's wages or salary in connection with activities governed by this article.
H. A loan originator shall not receive or disburse monies in servicing or arranging a mortgage loan.
I. A loan originator shall not make a false promise or misrepresentation or conceal an essential or material fact in the course of the mortgage broker or mortgage banker business.
J. A loan originator shall not fail to truthfully account for the monies belonging to a party to a mortgage loan transaction or fail to disburse monies in accordance with the employing mortgage broker or mortgage banker agreements.
K. A loan originator shall not engage in illegal or improper business practices.
L. A loan originator shall not require a person seeking a loan secured by real property to obtain property insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer.
M. A loan originator shall not originate a mortgage loan unless employed by a mortgage broker, mortgage banker or consumer lender or under an exclusive contract with an exempt person who is registered pursuant to section 6-912.
N. A loan originator shall not advertise for or solicit mortgage business in any manner without all of the following:
1. The name and license number as issued on the employing mortgage broker's, mortgage banker's, consumer lender's or registered exempt person's principal place of business license.
2. Approval of the employing mortgage broker, mortgage banker, consumer lender or registered exempt person.
3. The unique identifier the loan originator maintains with the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor.
O. On request, a loan originator shall make available to the superintendent deputy director the books and records relating to the loan originator's operations. The superintendent deputy director may have access to the books and records and interview the officers, principals, employees, independent contractors, agents and customers of the loan originator concerning their business. In connection with a request pursuant to this subsection, a person may not knowingly withhold, abstract, remove, mutilate, destroy or secrete any books, records or other information.
P. A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless the loan processor or underwriter obtains and maintains a license pursuant to section 6-991.03. Each independent contractor loan processor or underwriter licensed as a loan originator must have and maintain a valid unique identifier.
Q. An individual engaging solely in loan processor or underwriter activities shall not represent to the public through advertising or other means of communicating that the individual can or will perform any of the activities of a loan originator.
Sec. 225. Section 6-991.03, Arizona Revised Statutes, is amended to read:
6-991.03. Licensing; renewal; qualifications; application; fees
A. A natural person shall not act as a loan originator unless the person is licensed under this article.
B. The superintendent deputy director shall not grant a loan originator license to a person, other than a natural person. An applicant for an original loan originator's license shall have done all of the following:
1. Satisfactorily completed a course of study, including at least twenty hours of education, for loan originators approved by the superintendent deputy director during the three-year period immediately preceding the time of application. The twenty hours of education must include at least all of the following:
(a) Three hours of federal law.
(b) Three hours of ethics, which shall include instruction on fraud, consumer protection and fair lending issues.
(c) Two hours of training related to lending standards of the nontraditional mortgage product marketplace.
(d) Four hours of the laws of this state.
2. Completed late continuing education for the purposes of satisfying continuing education for the last year that the loan originator was in renewable status.
3. Passed a loan originator's examination pursuant to section 6-991.07. The applicant shall demonstrate knowledge and understanding of the following:
(a) Federal laws.
(b) Other applicable laws.
(c) Subjects described in section 6-991.07, subsection A.
4. Retaken the loan originator's examination if the licensed loan originator failed to maintain a valid license for a period of five years or longer, not including any time during which the applicant is a registered loan originator.
5. Obtained a unique identifier through the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor.
6. Deposited with the superintendent deputy director a bond executed by the applicant's employer or registered exempt person as principal and a surety company licensed to do business in this state as a surety pursuant to section 6-903, 6-912 or 6-943.
7. Submitted fingerprints to the department for the purpose of a background investigation.
8. Paid an amount to be determined by the superintendent deputy director for deposit in the mortgage recovery fund established pursuant to section 6-991.09 or deposited with the superintendent deputy director a bond executed by the applicant's employer or registered exempt person as principal and a surety company licensed or approved to do business in this state for the benefit of any person aggrieved by any act, representation, transaction or conduct of a licensed loan originator that violates this title or the rules adopted pursuant to this title. Notwithstanding section 6-903 or 6-943, the amount of the bond shall be in an amount of not less than two hundred thousand dollars $200,000. Loan originators working under the employer or registered exempt person bond described in this paragraph do not have to contribute to the mortgage recovery fund.
C. A person shall apply for a license or renewal of a license in writing in the manner prescribed by the superintendent deputy director and accompanied by the information prescribed by the superintendent deputy director.
D. Before submitting a renewal application, an applicant for renewal of a loan originator license shall have satisfactorily completed eight approved continuing education units that include at least:
1. Three hours of federal law.
2. Two hours of ethics, including instruction on fraud, consumer protection and fair lending issues.
3. Two hours of training related to lending standards for the nontraditional mortgage product marketplace.
4. One hour of the laws of this state.
E. Education courses taken before licensure shall be reviewed and approved by the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor.
F. Continuing education courses shall be reviewed and approved by the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor. A licensed loan originator:
1. May only receive credit for a continuing education course in the year in which the course is taken.
2. May not take the same approved course in the same year or successive years to meet the annual requirements for continuing education.
G. The nonrefundable application fee shall accompany each application for an original loan originator license.
H. A license issued pursuant to this article is not transferable or assignable.
I. At the superintendent's deputy director's discretion, application fees may be waived if the applicant is a housing counselor certified by the United States department of housing and urban development and employed by a nonprofit agency.
J. Each mortgage broker, mortgage banker or registered exempt person shall submit to the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor reports of condition that are in a form and that contain information required by the nationwide mortgage licensing system.
K. The superintendent deputy director shall establish a process for loan originators to challenge information that the superintendent deputy director enters into the nationwide mortgage licensing system and registry.
Sec. 226. Section 6-991.04, Arizona Revised Statutes, is amended to read:
6-991.04. Issuance of license; notice from employing mortgage broker, mortgage banker or consumer lender or registered exempt person; renewal; inactive status; address change; fee
A. The superintendent deputy director, on determining that an applicant is qualified and has paid the required fees, shall issue a loan originator's license to the applicant evidenced by a continuous certificate. The superintendent deputy director shall grant or deny a license within one hundred twenty days after receiving the completed application and fees. An applicant who has been denied a license may not reapply for a license before one year from after the date of the previous application.
B. On issuance of the license, the superintendent deputy director shall keep the loan originator's license until a mortgage broker or mortgage banker licensed pursuant to this chapter or a consumer lender employs the loan originator and the employer provides a written notice that the employer has hired the loan originator or until an exempt person who is registered pursuant to section 6-912 provides a written notice that the exempt person has engaged the loan originator on an exclusive contract with the exempt person. The employer shall provide the notice before the loan originator begins working for the employer. Exempt persons who are registered pursuant to section 6-912 shall provide the notice before the loan originator begins work under the exclusive contract with the exempt person. The notice shall be from an officer or other person authorized by the employer or registered exempt person. The notice shall contain a request for the loan originator's license and shall be dated, signed and notarized. On receipt of the request, the superintendent deputy director shall forward the loan originator's license to the employing mortgage broker, mortgage banker, consumer lender or registered exempt person.
C. Licenses shall be issued for a one-year period.
D. A loan originator shall apply for renewal on forms prescribed by the superintendent deputy director. The application shall include original certificates evidencing the loan originator's successful completion of eight continuing education units during the preceding one-year period by a continuing education provider approved by the superintendent deputy director.
E. A loan originator shall pay the renewal fee every year on or before December 31. Licenses not renewed by December 31 are suspended, and the licensee shall not act as a loan originator until the license is renewed or a new license is issued pursuant to this article. A person may renew a suspended license by paying the renewal fee plus a dollar amount to be determined by the superintendent deputy director for each day after December 31 that a license renewal fee is not received by the superintendent deputy director.
F. Licenses that are not renewed by January 31 of each year expire. A license shall not be granted to the holder of an expired license except as provided in this article for the issuance of an original license.
G. From December 1 through December 31 of each renewal period, a licensee may request inactive status for the following license period. The license shall be placed on inactive status after the licensee pays to the superintendent deputy director the inactive status renewal fee and surrenders the license to the superintendent deputy director. During inactive status, an inactive licensee shall not act as a loan originator. The license expires if the licensee violates this subsection.
H. At renewal an inactive licensee may return to active status by doing all of the following:
1. Providing the superintendent deputy director with evidence that the licensee has met the requirements of section 6-991.03, subsection B.
2. Making a written request to the superintendent deputy director for reactivation.
3. Paying the annual licensing fee.
4. Providing the superintendent deputy director with proof that the licensee meets all other requirements for acting as a loan originator.
I. The mortgage broker, mortgage banker, consumer lender or registered exempt person shall keep and maintain at the principal place of business in this state the loan originator's license during the loan originator's employment or exclusive contract term. A copy of the loan originator's license shall be available for public inspection during regular business hours.
J. A loan originator shall immediately notify the superintendent deputy director of a change in the loan originator's residence address. The superintendent deputy director shall endorse the change of address on the license for a fee to be determined by the superintendent deputy director.
K. Within five business days after any licensee's employment termination, the employing mortgage broker, mortgage banker, consumer lender or registered exempt person shall do both of the following:
1. Notify the superintendent deputy director of the licensee's termination.
2. Return the license to the superintendent deputy director.
L. An applicant for a loan originator license who is currently registered with the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor may be granted a temporary license for a period not to exceed one hundred eighty days.
M. The superintendent deputy director shall establish a process for loan originators to challenge information that the superintendent deputy director enters into the nationwide mortgage licensing system and registry.
Sec. 227. Section 6-991.05, Arizona Revised Statutes, is amended to read:
6-991.05. Denial, suspension or revocation of licenses
A. The superintendent deputy director may deny a license to a person or suspend or revoke a license if the superintendent deputy director finds that an applicant or licensee:
1. Is not a person of honesty, truthfulness or good character.
2. Has violated any law, rule or order.
3. Has been convicted of or pled guilty or nolo contendere to a misdemeanor if it involved an act of fraud, dishonesty or breach of trust or money laundering at any time preceding the date of application.
4. Has had a final judgment entered against the applicant or licensee in a civil action on grounds of fraud, deceit or misrepresentation, and the conduct on which the judgment is based indicates that it would be contrary to the interest of the public to permit allow the person to be licensed.
5. Has had an administrative agency of this state, the federal government or any other state or territory of the United States enter an order against the applicant or licensee involving fraud, deceit or misrepresentation, and the facts relating to the order indicate that it would be contrary to the interest of the public to permit allow the person to be licensed.
6. Has made a material misstatement or suppressed or withheld information on the application for a license or any document required to be filed with the superintendent deputy director.
7. Has had a loan originator license, consumer lender license, mortgage broker license or mortgage banker license revoked or denied in this state or any other state.
B. The superintendent deputy director shall deny a license to a person or suspend or revoke a license if the superintendent deputy director finds that either of the following applies:
1. The applicant or licensee has been convicted of or pled guilty or nolo contendere to a felony in a domestic, foreign or military court during the seven year seven-year period immediately preceding the date of the application or at any time preceding the date of application if the felony involved an act of fraud, dishonesty or a breach of trust or money laundering.
2. The applicant or licensee does not have the financial responsibility, experience or competence to adequately serve the public or to warrant the belief that the applicant or licensee will act lawfully, honestly and fairly pursuant to this article.
C. If a licensee or applicant under this article is indicted or informed against for forgery, embezzlement, obtaining money under false pretenses, extortion, criminal conspiracy to defraud or a similar offense, and a certified copy of the indictment or information or other proper evidence of the indictment or information is filed with the superintendent deputy director, the superintendent deputy director may suspend the license or refuse to grant a license to an applicant pending trial on the indictment.
Sec. 228. Section 6-991.07, Arizona Revised Statutes, is amended to read:
6-991.07. Examination; fee; definition
A. Each applicant for an original loan originator license, before issuance of the license, shall take and pass an examination that is developed or otherwise deemed acceptable by the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor and that is given under the supervision of the department or its designee. The examination must reasonably examine the applicant's knowledge of all of the following:
1. The obligations between principal and agent.
2. The applicable canons of business ethics.
3. The arithmetical computations common to mortgage brokerage.
4. The principles of real estate lending.
5. The general purposes and legal effect of mortgages, deeds of trust and security agreements.
6. The terms and conditions of conforming and nonconforming residential mortgage products.
B. The examination is subject to the superintendent's deputy director's approval.
C. An applicant may take the examination three consecutive times with each consecutive taking occurring at least thirty days after the preceding examination. An applicant who fails the examination on three consecutive occasions must wait at least six months before taking the examination again.
D. All examinations shall be given, conducted and graded in a fair and impartial manner and without unfair discrimination between individuals examined. The department's designee shall inform the applicant of the result of the examination within thirty days after the examination.
E. The superintendent deputy director shall set the fee for each examination that is consistent with the requirements established by the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110-289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor. The superintendent deputy director may contract for the examination for the licensing of applicants. If the superintendent deputy director contracts for the examination, the fee for examination for licenses pursuant to this section is payable directly to the contractor by the applicant for examination.
F. For the purposes of this section, "applicant" means a person who has submitted a completed application in the form prescribed by the superintendent deputy director.
Sec. 229. Section 6-991.09, Arizona Revised Statutes, is amended to read:
6-991.09. Mortgage recovery fund; liability limits
A. The superintendent deputy director shall establish and maintain a mortgage recovery fund consisting of the monies received by the superintendent deputy director pursuant to this article for the benefit of any person aggrieved by any act, representation, transaction or conduct of a licensed loan originator that violates this title or the rules adopted pursuant to this title.
B. On notice from the superintendent deputy director, the state treasurer shall invest and divest monies in the fund as provided by section 35-313, and monies earned from investment shall be credited to the fund.
C. Notwithstanding any other law, the superintendent deputy director may spend interest monies from the fund that are necessary to increase public awareness of the fund, but that do not to exceed fifty thousand dollars $50,000 in any fiscal year.
D. The fund shall only pay for a loss that is an actual and direct out-of-pocket loss to an aggrieved person directly arising out of a mortgage transaction, including reasonable attorney fees and court costs.
E. The mortgage recovery fund's liability shall not exceed:
1. Two hundred thousand dollars $200,000 for each transaction, regardless of the number of persons aggrieved or the number of licensees or parcels of real estate involved.
2. Five hundred thousand dollars $500,000 for each licensee.
F. The liability of the fund for the acts of a licensed loan originator is terminated on the issuance of orders authorizing payments from the fund in an aggregate amount as prescribed by subsection E of this section.
G. The fund is liable to pay only against the license of a natural person, not on that of a corporation, a partnership or any other fictitious entity.
H. The fund is liable to pay only for damages arising out of a transaction in which the defendant licensee performed acts for which a loan originator license was required or when the defendant licensee engaged in fraud or misrepresentation and the aggrieved person was harmed due to reliance on the defendant's licensed status.
I. The fund shall not pay any claim until the penal sums of the bonds required under section 6-903 or 6-943 have been exhausted.
Sec. 230. Section 6-991.10, Arizona Revised Statutes, is amended to read:
6-991.10. Payments to the mortgage recovery fund
A. In addition to any other fees, applicants shall pay an amount to be determined by the superintendent deputy director to the mortgage recovery fund on application for an original loan originator license.
B. If, on June 30 of any year, the balance remaining in the mortgage recovery fund is less than two million dollars $2,000,000, every licensee when renewing a loan originator license during the following license year shall pay, in addition to the license renewal fee, a fee to be determined by the superintendent deputy director for deposit in the mortgage recovery fund.
Sec. 231. Section 6-991.11, Arizona Revised Statutes, is amended to read:
6-991.11. Statute of limitations; service of summons; application for payment; insufficient monies; definition
A. An action for a judgment that subsequently results in an order for payment from the mortgage recovery fund shall be started no not later than five years after the accrual of the cause of action.
B. If an aggrieved person commences an action for a judgment that may result in an order for payment from the mortgage recovery fund and the defendant licensee cannot be served process personally in this state, the summons may be served by the alternative methods of service provided for by the Arizona rules of civil procedure, including service by publication. A judgment that complies with this section and that was obtained after service by publication only applies to and is enforceable against the mortgage recovery fund. The department may intervene in and defend any such action.
C. An aggrieved person may apply to the department for payment from the mortgage recovery fund after the aggrieved person obtains a judgment against a loan originator based on the licensee's act, representation, transaction or conduct in violation of this title or the rules adopted pursuant to this title. The claimant must file the original application, including appendices, within two years after the termination of all proceedings, reviews and appeals connected with the judgment. The superintendent deputy director, in the superintendent's deputy director's sole discretion, may waive the two year two-year application deadline if the superintendent deputy director determines that the waiver best serves the public interest. Delivery of the application must be by personal service or by certified mail, return receipt requested.
D. The application must be within the limitations prescribed in section 6-991.09 and for the amount that is unpaid on the judgment and that represents the claimant's actual and direct loss on the transaction.
E. The department shall prescribe and supply an application form that includes detailed instructions with respect to documentary evidence, pleadings, court rulings, the products of discovery in the underlying litigation and notice requirements to the judgment debtor under section 6-991.12. The claimant must submit the claim on an application form supplied by the department. The application must include:
1. The claimant's name and address.
2. If the claimant is represented by an attorney, the attorney's name, business address and telephone number.
3. The judgment debtor's name and address or, if unknown, the names and addresses of persons who may know the judgment debtor's present location.
4. A detailed narrative statement of the facts explaining the allegations of the complaint on which the underlying judgment is based, with a copy of the contracts, receipts and other documents from the transaction, the last amended complaint, all existing recorded judgments, documentation of actual and direct out-of-pocket losses and any offsetting payment received and all collection efforts attempted.
5. The identification of the judgment, the amount of the claim and an explanation of its computation, including an itemized list of actual and compensatory damages awarded and claimed.
6. For the purpose of an application that is not based on a criminal restitution order, a statement by the claimant, signed under penalty of perjury, that the complaint on which the underlying judgment is based was prosecuted conscientiously and in good faith. For the purposes of this paragraph, "conscientiously and in good faith" means that all of the following apply:
(a) No party who was potentially liable to the claimant in the underlying transaction was intentionally and without good cause omitted from the complaint.
(b) No party named in the complaint who otherwise reasonably appeared capable of responding in damages was intentionally and without good cause dismissed from the complaint.
(c) The claimant employed no other procedural means contrary to the diligent prosecution of the complaint in order to seek to qualify for the recovery fund.
7. For the purpose of an application that is based on a criminal restitution order, all of the following statements by the claimant, signed under penalty of perjury:
(a) The claimant has not intentionally and without good cause failed to pursue any person potentially liable to the claimant in the underlying transaction other than a defendant who is the subject of a criminal restitution order.
(b) The claimant has not intentionally and without good cause failed to pursue in a civil action for damages all persons who are potentially liable to the claimant in the underlying transaction and who otherwise reasonably appeared capable of responding in damages other than a defendant who is the subject of a criminal restitution order.
(c) The claimant employed no other procedural means contrary to the diligent prosecution of the complaint in order to seek to qualify for the mortgage recovery fund.
8. The following statements, signed under penalty of perjury, and information from the claimant:
(a) The claimant is not a spouse of the judgment debtor or a personal representative of the spouse.
(b) The claimant has complied with all of the requirements of this article.
(c) The judgment underlying the claim meets the requirements of this article.
(d) The claimant has recorded a certified copy of the superior court judgment or transcript of judgment pursuant to sections 33-961 and 33-962 in the county in which the judgment was obtained and in the county in which all judgment debtors reside and has provided a copy of the recorded judgment to the superintendent deputy director.
(e) The claimant has caused the judgment debtor to make discovery under oath, pursuant to section 12-1631, concerning the debtor's property.
(f) The claimant has caused a writ of execution to be issued on the judgment and the officer executing the writ has made a return showing that either:
(i) No personal or real property of the judgment debtor liable to be levied on in satisfaction of the judgment could be found, sold or applied.
(ii) The amount realized on the sale of the property, or as much of the property that was found, under the execution was insufficient to satisfy the judgment.
(g) The claimant has caused a writ of garnishment to be issued to each known employer of the judgment debtor ascertained by the claimant, that each garnishee defendant has complied with the respective writ and any judgment or order resulting from the writ and that the amount realized from all judgments against the garnishee defendants was insufficient to satisfy the balance due on the judgment.
(h) The claimant has deducted the following amounts from the actual or compensatory damages awarded by the court:
(i) Any amount recovered or anticipated from the judgment debtor or debtors.
(ii) Any amount recovered through collection efforts undertaken pursuant to subdivisions (d) through (g) of this paragraph and including an itemized valuation of the assets discovered and amounts applied.
(iii) Any amount recovered or anticipated from bonding, insurance or title companies, including recovery of punitive damages.
(iv) Any amount recovered or anticipated from in court or out of court settlements.
(v) Any amount of tax benefits accrued or taken as deductions on federal, state or local income tax returns.
F. If the claim is based on a judgment against a loan originator and the claimant has not obtained a judgment against the loan originator's employing mortgage broker, mortgage banker or consumer lender if any, or has not diligently pursued the assets of the employing mortgage broker, mortgage banker or consumer lender the department shall deny the claim for failure to diligently pursue the assets of all other persons liable to the claimant in the transaction unless the claimant demonstrates, by clear and convincing evidence, that either:
1. The loan originator was not employed by a mortgage broker, mortgage banker or consumer lender at the time of the transaction.
2. The loan originator's employing mortgage broker, mortgage banker or consumer lender would not have been liable to the claimant because the loan originator acted outside the scope of employment in the transaction.
G. The superintendent deputy director, at the superintendent's deputy director's sole discretion, may waive compliance with one or more of the requirements prescribed by subsection E, paragraph 8 or subsection F of this section if the claim is based on an award pursuant to a criminal restitution order or if the superintendent deputy director is satisfied that the claimant has taken all reasonable steps to collect the amount of the judgment or the unsatisfied part of the judgment from all judgment debtors but has been unable to collect.
H. If the superintendent deputy director finds it is likely that the total remaining liability of the recovery fund is insufficient to pay in full the valid claims of all aggrieved persons who may have claims against any one licensee, the superintendent deputy director may petition the court to initiate a proration proceeding. The court shall grant the petition and order a hearing to distribute the total remaining liability of the fund among the applicants in the ratio that their respective claims bear to the aggregate of the valid claims or in another manner that the court deems equitable. The superintendent deputy director or any party may file a proposed plan for equitable distribution of the available monies. The distribution of monies shall be among the persons entitled to share them, without regard to the order of priority in which their respective judgments may have been obtained or their respective applications may have been filed. The court may require all applicants and prospective applicants against one licensee to be joined in one action if the respective rights of all the applicants to the recovery fund may be equitably adjudicated and settled. The court shall not include in the claims for proration the claim of any person who has not, within ninety days after the court has entered the order for proration, filed a complaint with the court, served the licensee and provided written notice of the claim to the superintendent deputy director. The liability of the fund on any application affected by a proration proceeding is based on the limits in effect on the date when the last application for payment is filed. The court may refuse to consider or award prorated recovery to any person who fails to expeditiously prosecute a claim against the licensee or promptly file an application for payment and submit supporting documentation as required by this article.
I. If, at any time, the money deposited in the mortgage recovery fund is insufficient to satisfy any duly authorized claim or portion of a claim, the superintendent deputy director, when sufficient money has been deposited in the mortgage recovery fund, shall satisfy the unpaid claims or portions of claims, in the order that the claims or portions of claims were originally filed, plus accumulated interest at the rate of four per cent percent a year.
J. For the purposes of this section, "complaint" means the facts of the transaction on which the judgment is based.
Sec. 232. Section 6-991.12, Arizona Revised Statutes, is amended to read:
6-991.12. Notice of claim to judgment debtor; response
A. Within the same time prescribed by section 6-991.11, subsection C for applying for payment from the mortgage recovery fund, an aggrieved party who applies for payment shall serve notice of the claim on the judgment debtor, together with a copy of the application. The notice shall be in the following form:
NOTICE
Based on a judgment against you in favor of (enter name of claimant), application is being made to the Arizona department of insurance and financial institutions for payment from the mortgage recovery fund.
If you wish to contest payment from the mortgage recovery fund, you must file a written response to the application. The superintendent deputy director of the financial institutions division of the department of insurance and financial institutions must receive your response at (address) within thirty-five calendar days after the date this notice is (mailed, delivered, first published). You must also send a copy of the response to the claimant. If you fail to respond as required, you waive your right to present your objections to payment.
B. If the judgment debtor holds a current license issued by the department, the notice and copy of the application may be served by certified mail, return receipt requested, addressed to the judgment debtor's latest business or residence address on file with the department. If the judgment debtor does not hold a current license and if personal delivery cannot be effected by exercising reasonable diligence, the claimant must publish the notice once a week for two consecutive weeks in a newspaper of general circulation in the county in which the judgment debtor was last known to reside.
C. If the judgment debtor fails to file a written response to the application with the department within thirty-five calendar days after service under subsection B of this section or after the first publication of the notice, the judgment debtor is not entitled to notice of any action taken or proposed to be taken by the superintendent deputy director with respect to the claim.
Sec. 233. Section 6-991.13, Arizona Revised Statutes, is amended to read:
6-991.13. Correction of deficiencies in the application
A. If the superintendent deputy director determines that a claimant's application fails to comply substantially with the requirements of section 6-991.11 or rules adopted pursuant to this article, the superintendent deputy director, within thirty calendar days after receiving the application, shall mail an itemized list of deficiencies to the claimant. For the purposes of this subsection, "comply substantially" means filing with the department the documents that are minimally necessary to process a claim, including at least a certified copy of the judgment, legible copies of documents establishing the underlying transaction and amounts of losses suffered and a statement concerning amounts recovered from or on behalf of the judgment debtor.
B. The claimant must respond within sixty calendar days after receiving the list of deficiencies by providing the information identified by the superintendent deputy director. If the claimant fails to correct the deficiencies within sixty calendar days, the department shall close the file unless the claimant requests an extension in writing. A claimant whose file has been closed may submit a new application as provided by section 6-991.11.
C. The deadline prescribed by section 6-991.15 for the superintendent deputy director to make a decision on the application is suspended from the date the superintendent deputy director mails the list of deficiencies to the applicant until the date the department receives the requested information.
Sec. 234. Section 6-991.15, Arizona Revised Statutes, is amended to read:
6-991.15. Final decision and order on claim; notice
A. The superintendent deputy director shall make a final written decision and order on a claim within ninety calendar days after receiving a completed application except in the following cases:
1. A proration hearing is pending under section 6-991.11.
2. An application is deficient or fails to comply substantially with the requirements of section 6-991.11 or rules adopted pursuant to this article as determined pursuant to section 6-991.13.
3. The claimant agrees in writing to extend the time for making a decision.
B. If the superintendent deputy director fails to render a written decision and order on a claim within ninety calendar days after receiving a completed application, or within an extended period of time provided under subsection A of this section, the claim is considered to be approved on the day following the final day for rendering the decision.
C. The superintendent deputy director may approve or deny an application or may enter into a compromise with the claimant to pay less in settlement than the full amount of the claim. If the claimant refuses to accept a settlement offered by the superintendent deputy director, the superintendent deputy director shall deny the claim.
D. The superintendent deputy director shall give notice of a decision and order with respect to the claim to the claimant and to any judgment debtor who has filed a timely response to the claim pursuant to section 6-991.12 as follows:
1. If the superintendent deputy director denies the application, the notice shall include the following:
The claimant's application has been denied. If the claimant wishes to pursue the application in court, the claimant must file the application in the court in which the underlying judgment was entered within six months after receiving this notice, pursuant to section 6-991.16, Arizona Revised Statutes.
2. If the superintendent's deputy director's decision is to make a payment to the claimant out of the mortgage recovery fund, the following notice shall be given to the judgment debtor with a copy of the decision and order of the superintendent deputy director:
The decision of the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions on the claim of (name of claimant) is to pay $__________ from the mortgage recovery fund. A copy of that decision and order is enclosed. If you desire a judicial review of the superintendent's deputy director's decision and order or the termination of your licenses and license rights, you may petition the superior court, in the county in which the judgment that is the basis of this claim was rendered, for a judicial review. To be timely, you must file the petition with the court within thirty calendar days after receiving this notice.
Sec. 235. Section 6-991.16, Arizona Revised Statutes, is amended to read:
6-991.16. Claimant's right to appeal denial of claim; service of notice of appeal; response; failure to file response
A. A claimant whose application is denied pursuant to section 6-991.15 may file within six months after receiving notice of a denial of the claim a verified application in the court in which judgment was entered in the claimant's favor for an order directing payment out of the mortgage recovery fund based on the grounds set forth in the claimant's application to the superintendent deputy director.
B. The claimant must serve a copy of the verified application on the superintendent deputy director and on the judgment debtor and file a certificate or affidavit of service with the court. Service on the superintendent deputy director shall be made by certified mail addressed to the superintendent deputy director. Service on a judgment debtor shall be made pursuant to section 6-991.12 and shall include the following notice:
NOTICE
An application has been filed with the court for a payment from the mortgage recovery fund that was previously denied by the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions. If you wish to defend in court against this claim, you must file a written response with the court within thirty calendar days after you are served with a copy of the application. If you fail to file a written response, you waive your right to defend against the claim.
C. The superintendent deputy director and the judgment debtor each must file a written response within thirty calendar days after being served with the application under subsection B of this section. The court shall set the matter for hearing on the petition of the claimant. The court shall grant a request of the superintendent deputy director for a continuance of as much as thirty calendar days and, on a showing of good cause by any party, may continue the hearing for a time that the court considers to be appropriate.
D. At the hearing, the claimant must establish compliance with the requirements of section 6-991.11.
E. If the judgment debtor fails to file a written response to the application, the superintendent deputy director may compromise or settle the claim at any time during the court proceedings and, on joint petition of the applicant and the superintendent deputy director, the court shall issue an order directing payment out of the mortgage recovery fund.
Sec. 236. Section 6-991.17, Arizona Revised Statutes, is amended to read:
6-991.17. Deputy director's standing in court
The superintendent deputy director may enter an appearance, file an answer, appear at the court hearing, defend the action or take whatever other action the superintendent deputy director considers appropriate on behalf and in the name of the mortgage recovery fund and take recourse through any appropriate method of review on behalf of, and in the name of, the mortgage recovery fund.
Sec. 237. Section 6-991.18, Arizona Revised Statutes, is amended to read:
6-991.18. Subrogation of rights; collection
A. Before receiving payment from the fund, a claimant must complete and execute, as judgment creditor, an assignment of judgment lien and notice of subrogation and assignment of rights to the claimant's judgment on a form provided by the department.
B. If the superintendent deputy director has paid from the mortgage recovery fund any sum to the judgment creditor, the superintendent deputy director shall be subrogated to all of the rights of the judgment creditor and the judgment creditor shall assign all the rights, title and interest in the judgment to the superintendent deputy director. The superintendent deputy director may record the assignment of judgment lien and notice of subrogation and assignment of rights. Any amount and interest recovered by the superintendent deputy director on the judgment shall be deposited in the fund.
C. If the superintendent deputy director is subrogated to a claimant's rights as judgment creditor, the claimant shall not file a full or partial satisfaction of judgment without the superintendent's deputy director's prior written consent.
D. The attorney general shall bring any actions to recover amounts paid from the fund, including interest, attorney fees and costs of collection, pursuant to this article in the name of this state in the superior court in the county in which the violation occurred or in a county in which the superintendent deputy director maintains an office. A certified copy of a superintendent's deputy director's order requiring payment from the fund may be filed in the office of the clerk of the superior court. The clerk shall treat the superintendent's deputy director's order in the same manner as a judgment of the superior court. A superintendent's deputy director's order so filed has the same effect and may be recorded, enforced or satisfied in a similar manner, as a judgment of the superior court. No filing fee is required under this subsection.
Sec. 238. Section 6-991.20, Arizona Revised Statutes, is amended to read:
6-991.20. Effect of article on disciplinary action
This article does not limit the authority of the superintendent deputy director to take disciplinary action against any licensee for a violation of this chapter or of the rules adopted pursuant to this chapter. The repayment in full of all obligations to the fund by any licensee does not nullify or modify the effect of any other disciplinary proceeding brought pursuant to this chapter or the rules adopted pursuant to this chapter.
Sec. 239. Section 6-991.21, Arizona Revised Statutes, is amended to read:
6-991.21. Financial services fund; use of fund
A. The financial services fund is established consisting of loan originator fees collected pursuant to this article. The superintendent deputy director shall administer the fund for the purpose of discharging the duties imposed by law on the division.
B. Monies deposited in the financial services fund are subject to section 35-143.01.
Sec. 240. Section 6-1003, Arizona Revised Statutes, is amended to read:
6-1003. Change of location of repositories
A lessor may, during the term of any lease, move its repositories and the contents to another location upon on giving notice to the lessees in the manner and time required by such regulations as the superintendent deputy director may adopt.
Sec. 241. Section 6-1101, Arizona Revised Statutes, is amended to read:
6-1101. Definitions
In this chapter, unless the context otherwise requires:
1. "Acquisition of control" means a transaction by which a person obtains, directly or indirectly, control of a financial institution.
2. "Application" means an application which is made pursuant to this article for approval of the superintendent deputy director to become a financial institution holding company.
3. "Control" means direct or indirect ownership or power to vote twenty-five per cent percent or more of the outstanding voting securities of a financial institution or controlling person or to control in any manner the election of a majority of the directors of a financial institution or controlling person. For the purposes of determining the percentage of voting securities owned, controlled or held by a person, there shall be aggregated with the voting securities attributed to the person the voting securities of any other person directly or indirectly controlling, controlled by or under common control with the other person, by any officer, partner, employee or agent of the person or by any spouse, parent or child of the person.
4. "Controlling person" means a person who is directly or indirectly in control of a financial institution.
5. "Financial institution" means banks a bank, trust companies company, savings and loan associations association, international banking facilities, facility and holding companies company of banks a bank, trust companies company, savings and loan associations association and international banking facilities facility under the jurisdiction of the department.
6. "Financial institution holding company" means a corporation, trust, association, partnership or similar organization which that directly or indirectly, acting through one or more persons, controls a financial institution or a controlling person.
7. "Voting security" means any security presently entitling the owner or holder of the security to vote for the election of directors of a financial institution or controlling person, excluding, in the case of a savings and loan association, votes attributable to savings accounts. A specified percentage of outstanding voting securities is the amount of the outstanding voting securities that entitles the holder or holders of the securities to cast that specified percentage of the aggregate votes which that the holders of all outstanding voting securities are entitled to cast.
Sec. 242. Section 6-1102, Arizona Revised Statutes, is amended to read:
6-1102. Prohibitions
A person shall not directly or indirectly take any action that causes or results in a company becoming a financial institution holding company, except with the approval of the superintendent deputy director pursuant to this article or as otherwise permitted allowed by this article.
Sec. 243. Section 6-1103, Arizona Revised Statutes, is amended to read:
6-1103. Exempt persons and transactions
A. This article does not apply to the following persons or transactions of the type specified:
1. A registered dealer who acts as an underwriter or member of a selling group in a public offering of the voting securities of a financial institution or controlling person.
2. A person who acts as proxy for the sole purpose of voting at a designated meeting of the security holders of a financial institution or controlling person.
3. A person who acquires control of a financial institution or controlling person by devise or descent, except that the person shall divest himself of such control not more than two years after the date of the acquisition unless the acquisition of control is approved by the superintendent deputy director pursuant to this article.
4. A person who acquires control of a financial institution or controlling person as a personal representative, custodian, guardian or conservator appointed by a court or as a trustee, a receiver or other officer appointed by a court.
5. A pledgee of a voting security of a financial institution or controlling person who does not have the right, as pledgee, to vote the voting security.
6. A person who acquires control of a financial institution or controlling person through the collection of a debt previously contracted in good faith, except that the person shall divest himself of such control not more than two years after the date of the acquisition unless the acquisition of control is approved by the superintendent deputy director pursuant to this article.
B. A person or transaction that the superintendent deputy director by rule or order exempts as not being necessary or appropriate in the public interest or for the protection of a financial institution or the depositors, beneficiaries, creditors or shareholders of the financial institution is exempt from this article.
C. A person, before filing an application for approval pursuant to this article, may request in writing a determination from the superintendent deputy director as to whether the person, on consummation of a proposed transaction, will be in control. On such a request, the superintendent deputy director may enter an order that the person will not be in control, in which event the proposed transaction is an exempt transaction under this article.
D. This article does not supersede, rescind or modify any provision, requirement or condition of this title which that would otherwise be applicable to any acquisition of a financial institution by a financial institution holding company. This article does not supersede, rescind or modify any provision, requirement or condition which that would otherwise be applicable to any merger of financial institutions or the acquisition or sale of all or substantially all of the assets of the financial institution, except that an approval obtained pursuant to this article satisfies the requirements of chapter 1, article 4 of this title.
Sec. 244. Section 6-1104, Arizona Revised Statutes, is amended to read:
6-1104. Acquisition of control; approval by deputy director
A. A person shall not, directly or indirectly, make a tender offer for, request or invite a tender offer for, offer to exchange securities for or acquire in the open market or otherwise any voting security or any security convertible into a voting security of a financial institution or controlling person if the transaction would result in the person becoming a financial institution holding company unless the superintendent deputy director has approved the acquisition of control pursuant to this article. This section does not prohibit a person from negotiating or entering into agreements subject to the condition that the acquisition of control is not effective until approval of the superintendent deputy director pursuant to this article is obtained.
B. A person who has been approved pursuant to this article is not required to make a subsequent application pursuant to this article to acquire additional control or fractions of control of the financial institution or controlling person for which it was approved if the person has remained in continuous control of the financial institution or controlling person.
Sec. 245. Section 6-1105, Arizona Revised Statutes, is amended to read:
6-1105. Application for approval
A. An application shall be in writing, in such form as the superintendent deputy director may prescribe and accompanied by the information, data and records the superintendent deputy director requires. The superintendent deputy director shall prescribe by rule or order the form of the application and the information, data or records which that may be required.
B. The superintendent deputy director shall cause copies of an initial application and any amendment or supplement to the application to be given to the financial institution concerned and the controlling person, if any, within three business days.
Sec. 246. Section 6-1106, Arizona Revised Statutes, is amended to read:
6-1106. Material change of fact; filing amended statements
If any material change occurs in the facts set forth in the application, or if for any other reason the acquiring party desires to amend the application, the person shall file with the superintendent deputy director an amendment setting forth the change, together with copies of all documents and other material relevant to the change.
Sec. 247. Section 6-1107, Arizona Revised Statutes, is amended to read:
6-1107. Denial of application; grounds
A. The superintendent deputy director may deny an application if the superintendent deputy director finds any of the following:
1. The financial condition of the financial institution holding company that would acquire control will jeopardize the financial stability of the financial institution or controlling person or prejudice the interests of the depositors, beneficiaries, creditors and shareholders of the financial institution or controlling person.
2. A plan or proposal to liquidate or consolidate the financial institution or controlling person or to make any other major change in the business, corporate structure or management of the financial institution or controlling person is not fair and reasonable to the depositors, beneficiaries, creditors and shareholders of the financial institution or controlling person.
3. The overall moral character or integrity of any person who would acquire control indicates that it would not be in the interest of the depositors, beneficiaries, creditors and shareholders of the financial institution or controlling person, and in the interest of the public, to permit allow the person to control the financial institution or controlling person.
4. The applicant has neglected, failed or refused to furnish to the superintendent deputy director any required information.
5. It is contrary to law.
6. The acquisition would result in a monopoly or would be in furtherance of any combination or any conspiracy to monopolize or to attempt to monopolize the business of financial institutions and financial institution holding companies.
7. The effect of the proposed acquisition will be to substantially lessen competition, tend to create a monopoly or in any other manner be a restraint of trade, unless the superintendent deputy director finds that the effects of the proposed acquisition are clearly outweighed by its probable effect in meeting the convenience and needs of the community to be served and by the public interest.
8. The applicant has made a material false statement on the application.
B. The superintendent deputy director shall give the applicant written notification of the granting or denial of an application together with a statement in support of the decision. If the superintendent deputy director, based on the information available at the time, plans to deny the application and no hearing has been held in accordance with title 41, chapter 6, article 10, the superintendent deputy director shall send the applicant a written statement which shall specify that specifies the reasons for such tentative denial. The applicant shall have fifteen days following the date of this statement within which to file a written request to amend its application. Upon On the filing of such the request the applicant shall be given thirty days in which to amend its application.
C. The superintendent deputy director may approve an application subject to conditions he the deputy director considers necessary and appropriate to protect the public interest and carry out the purposes of this title. The superintendent deputy director shall give the applicant written notification of the approval of an application which is subject to conditions together with a statement in support of the decision.
Sec. 248. Section 6-1108, Arizona Revised Statutes, is amended to read:
6-1108. Failure to act on application as approval
An application which that is not denied or approved by the superintendent deputy director within sixty days after the application is filed with the superintendent deputy director is deemed to be approved by the superintendent deputy director as of the first day after the period. The superintendent deputy director and the applicant may extend the sixty day sixty-day period by agreement. If the superintendent deputy director gives notice of a hearing, the sixty day sixty-day period is extended to the date fixed by order of the superintendent deputy director. For the purposes of this section, an application is not deemed filed until all amendments, supplements and additional information required by the superintendent deputy director have been received.
Sec. 249. Section 6-1109, Arizona Revised Statutes, is amended to read:
6-1109. Determination of control of one person by another; hearing; notice
Before determining whether a person controls another person or before denying or approving an application for approval to become a financial institution holding company the superintendent deputy director may hold a hearing. The superintendent deputy director shall give notice of the hearing to the applicant, the financial institution or controlling person concerned and to such other persons as the superintendent deputy director determines appropriate. The date for commencement of the hearing shall be not later than thirty days after the date of the notice, unless the applicant consents to an extension of the period.
Sec. 250. Section 6-1110, Arizona Revised Statutes, is amended to read:
6-1110. Appointment of deputy director as agent for service of process; forwarding of process; consent to jurisdiction
A person who is not a resident of this state, domiciled in this state or authorized to do business in this state and who files an application is deemed to have:
1. Consented to the jurisdiction of the courts of this state for all actions arising under this article.
2. Appointed the superintendent deputy director as his the person's lawful agent for the purpose of accepting service of process in any action, suit or proceeding that may arise under this article. The superintendent deputy director shall transmit copies of all such lawful process accepted by the superintendent deputy director as an agent by certified mail to the person at his the person's last known address.
Sec. 251. Section 6-1112, Arizona Revised Statutes, is amended to read:
6-1112. Acquisition of voting securities in violation of article; limitation on rights as shareholder; injunction
A. With respect to any voting security acquired in violation of this article or any rule or order of the superintendent deputy director, a person is not entitled to vote or give a written proxy or consent for a period of five years after the acquisition except with the written consent of the superintendent deputy director. If a voting security of a financial institution or controlling person is acquired in violation of this article or any rule or order, any shareholder of the financial institution or controlling person or the superintendent deputy director may apply to the superior court for injunctive or other equitable relief, including costs and reasonable attorney fees, to enjoin prospectively any person from voting or giving any written proxy or consent with respect to the voting security for a period of five years after the acquisition except with the written consent of the superintendent deputy director. The superintendent deputy director may apply to the superior court for injunctive or other relief, including costs, to void any vote or any giving of a written proxy or consent with respect to the security which that has occurred since the acquisition, except that the court may not void the vote if the court finds that to void the vote would not be in the interest of the depositors, beneficiaries, creditors or shareholders of the financial institution or controlling person or in the public interest.
B. A person may file an application for consent of the superintendent deputy director with the superintendent deputy director and the superintendent deputy director shall grant or deny the application within thirty days. In giving consent, the superintendent deputy director may require those conditions that the superintendent deputy director deems reasonable, necessary or otherwise in the public interest. Except as provided in section 41-1092.08, subsection H, the final action of the superintendent deputy director is subject to judicial review pursuant to title 12, chapter 7, article 6 if the complaint seeking review is filed with the superior court in Maricopa county.
C. No civil action may be brought to void any vote pursuant to subsection A of this section unless commenced within one year after the transaction which that constituted a violation of this article or any rule or order of the superintendent deputy director.
Sec. 252. Section 6-1113, Arizona Revised Statutes, is amended to read:
6-1113. Reports; examination; costs
A. The superintendent deputy director may require reports from and examine financial institution holding companies and each subsidiary of the holding companies. The superintendent deputy director shall accept the examination and financial reports of the appropriate federal or state holding company regulatory authority in lieu of any examination or financial report authorized or required by this chapter. The reports so accepted are considered for all purposes as official reports of the department.
B. Notwithstanding subsection A of this section, the superintendent deputy director may require reports from and examine financial institution holding companies and their subsidiaries if it appears to the superintendent deputy director that any of these entities has engaged, is engaging or is about to engage in any act, practice or transaction which that constitutes an unsafe or unsound practice or a violation of this title or any rule or order of the superintendent deputy director. This section does not prohibit the department from participating with federal regulators in the examinations to aid in enforcing this title.
C. The cost of any examination shall be assessed against and paid by each financial institution holding company pursuant to section 6-125.
Sec. 253. Section 6-1203, Arizona Revised Statutes, is amended to read:
6-1203. Exemptions
A. This chapter does not apply to:
1. The United States or any department or agency of the United States.
2. This state, including any political subdivision of this state.
B. This chapter does not apply to the following if engaged in the regular course of their respective businesses, except that the provisions of article 2 of this chapter apply to:
1. A bank, financial institution holding company, credit union, savings and loan association or savings bank, whether organized under the laws of any state or the United States when the term "money transmitter" is used.
2. A person who engages in check cashing or foreign money exchange and engages in other activity regulated under this chapter only as an authorized delegate of a licensee acting within the scope of the contract between the authorized delegate and the licensee.
3. A person WHO IS licensed pursuant to chapter 5, 6, 7 or 8 of this title, chapter 9, article 2 of this title, chapter 12.1 of this title or title 32, chapter 9.
Sec. 254. Section 6-1204, Arizona Revised Statutes, is amended to read:
6-1204. Application for license; fees
A. Each application for a license shall be made in writing, under oath and in the form prescribed by the superintendent deputy director. The application shall contain at least the following:
1. Copies of the articles of incorporation for the applicant, a listing of all trade names or fictitious names used by the applicant and other information concerning the corporate status of the applicant.
2. The address of the applicant's principal place of business, the address of each location where the applicant intends to transact business in this state, including any branch offices, and the name and address of each location of any authorized delegates.
3. For each executive officer and director of the applicant and for each executive officer and director of any controlling person, unless the controlling person is a publicly traded company on a recognized national exchange and has assets in excess of four hundred million dollars $400,000,000, a statement of personal history in the form prescribed by the superintendent deputy director.
4. An identification statement for each branch manager and responsible individual including all of the following:
(a) Name and any aliases or previous names used.
(b) Date and place of birth.
(c) Alien registration information, if applicable.
(d) Employment history and residence addresses for the preceding fifteen years.
(e) Social security number.
(f) Criminal convictions, excluding traffic offenses.
5. The name and address of each authorized delegate.
6. The identity of any account in any financial institution through which the applicant intends to conduct any business regulated under this chapter.
7. A financial statement audited by a licensed independent certified public accountant.
B. Each application shall be accompanied by the nonrefundable application fee and an annual fee as prescribed in section 6-126.
Sec. 255. Section 6-1205, Arizona Revised Statutes, is amended to read:
6-1205. Bond required; conditions; notice; cancellation; substitution
A. Each application for a license shall be accompanied by and each licensee shall maintain at all times a bond executed by the licensee as principal and a surety company authorized to do business in this state as surety. The bond shall be in the amount of twenty-five thousand dollars $25,000 for a licensee with five or fewer authorized delegates and locations, one hundred thousand dollars $100,000 for a licensee with more than five but fewer than twenty-one authorized delegates and locations and an additional five thousand dollars $5,000 for each authorized delegate and location in excess of twenty but fewer than two hundred one authorized delegates and locations, to a maximum of two hundred fifty thousand dollars $250,000 and an additional five thousand dollars $5,000 for each authorized delegate and location in excess of two hundred authorized delegates and locations, to a maximum of five hundred thousand dollars $500,000.
B. The bond shall be conditioned on the faithful compliance of the licensee, including its directors, officers, authorized delegates and employees, with this chapter. The bond shall be payable to any person injured by the wrongful act, default, fraud or misrepresentation of the licensee, his the licensee's authorized delegates or his the licensee's employees or to the state for the benefit of the person injured. Only one bond is required for any licensee irrespective of the number of officers, directors, locations, employees or authorized delegates of that licensee.
C. The bond shall remain in effect until cancelled by the surety, which cancellation may be had only after thirty days' written notice to the superintendent deputy director. That cancellation does not affect any liability incurred or accrued during the thirty day thirty-day period.
D. In lieu of the bond prescribed in this section, an applicant for a license or a licensee may deposit with the superintendent deputy director cash or alternatives to cash acceptable to the superintendent deputy director in the amount of the required bond. Notwithstanding section 35-155, subsection E, the principal amount of the deposit shall be released only on written authorization of the superintendent deputy director or on the order of a court of competent jurisdiction. The principal amount of the deposit shall not be released to the licensee before the expiration of five years from after the first occurrence of any of the following:
1. The date of substitution of a bond for a cash alternative unless the superintendent deputy director determines in his the deputy director's discretion that the bond constitutes adequate security for all past, present or future obligations of the licensee. After that determination, the cash alternative may be immediately released.
2. The surrender of the license.
3. The revocation of the license.
4. The expiration of the license.
E. Notwithstanding subsections A through D of this section, if the required amount of the bond is reduced, whether by change in the number of authorized delegates or locations or by legislative action, a cash deposit in lieu of that bond shall not be correspondingly reduced but shall be maintained at the higher amount until the expiration of three years from after the effective date of the reduction in the required amount of that bond unless the superintendent deputy director in his the deputy director's discretion determines otherwise.
Sec. 256. Section 6-1206, Arizona Revised Statutes, is amended to read:
6-1206. Issuance of license; renewal
A. On the filing of a complete application, the superintendent deputy director shall investigate the financial condition and responsibility, financial and business experience, character and general fitness of the applicant. In his the deputy director's discretion, the superintendent deputy director may conduct an on-site investigation of the applicant, the reasonable cost of which shall be borne by the applicant. The superintendent deputy director shall issue a license to an applicant if the superintendent deputy director finds that all of the following conditions are met:
1. The applicant has complied with sections 6-1204, 6-1205 and 6-1205.01.
2. The competence, experience and integrity of the officers, directors and controlling persons and any proposed management personnel indicate that it would be in the interest of the public to permit allow such a person to participate in the affairs of a licensee.
3. The applicant has paid the required license fee.
B. The superintendent deputy director shall approve or deny every application for an original license within one hundred twenty days after the date an application is complete, which period may be extended by the written consent of the applicant. The superintendent deputy director shall notify the applicant of the date on which the application is determined to be complete. In the absence of approval or denial of the application or consent to the extension of the one hundred twenty day twenty-day period, the application is deemed approved and the superintendent deputy director shall issue the license effective as of the first business day after that one hundred twenty day twenty-day period or any extended period.
C. A licensee shall pay a renewal fee as prescribed in section 6-126 on or before November 1 of each year. The renewal fee shall be accompanied by a renewal application in the form prescribed by the superintendent deputy director. A license for which no renewal fee and application have been received by November 1 shall be suspended. A licensee may renew a suspended license no not later than December 1 of the year of expiration by paying the renewal fee plus one hundred dollars $100 for each day the renewal fee and application were not received by the superintendent deputy director. A license expires on December 1 of each year, unless earlier renewed, surrendered or revoked. A license shall not be granted to the holder of an expired license or to an incorporator, director or officer of the holder of an expired license except on compliance with the requirements provided in this article for an original license.
Sec. 257. Section 6-1207, Arizona Revised Statutes, is amended to read:
6-1207. Principal and branch offices; notices
A. A licensee shall designate and maintain a principal place of business for the transaction of business regulated by this chapter. If a licensee maintains one or more places of business in this state, the licensee shall designate a place of business in this state as its principal place of business for purposes of this section. The license shall specify the address of the principal place of business and shall designate a responsible individual for its principal place of business.
B. If a licensee maintains one or more locations in this state in addition to a principal place of business, and those locations are to be under the control of the licensee and not under the control of authorized delegates as prescribed in section 6-1208, the licensee shall obtain a branch office license from the superintendent deputy director for each additional location by filing an application as required by the superintendent deputy director at the time the licensee files its license application. If branch offices are added by the licensee, the licensee shall file with the superintendent deputy director an application for a branch office license with the licensee's next quarterly fiscal report prescribed by section 6-1211. The superintendent deputy director shall issue a branch office license if the superintendent deputy director determines that the licensee has complied with the provisions of this subsection. The license shall indicate on its face the address of the branch office and shall designate a manager for each branch office to oversee that office. The superintendent deputy director may disapprove the designated manager then or at any later time if the superintendent deputy director finds that the competence, experience and integrity of the branch manager warrants warrant disapproval. A person may be designated as the manager for more than one branch. The licensee shall submit a fee as prescribed in section 6-126 for each branch office license.
C. A licensee shall prominently display the money transmitter license in its principal place of business and the branch office license in each branch office. Each authorized delegate shall prominently display at each location a notice in a form prescribed by the superintendent deputy director that indicates that the authorized delegate is an authorized delegate of a licensee under this chapter.
D. If the address of the principal place of business or any branch office is changed, the licensee shall immediately notify the superintendent deputy director of the change. The superintendent deputy director shall endorse the change of address on the license for a fee as prescribed in section 6-126.
Sec. 258. Section 6-1208, Arizona Revised Statutes, is amended to read:
6-1208. Authorized delegates of licensee; reports
A. A licensee may conduct the business regulated under this chapter at one or more locations in this state through authorized delegates designated by the licensee.
B. Each contract between a licensee and an authorized delegate shall require the authorized delegate to operate in full compliance with the law and shall contain as an appendix a current copy of this chapter. The licensee shall provide each authorized delegate with operating policies and procedures sufficient to permit allow compliance by the delegate with the provisions of title 13, chapter 23 and this chapter and rules adopted pursuant to this chapter. The licensee shall promptly update the policies and procedures to permit allow compliance with those laws and rules.
C. An authorized delegate is not liable for any obligation imposed on its licensee by this chapter with respect to the business for which it is a delegate. On suspension or revocation of a license or the failure of a licensee to renew its license, the superintendent deputy director shall notify all delegates of the licensee who are on record with the department of the department's action. On receipt of this notice, an authorized delegate shall immediately cease to operate as a delegate of that licensee.
Sec. 259. Section 6-1209, Arizona Revised Statutes, is amended to read:
6-1209. Cease and desist orders; examinations
A. In addition to his the deputy director's authority under section 6-137, the superintendent deputy director may issue an order to cease and desist against a licensee, requiring the licensee to cease conducting its business through an authorized delegate and to take appropriate affirmative action, pursuant to section 6-137, if the superintendent deputy director finds that:
1. The authorized delegate has violated, is violating or is about to violate any applicable law or rule or order of the superintendent deputy director.
2. The authorized delegate has failed to cooperate with an examination or investigation by the superintendent deputy director or the attorney general authorized by this title.
3. The competence, experience, integrity or overall moral character of the authorized delegate or any controlling person of the authorized delegate indicates that it would not be in the interest of the public to permit allow that person to participate in the business regulated under this chapter.
4. The financial condition of the authorized delegate is such that it might prejudice the interests of the public in the conduct of the business regulated under this chapter.
5. The authorized delegate has engaged, is engaging or is about to engage in any unsafe or unsound act, practice or transaction or an act, practice or transaction that constitutes a violation of this title or of any rule or order of the superintendent deputy director.
B. Any business for which a license is required by this chapter conducted by an authorized delegate outside the scope of authority conferred in the contract between the authorized delegate and the licensee is unlicensed activity. An authorized delegate of a licensee holds in trust for the benefit of the licensee all monies received from the sale or delivery of the licensee's payment instruments or monies received for transmission. If an authorized delegate commingles any such monies with any monies or other property owned or controlled by the authorized delegate, a trust against all commingled proceeds and other monies or property owned or controlled by the authorized delegate is imposed in favor of the licensee in an amount equal to the amount of the proceeds due the licensee.
C. An authorized delegate is subject to examination by the superintendent deputy director at the discretion of the superintendent deputy director. The licensee is responsible for the payment of an assessment for the examination of its authorized delegates to the extent that the examination relates to the activities conducted by the authorized delegate on behalf of the licensee. That assessment shall be made at the rate set by the superintendent deputy director for examination of an enterprise pursuant to section 6-125, subsection B, and payment of that assessment shall be made as prescribed by section 6-125.
Sec. 260. Section 6-1210, Arizona Revised Statutes, is amended to read:
6-1210. Suspension or revocation of licenses
The superintendent deputy director may suspend or revoke a license if the superintendent deputy director finds any of the following:
1. The licensee has made a material misstatement or suppressed or withheld information on an application for a license or any document required to be filed with the superintendent deputy director.
2. A fact or condition exists that, if it had existed or had been known at the time the licensee applied for its license, would have been grounds for denying the application.
3. The licensee is insolvent as defined in section 47-1201.
4. The licensee has violated any provision of title 13, chapter 23, this chapter or rules adopted pursuant to this chapter or any order of the superintendent deputy director.
5. An authorized delegate of the licensee has violated any provision of title 13, chapter 23, this chapter or rules adopted thereunder or any order of the superintendent deputy director as a result of a course of negligent failure to supervise or as a result of the wilful misconduct of the licensee.
6. The licensee refuses to permit allow the superintendent deputy director or the attorney general to make any examination authorized by this title.
7. The licensee knowingly fails to make any report required by this chapter.
8. The licensee fails to pay a judgment entered in favor of a claimant, plaintiff or creditor in an action arising out of the licensee's business regulated under this article within thirty days after the judgment becomes final or within thirty days after expiration or termination of a stay of execution or other stay of proceedings, whichever is later. If execution on the judgment is stayed by court order, operation of law or otherwise, proceedings to suspend or revoke the license for failure of the licensee to comply with that judgment may not be commenced by the superintendent deputy director under this subsection until thirty days after that stay.
9. The licensee has been convicted in any state of a felony or of any crime involving a breach of trust or dishonesty.
Sec. 261. Section 6-1211, Arizona Revised Statutes, is amended to read:
6-1211. Reports
Each licensee shall file with the superintendent deputy director within forty-five days after the end of each fiscal quarter a consolidated financial statement including a balance sheet, income and expense statements and a list of all authorized delegates, branch managers, responsible individuals and locations within this state that have been added or terminated by the licensee within the fiscal quarter. Information regarding branch managers and responsible individuals shall include the information prescribed in section 6-1204, subsection A, paragraph 4. For locations and authorized delegates, the licensee shall include the name and street address of each location and authorized delegate.
Sec. 262. Section 6-1212, Arizona Revised Statutes, is amended to read:
6-1212. Permissible investments
A. Every licensee shall maintain at all times permissible investments that comply with either of the following:
1. A market value computed in accordance with generally accepted accounting principles of not less than the aggregate amount of all of its outstanding payment instruments.
2. A net carrying value computed in accordance with generally accepted accounting principles of not less than the aggregate amount of all of its outstanding payment instruments, provided the market value of these permissible investments is at least ninety-five per cent percent of the net carrying value.
B. Notwithstanding any other provision of this chapter, the superintendent deputy director, with respect to any particular licensee or all licensees, may limit the extent to which any class of permissible investments as defined in section 6-1201 may be considered a permissible investment, except for money and certificates of deposit. The superintendent deputy director may by rule prescribe or by order allow other types of investments which that the superintendent deputy director determines to have substantially equivalent safety as other permissible investments to be considered a permissible investment under this chapter.
Sec. 263. Section 6-1213, Arizona Revised Statutes, is amended to read:
6-1213. Records
A. Each licensee shall keep and use in its business books, accounts and records in accordance with generally accepted accounting principles that will enable the superintendent deputy director to determine whether that licensee is complying with the provisions of this chapter. Each licensee and authorized delegate shall preserve its records for at least five years after making the final entry on any transaction. Each authorized delegate shall keep records as required by the superintendent deputy director.
B. For each authorized delegate, the licensee shall maintain records that demonstrate that the licensee conducted a reasonable background investigation of each authorized delegate. A licensee shall preserve those records for at least five years after the authorized delegate's most recent designation by the licensee. For an authorized delegate designated after November 1, 1991, the records shall be available at all times, and for an authorized delegate designated on or before November 1, 1991, the records shall be available at all times after November 1, 1992.
C. The records of the licensee regarding the business regulated under this chapter shall be maintained at its principal place of business or, with notice to the superintendent deputy director, at another location designated by the licensee. If the records are maintained outside this state, the superintendent deputy director may require that the licensee make those records available to the superintendent deputy director at his the deputy director's, office not more than five business days after demand. The superintendent deputy director may further require that those records be accompanied by an individual who is available to answer questions regarding those records and the business regulated under this chapter. The superintendent deputy director may require the appearance of a specific individual or may request the licensee to designate an individual knowledgeable with regard to the records and the business. The individual appearing with the records shall be available to the superintendent deputy director for up to three business days.
D. On-site examinations of records prescribed by this chapter may be conducted in conjunction with representatives of other state agencies or agencies of another state or of the federal government as determined by the superintendent deputy director. In lieu of an on-site examination, the superintendent deputy director may accept the examination report of an agency of this state, or of another state or of the federal government or a report prepared by an independent licensed certified public accountant. Joint examination or acceptance of an examination report shall not be deemed a waiver of examination assessments provided by law, and joint reports and reports accepted under this subsection are considered an official report of the department for all purposes. Information obtained by examinations prescribed by this article shall be disclosed only as provided in section 6-129.
Sec. 264. Section 6-1215, Arizona Revised Statutes, is amended to read:
6-1215. Notice of source of instrument; transaction records
A. Every payment instrument sold by a licensee directly or through an authorized delegate shall bear the name of the licensee and a unique consecutive number clearly stamped or imprinted on it.
B. For every transaction involving the receipt of money from a customer, the licensee or authorized delegate who receives the money shall maintain written records of the transaction. The records may be reduced to computer or other electronic medium. The records collectively shall contain the name of the licensee, the street address of the location where the money was received, the name and street address of the customer if reported to the licensee or authorized delegate, the approximate date of the transaction, the name or other information from which, together with other contemporaneous records, the superintendent deputy director can determine the identity of those employees of the licensee or authorized delegate who may have conducted the transaction and the amount of the transaction. The information required by this section shall be available through the licensee or authorized delegate who received the money for at least five years from after the date of the transaction.
Sec. 265. Section 6-1216, Arizona Revised Statutes, is amended to read:
6-1216. Acquisition of control
A. A person shall not directly or indirectly acquire control of a licensee or controlling person without the prior written approval of the superintendent deputy director, except as otherwise provided by this section.
B. An application for approval to acquire control of a licensee shall be in writing in a form prescribed by the superintendent deputy director and shall be accompanied by information as the superintendent deputy director may require. The application shall be accompanied by the fee prescribed in section 6-126. The superintendent deputy director shall act on the application within one hundred twenty days after the date on which the application is complete, unless the applicant consents in writing to an extended period. An application that is not denied or approved within that period shall be deemed approved as of the first business day after the expiration of that period.
C. The superintendent deputy director shall deny the application to acquire control of a licensee if he the deputy director finds that the acquisition of control is contrary to law or determines that disapproval is reasonably necessary to protect the interest of the public. In making that determination, the superintendent deputy director shall consider both of the following:
1. Whether the financial condition of the person that seeks to control the licensee might jeopardize the financial condition of the licensee or prejudice the interests of the public in the conduct of the business regulated under this chapter.
2. Whether the competence, experience, integrity and overall moral character of the person that seeks to control the licensee, or the officers, directors and controlling persons of the person that seeks to control the licensee, indicate that it would not be in the interest of the public to permit allow that person to control the licensee.
D. Nothing in This section prohibits does not prohibit a person from negotiating or entering into agreements subject to the condition that the acquisition of control will not be effective until approval of the superintendent deputy director is obtained.
E. This section does not apply to any of the following persons or transactions:
1. A registered dealer who acts as an underwriter or member of a selling group in a public offering of the voting securities of a licensee or controlling person of a licensee.
2. A person who acts as proxy for the sole purpose of voting at a designated meeting of the security holders of a licensee or controlling person of a licensee.
3. A person who acquires control of a licensee or controlling person of a licensee by devise or descent.
4. A person who acquires control of a licensee or controlling person as a personal representative, custodian, guardian, conservator, trustee or any other officer appointed by a court of competent jurisdiction or by operation of law.
5. A pledgee of a voting security of a licensee or controlling person who does not have the right, as pledgee, to vote that security.
6. A person or transaction that the superintendent deputy director by rule or order exempts in the public interest.
F. Before filing an application for approval to acquire control, a person may request in writing a determination from the superintendent deputy director as to whether that person will be deemed in control on consummation of a proposed transaction. If the superintendent deputy director determines in response to that request that the person will not be in control within the meaning of this chapter, the superintendent deputy director shall enter an order to that effect and the proposed transaction is not subject to the requirements of this section.
Sec. 266. Section 6-1217, Arizona Revised Statutes, is amended to read:
6-1217. Appointment of deputy director as agent for service of process; forwarding of process; consent to jurisdiction
A. A licensee, an authorized delegate or a person who knowingly engages in business activities that are regulated under this chapter with or without filing an application is deemed to have done both of the following:
1. Consented to the jurisdiction of the courts of this state for all actions arising under this chapter.
2. Appointed the superintendent deputy director as his the LICENSEE'S, authorized delegate's or person's lawful agent for the purpose of accepting service of process in any action, suit or proceeding that may arise under this chapter.
B. Within three business days after service of process upon on the superintendent deputy director, the superintendent deputy director shall transmit by certified mail copies of all lawful process accepted by the superintendent deputy director as an agent to that person at its last known address. Service of process shall be considered complete three business days after the superintendent deputy director deposits the copies of the documents in the United States mail.
Sec. 267. Section 6-1241, Arizona Revised Statutes, is amended to read:
6-1241. Reports to the attorney general; investigation; violation; classification
A. Within thirty days after any transaction or series or pattern of transactions that is conducted or attempted by, at or through the business and that involves or aggregates five thousand dollars $5,000 or more in funds or other assets, each licensee and authorized delegate of a licensee and each money transmitter shall file with the attorney general's office in a form prescribed by the attorney general a report of the transaction or series or pattern of transactions if the licensee, authorized delegate or money transmitter knows, suspects or has reason to suspect that the activity either:
1. Involves funds that are derived from illegal activities, is intended or conducted in order to hide or disguise funds or other assets that are derived from illegal activities, including, without limitation, the ownership, nature, source, location or control of the funds or other assets, as part of a plan to violate or evade any law or regulation or to avoid any transaction reporting requirement under this chapter or may constitute a possible money laundering violation under section 13-2317 or another racketeering violation as defined in section 13-2301.
2. Has no business or apparent lawful purpose or is not the sort of activity in which the particular customer would normally be expected to engage and the licensee, authorized delegate or money transmitter knows of no reasonable explanation for the activity after examining the available facts, including the background and possible purpose of the activity.
B. A licensee, authorized delegate or money transmitter that is required to file a report regarding business conducted in this state pursuant to the currency and foreign transactions reporting act (31 United States Code sections 5311 through 5326, including any special measures that are established under 31 United States Code section 5318A, and 31 Code of Federal Regulations chapter X or 12 Code of Federal Regulations section 21.11) shall file a duplicate of that report with the attorney general.
C. All persons who are engaged in a trade or business and who receive more than ten thousand dollars $10,000 in money in one transaction or who receive more than ten thousand dollars $10,000 in money through two or more related transactions shall complete and file with the attorney general the information required by 31 United States Code section 5331 and the federal regulations relating to this section concerning reports relating to cash received in trade or business.
D. A licensee, authorized delegate or money transmitter that is regulated under the currency and foreign transactions reporting act (31 United States Code section 5325 and 31 Code of Federal Regulations chapter X) and that is required to make available prescribed records to the secretary of the United States department of treasury on request at any time shall follow the same prescribed procedures and create and maintain the same prescribed records relating to each transaction.
E. In addition to the requirements under subsection D of this section and in connection with each transaction that involves transmitting money in an amount of one thousand dollars $1,000 or more, whether sending or receiving, a licensee or, for transactions conducted through an authorized delegate, an authorized delegate shall retain a record of each of the following:
1. The name and social security or taxpayer identification number, if any, of the individual presenting the transaction and the person and the entity on whose behalf the transaction is to be effected.
2. The type and number of the customer's verified photographic identification, as described in 31 Code of Federal Regulations section 1010.312.
3. The customer's current occupation.
4. The customer's current residential address.
5. The customer's signature.
F. Subsection E of this section does not apply to transactions by which the licensee's customer is making a bill payment either to a commercial creditor pursuant to a contract between the licensee and the commercial creditor or to a utility company.
G. Each licensee shall create records that reflect the provision of updated operating policies and procedures pursuant to section 6-1208, subsection B and of instruction that promotes compliance with this chapter, title 13, chapter 23 and 31 United States Code section 5318, including the identification of the provider and the material and instruction that were provided.
H. On request of the attorney general, a county attorney or the superintendent deputy director, a licensee, authorized delegate or money transmitter shall make any records that are created pursuant to this section available to the attorney general, a county attorney or the superintendent deputy director at any time.
I. A licensee or, for transactions conducted through an authorized delegate, an authorized delegate shall maintain any customer identification records that are created pursuant to subsection E of this section for three years. After three years, the licensee or, for transactions conducted through an authorized delegate, the authorized delegate shall deliver the customer identification records to the attorney general. The attorney general shall make the records available on request to the superintendent deputy director or a county attorney but shall not otherwise distribute the customer identification records without a court order. The customer identification records shall not be used for any purpose other than for criminal and civil prosecution and the prevention and detection of fraud and other criminal conduct.
J. If the superintendent deputy director or the attorney general finds that reasonable grounds exist for requiring additional record keeping recordkeeping and reporting in order to carry out the purposes of this chapter and to prevent the evasion of this chapter, the superintendent deputy director or the attorney general may:
1. Issue an order requiring any group of licensees, authorized delegates or money transmitters in a geographic area to do any of the following:
(a) Obtain information regarding transactions that involve total dollar amounts or denominations of five hundred dollars $500 or more, including the names of any persons participating in those transactions and any persons or entities on whose behalf they are to be effected.
(b) Maintain records of that information for at least five years and make those records available to the attorney general and the superintendent deputy director.
(c) File a report with the attorney general and the superintendent deputy director regarding any transaction in the manner prescribed in the order.
2. Issue an order exempting any group of licensees or authorized delegates from the requirements of subsection E of this section based on the geographic area, the volume of business conducted, the record of compliance with the reporting requirements of this chapter and other objective criteria.
K. An order issued pursuant to subsection J of this section is not effective for more than one hundred eighty days unless renewed after finding that reasonable grounds exist for continuation of the order.
L. The timely filing of a report required by this section with the appropriate federal agency shall be deemed compliance with the reporting requirements of this section, unless the attorney general has notified the superintendent deputy director that reports of that type are not regularly and comprehensively transmitted by that federal agency to the attorney general.
M. This chapter does not preclude a licensee, authorized delegate, money transmitter, financial institution or person engaged in a trade or business from instituting contact with and disclosing customer financial records to appropriate state or local law enforcement agencies if the licensee, authorized delegate, money transmitter, financial institution or person has information that may be relevant to a possible violation of any criminal statute or to the evasion or attempted evasion of any reporting requirement of this chapter.
N. A licensee, authorized delegate, money transmitter, financial institution, person engaged in a trade or business or director, officer, employee, agent or authorized delegate of any of them that keeps or files a record as prescribed by this section, that communicates or discloses information or records under subsection M of this section or that requires another to make any such disclosure is not liable to any person under any law or rule of this state or any political subdivision of this state or under any contract or other legally enforceable agreement, including any arbitration agreement, for the disclosure or for the failure to provide notice of the disclosure to the person who is the subject of the disclosure or to any other person who is identified in the disclosure. This subsection shall be construed to be is consistent with 31 United States Code section 5318(g)(3).
O. The attorney general may report any possible violations indicated by analysis of the reports required by this chapter to any appropriate law enforcement agency for use in the proper discharge of its official duties. If an officer or employee of this state or any political subdivision of this state receives a report pursuant to 31 United States Code section 5318(g), the report shall be disclosed only as provided in 31 United States Code section 5318(g). A person who releases information received pursuant to this subsection except in the proper discharge of official duties is guilty of a class 2 misdemeanor.
P. The requirements of this section shall be construed to be are consistent with the requirements of the currency and foreign transactions reporting act (31 United States Code sections 5311 through 5326 and federal regulations prescribed under those sections) unless the context otherwise requires.
Q. A person who refuses to permit allow any lawful investigation by the superintendent deputy director, a county attorney or the attorney general or who refuses to make records available to the superintendent deputy director, a county attorney or the attorney general pursuant to subsection H of this section is guilty of a class 6 felony.
Sec. 268. Repeal
Title 6, chapter 12.1, Arizona Revised Statutes, is repealed.
Sec. 269. Section 6-1302, Arizona Revised Statutes, is amended to read:
6-1302. Scope of chapter; exemptions
A. Any person who acts as an advance fee loan broker shall register with the superintendent deputy director as provided in this chapter. A person who is not exempt under subsection B of this section and who advertises for, solicits or purports to be willing to make or procure a loan or extension of credit for an advance fee is presumed to be engaged in the business of an advance fee loan broker.
B. This chapter does not apply to:
1. Individuals not regularly engaged in the business of making or procuring loans or extensions of credit for an advance fee.
2. A person doing business as permitted allowed by any law of any state or of the United States relating to banks, savings banks, trust companies, savings and loan associations, credit unions, insurance companies, consumer lenders or profit sharing and pension trusts.
3. A person licensed as a mortgage broker, a mortgage banker or a commercial mortgage banker pursuant to chapter 9 of this title.
4. A person who makes a loan with the person's own money or for the person's own investment.
5. A person licensed as a real estate broker or salesperson pursuant to title 32, chapter 20, article 2.
6. A person who is licensed to practice law in this state but who is not actively and principally engaged in the business of making or procuring loans or extensions of credit, if this person renders services in the course of the person's practice as an attorney.
7. An institutional investor as defined in section 6-971 unless the institutional investor advertises for, solicits or holds himself out as willing to make or procure for an advance fee a loan or extension of credit other than a commercial mortgage loan as defined in section 6-971.
8. This state including any political subdivision of this state.
9. The United States or any department or agency of the United States.
Sec. 270. Section 6-1303, Arizona Revised Statutes, is amended to read:
6-1303. Application for registration
A. Application for registration as an advance fee loan broker may be made by any person. An application for registration shall be signed by the applicant and duly verified by oath. The application shall be filed with the superintendent deputy director and shall contain such information as the superintendent deputy director prescribes by rule and deems necessary in determining whether the applicant is entitled to engage in the advance fee loan broker business.
B. The superintendent deputy director shall rule on an application within sixty days following the date the application is filed with the superintendent deputy director.
Sec. 271. Repeal
Section 6-1304, Arizona Revised Statutes, is repealed
Sec. 272. Section 6-1305, Arizona Revised Statutes, is amended to read:
6-1305. Registration; renewal; reporting requirements
A. The superintendent deputy director shall register the applicant as an advance fee loan broker when an applicant has fully complied with this chapter and the rules prescribed by the superintendent deputy director.
B. The superintendent deputy director shall immediately notify the applicant by mail on registering the applicant as an advance fee loan broker.
C. A registered advance fee loan broker shall apply for renewal as prescribed by the superintendent deputy director not later than June 30 of each year. A registration for which a renewal application is not received by the superintendent deputy director by June 30 is suspended and the registered advance fee loan broker may not act as an advance fee loan broker until the registration is renewed or a new registration is issued pursuant to this article. The registration of an advance fee loan broker that has not filed a renewal application and paid the renewal fee by July 31 expires. A registration may not be granted to the holder of an expired registration except as provided in this article for the issuance of an original registration.
D. An advance fee loan broker may annually renew the broker's registration by filing a supplemental statement showing any changes in the facts set forth in the original application for registration or any previously filed supplemental statement made at the time of annual renewal.
E. An advance fee loan broker shall file a supplemental statement showing any changes in the facts set forth in the original application or in any supplemental statement made at the time of annual renewal within thirty days of after a change in any material fact.
Sec. 273. Section 6-1306, Arizona Revised Statutes, is amended to read:
6-1306. Register of advance fee loan brokers
The names and addresses of all persons who have been registered as advance fee loan brokers shall be recorded in a register of advance fee loan brokers in the office of the superintendent deputy director.
Sec. 274. Section 6-1307, Arizona Revised Statutes, is amended to read:
6-1307. Records
Advance fee loan brokers shall maintain books, records and accounts in connection with transactions involving the receipt and disbursement of funds received by the advance fee loan broker. The books, records and accounts shall be maintained in accordance with generally accepted accounting practices and shall be subject to inspection at all times by authorized representatives of the superintendent deputy director.
Sec. 275. Section 6-1308, Arizona Revised Statutes, is amended to read:
6-1308. Denial, revocation or suspension of registration
A. The superintendent deputy director may deny, revoke or suspend the registration of an advance fee loan broker if the superintendent deputy director finds that:
1. The application for registration, any supplemental statement or any other document filed with the superintendent deputy director is incomplete, inaccurate or misleading.
2. The advance fee loan broker is insolvent or is in an unsound financial condition.
3. The advance fee loan broker has violated any provision of this chapter or any rule or order of the superintendent deputy director.
4. The advance fee loan broker has refused to permit allow an examination of the books, records and accounts in connection with transactions involving the receipt and disbursement of funds received by the advance fee loan broker.
5. The advance fee loan broker has failed to pay the original application fee or any supplemental statement fees as required by this chapter.
B. It is sufficient cause for denial, revocation or suspension of registration of an advance fee loan broker as provided in this section, if the advance fee loan broker is a partnership, corporation, unincorporated association or trust, that a member of the partnership, an officer or a director of the corporation or unincorporated association or the trustee or other fiduciary of the trust or a person controlling, controlled by or under common control with the broker has been guilty of any act or omission which that would be sufficient grounds for denying, revoking or suspending the registration of an individual broker.
Sec. 276. Section 6-1402, Arizona Revised Statutes, is amended to read:
6-1402. Licensure required; contents of application; fees; nontransferable; branch office permit
A. A person shall not engage in the business of a premium finance company in this state without first being licensed as a premium finance company by the superintendent deputy director. A person who is not exempt under section 6-1403 and who advertises for, solicits or holds himself out as willing to finance premiums or enter into or acquire premium finance agreements is presumed to be engaged in the business as a premium finance company.
B. A licensee shall not establish a branch office without first obtaining a branch office permit from the superintendent deputy director.
C. An application for a license or branch office permit shall be made in writing, under oath, and in the form prescribed by the superintendent deputy director. The superintendent deputy director may require as part of an application such other information as he the deputy director deems necessary.
D. An applicant at the time of filing an application for a license or branch office permit shall pay to the superintendent deputy director the fee prescribed in section 6-126.
E. Prior to December 31 of each year, each licensee may obtain a renewal of a license or branch office permit by payment of the fee prescribed in section 6-126.
F. A premium finance company license or branch office permit is not transferable or assignable, and control shall not be acquired through stock purchase or other device without the prior written consent of the superintendent deputy director. The superintendent deputy director may refuse consent if the superintendent deputy director finds that any of the grounds for denial, revocation or suspension of a license prescribed by section 6-1404 are applicable to the acquiring person. For purposes of this subsection, "control" means the power to vote more than twenty per cent percent of outstanding voting shares of a licensed corporation, limited liability company, partnership, association or trust.
Sec. 277. Section 6-1404, Arizona Revised Statutes, is amended to read:
6-1404. Denial, suspension or revocation of licenses and branch office permits
A. The superintendent deputy director may deny a license to a person or suspend or revoke a license if the superintendent deputy director finds that an applicant or licensee:
1. Is insolvent as defined in section 47-1201.
2. Has shown that he the person is not a person of honesty, truthfulness and good character.
3. Refuses to permit allow an examination by the superintendent deputy director of the licensee's books and affairs or refuses or fails, within a reasonable time, to furnish any information or make any report that may be required by the superintendent deputy director.
4. Has been convicted in any state of a felony or any crime of breach of trust or dishonesty.
5. Has had a final judgment entered against him the person in a civil action on grounds of fraud, deceit or misrepresentation and the conduct on which the judgment is based indicates that it would be contrary to the interest of the public to permit allow that person to be licensed or to control or manage a licensee.
6. Has had an order entered against him the person involving fraud, deceit or misrepresentation by any administrative agency of this state, the federal government or any other state or territory of the United States and that the facts relating to the order indicate that it would be contrary to the interest of the public to permit allow that person to be licensed or to control or manage a licensee.
7. Has violated any applicable law, rule or order.
8. Has failed to pay the license or annual renewal fees.
9. Has failed to file an annual report when due or within any extension of time that the superintendent deputy director, for good cause, may have granted.
10. Fails to have or maintain at least twenty-five thousand dollars $25,000 in liquid assets available for use in the conduct of the business.
B. If any person to whom a license is issued or who has applied for a license is indicted or informed against for forgery, embezzlement, obtaining money under false pretenses, extortion, criminal conspiracy to defraud, or a like offense or offenses, and a certified copy of the indictment or information or other proper evidence of that indictment or information is filed with the superintendent deputy director, the superintendent deputy director may suspend the license issued to the licensee or refuse to grant a license to an applicant pending trial on the indictment or information.
C. It is sufficient cause for the suspension or revocation of the license if an owner, officer, director, member, partner, trustee or employee, while acting in the course of the premium finance business, or a person who is entitled to vote more than twenty per cent percent of the outstanding voting shares of the licensed corporation or a person who has a controlling interest in a licensed limited liability company, partnership, association or trust has acted or failed to act in the same manner as would be cause for suspending or revoking a license of the person to whom the license was issued.
D. The superintendent deputy director may deny a branch office permit to a person or suspend or revoke a branch office permit for the same reasons sufficient under this section for denial, suspension or revocation of a license.
Sec. 278. Section 6-1405, Arizona Revised Statutes, is amended to read:
6-1405. Issuance of license or branch office permit; license year; requirements
A. If no grounds for denial of a license or branch office permit are found to exist, the superintendent deputy director shall, within one hundred twenty days of receiving a complete application, grant the application and issue a license or branch office permit to the applicant.
B. The license or branch office permit year for a licensee begins January 1 and ends December 31 of each year.
C. All licenses and branch office permits issued shall remain in full force and effect until surrendered, revoked or suspended.
D. A license or branch office permit remains the property of this state. On termination at the request of the licensee or revocation by the superintendent deputy director, the licensee shall immediately deliver the license or branch office permit to the superintendent deputy director.
Sec. 279. Section 6-1406, Arizona Revised Statutes, is amended to read:
6-1406. Books and records of premium finance company; access to records
A. A licensee shall maintain books, accounts and records as prescribed by the superintendent deputy director that will enable the superintendent deputy director to determine whether the licensee is complying with the provisions of this article.
B. A licensee shall preserve its books, accounts and records of premium finance transactions for at least three years after making the final entry with respect to any premium finance agreement. The preservation of records in any form authorized by the superintendent deputy director constitutes compliance with this section.
C. Every licensee shall observe generally accepted accounting principles and practices.
D. A licensee shall make any books, accounts and records that are kept outside of this state available to the superintendent deputy director in this state not more than three business days after demand or the superintendent deputy director may choose to perform the examination or investigation at the office of the licensee located outside of this state.
E. For purposes of this article, the superintendent deputy director or his the deputy director's duly authorized representatives shall have access to the offices and places of business, files, safes and vaults of all licensees regarding that business or the subject matter of any examination, investigation or hearing during business hours.
Sec. 280. Section 6-1407, Arizona Revised Statutes, is amended to read:
6-1407. Removal of place of business
A licensee may change the licensed place of business by giving written notice to the superintendent deputy director, who shall amend the license accordingly.
Sec. 281. Section 6-1408, Arizona Revised Statutes, is amended to read:
6-1408. Annual report of licensee; civil penalty for failure to file
A. On or before February 1, the licensee shall annually file a report under oath and in the form prescribed by the superintendent deputy director concerning the business and operations during the preceding calendar year. On good cause shown by a licensee, the superintendent deputy director may extend the time for filing the report for a period not to exceed sixty days.
B. If a licensee fails to file the annual report, the superintendent deputy director or any person designated by him the deputy director may examine the books, accounts and records of the licensee and prepare the annual report and the licensee shall be assessed an examination fee as prescribed in section 6-125.
C. If a licensee fails to file the annual report within the specified time, the superintendent deputy director may assess a civil penalty for the failure to file unless an extension of time is granted by the superintendent deputy director in writing prior to the due date of the annual report. The penalty shall not be more than twenty-five dollars $25 per day. The licensee shall pay the penalty to the superintendent deputy director within thirty days of after the assessment.
Sec. 282. Section 6-1410, Arizona Revised Statutes, is amended to read:
6-1410. Form of premium finance agreement; notice
A. A premium finance agreement shall:
1. Be dated and signed by the insured and the printed portion of the agreement shall be in at least eight point eight-point type.
2. Contain the name, place of business and mailing address of the agent or broker who is negotiating the related insurance contract, the name and residence or mailing address of the insured as specified by the insured, the name, place of business or mailing address of the premium finance company, a brief description of the insurance contract involved and the amount of the premium.
3. Set forth the following items if applicable:
(a) The total amount of the premiums.
(b) The amount of the down payment.
(c) The principal balance.
(d) The amount of the interest or discount.
(e) The balance payable by the insured.
(f) The number of installments required, the amount of each installment expressed in dollars and the due date or period of the installments.
(g) The amount of any service charge and if the charge is refundable.
B. Notwithstanding the provisions of subsection A, paragraph 1 of this section, if a premium finance agreement is for a renewal contract, the agreement may be signed by the insured or by an authorized person on behalf of the insured. The superintendent deputy director may adopt rules identifying persons authorized to sign premium finance agreements on behalf of the insured.
C. The licensee may include additional information regarding computations made in determining the amount to be paid by the insured.
D. The agent or broker who submits the premium finance agreement to the licensee shall list any managing general agent to whom the submitting agent or broker is required to pay insurance premiums for the policies listed on the premium finance agreement.
E. If a managing general agent's name and address are listed on a premium finance agreement submitted to a licensee, the licensee shall notify the managing general agent that a premium finance agreement has been executed no not later than thirty days after the licensee accepts the premium finance agreement.
F. If an insurer or the managing general agent of an insurer gives notice in writing that an agent or broker is not authorized to receive premiums on behalf of the insurer, the licensee shall pay all future monies advanced on policies purchased from the agent or broker to the insurer or managing general agent of the insurer as directed in the notice.
G. A licensee or an employee of a licensee shall not pay, allow or offer to pay or allow any other person to pay valuable consideration or a rebate of any kind which that exceeds a value of ten dollars $10 to an insurer, agent, broker or managing general agent, or any of its employees, as an inducement to arrange the financing of an insurance policy providing coverage for an individual, family or household purpose directly or indirectly either before or after the issuance of the policy. Office equipment loaned for the purpose of preparing and servicing premium finance agreements or an article of merchandise not exceeding two dollars $2 in value that bears the advertisement of the licensee shall not be deemed an inducement or rebate in violation of this subsection. This subsection does not apply to financing of policies providing coverage for any entity involved in transactions solely for business purposes.
H. Nothing in This section shall does not prevent a licensee from purchasing or otherwise acquiring a premium finance agreement which that otherwise conforms to this article in all respects if the acquisition is from another premium finance company with recourse against the agent, broker or insurer on such terms and conditions as may be mutually agreed on.
I. No premium finance agreement shall contain any provision by which:
1. In the absence of default of the insured or insolvency of the insurer, the licensee holding the agreement may, arbitrarily and without reasonable cause, accelerate the maturing of any part or all of the amount owing under the premium finance agreement.
2. The insured relieves the agent or broker from liability for any legal rights or remedies which that the insured may otherwise have against the agent or broker.
J. A licensee shall comply with title I of the consumer credit protection act (15 United States Code sections 1601 through 1667) and the regulations of the act.
Sec. 283. Section 6-1419, Arizona Revised Statutes, is amended to read:
6-1419. Rules
The superintendent deputy director may adopt rules necessary for the proper conduct of a premium finance company.
Sec. 284. Section 10-2251, Arizona Revised Statutes, is amended to read:
10-2251. Definitions
In this chapter, unless the context otherwise requires:
1. "Bank" means any banking corporation or national banking association.
2. "Corporation" means a business development corporation formed under the provisions of this chapter.
6. 3. "Superintendent "deputy director of financial institutions" means the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions.
3. 4. "Member" means any bank or federal or state savings and loan association authorized to do business within this state which that shall undertake to lend money to the corporation upon on its call and in accordance with the provisions of this chapter.
4. 5. "Shareholder" means a registered owner of shares in a corporation formed under the provisions of this chapter.
5. 6. "Shares" means units into which the shareholders' rights to participate in the control of a corporation, in its surplus or profits, or in the distribution of its assets, are divided.
Sec. 285. Section 10-2258, Arizona Revised Statutes, is amended to read:
10-2258. Board of directors
A. The affairs of a corporation shall be conducted by a board of directors, consisting of fifteen persons, who shall all be at least eighteen years of age and be citizens of the United States. In addition, the executive director of the Arizona development board or its successor, shall act as a nonvoting ex officio member of the board of directors.
B. At the first meeting of the shareholders and members of a corporation and at each annual meeting thereafter, six directors shall be elected by the shareholders and nine directors shall be elected by the members. Each member shall have one vote for each one thousand dollars $1,000 of the member's outstanding loans to the corporation and the uncalled balance of the member's loan agreement with the corporation. A member shall be entitled to cast his the member's votes for directors on a cumulative basis.
C. The first meeting of the shareholders and members of the corporation shall be held at a time and place to be fixed by the temporary board of directors, which shall be as soon as reasonably possible after the certificate required by section 10-2261 has been filed with the superintendent deputy director of financial institutions.
Sec. 286. Section 10-2259, Arizona Revised Statutes, is amended to read:
10-2259. Method of incorporation
A. A corporation may be formed by five or more residents of the this state of Arizona who each subscribe to at least one share of stock of the corporation.
B. The articles of incorporation shall set forth:
1. The name of the proposed corporation, which shall include the words "business development corporation".
2. The purpose for which it the corporation is to be formed, which shall be within the purposes and powers set forth in this chapter.
3. The location of the principal place of business of the corporation, but the corporation may have offices in such other places in the this state as may be fixed by the board of directors.
4. The term of its existence.
5. The authorized capital stock of the corporation.
6. The names and addresses of the incorporators and the amount of their capital stock subscriptions.
7. The names and addresses of eight temporary directors.
8. The name and address of the treasurer.
9. The names and addresses of five qualified banks which that have obligated themselves to become members of the corporation at the time of its incorporation.
10. Any other provisions not inconsistent with law which that the proposed corporation may adopt governing the regulation and conduct of its affairs.
C. A corporation formed under this chapter may amend its articles of incorporation provided that prior to the filing of articles of amendment with the corporation commission the same articles of amendment shall have been approved by the superintendent deputy director of financial institutions in the manner and as provided for in section 10-2260.
Sec. 287. Section 10-2260, Arizona Revised Statutes, is amended to read:
10-2260. Approval of articles of incorporation; incorporation
A. The articles of incorporation required by this chapter shall be filed with the superintendent deputy director of financial institutions. Within sixty days after the receipt of the articles of incorporation, the superintendent deputy director shall approve or disapprove the articles of incorporation.
B. If the superintendent deputy director disapproves the articles, the superintendent deputy director shall promptly give notice of the disapproval to the incorporators, stating in detail the reason for his the deputy director's action. Upon On remedying the defect or defects, the incorporators may, in the same manner, may refile the articles.
C. If the superintendent deputy director finds that the articles of incorporation are in the form prescribed by this chapter or have been made to conform with this chapter, the superintendent deputy director shall conduct any investigation deemed necessary to ascertain from the best sources of information available:
1. Whether the name of the proposed corporation is likely to mislead the public as to its character or purposes.
2. Whether the convenience and advantage of the public will be served by the proposed corporation.
3. Whether the economic condition of the area in which the corporation may be expected to do most of its business affords reasonable promise of adequate support for the activities of such corporation.
4. Whether the responsibility, character and general fitness for the business of the incorporators, directors and officers named in the articles are such as to command confidence and to warrant the belief that the business of the proposed corporation will be honestly and efficiently conducted, in accordance with the intent and purpose of this chapter.
D. If the superintendent deputy director finds, on the basis of the facts disclosed by the superintendent’s deputy director's investigation, that the proposed incorporation meets all the requirements of this chapter, the superintendent deputy director shall endorse approval on the articles of incorporation and the articles may then be filed with the corporation commission. The corporation commission shall not issue a certificate of incorporation to a business development corporation without the approval by the superintendent deputy director endorsed on the articles of incorporation.
E. If the superintendent deputy director finds, on the basis of the facts disclosed by the superintendent’s deputy director's investigation, that the proposed incorporation does not meet all the requirements of this chapter, the superintendent deputy director shall disapprove the articles and return them to the incorporators stating in detail the reasons for doing so.
Sec. 288. Section 10-2261, Arizona Revised Statutes, is amended to read:
10-2261. Authorization to commence business
A corporation formed under this chapter shall not begin the transaction of any business, except such as is incident to its organization or to the obtaining of members of subscriptions to or payment for its shares, until it certifies to the superintendent deputy director of financial institutions that there has been paid into the corporate treasury a minimum of one hundred thousand dollars $100,000 from the sale at par value of the capital stock of the corporation.
Sec. 289. Section 10-2265, Arizona Revised Statutes, is amended to read:
10-2265. Supervision and reports
The superintendent deputy director of financial institutions may supervise, examine and control a corporation in the same manner as financial institutions are so supervised, examined and controlled by the superintendent deputy director pursuant to law, except that it shall not be the duty of the superintendent deputy director to supervise the investment or lending policies of a corporation. In addition to such other reports as are required by law, a corporation shall make an annual report of its condition to the superintendent deputy director on or before March 1 of each year. An audit report prepared by a certified public accountant shall accompany the annual report of condition. The audit may be accepted by the superintendent deputy director in lieu of an examination.
Sec. 290. Section 13-2317, Arizona Revised Statutes, is amended to read:
13-2317. Money laundering; classification; definitions
A. A person is guilty of money laundering in the first degree if the person does any of the following:
1. Knowingly initiates, organizes, plans, finances, directs, manages, supervises or is in the business of money laundering in violation of subsection B of this section.
2. Violates subsection B of this section in the course of or for the purpose of facilitating terrorism or murder.
B. A person is guilty of money laundering in the second degree if the person does any of the following:
1. Acquires or maintains an interest in, transacts, transfers, transports, receives or conceals the existence or nature of racketeering proceeds knowing or having reason to know that they are the proceeds of an offense.
2. Makes property available to another by transaction, transportation or otherwise knowing that it is intended to be used to facilitate racketeering.
3. Conducts a transaction knowing or having reason to know that the property involved is the proceeds of an offense and with the intent to conceal or disguise the nature, location, source, ownership or control of the property or the intent to facilitate racketeering.
4. Intentionally or knowingly makes a false statement, misrepresentation or false certification or makes a false entry or omits a material entry in any application, financial statement, account record, customer receipt, report or other document that is filed or required to be maintained or filed under title 6, chapter 12.
5. Intentionally or knowingly evades or attempts to evade any reporting requirement under section 6-1241, whether by structuring transactions as described in 31 Code of Federal Regulations chapter X, by causing any financial institution, money transmitter, trade or business to fail to file the report, by failing to file a required report or record or by any other means.
6. Intentionally or knowingly provides any false information or fails to disclose information that causes any licensee, authorized delegate, money transmitter, trade or business to either:
(a) Fail to file any report or record that is required under section 6-1241.
(b) File such a report or record that contains a material omission or misstatement of fact.
7. Intentionally or knowingly falsifies, conceals, covers up or misrepresents or attempts to falsify, conceal, cover up or misrepresent the identity of any person in connection with any transaction with a financial institution or money transmitter.
8. In connection with a transaction with a financial institution or money transmitter, intentionally or knowingly makes, uses, offers or presents or attempts to make, use, offer or present, whether accepted or not, a forged instrument, a falsely altered or completed written instrument or a written instrument that contains any materially false personal identifying information.
9. If the person is a money transmitter, a person engaged in a trade or business or any employee of a money transmitter or a person engaged in a trade or business, intentionally or knowingly accepts false personal identifying information from any person or otherwise knowingly incorporates false personal identifying information into any report or record that is required by section 6-1241.
10. Intentionally conducts, controls, manages, supervises, directs or owns all or part of a money transmitting business for which a license is required by title 6, chapter 12 unless the business is licensed pursuant to title 6, chapter 12 and complies with the money transmitting business registration requirements under 31 United States Code section 5330.
C. A person is guilty of money laundering in the third degree if the person intentionally or knowingly does any of the following:
1. In the course of any transaction transmitting money, confers or agrees to confer anything of value on a money transmitter or any employee of a money transmitter that is intended to influence or reward any person for failing to comply with any requirement under title 6, chapter 12.
2. Engages in the business of receiving money for transmission or transmitting money, as an employee or otherwise, and receives anything of value upon on an agreement or understanding that it is intended to influence or benefit the person for failing to comply with any requirement under title 6, chapter 12.
D. In addition to any other criminal or civil remedy, if a person violates subsection A or B of this section as part of a pattern of violations that involve a total of one hundred thousand dollars $100,000 or more in any twelve month twelve-month period, the person is subject to forfeiture of substitute assets in an amount that is three times the amount that was involved in the pattern, including conduct that occurred before and after the twelve month twelve-month period.
E. Money laundering in the third degree is a class 6 felony. Money laundering in the second degree is a class 3 felony. Money laundering in the first degree is a class 2 felony.
F. For the purposes of this section:
1. The following terms have the same meaning prescribed in section 6-1201:
(a) "Authorized delegate".
(b) "Licensee".
(c) "Money accumulation business".
(d) "Money transmitter".
(e) "Trade or business".
(f) "Transmitting money".
2. The following terms have the same meaning prescribed in section 13-2001:
(a) "Falsely alters a written instrument".
(b) "Falsely completes a written instrument".
(c) "Falsely makes a written instrument".
(d) "Forged instrument".
(e) "Personal identifying information".
(f) "Written instrument".
3. The following terms have the same meaning prescribed in section 13-2301:
(a) "Financial institution".
(b) "Financial instrument".
(c) "Racketeering", except that for the purposes of civil remedies sought by the attorney general, racketeering includes any act, regardless of whether the act would be chargeable or indictable under the laws of this state or whether the act is charged or indicted, that is committed for financial gain, punishable by imprisonment for more than one year under the laws of the United States and described in section 274(a)(1)(A)(i), (ii) or (iii) or (a)(2) of the immigration and nationality act (8 United States Code section 1324(a)(1)(A)(i), (ii) or (iii) or (a)(2)) if persons acting in concert in the conduct acquire a total of more than five thousand dollars $5,000 through the conduct in a one month one-month period. For the purpose of forfeiture of property other than real property, the conduct must involve more than three aliens in a one month one-month period. For the purpose of forfeiture of real property, the conduct must involve more than fifteen aliens in a one month one-month period.
4. The following terms have the same meaning prescribed in section 13-2314:
(a) "Acquire".
(b) "Proceeds".
G. For the purposes of this section:
2. 1. "Superintendent" "deputy director" has the same meaning prescribed in section 6-101.
1. 2. "Offense" has the same meaning prescribed in section 13-105 and includes conduct for which a sentence to a term of incarceration is provided by any law of the United States.
3. "Transaction" means a purchase, sale, trade, loan, pledge, investment, gift, transfer, transmission, delivery, deposit, withdrawal, payment, transfer between accounts, exchange of currency, extension of credit, purchase or sale of any financial instrument or any other acquisition or disposition of property by whatever means.
Sec. 291. Section 14-3603, Arizona Revised Statutes, is amended to read:
14-3603. Bond required; exceptions
A. A bond is required of a personal representative unless either:
1. The will expressly waives the bond.
2. All of the heirs if no will has been probated, or all of the devisees under a will which that does not provide for waiver of the bond, file with the court a written waiver of the bond requirement. A duly appointed guardian or conservator may waive on behalf of the ward or protected person unless the guardian or conservator is the personal representative.
3. The personal representative is a national banking association, a holder of a banking permit under the laws of this state, a savings and loan association authorized to conduct trust business in this state, a title insurance company that is qualified to do business under the laws of this state, a trust company holding a certificate to engage in trust business from the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions or the public fiduciary.
4. The petition for formal or informal appointment alleges that the probable value of the entire estate will permit allow summary procedures under section 14-3973 and the surviving spouse, or the nominee of the surviving spouse, is applying for appointment as personal representative.
B. In any case where a bond is not required under subsection A of this section, the court may, upon on petition of any interested person and on reasonable proof that the interest of the petitioning person is in danger of being lost because of the administration of the estate, may require a bond in such an amount as the court may direct to protect the interest of the petitioner or of the petitioner and others. An heir or devisee who initially waived bond may be a petitioner under this subsection.
C. If a bond is not initially required because the petition for appointment alleges that the probable value of the entire estate will permit allow summary procedures under section 14-3973, and it later appears from the inventory and appraisal that the value of the estate will not permit allow use of such procedures, then the personal representative must promptly file a bond unless one is not required for some other reason under subsection A of this section.
Sec. 292. Section 14-5411, Arizona Revised Statutes, is amended to read:
14-5411. Bond; exception
A. Except as otherwise provided in subsection B of this section, the court shall require a conservator to furnish a bond conditioned on faithful discharge of all duties according to law, with sureties as it shall specify. Unless otherwise directed, the bond shall be in the amount of the aggregate capital value of the property of the estate in the conservator's control plus one year's estimated income minus the value of securities deposited under arrangements requiring an order of the court for their removal and the value of any land that the fiduciary, by express limitation of power, lacks power to sell or convey without court authorization. For good cause shown the court may reduce or eliminate the bond to the extent of regular fixed expenses paid for the benefit of the protected person. The court in lieu of sureties on a bond may accept other security for the performance of the bond, including a pledge of securities or a mortgage of land.
B. A bond is not required of a conservator that is a national banking association, a holder of a banking permit under the laws of this state, a savings and loan association authorized to conduct trust business in this state, a title insurance company qualified to do business under the laws of this state, a trust company holding a certificate to engage in trust business from the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions or the public fiduciary.
Sec. 293. Section 20-466, Arizona Revised Statutes, is amended to read:
20-466. Fraud unit; investigators; peace officer status; powers; information sharing; assessment
A. The
fraud unit is established in the department of insurance and financial
institutions. The director of the department of insurance and financial
institutions shall appoint an individual to operate the fraud unit in
conjunction with operating the automobile theft authority established by
section 41-3451.
B. The fraud unit shall work in conjunction with the department of public safety.
C. The director may investigate any act or practice of fraud prohibited by section 20-466.01 and any other act or practice of fraud against an insurer or entity licensed under this title. The director shall administer the fraud unit.
D. The director may employ investigators for the fraud unit. A fraud unit investigator has and shall exercise the law enforcement powers of a peace officer of this state but only while acting in the course and scope of employment for the department of insurance and financial institutions. The director shall adopt guidelines for the conduct of investigations that are substantially similar to the investigative policy and procedural guidelines of the department of public safety for peace officers. Fraud unit investigators shall not preempt the authority and jurisdiction of other law enforcement agencies of this state or its political subdivisions. Fraud unit investigators:
1. Shall have at least the qualifications prescribed by the Arizona peace officer standards and training board pursuant to section 41-1822.
2. Are not eligible to participate in the public safety personnel retirement system established by title 38, chapter 5, article 4 due solely to employment as fraud unit investigators.
E. The director may request the submission of papers, documents, reports or other evidence relating to an investigation under this section. The director may issue subpoenas and take other actions pursuant to section 20-160. The materials are privileged and confidential until the director completes the investigation. Any documents, materials or other information that is provided to the director pursuant to this section is not subject to discovery or subpoena until opened for public inspection by the director or, after notice and a hearing, a court determines that the director would not be unduly burdened by compliance with the subpoena. The director shall keep the identity of an informant confidential, including any information that might identify the informant, unless the request for information is made by a law enforcement agency, the attorney general or a county attorney for purposes of a criminal investigation or prosecution. The director may use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the director's official duties.
F. If the documents, materials or other information the director seeks to obtain by request is located outside this state, the person requested to provide the documents, materials or other information shall arrange for the fraud unit or a representative, including an official of the state in which the documents, materials or other information is located, to examine the documents, materials or other information where it is located. The director may respond to similar requests from other states.
G. An insurer that believes a fraudulent claim has been or is being made shall send to the director, on a form prescribed by the director, information relative to the claim including the identity of parties claiming loss or damage as a result of an accident and any other information the fraud unit may require. The director shall review the report and determine if further investigation is necessary. If the director determines that further investigation is necessary, the director may conduct an independent investigation to determine if fraud, deceit or intentional misrepresentation in the submission of the claim exists. If the director is satisfied that fraud, deceit or intentional misrepresentation of any kind has been committed in the submission of a claim, the director may report the violations of the law to the reporting insurer, to the appropriate licensing agency as defined in section 20-466.04 and to the appropriate county attorney or the attorney general for prosecution.
H. The director may:
1. Share nonpublic documents, materials or other information with other state, federal and international regulatory agencies, with the national association of insurance commissioners and its affiliates and subsidiaries and with state, federal and international law enforcement authorities if the recipient agrees and warrants that it has the authority to maintain the confidentiality and privileged status of the documents, materials or other information.
2. Receive documents, materials and other information from the national association of insurance commissioners and its affiliates and subsidiaries and from regulatory and law enforcement officials of other jurisdictions and shall maintain as confidential or privileged any document, material or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or other information.
3. Enter into agreements that govern the sharing and use of documents, materials and other information and that are consistent with this section.
I. A disclosure to or by the director pursuant to this section or as a result of sharing information pursuant to subsection H of this section is not a waiver of any applicable privilege or claim of confidentiality in the documents, materials or other information disclosed or shared.
J. The director shall annually assess each insurer as defined in section 20-441, subsection B authorized to transact business in this state up to $1,050 for the administration and operation of the fraud unit and the prosecution of fraud pursuant to this section. Monies collected shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund for appropriation to the fraud unit. all monies appropriated to the department for the fraud unit shall be included as a separate line item in the general appropriations act. The department shall use all appropriated monies exclusively to operate the fraud unit.
K. A person, or an officer, employee or agent of the person acting within the scope of employment or agency of that officer, employee or agent, who in good faith files a report or provides other information to the fraud unit pursuant to this section is not subject to civil or criminal liability for reporting that information to the fraud unit.
Sec. 294. Section 20-3251, Arizona Revised Statutes, is amended to read:
20-3251. Interstate insurance product regulation compact
The interstate insurance product regulation compact is enacted into law as follows:
Article I
Purpose
Under the terms and conditions of this compact, this state seeks to join with other states and establish the interstate insurance product regulation compact and thus become a member of the interstate insurance product regulation commission. The director is hereby designated to serve as the representative of this state to the commission. The purposes of the compact are, through means of joint and cooperative action among the compacting states:
1. To promote and protect the interest of consumers of individual and group annuity, life insurance, disability income and long-term care insurance products.
2. To develop uniform standards for insurance products covered under the compact.
3. To establish a central clearinghouse to receive and provide prompt review of insurance products covered under the compact and, in certain cases, related advertisements, submitted by insurers authorized to do business in one or more compacting states.
4. To give appropriate regulatory approval to those product filings and advertisements satisfying the applicable uniform standard.
5. To improve coordination of regulatory resources and expertise between state insurance departments regarding the setting of uniform standards and review of insurance products covered under the compact.
6. To create the interstate insurance product regulation commission.
7. To perform these and other related functions as may be consistent with the state regulation of the business of insurance.
Article II
Definitions
In this compact, unless the context otherwise requires:
1. "Advertisement" means any material designed to create public interest in a product or induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain a policy, as more specifically defined in the rules and operating procedures of the commission.
2. "Bylaws" means those bylaws established by the commission for its governance or for directing or controlling the commission's actions or conduct.
3. "Commission" means the interstate insurance product regulation commission established by this compact.
4. "Commissioner" means the insurance director or the chief insurance regulatory official of a state including commissioner, superintendent deputy director, director or administrator.
5. "Compact" means the interstate insurance product regulation compact.
6. "Compacting state" means any state that has enacted the compact and that has not withdrawn or been terminated under article XIV of this compact.
7. "Insurer" means any entity licensed by a state to issue contracts of insurance for any of the lines of insurance covered by the compact.
8. "Member" means the person chosen by a compacting state as its representative to the commission or the person's designee.
9. "Noncompacting state" means any state that is not at the time a compacting state.
10. "Operating procedures" means procedures adopted by the commission implementing a rule, uniform standard or compact provision.
11. "Product" means the form of a policy or contract, including any application, endorsement or related form that is attached to and made a part of the policy or contract, and any evidence of coverage or certificate, for an individual or group annuity, life insurance, disability income or long-term care insurance product that an insurer is authorized to issue.
12. "Rule" means a statement of general or particular applicability and future effect that is adopted by the commission, including a uniform standard developed pursuant to article VII of this compact, and that is designed to implement, interpret or prescribe law or policy or describes the organization, procedure or practice requirements of the commission, which shall have the force and effect of law in the compacting states.
13. "State" means any state, district or territory of the United States.
14. "Third-party filer" means an entity that submits a product filing to the commission on behalf of an insurer.
15. "Uniform standard" means a standard adopted by the commission for a product line pursuant to article VII of this compact and includes all of the product requirements in aggregate. Each uniform standard shall be construed, whether express or implied, to prohibit the use of any inconsistent, misleading or ambiguous provisions in a product and the form of the product made available to the public shall not be unfair, inequitable or against public policy as determined by the commission.
Article III
Commission Establishment and Venue
A. The compacting states hereby create and establish a joint public agency known as the interstate insurance product regulation commission. Under article IV of this compact, the commission has the power to develop uniform standards for product lines, receive and provide prompt review of products filed with the commission and give approval to those product filings satisfying applicable uniform standards. It is not intended for the commission to be the exclusive entity for receipt and review of insurance product filings. This section does not prohibit any insurer from filing its product in any state wherein the insurer is licensed to conduct the business of insurance. Any filing is subject to the laws of the state where filed.
B. The commission is a body corporate and politic, and an instrumentality of the compacting states.
C. The commission is solely responsible for its liabilities except as otherwise specifically provided in this compact.
D. Venue is proper and judicial proceedings by or against the commission shall be brought solely and exclusively in a court of competent jurisdiction where the principal office of the commission is located.
Article IV
Commission Powers
The commission has the following powers:
1. To adopt rules pursuant to article VII of this compact that shall have the force and effect of law and shall be binding in the compacting states to the extent and in the manner provided in the compact.
2. To exercise its rulemaking authority and establish reasonable uniform standards for products covered under the compact, and advertisement related thereto, which shall have the force and effect of law and shall be binding in the compacting states, but only for those products filed with the commission. A compacting state shall have the right to opt out of the uniform standard pursuant to article VII of this compact, to the extent and in the manner provided in this compact. Any uniform standard established by the commission for long-term care insurance products may provide the same or greater protections for consumers as, but shall not provide less than, those protections set forth in the national association of insurance commissioners' long-term care insurance model act and long-term care insurance model regulation, respectively, adopted as of 2001. The commission shall consider whether any subsequent amendments to the long-term care insurance model act or long-term care insurance model regulation adopted by the national association of insurance commissioners require amending of the uniform standards established by the commission for long-term care insurance products.
3. To receive and review in an expeditious manner products filed with the commission, and rate filings for disability income and long-term care insurance products, and give approval of those products and rate filings that satisfy the applicable uniform standard, where such approval shall have the force and effect of law and be binding on the compacting states to the extent and in the manner provided in the compact.
4. To receive and review in an expeditious manner advertisement relating to long-term care insurance products for which uniform standards have been adopted by the commission, and give approval to all advertisement that satisfies the applicable uniform standard. For any product covered under this compact, other than long-term care insurance products, the commission shall have the authority to require an insurer to submit all or any part of its advertisement with respect to that product for review or approval before use if the commission determines that the nature of the product is such that an advertisement of the product could have the capacity or tendency to mislead the public. The actions of the commission as provided in this section shall have the force and effect of law and shall be binding in the compacting states to the extent and in the manner provided in the compact.
5. To exercise its rulemaking authority and designate products and advertisement that may be subject to a self-certification process without the need for prior approval by the commission.
6. To adopt operating procedures pursuant to article VII of this compact that shall be binding in the compacting states to the extent and in the manner provided in the compact.
7. To bring and prosecute legal proceedings or actions in its name as the commission. The standing of any state insurance department to sue or be sued under applicable law shall not be affected.
8. To issue subpoenas requiring the attendance and testimony of witnesses and the production of evidence.
9. To establish and maintain offices.
10. To purchase and maintain insurance and bonds.
11. To borrow, accept or contract for services of personnel, including employees of a compacting state.
12. To hire employees, professionals or specialists, and elect or appoint officers, and to fix their compensation, define their duties and give them appropriate authority to carry out the purposes of the compact, and determine their qualifications and to establish the commission's personnel policies and programs relating to, among other things, conflicts of interest, rates of compensation and qualifications of personnel.
13. To accept any and all appropriate donations and grants of money, equipment, supplies, materials and services, and to receive, use and dispose of the same. The commission shall strive to avoid any appearance of impropriety.
14. To lease, purchase, accept appropriate gifts or donations of, or otherwise to own, hold, improve or use, any property, real, personal or mixed. The commission shall strive to avoid any appearance of impropriety.
15. To sell, convey, mortgage, pledge, lease, exchange, abandon or otherwise dispose of any property, real, personal or mixed.
16. To remit filing fees to compacting states as may be set forth in the bylaws, rules or operating procedures.
17. To enforce compliance by compacting states with rules, uniform standards, operating procedures and bylaws.
18. To provide for dispute resolution among compacting states.
19. To advise compacting states on issues relating to insurers domiciled or doing business in noncompacting jurisdictions, consistent with the purposes of the compact.
20. To provide advice and training to those personnel in state insurance departments responsible for product review, and to be a resource for state insurance departments.
21. To establish a budget and make expenditures.
22. To borrow money.
23. To appoint committees, including advisory committees comprising members, state insurance regulators, state legislators or their representatives, insurance industry and consumer representatives and other interested persons as may be designated in the bylaws.
24. To provide and receive information from, and to cooperate with, law enforcement agencies.
25. To adopt and use a corporate seal.
26. To perform other functions as may be necessary or appropriate to achieve the purposes of the compact consistent with the state regulation of the business of insurance.
Article V
Commission Organization
A. Each compacting state shall have and be limited to one member. Each member shall be qualified to serve in that capacity pursuant to applicable law of the compacting state. Any member may be removed or suspended from office as provided by the law of the state from which the member shall be appointed. Any vacancy occurring in the commission shall be filled in accordance with the laws of the compacting state wherein the vacancy exists. This section does not affect the manner in which a compacting state determines the election or appointment and qualification of its own commissioner.
B. Each member shall be entitled to one vote and shall have an opportunity to participate in the governance of the commission in accordance with the bylaws. Notwithstanding any provision in this compact to the contrary, no action of the commission with respect to the adoption of a uniform standard shall be effective unless two-thirds of the members vote in favor of the uniform standard.
C. The commission, by a majority of the members, shall prescribe bylaws to govern its conduct as may be necessary or appropriate to carry out the purposes, and exercise the powers, of the compact, including:
1. Establishing the fiscal year of the commission.
2. Providing reasonable procedures for appointing and electing members, as well as holding meetings, of the management committee.
3. Providing reasonable standards and procedures for:
(a) The establishment and meetings of other committees.
(b) Governing any general or specific delegation of any authority or function of the commission.
4. Providing reasonable procedures for calling and conducting meetings of the commission that consist of a majority of commission members, ensuring reasonable advance notice of each such meeting and providing for the right of citizens to attend each such meeting with enumerated exceptions designed to protect the public's interest, the privacy of individuals and insurers' proprietary information, including trade secrets. The commission may meet in camera only after a majority of the entire membership votes to close a meeting. As soon as practicable, the commission must make public a copy of the vote to close the meeting revealing the vote of each member with no proxy votes allowed and the votes taken during the meeting.
5. Establishing the titles, duties, authority and reasonable procedures for the election of the officers of the commission.
6. Providing reasonable standards and procedures for the establishment of the personnel policies and programs of the commission. Notwithstanding any civil service or other similar laws of any compacting state, the bylaws shall exclusively govern the personnel policies and programs of the commission.
7. Adopting a code of ethics to address permissible and prohibited activities of commission members and employees.
8. Providing a mechanism for winding up the operations of the commission and the equitable disposition of any surplus funds that may exist after the termination of the compact and after the payment or reserving of all of its debts and obligations.
D. The commission shall publish its bylaws in a convenient form and file a copy of the bylaws and any amendment to the bylaws with the appropriate agency or officer in each of the compacting states.
E. A management committee comprising no more than fourteen members shall be established as follows:
1. One member from each of the six compacting states with the largest premium volume for individual and group annuities, life, disability income, and long-term care insurance products, determined from the records of the national association of insurance commissioners for the prior year.
2. Four members from those compacting states with at least two percent of the market based on the premium volume described in paragraph 1 of this subsection, other than the six compacting states with the largest premium volume, selected on a rotating basis as provided in the bylaws.
3. Four members from those compacting states with less than two percent of the market, based on the premium volume described in paragraph 1 of this subsection, with one selected from each of the four zone regions of the national association of insurance commissioners as provided in the bylaws.
F. The management committee shall have such authority and duties as may be set forth in the bylaws, including:
1. Managing the affairs of the commission in a manner consistent with the bylaws and purposes of the commission.
2. Establishing and overseeing an organizational structure within, and appropriate procedures for, the commission to provide for the creation of uniform standards and other rules, the receipt and review of product filings, administrative and technical support functions, the review of decisions regarding the disapproval of a product filing and the review of elections made by a compacting state to opt out of a uniform standard. However, a uniform standard shall not be submitted to the compacting states for adoption unless approved by two-thirds of the members of the management committee.
3. Overseeing the offices of the commission.
4. Planning, implementing and coordinating communications and activities with other state, federal and local government organizations in order to advance the goals of the commission.
G. The commission shall elect annually officers from the management committee, with each having such authority and duties, as may be specified in the bylaws.
H. The management committee, subject to the approval of the commission, may appoint or retain an executive director for such period, on such terms and conditions and for such compensation as the commission may deem appropriate. The executive director shall serve as secretary to the commission, but shall not be a member of the commission. The executive director shall hire and supervise other staff as may be authorized by the commission.
I. A legislative committee comprising state legislators or their designees shall be established to monitor the operations of, and make recommendations to, the commission, including the management committee. However, the manner of selection and term of any legislative committee member shall be as set forth in the bylaws. Before the adoption by the commission of any uniform standard, revision to the bylaws, annual budget or other significant matter as may be provided in the bylaws, the management committee shall consult with and report to the legislative committee.
J. The commission shall establish two advisory committees, one of which shall comprise consumer representatives independent of the insurance industry, and the other comprising insurance industry representatives.
K. The commission may establish additional advisory committees as its bylaws may provide for the carrying out of its functions.
L. The commission shall maintain its corporate books and records in accordance with the bylaws.
M. The members, officers, executive director, employees and representatives of the commission shall be immune from suit and liability, either personally or in their official capacity, for any claim for damage to or loss of property or personal injury or other civil liability caused by or arising out of any actual or alleged act, error or omission that occurred, or that the person against whom the claim is made had a reasonable basis for believing occurred within the scope of commission employment, duties or responsibilities. This subsection does not protect any such person from suit or liability for any damage, loss, injury or liability caused by the intentional or wilful and wanton misconduct of that person.
N. The commission shall defend any member, officer, executive director, employee or representative of the commission in any civil action seeking to impose liability arising out of any actual or alleged act, error or omission that occurred within the scope of commission employment, duties or responsibilities, or that the person against whom the claim is made had a reasonable basis for believing occurred within the scope of commission employment, duties or responsibilities. This subsection does not prohibit that person from retaining the person's own counsel. Also, the actual or alleged act, error or omission may not have resulted from that person's intentional or wilful and wanton misconduct.
O. The commission shall indemnify and hold harmless any member, officer, executive director, employee or representative of the commission for the amount of any settlement or judgment obtained against that person arising out of any actual or alleged act, error or omission that occurred within the scope of commission employment, duties or responsibilities, or that such person had a reasonable basis for believing occurred within the scope of commission employment, duties or responsibilities. However, the actual or alleged act, error or omission may not have resulted from the intentional or wilful and wanton misconduct of that person.
Article VI
Commission Meeting and Acts
A. The commission shall meet and take such actions as are consistent with the provisions of this compact and the bylaws.
B. Each member of the commission shall have the right and power to cast a vote to which that compacting state is entitled and to participate in the business and affairs of the commission. A member shall vote in person or by such other means as provided in the bylaws. The bylaws may provide for members' participation in meetings by telephone or other means of communication.
C. The commission shall meet at least once during each calendar year. Additional meetings shall be held as set forth in the bylaws.
Article VII
Rules and Operating Procedures, Rulemaking Functions
and Opting Out of Uniform Standards
A. The commission shall adopt reasonable rules, including uniform standards, and operating procedures in order to effectively and efficiently achieve the purposes of this compact. If the commission exercises its rulemaking authority in a manner that is beyond the scope of the purposes of this compact, the action by the commission shall be invalid and have no force and effect.
B. Rules and operating procedures shall be made pursuant to a rulemaking process that conforms to the model state administrative procedure act of 1981 as amended, as may be appropriate to the operations of the commission. Before the commission adopts a uniform standard, the commission shall give written notice to the relevant state legislative committees in each compacting state responsible for insurance issues of its intention to adopt the uniform standard. The commission in adopting a uniform standard shall consider fully all submitted materials and issue a concise explanation of its decision.
C. A uniform standard shall become effective ninety days after its adoption by the commission or such later date as the commission may determine. A compacting state may opt out of a uniform standard as provided in this article. "Opt out" means any action by a compacting state to decline to adopt or participate in an adopted uniform standard. All other rules and operating procedures, and amendments thereto, shall become effective as of the date specified in each rule, operating procedure or amendment.
D. A compacting state may opt out of a uniform standard, either by legislation or rule adopted by the insurance department under the compacting state's administrative procedure act. If a compacting state elects to opt out of a uniform standard by rule, it must:
1. Give written notice to the commission no later than ten business days after the uniform standard is adopted, or at the time the state becomes a compacting state.
2. Find that the uniform standard does not provide reasonable protections to the citizens of the state, given the conditions in the state.
E. The commissioner shall make specific findings of fact and conclusions of law, based on a preponderance of the evidence, detailing the conditions in the state that warrant a departure from the uniform standard and determining that the uniform standard would not reasonably protect the citizens of the state. The commissioner must consider and balance the following factors and find that the conditions in the state and needs of the citizens of the state outweigh both:
1. The intent of the legislature to participate in, and the benefits of, an interstate agreement to establish national uniform consumer protections for the products subject to this compact.
2. The presumption that a uniform standard adopted by the commission provides reasonable protections to consumers of the relevant product.
F. A compacting state, at the time of its enactment of the compact, may prospectively opt out of all uniform standards involving long-term care insurance products by expressly providing for such opt out in the enacted compact, and such an opt out shall not be treated as a material variance in the offer or acceptance of any state to participate in the compact. Such an opt out shall be effective at the time of enactment of the compact by the compacting state and shall apply to all existing uniform standards involving long-term care insurance products and those subsequently adopted. Pursuant to this subsection, this state opts out of all uniform standards involving long-term care insurance products.
G. If a compacting state elects to opt out of a uniform standard, the uniform standard shall remain applicable in the compacting state electing to opt out until the opt out legislation is enacted into law or the regulation opting out becomes effective. Once the opt out of a uniform standard by a compacting state becomes effective as provided under the laws of that state, the uniform standard shall have no further force and effect in that state unless and until the legislation or regulation implementing the opt out is repealed or otherwise becomes ineffective under the laws of that state. If a compacting state opts out of a uniform standard after the uniform standard has been made effective in that state, the opt out shall have the same prospective effect as provided under article XIV of this compact for withdrawals.
H. If a compacting state has formally initiated the process of opting out of a uniform standard by regulation, and while the regulatory opt out is pending, the compacting state may petition the commission, at least fifteen days before the effective date of the uniform standard, to stay the effectiveness of the uniform standard in that state. The commission may grant a stay if it determines the regulatory opt out is being pursued in a reasonable manner and there is a likelihood of success. If a stay is granted or extended by the commission, the stay or extension thereof may postpone the effective date by up to ninety days, unless affirmatively extended by the commission. However, a stay may not be permitted to remain in effect for more than one year unless the compacting state can show extraordinary circumstances that warrant a continuance of the stay, including, the existence of a legal challenge that prevents the compacting state from opting out. A stay may be terminated by the commission on notice that the rulemaking process has been terminated.
I. Not later than thirty days after a rule or operating procedure is adopted, any person may file a petition for judicial review of the rule or operating procedure. However, the filing of such a petition shall not stay or otherwise prevent the rule or operating procedure from becoming effective unless the court finds that the petitioner has a substantial likelihood of success. The court shall give deference to the actions of the commission consistent with applicable law and shall not find the rule or operating procedure to be unlawful if the rule or operating procedure represents a reasonable exercise of the commission's authority.
Article VIII
Commission Records and Enforcement
A. The commission shall adopt rules establishing conditions and procedures for public inspection and copying of its information and official records, except information and records involving the privacy of individuals and insurers' trade secrets. The commission may adopt additional rules under which it may make available to federal and state agencies, including law enforcement agencies, records and information otherwise exempt from disclosure, and may enter into agreements with such agencies to receive or exchange information or records subject to nondisclosure and confidentiality provisions.
B. Except as to privileged records, data and information, the laws of any compacting state pertaining to confidentiality or nondisclosure shall not relieve any compacting state commissioner of the duty to disclose any relevant records, data or information to the commission. Disclosure to the commission does not waive or otherwise affect any confidentiality requirement. Except as otherwise expressly provided in this compact, the commission shall not be subject to the compacting state's laws pertaining to confidentiality and nondisclosure with respect to records, data and information in its possession. Confidential information of the commission shall remain confidential after the information is provided to any commissioner.
C. The commission shall monitor compacting states for compliance with duly adopted bylaws, rules, including uniform standards, and operating procedures. The commission shall notify any noncomplying compacting state in writing of its noncompliance with commission bylaws, rules or operating procedures. If a noncomplying compacting state fails to remedy its noncompliance within the time specified in the notice of noncompliance, the compacting state shall be deemed to be in default as set forth in article XIV of this compact.
D. The commissioner of any state in which an insurer is authorized to do business, or is conducting the business of insurance, shall continue to exercise the commissioner's authority to oversee the market regulation of the activities of the insurer in accordance with the provisions of the state's law. The commissioner's enforcement of compliance with the compact is governed by the following provisions:
1. With respect to the commissioner's market regulation of a product or advertisement that is approved or certified to the commission, the content of the product or advertisement shall not constitute a violation of the provisions, standards or requirements of the compact except on a final order of the commission, issued at the request of a commissioner after prior notice to the insurer and an opportunity for hearing before the commission.
2. Before a commissioner may bring an action for violation of any provision, standard or requirement of the compact relating to the content of an advertisement not approved or certified to the commission, the commission, or an authorized commission officer or employee, must authorize the action. Authorization under this paragraph does not require notice to the insurer, opportunity for hearing or disclosure of requests for authorization or records of the commission's action on such requests.
Article IX
Dispute Resolution
On the request of a member, the commission shall attempt to resolve any disputes or other issues that are subject to this compact and that may arise between two or more compacting states, or between compacting states and noncompacting states, and the commission shall adopt an operating procedure providing for resolution of such disputes.
Article X
Product Filing and Approval
A. Insurers and third-party filers seeking to have a product approved by the commission shall file the product with, and pay applicable filing fees to, the commission. This compact does not restrict or otherwise prevent an insurer from filing its product with the insurance department in any state wherein the insurer is licensed to conduct the business of insurance, and such filing shall be subject to the laws of the states where filed.
B. The commission shall establish appropriate filing and review processes and procedures pursuant to commission rules and operating procedures. The commission shall adopt rules to establish conditions and procedures under which the commission will provide public access to product filing information. In establishing such rules, the commission shall consider the interests of the public in having access to such information, as well as protection of personal medical and financial information and trade secrets, that may be contained in a product filing or supporting information.
C. Any product approved by the commission may be sold or otherwise issued in those compacting states for which the insurer is legally authorized to do business.
Article XI
Review of Commission Decisions Regarding Filings
A. Not later than thirty days after the commission has given notice of a disapproved product or advertisement filed with the commission, the insurer or third-party filer whose filing was disapproved may appeal the determination to a review panel appointed by the commission. The commission shall adopt rules to establish procedures for appointing the review panels and provide for notice and hearing. An allegation that the commission, in disapproving a product or advertisement filed with the commission, acted arbitrarily, capriciously or in a manner that is an abuse of discretion or otherwise not in accordance with the law, is subject to judicial review in accordance with article III, subsection D of this compact.
B. The commission shall have authority to monitor, review and reconsider products and advertisement subsequent to their filing or approval on a finding that the product does not meet the relevant uniform standard. Where appropriate, the commission may withdraw or modify its approval after proper notice and hearing, subject to the appeal process in subsection A of this article.
Article XII
Finance
A. The commission shall pay or provide for the payment of the reasonable expenses of its establishment and organization. To fund the cost of its initial operations, the commission may accept contributions and other forms of funding from the national association of insurance commissioners, compacting states and other sources. Contributions and other forms of funding from other sources shall be of such a nature that the independence of the commission concerning the performance of its duties shall not be compromised.
B. The commission shall collect a filing fee from each insurer and third-party filer filing a product with the commission to cover the cost of the operations and activities of the commission and its staff in a total amount sufficient to cover the commission's annual budget.
C. The commission's budget for a fiscal year shall not be approved until it has been subject to notice and comment as set forth in article VII of this compact.
D. The commission shall be exempt from all taxation in and by the compacting states.
E. The commission shall not pledge the credit of any compacting state, except by and with the appropriate legal authority of that compacting state.
F. The commission shall keep complete and accurate accounts of all its internal receipts, including grants and donations, and disbursements of all funds under its control. The internal financial accounts of the commission shall be subject to the accounting procedures established under its bylaws. The financial accounts and reports including the system of internal controls and procedures of the commission shall be audited annually by an independent certified public accountant. On the determination of the commission, but no less frequently than every three years, the review of the independent auditor shall include a management and performance audit of the commission. The commission shall make an annual report to the governor and legislature of the compacting states, which shall include a report of the independent audit. The commission's internal accounts shall not be confidential and such materials may be shared with the commissioner of any compacting state on request. Any work papers related to any internal or independent audit and any information regarding the privacy of individuals and insurers' proprietary information, including trade secrets, shall remain confidential.
G. A compacting state does not have any claim to or ownership of any property held by or vested in the commission or to any commission funds held under this compact.
Article XIII
Compacting States, Effective Date and Amendment
A. Any state is eligible to become a compacting state.
B. The compact shall become effective and binding on legislative enactment of the compact into law by two compacting states. The commission shall become effective for purposes of adopting uniform standards for, reviewing and giving approval or disapproval of products filed with the commission that satisfy applicable uniform standards only after twenty-six states are compacting states or, alternatively, by states representing greater than forty percent of the premium volume for life insurance, annuity, disability income and long-term care insurance products, based on records of the national association of insurance commissioners for the prior year. Thereafter, it shall become effective and binding as to any other compacting state on enactment of the compact into law by that state.
C. Amendments to the compact may be proposed by the commission for enactment by the compacting states. An amendment does not become effective and binding on the commission and the compacting states unless and until all compacting states enact the amendment into law.
Article XIV
Withdrawal, Default and Termination
A. Once effective, the compact shall continue in force and remain binding on each and every compacting state. A compacting state may withdraw from the compact by enacting a statute specifically repealing the statute that enacted the compact into law.
B. The effective date of withdrawal is the effective date of the repealing statute. The withdrawal shall not apply to any product filings approved or self-certified, or any advertisement of such products, on the date the repealing statute becomes effective, except by mutual agreement of the commission and the withdrawing state unless the approval is rescinded by the withdrawing state as provided in subsection E of this article.
C. The commissioner of the withdrawing state shall immediately notify the management committee in writing on the introduction of legislation repealing the compact in the withdrawing state.
D. The commission shall notify the other compacting states of the introduction of such legislation within ten days after its receipt of notice thereof.
E. The withdrawing state is responsible for all obligations, duties and liabilities incurred through the effective date of withdrawal, including any obligations, the performance of which extend beyond the effective date of withdrawal, except to the extent those obligations may have been released or relinquished by mutual agreement of the commission and the withdrawing state. The commission's approval of products and advertisement before the effective date of withdrawal shall continue to be effective and be given full force and effect in the withdrawing state, unless formally rescinded by the withdrawing state in the same manner as provided by the laws of the withdrawing state for the prospective disapproval of products or advertisement previously approved under state law.
F. Reinstatement following withdrawal of any compacting state shall occur on the effective date of the withdrawing state reenacting the compact.
G. If the commission determines that any compacting state has at any time defaulted in the performance of any of its obligations or responsibilities under the compact, the bylaws or adopted rules or operating procedures, after notice and hearing as set forth in the bylaws, all rights, privileges and benefits conferred by the compact on the defaulting state shall be suspended from the effective date of default as fixed by the commission. The grounds for default include failure of a compacting state to perform its obligations or responsibilities and any other grounds designated in commission rules. The commission shall immediately notify the defaulting state in writing of the defaulting state's suspension pending a cure of the default. The commission shall stipulate the conditions and the time period within which the defaulting state must cure its default. If the defaulting state fails to cure the default within the time period specified by the commission, the defaulting state shall be terminated from the compact and all rights, privileges and benefits conferred by the compact shall be terminated from the effective date of termination.
H. Product approvals by the commission or product self-certifications, or any advertisement in connection with such product, that are in force on the effective date of termination shall remain in force in the defaulting state in the same manner as if the defaulting state had withdrawn voluntarily under this article.
I. Reinstatement following termination of any compacting state requires a reenactment of the compact.
J. The compact dissolves effective on the date of the withdrawal or default of the compacting state that reduces membership in the compact to one compacting state. On the dissolution of the compact, the compact becomes null and void and shall be of no further force or effect, and the business and affairs of the commission shall be wound up and any surplus funds shall be distributed in accordance with the bylaws.
Article XV
Binding Effect of Compact and Other Laws
A. The compact does not prevent the enforcement of any other law of a compacting state, except as provided in subsection B of this article.
B. For any product approved or certified to the commission, the rules, uniform standards and any other requirements of the commission shall constitute the exclusive provisions applicable to the content, approval and certification of such products. For advertisement that is subject to the commission's authority, any rule, uniform standard or other requirement of the commission that governs the content of the advertisement shall constitute the exclusive provision that a commissioner may apply to the content of the advertisement. No action taken by the commission shall abrogate or restrict any of the following:
1. The access of any person to state courts.
2. Remedies available under state law related to breach of contract, tort or other laws not specifically directed to the content of the product.
3. State law relating to the construction of insurance contracts.
4. The authority of the attorney general of the state, including maintaining any actions or proceedings, as authorized by law.
C. All insurance products filed with individual states shall be subject to the laws of those states.
D. All lawful actions of the commission, including all rules and operating procedures adopted by the commission, are binding on the compacting states.
E. All agreements between the commission and the compacting states are binding in accordance with their terms.
F. On the request of a party to a conflict over the meaning or interpretation of commission actions, and on a majority vote of the compacting states, the commission may issue advisory opinions regarding the meaning or interpretation in dispute.
G. If any provision of the compact exceeds the constitutional limits imposed on the legislature of any compacting state, the obligations, duties, powers or jurisdiction sought to be conferred by that provision on the commission shall be ineffective as to that compacting state, and those obligations, duties, powers or jurisdiction shall remain in the compacting state and shall be exercised by the agency thereof to which those obligations, duties, powers or jurisdiction are delegated by law in effect at the time the compact becomes effective.
Article XVI
Severability and Construction
A. If any provision of this compact or its application to any person or circumstance is held invalid, the remainder of the compact or the application of the provision to other persons or circumstances is not affected.
B. This compact shall be liberally construed to effectuate its purposes.
Sec. 295. Section 25-519, Arizona Revised Statutes, is amended to read:
25-519. Regulatory entities; suspension of license
The following are subject to the requirements of section 25-518:
1. All boards established under title 32.
2. The superintendent deputy director of the financial institutions division of the department of insurance and financial institutions.
3. The registrar of contractors.
4. The department of public safety.
5. Boards and agencies that provide occupational, recreational and professional licenses or certificates pursuant to titles 3, 4, 5, 6, 8, 15, 17, 20, 36 and 41 and title 28, chapter 8.
Sec. 296. Section 32-1001, Arizona Revised Statutes, is amended to read:
32-1001. Definitions
In this chapter, unless the context otherwise requires:
1. "Claim" means an obligation for the payment of money or its equivalent and a sum or sums owed, due or asserted to be owed or due to another, for which a person is employed to demand payment and collect or enforce such payment, and includes:
(a) Obligations for the payment of money to another, in the form of conditional sales agreements, notwithstanding the personal property sold thereunder, for which payment is claimed or may be or is repossessed in lieu of payment.
(b) An obligation for the payment of money or its equivalent and a sum or sums owed, due or asserted to be owed or due which that is sold or assigned to a purchaser or assignee for which either:
(i) The final payment has not been tendered to the seller or assignor.
(ii) Title has not yet passed.
(iii) The purchaser or assignee has a right of recourse against the seller or assignor.
2. "Collection agency" means:
(a) All persons engaged directly or indirectly in soliciting claims for collection or in collection of claims owed, due or asserted to be owed or due.
(b) Any person who, in the process of collecting debts occurring in the operation of the person's own business, uses any name other than the person's own name, which would indicate that a third person is collecting or attempting to collect such debts.
3. "Department" means the department of insurance and financial institutions.
6. 4. "Superintendent" "deputy director" means the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions.
4. 5. "Financial institution" means a person who does business under any other law of this state or law of another state or the United States relating to banks, trust companies, savings and loan associations, credit unions and savings banks.
5. 6. "Person" means an individual, firm, partnership, association or corporation.
Sec. 297. Section 32-1004, Arizona Revised Statutes, is amended to read:
32-1004. Exemptions
A. The following persons are exempt from the provisions of this chapter when engaged in the regular course of their respective businesses but shall comply with the requirements of section 32-1051, paragraphs 2 through 7 and section 32-1055, subsection C and subsection D, paragraphs 1, 2, 3 and 5:
1. Attorneys-at-law.
2. A person regularly employed on a regular wage or salary in the capacity of credit person or a similar capacity, except as an independent contractor.
3. Banks, including trust departments of a bank, fiduciaries and financing and lending institutions.
4. Common carriers.
5. Title insurers, title insurance agents and abstract companies while doing an escrow business.
6. Licensed real estate brokers.
7. Employees of licensees under this chapter.
8. Substation payment offices employed by or serving as independent contractors or public utilities.
9. A person licensed pursuant to title 6, chapter 7.
10. A person licensed pursuant to title 6, chapter 9.
11. A person licensed pursuant to title 6, chapter 14, article 1.
12. A participant in a finance transaction in which a lender receives the right to collect commercial claims due the borrower by assignment, by purchase or by the taking of a security interest in those commercial claims.
13. An accounting, bookkeeping or billing service provider that complies with all of the following:
(a) Does not accept accounts that are contractually past due at the time of receipt.
(b) Does not initiate any contact with individual debtors except for the initial written notice of the amount owing and one written follow-up notice.
(c) Does not give or send to any debtor a written communication that requests or demands payment.
(d) Does not receive or have access to monies paid by debtors or their insurers.
(e) All communications with the debtors are done in the name of the creditor.
14. A person collecting claims owed, due or asserted to be owed or due to a financial institution the deposits of which are insured by an agency of the federal government, or any affiliate of the financial institution, if the person is related by common ownership or affiliated by corporate control with the financial institution and collects the claims only for the financial institution or any affiliate of the financial institution.
15. A person who is licensed pursuant to title 20, chapter 2, article 3, 3.1, 3.2, 3.3 or 3.5 and who is authorized to collect premiums under an insurance policy financed by a premium finance agreement as defined in section 6-1401.
16. A person that is licensed pursuant to title 20, chapter 2, article 9, that is authorized to act as an administrator for an insurer as defined in section 20-485 and that collects charges pursuant to section 20-485.09, subsection B.
B. For the purposes of subsection A, paragraph 12 of this section:
1. A transaction shall not be deemed a finance transaction if the primary purpose is to facilitate the collection of claims.
2. Commercial claim does not include an account arising from the purchase of a service or product intended for personal, family or household use.
C. For the purposes of subsection A, paragraph 13, subdivision (b) of this section, the initial written notice and follow-up notice may contain only the following information:
1. The name, address and telephone and telefacsimile numbers of the creditor.
2. The amount due and an itemization of that amount.
3. The date payment is due.
4. The address or place where payment is to be made.
5. If the payment is past due, that payment is past due.
D. For a person who is exempt under subsection A, paragraph 14 of this section, the superintendent deputy director shall investigate complaints of residents of this state relating to any violations of section 32-1051, paragraphs 2 through 7 or section 32-1055, subsection C or subsection D, paragraph 1, 2, 3 or 5 and may examine the books, accounts, claims and files of a person that relate to the complaint. A person who is exempt and who violates the provisions of section 32-1051, paragraphs 2 through 7 or section 32-1055, subsection C or subsection D, paragraph 1, 2, 3 or 5 is subject to the provisions of sections 6-132, 6-136 and 6-137.
Sec. 298. Section 32-1021, Arizona Revised Statutes, is amended to read:
32-1021. Original application for license; financial statement; bond; definition
A. A person desiring to conduct a collection agency shall make an original application to the department upon on forms prescribed by the superintendent deputy director setting forth verified information to assist the superintendent deputy director in determining the applicant's ability to meet the requirements of this chapter.
B. An application for an original or a renewal license shall be accompanied by:
1. A financial statement in the form provided in section 32-1022, showing the applicant's assets and liabilities and truly reflecting the applicant's net worth in cash or its equivalent.
2. A bond in the form provided in section 32-1022, computed on a base consisting of the gross annual income of the licensee generated from all business transacted in this state by the licensee during the preceding year, in the minimum amount as follows:
Base Minimum Bond
Not over $250,000 $10,000
$250,001 to $500,000 $15,000
$500,001 to $750,000 $25,000
$750,001 and over $35,000
C. The superintendent deputy director may require from all applicants additional information that the superintendent deputy director deems necessary in determining whether the applicant is entitled to the license sought.
D. For the purposes of this section, "all business transacted in this state" includes:
1. The collection of debts from debtors who reside in this state, regardless of where the licensee is located.
2. The collection of debts made from an office in this state, regardless of where the debtor resides.
3. The collection of debts made on behalf of creditors who reside in this state, regardless of where the debtor and the collection agent reside.
Sec. 299. Section 32-1022, Arizona Revised Statutes, is amended to read:
32-1022. Contents of financial statement; bond provisions
A. The financial statement required by section 32-1021 shall be sworn to by the applicant, if he the applicant is an individual, or by a partner, director, manager or treasurer in its behalf if the applicant is a partnership, corporation or incorporated association. The information in the financial statement shall be confidential and is not a public record.
B. The bond shall run to the people of the state and shall be executed and acknowledged by the applicant as principal and by a corporation, licensed by this state to transact fidelity and surety insurance business, as surety. The bond shall be continuous in form and shall remain in full force and effect at all times while holding a license. The bond shall be conditioned that the applicant, within thirty days from after the last day of the month in which a collection is made, shall make an account of and pay to the client the proceeds collected for him the client by the applicant, less charges for collection in accordance with the agreement between the applicant and client, but when the amount due the client is less than five dollars $5, payment may be deferred for an additional thirty days.
C. Any surety company intending to withdraw as surety of any licensee shall give sixty days' notice of such intention to the superintendent deputy director, which notice shall be by registered mail and shall also give sixty days' notice by registered mail to the licensee addressed to his the licensee's last known address. When a surety shall for any cause cancel the bond of any licensee, the superintendent deputy director shall immediately notify such licensee by registered mail addressed to his the licensee's last known address as shown by the files of the department. The license of any licensee shall be void unless, prior to the termination, a new bond has been filed with the department. A licensee changing his the licensee's surety shall file a new bond with the department with a surety on the new bond meeting the qualifications of this section.
D. Notwithstanding section 35-155, in lieu of the bond described in this section, an applicant for a license or renewal of a license may deposit with the superintendent deputy director a deposit in the form of cash or alternatives to cash in the amount prescribed under section 32-1021. The superintendent deputy director may accept any of the following as an alternative to cash:
1. Certificates of deposit or investment certificates which that are payable or assigned to the state treasurer, issued by banks doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.
2. Certificates of deposit, investment certificates or share accounts which that are payable or assigned to the state treasurer, issued by a savings and loan association or savings bank doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.
3. Certificates of deposit, investment certificates or share accounts which that are payable or assigned to the state treasurer, issued by a credit union doing business in this state and fully insured by the national credit union administration or any successor institution.
E. The superintendent deputy director shall deposit the cash or alternative to cash received under this section with the state treasurer. The state treasurer shall hold the cash or alternatives to cash in the name of this state to guarantee the faithful performance of all legal obligations of the person required to post bond pursuant to section 32-1021, subsection B. The person is entitled to receive any accrued interest earned from the alternatives to cash. The state treasurer may impose a fee to reimburse the state treasurer for administrative expenses. The fee shall not exceed ten dollars $10 for each cash or alternative to cash deposit and shall be paid by the applicant for a license or renewal of a license. The state treasurer may prescribe rules relating to the terms and conditions of each type of security provided by this section.
F. In addition to such other terms and conditions as the superintendent deputy director prescribes by rule or order, the principal amount of the deposit shall be released only on written authorization of the superintendent deputy director or on the order of a court of competent jurisdiction. The principal amount of the deposit shall not be released before the expiration of three years from after the first to occur of any of the following:
1. The date of substitution of a bond for a cash alternative.
2. The surrender of the license.
3. The revocation of the license.
4. The expiration of the license.
G. A suit may not be commenced on a bond or cash or alternatives to cash later than three years following the act or acts on which the suit is based, except that for claims of fraud or mistake, the period of limitations shall be measured as prescribed in section 12-543, paragraph 3.
Sec. 300. Section 32-1023, Arizona Revised Statutes, is amended to read:
32-1023. Qualifications of applicants
A. An applicant for a license issued under this chapter shall:
1. Be a citizen of the United States and be of good moral character.
2. Not have been convicted of a crime involving moral turpitude.
3. Not have defaulted on payment of money collected or received for another.
4. Not have been a former licensee under the provisions of this chapter whose license was suspended or revoked and not subsequently reinstated.
B. If the applicant for a license is a firm, partnership, association or corporation, the qualifications required by subsection A of this section shall be required of the individual in active management of the firm, partnership, association or corporation.
C. When a licensed agency ceases to be under the active management of a qualified person, as defined in rules, notice of this fact shall be given to the superintendent deputy director within ten days. The licensee shall have ninety days after the termination of the services of the acting manager to replace the qualified person and notify the superintendent deputy director of the qualified replacement. If the agency is not placed under the active management of a new qualified person and notice thereof is not given to the superintendent deputy director within the ninety-day period, the license of the agency expires unless a provisional license has been granted under the provisions of section 32-1027.
Sec. 301. Section 32-1024, Arizona Revised Statutes, is amended to read:
32-1024. Licensing out-of-state collection agents
The superintendent deputy director shall issue a license to operate a collection agency to a person who holds and presents with the person's application a valid and subsisting license to operate a collection agency issued by another state or an agency of another state if:
1. Requirements for securing the license were, at the time of issuance, substantially the same or equal to requirements imposed by this chapter.
2. The state concerned extends reciprocity under similar circumstances to licensed collection agents of this state.
3. The application is accompanied by the fees and financial and bonding requirements set forth in this chapter.
Sec. 302. Section 32-1025, Arizona Revised Statutes, is amended to read:
32-1025. Annual renewal of license; suspension; expiration
A. Except as provided in section 32-4301, a person desiring to secure renewal of a collection agency license shall file a financial statement, make a renewal application to the department and pay the fees prescribed in section 6-126 not later than January 1 of each year on forms prescribed by the superintendent deputy director setting forth verified information to assist the superintendent deputy director in determining whether or not the applicant is in default of or in violation of the terms of this chapter and whether the applicant is still meeting the requirements of this chapter. If the renewal applicant is unable to make a financial statement at the time of filing the application, the applicant may make a written request for an extension of time to file such financial report, and if the extension is granted the applicant shall file a financial statement no not later than March 1.
B. Licenses that are not renewed on or before January 1 are suspended. A licensee may renew a suspended license by submitting to the department the fees prescribed in section 6-126 along with a renewal application and any applicable late fee, as may be determined by the superintendent deputy director by rule, before January 31. Licenses that are not renewed on or before January 31 expire.
Sec. 303. Section 32-1026, Arizona Revised Statutes, is amended to read:
32-1026. Issuance of licenses
A. On receipt of an original application accompanied by the fees prescribed in section 6-126 and the financial statement and bond required by this chapter, the superintendent deputy director shall investigate the qualifications of the applicant and, if he the applicant meets the qualifications of this chapter, shall approve the application. If the application is approved, the license shall be promptly issued to the applicant.
B. A license issued under the provisions of this chapter shall not be transferable or assignable and control of a license may not be acquired through a stock purchase or other device without the prior written consent of the superintendent deputy director. Consent shall not be given if the superintendent deputy director finds that the acquiring person does not meet the qualifications of this chapter. For purposes of this subsection, "control" means the power to vote more than twenty per cent percent of the outstanding voting shares of a licensed corporation, partnership, association or trust.
Sec. 304. Section 32-1027, Arizona Revised Statutes, is amended to read:
32-1027. Issuance of provisional license for limited purposes
In the event of the death of an individual licensee, dissolution of a licensee partnership by death or operation of law, or termination of employment of the active manager if the licensee is a firm, partnership, association or corporation, if it is shown that the financial and bonding requirements of this chapter have been met, the superintendent deputy director shall issue without fee a provisional license to the personal representative of the deceased or his the deceased's appointee, to the surviving partners, or to the firm, association or corporation, as the case may be, which shall be valid for the following purposes only and expire at the following times:
1. A provisional license issued to a personal representative or his the personal representative's appointee shall expire one year from the date of issuance and shall not be subject to renewal. Authority of the provisional licensee shall be limited to those activities deemed necessary to wind up the business of the former licensee.
2. Other provisional licenses shall expire three months from after the date of issuance unless the provisional licensee within such period can qualify for a full license.
Sec. 305. Section 32-1053, Arizona Revised Statutes, is amended to read:
32-1053. Denial, revocation or suspension of license
A. The superintendent deputy director may deny a license to a person or suspend or revoke a license pursuant to title 41, chapter 6, article 10 if the superintendent deputy director finds that an applicant or licensee:
1. Is insolvent as defined in section 47-1201.
2. Has shown that the applicant or licensee is not a person of honesty, truthfulness or good character.
3. Has violated any applicable law, rule or order.
4. Has been convicted in any state of any felony or other crime involving breach of trust or dishonesty.
5. Has had an order entered against the applicant or licensee by an administrative agency of this state, the federal government or any other state of the United States and that order is based on conduct involving fraud, deceit or misrepresentation by the licensee or applicant.
6. Has made a material misstatement or omission on the application for a license or on any document required to be filed with the superintendent deputy director.
B. It is sufficient cause for the denial, suspension or revocation of a license if an officer, director, partner, employee or controlling person of the collection agency has acted or failed to act in a manner that would be cause for denial, suspension or revocation of a license. For purposes of this subsection, "controlling person" means a person who owns more than a twenty per cent percent equity interest in the collection agency and has the power to actively participate in the conduct of the collection agency.
Sec. 306. Section 32-3601, Arizona Revised Statutes, is amended to read:
32-3601. Definitions
In this chapter, unless the context otherwise requires:
1. "Appraisal" or "real estate appraisal" means a statement that is independently and impartially prepared by an individual setting forth an opinion as to the market value of real property as of a specific date and supported by the presentation and analysis of relevant market information.
2. "Appraisal assignment" means an engagement for which a real estate appraiser is employed or retained to act, or would be perceived by third parties or the public in acting, as a disinterested third party in rendering an unbiased analysis, opinion or conclusion relating to the nature, quality, value or utility of specified interests in or aspects of identified real estate.
3. "Appraisal foundation" means the appraisal foundation incorporated as an Illinois nonprofit corporation on November 30, 1987.
4. "Appraisal report" means any communication, written or oral, of an appraisal.
5. "Appraisal review" means the act of reviewing or the report that follows a review of an appraisal assignment or appraisal report in which a real estate appraiser forms an opinion as to the adequacy and appropriateness of the report being reviewed.
6. "Appraisal standards board" means the appraisal standards board appointed by the board of trustees of the appraisal foundation to develop, interpret and amend the uniform standards of professional appraisal practice.
7. "Appraisal subcommittee" means the subcommittee of the federal financial institutions examination council created pursuant to 12 United States Code section 3310 and chapter 34A, as amended.
8. "Appraiser qualifications board" means the appraiser qualifications board that is appointed by the board of trustees of the appraisal foundation to establish the minimum education, experience and examination requirements for real estate appraisers.
9. "Complex one to four residential units" means property that is atypical for the marketplace. Atypical factors may include architectural style, age of improvements, size of improvements, size of lot, neighborhood land use, potential environmental hazard liability, leasehold interests, limited readily available comparable sales data or other unusual factors.
10. "Course approval" means the act of the superintendent deputy director reviewing course materials to form an opinion as to the adequacy and appropriateness of the course for licensing pursuant to section 32-3613, certification pursuant to section 32-3614 and continuing education as prescribed in section 32-3625 in accordance with the appraiser qualifications board and this chapter.
11. "Department" means the department of insurance and financial institutions.
22. 12. "Superintendent" "deputy director" means the superintendent deputy director of the financial institutions division of the department.
12. 13. "Federal financial institutions examination council" means that agency of the federal government created pursuant to 12 United States Code chapters 34 and 34A, as amended.
13. 14. "Federally related transaction" means any real estate related financial transaction that a federal financial institution's regulatory agency or the resolution trust corporation engages in, contracts for or regulates and that requires an appraisal.
14. 15. "Property tax agent" means an individual who is designated by a person or is an employee of an entity designated as an agent pursuant to section 42-16001, who acts on behalf of a person who owns, controls or possesses property valued by a county assessor and who receives a fee for the analysis of any matter relating to the review of the valuation of the person's property before the assessor. Property tax agent does not include a person who is admitted to practice law in this state, an employee of the person owning, controlling or possessing the property or an employee of an entity designated pursuant to section 42-16001, if the employee is performing a secretarial, clerical or administrative support function.
15. 16. "Real estate" means an identified parcel or tract of land, including improvements, if any.
16. 17. "Real estate related financial transaction" means any transaction involving the sale of, lease of, purchase of, investment in or exchange of real property, including interests in property or the financing of property, the refinancing of real property or interests in real property and the use of real property or interests in property as security for a loan or investment, including mortgage-backed securities.
17. 18. "Real property" means one or more defined interests, benefits and rights inherent in the ownership of real estate.
18. 19. "Registered trainee appraiser" means a person who meets both of the following requirements:
(a) Is registered with the superintendent deputy director and meets the appraiser qualifications board's qualifications for trainee appraisers to perform appraisal services only under the direct supervision of a certified appraiser who has met the minimum criteria to be a supervisory appraiser.
(b) Accepts assignments only from the registered trainee appraiser's supervisory appraiser.
19. 20. "Review appraiser" means a person who engages in the activity of reviewing and evaluating the appraisal work of others from the perspective of an appraiser, generally for compensation as a separate skill. This includes the function of reviewing an appraisal report or a file memorandum setting forth the results of the review process.
20. 21. "Standards of professional appraisal practice" means the uniform standards of professional appraisal practice promulgated by the appraisal standards board of the appraisal foundation.
21. 22. "State-licensed or state-certified appraiser" means a person who develops and communicates appraisals and who holds a current, valid license or certificate issued under this chapter.
23. "Supervisory appraiser" means a state-certified appraiser who has a supervisory appraiser designation and who:
(a) Has been in good standing for the last three years in the jurisdiction in which the registered trainee appraiser practices.
(b) Has not been disciplined in a manner that affects the supervisory appraiser's eligibility to engage in appraisal practice in any jurisdiction in the last three years.
(c) Directly supervises registered trainee appraisers by doing the following:
(i) Accepting responsibility for an appraisal by signing and certifying that the appraisal complies with the uniform standards of professional appraisal practice.
(ii) Reviewing and signing all registered trainee appraiser reports.
24. "Value" means the monetary relationship between properties and those who buy, sell or use those properties.
Sec. 307. Section 32-3605, Arizona Revised Statutes, is amended to read:
32-3605. Deputy director; duties; powers; immunity
A. The superintendent deputy director shall adopt rules in aid or in furtherance of this chapter.
B. The superintendent deputy director shall:
1. Adopt standards for appraisal practice that is regulated by this chapter. The standards at a minimum shall be equivalent to the standards of professional appraisal practice.
2. In prescribing criteria for certification, adopt criteria that at a minimum are equal to the minimum criteria for certification adopted by the appraiser qualifications board.
3. In prescribing criteria for licensing and registration, adopt criteria that at a minimum are equal to the minimum criteria for licensing and registration adopted by the appraiser qualifications board.
4. Further define by rule with respect to state-licensed or state-certified appraisers appropriate and reasonable educational experience, appraisal experience and equivalent experience that meets the statutory requirement of this chapter.
5. Adopt the national examination as approved by the appraiser qualifications board for state-certified appraisers.
6. Adopt the national examination as approved by the appraiser qualifications board for state-licensed appraisers.
7. Establish administrative procedures for:
(a) Processing applications for licenses and certificates, including registration certificates.
(b) Approving or disapproving applications for registration, licensure and certification.
(c) Issuing licenses and certificates, including registration certificates.
8. Define by rule, with respect to registered trainee appraisers and state-licensed and state-certified appraisers, the continuing education requirements for the renewal of licenses or certificates that satisfy the statutory requirements provided in this chapter.
9. Periodically review the requirements for the development and communication of appraisals provided in this chapter and adopt rules explaining and interpreting the requirements.
10. Define and explain by rule each stage and step associated with the administrative procedures for the disciplinary process pursuant to this chapter, including:
(a) Prescribing minimum criteria for accepting a complaint against a registered trainee appraiser or a licensed or certified appraiser. The superintendent deputy director may not consider a complaint for administrative action if the complaint either:
(i) Relates to an appraisal that was completed more than five years before the complaint was submitted to the superintendent deputy director or more than two years after final disposition of any judicial proceeding in which the appraisal was an issue, whichever period of time is greater.
(ii) Is filed against a person who is a staff person of the department and the person is a licensed or certified appraiser and the complaint is against the person's license or certificate and relates to the person's performance of duties. This item applies to a contract investigator who is under contract with the department for the performance of an appraisal review as defined by the uniform standards of professional appraisal practice.
(b) Defining the process and procedures used in investigating the allegations of the complaint. The superintendent deputy director shall consolidate complaints that are filed within a six-month period of time if the complaints are against the same appraiser, relate to the same appraisal and property and are filed by an entity that is subject to the mandatory reporting provisions of the Dodd-Frank Wall Street reform and consumer protection act (P.L. 111-203; 124 Stat. 1376). Complaints that are consolidated pursuant to this subdivision must be considered and adjudicated as one complaint.
(c) Defining the process and procedures used in hearings on the complaint, including a description of the rights of the superintendent deputy director and any person who is alleged to have committed the violation.
(d) Establishing criteria to be used in determining the appropriate actions for violations.
11. Communicate information that is useful to the public and appraisers relating to actions for violations.
12. Issue decrees of censure, fix periods and terms of probation and suspend and revoke licenses and certificates pursuant to the disciplinary proceedings provided for in section 32-3631.
13. At least monthly transmit to the appraisal subcommittee a listing of all appraisal management companies that have received a state certificate of registration in accordance with this chapter.
14. Investigate and assess potential law or order violations and discipline, suspend, terminate or deny registration renewals of appraisal management companies that violate laws or orders. The superintendent deputy director shall report violations of appraisal-related laws or orders and disciplinary and enforcement actions to the appraisal subcommittee.
15. Transmit the national registry fee collected pursuant to section 32-3607 to the appraisal subcommittee.
16. Establish the fees in accordance with section 32-3607.
17. Receive applications for state licenses and certificates.
18. Maintain a registry of the names and addresses of persons who are registered, licensed or certified under this chapter.
19. Retain records and all application materials submitted to the superintendent deputy director.
20. Publish on the department's website a current list of supervisory appraisers and registered trainee appraisers.
21. Perform such other functions and duties as may be necessary to carry out this chapter.
C. The superintendent deputy director may accept and spend federal monies and grants, gifts, contributions and devises from any public or private source to assist in carrying out the purposes of this chapter. These monies do not revert to the state general fund at the end of the fiscal year.
D. The superintendent deputy director may impose a civil penalty penalties pursuant to section 32-3631.
Sec. 308. Section 32-3607, Arizona Revised Statutes, is amended to read:
32-3607. Fees; use of credit cards; appraisal subcommittee fund
A. The superintendent deputy director shall charge and collect fees that are sufficient to fund the activities necessary to carry out this chapter. These The fees include:
1. An application fee for licensure or certification of not more than four hundred dollars $400.
2. An application fee for a resident temporary license or certificate of not more than four hundred dollars $400.
3. An examination fee in an amount to be determined by the superintendent deputy director.
4. A fee for renewal of a license, certificate or resident temporary license or certificate of not more than four hundred twenty-five dollars $425.
5. A delinquent renewal fee in addition to the renewal fee of not more than twenty-five dollars $25.
6. A two-year national registry fee of not to exceed the actual cost of twice the current annual national registry fee for a state-licensed or state-certified appraiser.
7. A one-year national registry fee not to exceed the actual cost of the current annual national registry fee for appraisal management companies.
8. A nonresident temporary licensure or certification fee of not more than one hundred fifty dollars $150.
9. A course approval fee of not more than five hundred dollars $500.
10. An application fee to be a registered trainee appraiser in an amount to be determined by the superintendent deputy director.
B. If the appraisal subcommittee raises the national registry fee during the second year of a biennial license or certificate, state-licensed and state-certified appraisers shall pay the additional national registry fee on demand by the superintendent deputy director. Failure to pay the additional fee within thirty days of after notice by the superintendent deputy director subjects the license or certificate holder to a penalty of twice the amount owed but not to exceed twenty dollars $20. The superintendent deputy director shall not renew a license or certificate until all outstanding obligations of the license or certificate holder are paid.
C. Pursuant to section 35-142, subsection J, the superintendent deputy director may accept a credit card or debit card for the payment of fees established by this section. The superintendent deputy director may impose a convenience fee for payment made pursuant to this subsection in an amount to be determined by the superintendent deputy director.
D. The appraisal subcommittee fund is established consisting of national registry fee monies collected pursuant to this section. The department shall administer the fund. The department shall use the monies to promptly remit the national registry fees to the appraisal subcommittee for state-licensed appraisers, state-certified appraisers, registered appraisal management companies or appraisal management companies that operate as a subsidiary of a federally regulated financial institution.
Sec. 309. Section 32-3609, Arizona Revised Statutes, is amended to read:
32-3609. Confidential records
Except as otherwise provided by law, the following records are confidential:
1. Questions contained in any examination administered by or for the superintendent deputy director or in any examination submitted to the superintendent deputy director for course approval.
2. Questions asked and the answers of individual examinees, except that the superintendent deputy director shall provide the grades of each examinee for public inspection and copying.
3. Appraisal reports or appraisal reviews and supporting documentation deemed confidential under the uniform standards of professional appraisal practice.
4. All documents associated with a complaint as prescribed by section 6-129.
Sec. 310. Title 32, chapter 36, article 1, Arizona Revised Statutes, is amended by adding section 32-3610, to read:
32-3610. Uniform standards of professional appraisal practice; state standards; exception
The uniform standards of professional appraisal practice as published by the appraisal standards board are the standards for the appraisal practice in this state unless the deputy director objects.
Sec. 311. Section 32-3611, Arizona Revised Statutes, is amended to read:
32-3611. Registration, licensure and certification process
A. Applications for original registration, licensure or certification, renewals and examinations shall be made in writing to the superintendent deputy director on forms approved by the superintendent deputy director.
B. Appropriate fees, as fixed by the superintendent deputy director pursuant to section 32-3607, shall accompany all applications for original registration, licensure or certification, renewal and examination.
C. At the time of filing an application for registration, licensure or certification, each applicant shall sign a pledge to comply with the standards set forth in this chapter and shall state that the applicant understands the types of misconduct for which disciplinary proceedings may be initiated against a registered trainee appraiser or a state-licensed or state-certified appraiser, as set forth in this chapter.
D. Except as otherwise provided in this chapter, the superintendent deputy director shall require such other proof and request such documents, through the application or otherwise, as the superintendent deputy director deems necessary for the interests of the public and to verify the honesty, truthfulness, reputation and competency of the applicant and shall require that the applicant for registration, licensure or certification:
1. Be at least eighteen years of age and a citizen of the United States or a qualified alien as defined in 8 United States Code section 1641.
2. Not have had a license or certificate denied pursuant to this chapter within one year immediately preceding the application.
3. Not have had a license or certificate revoked pursuant to this chapter within five years immediately preceding the application.
4. State whether or not the applicant has ever been convicted in a court of competent jurisdiction in this or any other state of a felony or of forgery, theft, extortion or conspiracy to defraud or any other crime involving dishonesty or moral turpitude.
E. Applications for registration, licensure or certification by persons who are charged or under indictment for fraud involving appraisal of real property may be denied pending final disposition of the charge or indictment. On final disposition, the superintendent deputy director shall review the proceedings and act on the application.
Sec. 312. Section 32-3613, Arizona Revised Statutes, is amended to read:
32-3613. Application and qualification requirements for licensure
A. An application for licensure and examination shall be made on forms as prescribed by the superintendent deputy director and be accompanied by the required fees.
B. Persons filing for licensure shall meet the minimum criteria for licensure established by the superintendent deputy director under section 32-3605, subsection B, paragraph 3.
C. A person may not be a state-licensed appraiser unless the person has achieved a passing grade on the national examination approved by the appraiser qualifications board.
Sec. 313. Section 32-3614, Arizona Revised Statutes, is amended to read:
32-3614. Application and qualification requirements for certification
A. An application for certification and examination shall be made on forms prescribed by the superintendent deputy director and be accompanied by the required fees.
B. Persons filing for certification shall meet the minimum criteria for certification established by the superintendent deputy director under section 32-3605, subsection B, paragraph 2 and section 32-3615.
C. A person may not be a state-certified real estate appraiser unless the person has achieved a passing grade on the national examination approved by the appraiser qualifications board.
D. Persons presenting evidence showing successful completion of the requirements of this section shall be recognized as having met the qualifications as a state-certified real estate appraiser.
Sec. 314. Section 32-3614.01, Arizona Revised Statutes, is amended to read:
32-3614.01. Application for registered trainee appraiser certificates
An application for a registered trainee appraiser certificate shall be made on a form prescribed by the superintendent deputy director and be accompanied by the fees prescribed by section 32-3607. An applicant must complete education requirements as outlined by the appraiser qualifications board. The applicant must submit proof that the applicant has successfully passed the required courses that are specifically oriented to the requirements and responsibilities of supervisory appraisers and trainee appraisers and that comply with the specifications established by the appraiser qualifications board.
Sec. 315. Section 32-3614.02, Arizona Revised Statutes, is amended to read:
32-3614.02. Application for supervisory appraiser designation
An application for a supervisory appraiser designation shall be made on a form prescribed by the superintendent deputy director. The applicant must submit proof of successful completion of a course that is specifically oriented to the requirements and responsibilities of supervisory appraisers and trainee appraisers and that complies with the specifications established by the appraiser qualifications board.
Sec. 316. Section 32-3615, Arizona Revised Statutes, is amended to read:
32-3615. Experience requirement for licensure or certification
A. Each applicant for licensure or certification shall have experience that was acquired within ten years immediately preceding the filing of the application for licensure or certification.
B. Each applicant for licensure or certification shall furnish under oath a detailed listing of the real estate or other appraisal reports, review reports or filed memoranda for each year for which experience is claimed by the applicant. On request, the applicant shall make available to the superintendent deputy director for examination copies of appraisal reports that the applicant has prepared in the course of the applicant's appraisal experience.
Sec. 317. Section 32-3617, Arizona Revised Statutes, is amended to read:
32-3617. Nonresident temporary licensure or certification
A. Every applicant for nonresident temporary licensure or certification under this chapter who is not a resident of this state shall submit, with the application for nonresident temporary licensure or certification, an irrevocable consent that service of process on the applicant may be made by delivery of the process to the secretary of state if, in an action against the applicant in a court of this state arising out of the applicant's activities as a nonresident temporary state-licensed or state-certified appraiser, the plaintiff cannot effect, in the exercise of due diligence, personal service on the applicant.
B. A nonresident of this state who has complied with subsection A of this section may obtain a nonresident temporary license or certificate as a nonresident temporary state-licensed or state-certified appraiser by conforming to all of the requirements of this chapter relating to state-licensed or state-certified appraisers.
C. A nonresident of this state who is licensed or certified in another state is entitled to nonresident temporary licensure or certification by the superintendent deputy director, which is valid until the completion of each appraisal assignment but not for a period of more than one year from after the date of issuance, if:
1. The nonresident appraiser's business in this state is of a temporary nature.
2. The nonresident appraiser applies with the superintendent deputy director on forms prescribed by the superintendent deputy director.
3. The nonresident appraiser pays the nonresident temporary licensure or certification fee required by the superintendent deputy director.
D. The superintendent deputy director shall adopt rules in furtherance of this section to avoid the abuse of the temporary practice rights in this state.
Sec. 318. Section 32-3618, Arizona Revised Statutes, is amended to read:
32-3618. Reciprocity
Reciprocity shall be granted to an appraiser if all of the following conditions apply:
1. The appraiser holds a credential from a state that is in compliance with 12 United States Code sections 3310, 3332, 3333, 3335, 3338, 3339, 3341, 3342, 3345, 3346, 3347, 3348, 3350, 3351, 3353, 3354 and 3355.
2. The credential requirements for the state described in paragraph 1 of this section meet or exceed those of this state.
3. The appraiser has completed an application for licensure or certification on a form as prescribed by the superintendent deputy director and submitted the fees prescribed pursuant to section 32-3607.
Sec. 319. Section 32-3619, Arizona Revised Statutes, is amended to read:
32-3619. Renewal of license or certificate; fees
A. Except as otherwise provided in this section and in section 32-4301, to renew a registration certificate as a registered trainee appraiser or a license or certificate as a state-licensed or state-certified appraiser, the holder of a current, valid license or certificate shall apply and pay the prescribed fee to the superintendent deputy director not earlier than ninety days nor later than thirty days before the license or certificate expires. With the application for renewal, the registered trainee appraiser or the state-licensed or state-certified appraiser shall present evidence in the form prescribed by the superintendent deputy director of having completed the continuing education requirements for renewal specified in section 32-3625.
B. The superintendent deputy director may accept a renewal application after the expiration date and within ninety days of the date of expiration but shall assess a delinquent renewal fee in addition to the renewal fee.
C. An appraiser or registered trainee appraiser who fails to seek renewal within the time period specified in subsection A or B of this section must reapply for licensure or certification and meet all of the requirements of this chapter.
D. An appraiser or registered trainee appraiser shall not engage in, advertise or purport to engage in real estate appraisal activity in this state after a license or certificate has expired and before the renewal of the expired license or certificate except as provided in section 41-1092.11.
Sec. 320. Section 32-3620, Arizona Revised Statutes, is amended to read:
32-3620. Basis for denial of a license or certificate
A. The superintendent deputy director may deny the initial issuance or renewal of a license or certificate as a registered trainee appraiser, a supervisory appraiser or a state-licensed or state-certified appraiser to an applicant who has been convicted of a felony or on any of the grounds prescribed in this chapter.
B. To assist in determining whether grounds exist to deny the initial issuance or renewal of a license or certificate to an applicant, the superintendent deputy director shall require the applicant to apply for a valid fingerprint clearance card issued pursuant to section 41-1758.03.
C. A person who is denied the issuance of a license or certificate may request, and if requested shall receive, a hearing in accordance with title 41, chapter 6, article 10.
Sec. 321. Section 32-3621, Arizona Revised Statutes, is amended to read:
32-3621. Addresses; telephone numbers; email addresses; notification of change
A. Each registered trainee appraiser or state-licensed or state-certified appraiser shall advise the superintendent deputy director of the address of the person's principal place of business and all other addresses at which the person is currently engaged in the business of preparing real property appraisal reports.
B. Every registered trainee appraiser or state-licensed or state-certified appraiser shall notify the superintendent deputy director of the person's current residence address. Residence addresses on file with the superintendent deputy director are exempt from disclosure as public records.
C. Every registered trainee appraiser or state-licensed or state-certified appraiser shall provide the person's e-mail email address if one exists and a daytime telephone number to the superintendent deputy director.
D. If a registered trainee appraiser or a state-licensed or state-certified appraiser changes the person's place of business or residence, e-mail email address or daytime telephone number, the person shall give the superintendent deputy director written notification of the change within ten days after the change.
Sec. 322. Section 32-3622, Arizona Revised Statutes, is amended to read:
32-3622. Licenses and certificates
A. A license or certificate issued under this chapter shall be signed on behalf of the superintendent deputy director and shall bear the license or certificate number assigned by the superintendent deputy director.
B. Each state-licensed or state-certified appraiser shall place the appraiser's license or certificate number adjacent to or immediately below the title "state-licensed appraiser" or "state-certified appraiser", and the number shall be included in an appraisal report or in a contract or other instrument used by the license or certificate holder in conducting appraisal activities.
Sec. 323. Section 32-3624, Arizona Revised Statutes, is amended to read:
32-3624. Professional corporations and partnerships; appraisal assistance
A corporation, partnership or other business entity may provide appraisal services in connection with transactions related to this chapter if the appraisal is prepared by individuals who are licensed or certified in accordance with this chapter. An individual who is not a state-licensed or state-certified appraiser may assist provide clerical or administrative assistance in the preparation of an appraisal document. An individual who is a registered trainee appraiser may be involved in developing and reporting the appraisal if both of the following apply:
1. The assistant registered trainee appraiser is under the direct supervision of a state-licensed or state-certified appraiser as prescribed in section 32-3612, paragraph 4.
2. The final appraisal document is approved and the certification is signed by an individual who is licensed a state-licensed or certified state-certified appraiser.
Sec. 324. Section 32-3625, Arizona Revised Statutes, is amended to read:
32-3625. Continuing education
A. As a prerequisite to renewal of a license or certificate, a state registered trainee appraiser or a state-licensed or state-certified appraiser shall present evidence satisfactory to the superintendent deputy director of having met the continuing education requirements of either subsection B or C of this section.
B. The basic continuing education requirement for renewal of a license or certificate is the completion by the applicant, during the immediately preceding term of the license or certificate, of courses or seminars that are approved by the superintendent deputy director.
C. An applicant for reregistering, relicensing or recertification may satisfy all or part of the continuing education requirements by presenting evidence of the following, which shall be approved by the superintendent deputy director:
1. Completion of an education program of study determined by the superintendent deputy director to be equivalent, for continuing education purposes, to courses approved by the superintendent deputy director pursuant to subsection B of this section.
2. Participation other than as a student in educational processes and programs that are approved by the superintendent deputy director and that relate to appropriate appraisal theory, practices or techniques, including teaching, program development and preparation of textbooks, monographs, articles and other instructional materials, not to exceed fifty percent of an applicant's continuing education requirements and not for the same course in consecutive renewal periods.
D. The superintendent deputy director shall adopt rules to ensure that a person who renews the person's license or certificate as a state-licensed or state-certified appraiser follows practices and techniques that provide a high degree of service and protection to members of the public with whom the person deals in the professional relationship under the authority of the license or certificate. The rules shall include the following:
1. Policies and procedures for obtaining the superintendent's deputy director's approval of courses and instruction pursuant to subsection B of this section.
2. Standards, policies and procedures to be applied by the superintendent deputy director in evaluating an applicant's claims of equivalency in accordance with subsection C of this section.
3. Standards, monitoring methods and systems for recording attendance to be employed by course sponsors as a prerequisite to the superintendent's deputy director's approval of courses for credit.
E. In adopting rules pursuant to subsection D, paragraph 1 of this section, the superintendent deputy director shall give consideration to consider courses of instruction, seminars and other appropriate appraisal educational courses or programs previously or hereafter developed by or under the auspices of professional appraisal organizations and used by those associations for purposes of designation or indicating compliance with the continuing education requirements of such organizations. A person who offers these courses may not discriminate in the opportunity to participate in these courses on the basis of membership or nonmembership in an appraisal organization.
F. An amendment or repeal of a rule adopted by the superintendent deputy director pursuant to this section may not deprive a state registered trainee appraiser or a state-licensed or state-certified appraiser of credit toward renewal of a license or certificate for any course of instruction that the applicant either completed or enrolled in before the amendment or repeal of the rule that would have qualified for continuing education credit as the rule existed before the repeal or amendment.
G. A license or certificate as a state registered trainee appraiser or a state-licensed or state-certified appraiser that has been suspended as a result of disciplinary action by the superintendent deputy director shall not be reinstated unless the applicant presents evidence of completion of the continuing education required by this chapter.
H. A license or certificate that has been revoked by the superintendent deputy director shall not be reinstated unless the applicant successfully completes the appropriate requirements of the appraisal qualifications board, including education and passage of the current national examination.
Sec. 325. Section 32-3627, Arizona Revised Statutes, is amended to read:
32-3627. Inactive license or certificate status; reactivation application; renewal application and fee; continuing education
A. Any license or certificate holder may request that the license or certificate be placed on inactive status by filing with the superintendent deputy director an application that includes all of the following:
1. The license or certificate holder's name.
2. The license or certificate number.
3. A request for inactive status.
B. The period a license or certificate is on inactive status under this section may not exceed two years.
C. A license or certificate holder who is on inactive status shall not do either of the following:
1. Represent that the license or certificate holder is an active appraiser licensed or certified in this state.
2. Perform real estate appraisals or appraisal reviews on real estate in this state.
D. A license or certificate holder who is on inactive status under this section must file with the superintendent deputy director an application for reactivation of the license or certificate before resuming real estate appraisal activity.
E. To return to active status, the inactive license or certificate holder shall do both of the following:
1. File with the superintendent deputy director an application for reactivation of the license or certificate.
2. Provide evidence of completion of the required continuing education that the license or certificate holder would have been required to meet during the period when the license or certificate holder's license or certificate was on inactive status.
F. If the holder of an inactive license or certificate under this section does not file an application for reactivation within a two-year period, that person must reapply for licensure or certification pursuant to the requirements of this chapter.
G. A license or certificate holder who is on inactive status pursuant to this section remains on inactive status until the superintendent deputy director approves the application for reactivation of the license or certificate.
H. The superintendent deputy director may take disciplinary or remedial action against a license or certificate holder who is on inactive status pursuant to this section.
I. A license or certificate holder who places the holder's license or certificate on inactive status must pay the renewal fee and complete an application for renewal as prescribed in section 32-3619. The license or certificate holder on inactive status is not required to provide evidence of completion of the continuing education requirements until the application for reactivation is filed pursuant to subsection E of this section.
Sec. 326. Section 32-3628, Arizona Revised Statutes, is amended to read:
32-3628. Inactive license or certificate status during military duty; reactivation application; renewal application and fee; continuing education
A. A license or certificate holder who is ordered to active military duty with the United States armed forces may request that the license or certificate be placed on inactive status by filing with the superintendent deputy director an application that includes all of the following:
1. The license or certificate holder's name.
2. The license or certificate number.
3. The date that the active military duty begins.
4. A request for inactive status.
B. The license or certificate is deemed to be on inactive status while the license or certificate holder is on active military duty, but the period of inactive status may not exceed three years.
C. A license or certificate holder who is on inactive status pursuant to this section shall not do either of the following:
1. Represent that the holder is an active appraiser licensed or certified in this state.
2. Perform real estate appraisals or appraisal reviews on real estate in this state.
D. A license or certificate holder who is on inactive status must file with the superintendent deputy director an application for reactivation of the license or certificate within one hundred eighty days after returning home from active military duty.
E. If the holder of an inactive license or certificate timely files an application for reactivation of the license or certificate, the license or certificate is returned to active status on the superintendent's deputy director's approval of the application for reactivation. The license or certificate holder shall complete the continuing education requirements that would otherwise have been required when the license or certificate was on inactive status within ninety days after the person's return from active military duty. The license or certificate holder must submit proof of completion of any continuing education requirements to the superintendent no deputy director not later than one hundred twenty days after completion.
F. If the holder of an inactive license or certificate under this section does not timely apply for reactivation as required by subsection D of this section, the holder must reapply for licensure or certification meeting all of the requirements of this chapter.
G. A license or certificate holder who is on inactive status pursuant to this section remains on inactive status until the superintendent deputy director approves the application for reactivation of the license or certificate.
H. The holder of an inactive license or certificate applying for reactivation of the license or certificate under this section shall include with the application for reactivation a copy of the documentation from the armed forces showing the period of time that the holder of the inactive license or certificate was on active military duty.
I. Any license or certificate holder who places the holder's license or certificate on inactive status under this section must pay the renewal fee prescribed in section 32-3607 and complete an application for renewal pursuant to section 32-3619. A license or certificate holder on inactive status pursuant to this section who files an application for reactivation shall provide evidence of completion of the continuing education requirements pursuant to subsection E of this section.
J. For the purposes of this section, active military duty does not include service persons performing weekend drill and annual training.
Sec. 327. Section 32-3631, Arizona Revised Statutes, is amended to read:
32-3631. Disciplinary proceedings; civil penalties
A. The rights of an applicant or holder under a license or certificate as a registered trainee appraiser or a state-licensed or state-certified appraiser may be revoked or suspended, or the holder of the license or certificate may otherwise be disciplined, including being placed on probation as prescribed by rule, in accordance with this chapter on any of the grounds set forth in this section. The superintendent deputy director may investigate the actions of a registered trainee appraiser or a state-licensed or state-certified appraiser in this state or in any other state and may revoke or suspend the rights of a license or certificate holder or otherwise discipline a registered trainee appraiser or a state-licensed or state-certified appraiser for any of the following acts or omissions:
1. Procuring or attempting to procure a license or certificate pursuant to this chapter by knowingly making a false statement, submitting false information, refusing to provide complete information in response to a question in an application for a license or certificate or committing any form of fraud or misrepresentation.
2. Failing to meet the minimum qualifications established by this chapter.
3. Paying or offering to pay money or other considerations other than as provided by this chapter to any member or employee of the department to procure a license or certificate under this chapter.
4. Being convicted, including based on a plea of guilty, of a crime that is substantially related to the qualifications, functions and duties of a person developing appraisals and communicating appraisals to others, or being convicted of any felony or any crime involving moral turpitude.
5. Committing an act or omission involving dishonesty, fraud or misrepresentation with the intent to substantially benefit the license or certificate holder or another person or with the intent to substantially injure another person.
6. Violating any of the standards of the development or communication of appraisals as provided in this chapter.
7. Being negligent or incompetent as a state-licensed or state-certified appraiser in developing an appraisal, in preparing an appraisal report or in communicating an appraisal.
8. Wilfully disregarding or violating any provisions of this chapter or an order or rule of the superintendent deputy director for the administration and enforcement of this chapter.
9. Accepting an appraisal assignment if the employment itself is contingent on the appraiser reporting a predetermined estimate, analysis or opinion or if the fee to be paid is contingent on the opinion, conclusion or value reached or on the consequences resulting from the appraisal assignment.
10. Violating the confidential nature of any records to which the registered trainee appraiser or the state-licensed or state-certified appraiser gains access through employment or engagement as a registered trainee appraiser or an appraiser.
11. Having a final civil judgment entered against the person on grounds of fraud, misrepresentation or deceit in the making of any appraisal.
B. In a disciplinary proceeding based on a civil judgment, a registered trainee appraiser or state-licensed or state-certified appraiser may present matters in mitigation and extenuation.
C. The superintendent deputy director may issue subpoenas for the attendance of witnesses and the production of books, records, documents and other evidence necessary and relevant to an investigation or hearing.
D. The lapsing or suspension of a license or certificate by operation of law or by an order or decision of the superintendent deputy director or a court of law, or the voluntary surrender of a license or certificate by a license or certificate holder, shall not deprive the superintendent deputy director of jurisdiction to do either of the following within twenty-four months after the expiration of the license or certificate pursuant to section 32-3616:
1. Proceed with any investigation of or action or disciplinary proceeding against the license or certificate holder.
2. Render a decision suspending or revoking the license or certificate or denying the renewal or right of renewal of the license or certificate.
E. If the superintendent deputy director determines that a state-licensed or state-certified appraiser is in violation of this chapter, the superintendent deputy director may take disciplinary or remedial action and may impose a civil penalty not to exceed three thousand dollars $3,000 per complaint filed with the superintendent deputy director pursuant to this chapter. All civil penalties collected pursuant to this subsection shall be deposited in the department revolving fund established by section 6-135.
Sec. 328. Section 32-3632, Arizona Revised Statutes, is amended to read:
32-3632. Hearing and judicial review; costs and fees; appeal
A. The hearing on the charges shall be at a time and place prescribed by the deputy director and shall be in accordance with title 41, chapter 6, article 10.
B. If a case proceeds to a hearing before either the superintendent deputy director or an administrative law judge, both of the following apply:
1. If the department sustains its burden of proof and prevails on the merits of the case, the department may collect from the respondent applicant, registered trainee appraiser, appraiser or property tax agent the department's costs and expenses associated with the formal hearing, including reasonable attorney fees, expert testimony and preparation fees, investigative costs and expenses and costs incurred relating to the office of administrative hearings and court reporters. All monies collected pursuant to this paragraph shall be deposited in the department revolving fund established by section 6-135.
2. If the department does not sustain its burden of proof and the respondent applicant, registered trainee appraiser, appraiser or property tax agent prevails on the merits of the case, the respondent applicant, registered trainee appraiser, appraiser or property tax agent may collect from the department fees and other costs associated with the formal hearing.
C. Except as provided in section 41-1092.08, subsection H, any final decision or order of the superintendent deputy director may be appealed to the superior court pursuant to title 12, chapter 7, article 6.
Sec. 329. Section 32-3637, Arizona Revised Statutes, is amended to read:
32-3637. Retention of records; definition
A. A state-licensed or state-certified appraiser shall retain a work file for at least five years after preparation of the work file or at least two years after final disposition of any judicial proceeding in which the appraiser provided testimony related to the work file, whichever period of time is greater.
B. A state-licensed or state-certified appraiser shall do either of the following:
1. Have custody of the appraiser's work file.
2. Make appropriate work file retention, access and retrieval arrangements with the party having custody of the work file.
C. The superintendent deputy director may inspect all records required to be maintained under this chapter by the state-licensed or state-certified appraiser on reasonable notice to the appraiser.
D. For the purposes of this section, "work file" includes documentation that is necessary to support an appraiser's analyses, opinions and conclusions and that demonstrates compliance with the uniform standards of professional appraisal practice.
Sec. 330. Section 32-3638, Arizona Revised Statutes, is amended to read:
32-3638. Violation; classification
Any person who performs a real estate appraisal or appraisal review, who is not licensed or certified under this chapter and who knowingly assumes or uses any title, designation or abbreviation likely to create the impression of licensure or certification by this state or any person who knowingly provides false or fraudulent information to the superintendent deputy director is guilty of a class 1 misdemeanor.
Sec. 331. Section 32-3639, Arizona Revised Statutes, is amended to read:
32-3639. Damages; injunctive relief
If the superintendent deputy director has a reasonable basis to believe, after investigation, that any person is violating any provision of this chapter, the superintendent deputy director may bring an action in superior court for appropriate injunctive or other equitable relief, damages sustained and taxable costs and reasonable attorney fees.
Sec. 332. Section 32-3652, Arizona Revised Statutes, is amended to read:
32-3652. Registration; renewal; fees
A. An individual who wishes to act as a property tax agent shall apply for registration by submitting to the superintendent deputy director a completed application form prescribed by the superintendent deputy director with the initial registration fee. The applicant shall also file with the superintendent deputy director an affidavit stating whether the applicant has been convicted of a felony or any misdemeanor involving dishonesty or moral turpitude in this or any other state within the last ten years. The superintendent deputy director may review the affidavit and issue or deny the registration based on its findings.
B. Except as provided in section 32-4301, registration is valid for two years. An individual may renew a registration by submitting to the superintendent deputy director a renewal form prescribed by the superintendent deputy director with the renewal fee on or before the date the registration expires.
C. An appraiser who is licensed or certified pursuant to this chapter may register and renew registration as a property tax agent without paying the fee prescribed by this section.
D. The superintendent deputy director shall issue a certificate of registration to an individual if the individual complies with this section and is not prohibited from registering pursuant to section 32-3654.
E. A person shall not act as a property tax agent if the person is not registered pursuant to this section.
F. The superintendent deputy director shall collect from each individual a fee of:
1. Two hundred dollars $200 for an initial registration.
2. One hundred dollars $100 for a renewal.
3. Five dollars $5 for a duplicate registration certificate.
Sec. 333. Section 32-3653, Arizona Revised Statutes, is amended to read:
32-3653. Property tax agent conduct
A property tax agent:
1. Shall not knowingly misrepresent any information or act in a fraudulent manner.
2. Shall not prepare documents or provide evidence in a property valuation or legal classification appeal unless the agent is authorized by the property owner to do so and any required agency authorization form has been filed.
3. Shall not knowingly submit false or erroneous information in a property valuation or legal classification appeal.
4. Shall use appraisal standards and methods that are adopted by the superintendent deputy director when the agent submits appraisal information in a property valuation or legal classification appeal.
Sec. 334. Section 32-3654, Arizona Revised Statutes, is amended to read:
32-3654. Disciplinary actions
A. On the complaint of any person or on the superintendent's deputy director's own motion, the superintendent deputy director shall investigate any suspected violation of this article by a property tax agent. If the superintendent deputy director finds a violation, the superintendent deputy director may issue a letter of concern.
B. If the superintendent deputy director finds that the property tax agent committed any of the following violations, the superintendent deputy director shall revoke or suspend the agent's registration:
1. Secured registration by fraud or deceit.
2. Committed an act or is responsible for an omission involving fraud or knowing misrepresentation with the intent to obtain a benefit.
3. Knowingly violated section 32-3653.
C. The superintendent deputy director shall:
1. Suspend the agent's registration for not less than six months on the first finding of a violation pursuant to subsection B of this section.
2. Suspend the agent's registration for not less than twelve months on the second finding of a violation pursuant to subsection B of this section.
3. Revoke the agent's registration on a third or subsequent finding of a violation pursuant to subsection B of this section.
D. The superintendent deputy director shall not impose discipline until the agent has been provided an opportunity for a hearing pursuant to title 41, chapter 6, article 10. The superintendent deputy director shall notify the agent of the charges and the date and time of the hearing. The notice may be personally served or sent by certified mail to the agent's last known address. Except as provided in section 41-1092.08, subsection H, the final decision of the superintendent deputy director is subject to judicial review pursuant to title 12, chapter 7, article 6.
E. The superintendent deputy director shall not renew an agent's registration during the time the registration is suspended or revoked.
Sec. 335. Section 32-3655, Arizona Revised Statutes, is amended to read:
32-3655. Rules
The superintendent deputy director may adopt rules for the purpose of administering this article.
Sec. 336. Section 32-3661, Arizona Revised Statutes, is amended to read:
32-3661. Definitions
In this article, unless the context otherwise requires:
1. "Appraisal" means the act or process of developing an opinion of the value of real property in conformance with the uniform standards of professional appraisal practice published by the appraisal foundation, or any other definition used in state or federal laws.
2. "Appraisal management company" means a corporation, partnership, sole proprietorship, subsidiary or other business entity that directly or indirectly performs appraisal management services, regardless of the use of the term "appraisal management company", "mortgage technology provider", "lender processing services", "lender services", "loan processor", "mortgage services", "real estate closing services provider", "settlement services provider" or "vendor management company" or any other term, and that does any of the following:
(a) Administers an appraiser panel of at least sixteen state-licensed or state-certified appraisers in one state who are independent contractors or at least twenty-five state-licensed or state-certified appraisers in at least two states who perform real property appraisal services in this state for clients.
(b) Otherwise serves as a third-party liaison of appraisal management services between clients and appraisers.
3. "Appraisal management services" means any of the following:
(a) Recruiting, selecting and retaining appraisers.
(b) Contracting with state-licensed or state-certified appraisers to perform appraisal agreements.
(c) Managing the process of having an appraisal performed, including providing administrative services such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary market participants, collecting fees from creditors and secondary market participants for services provided and paying appraisers for services performed.
(d) Reviewing and verifying the work of appraisers.
4. "Appraisal review" means the act or process of developing and communicating an opinion about the quality of another appraiser's work that was performed as part of an appraisal assignment, but does not include an examination of an appraisal for grammatical, typographical or other similar errors that do not communicate an opinion related to the appraiser's data collection, analysis, opinions, conclusions, estimate of value or compliance with the uniform standards of professional appraisal practice.
5. "Appraiser" means a person who is licensed or certified as an appraiser pursuant to this chapter and who performs valuation services competently and in a manner that is independent, impartial and objective.
6. "Appraiser panel":
(a) Means a network, list or roster of state-licensed or state-certified appraisers approved by an appraisal management company to perform appraisals as independent contractors for the appraisal management company. For the purposes of this subdivision, an appraiser is an independent contractor if the appraiser management company treats the appraiser as an independent contractor for federal income tax purposes.
(b) Includes both appraisers accepted by the appraisal management company for consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions and appraisers engaged by the appraisal management company to perform one or more appraisals in covered transactions.
7. "Client" means a person that contracts with, or otherwise enters into an agreement with, an appraisal management company for the performance of real property appraisal services.
8. "Controlling person" means any of the following:
(a) An owner, officer or director of a corporation, partnership or other business entity seeking to offer appraisal management services in this state.
(b) An individual who is employed, appointed or authorized by an appraisal management company and who has the authority to enter into a contractual relationship with clients for the performance of appraisal management services and to enter into agreements with independent appraisers for the performance of real property appraisal services.
(c) An individual who possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of an appraisal management company.
9. "Federally regulated appraisal management company" means an appraisal management company that is a subsidiary owned and controlled by an insured depository institution or an insured credit union and regulated by a federal financial institutions regulatory agency.
9. 10. "Real property appraisal services" means the practice of developing an opinion of the value of real property in conformance with the uniform standards of professional appraisal practice published by the appraisal foundation.
10. 11. "Relocation management company" means a business entity whose exclusive business services are not for mortgage purposes and include the relocation of employees as an agent or contractor for the employer or the employer's agent for the purposes of determining an anticipated sales price, as defined by the worldwide employee relocation council, of the residence of an employee being relocated by the employer in the course of its business.
11. 12. "Uniform standards of professional appraisal practice" means the uniform standards of professional appraisal practice promulgated by the appraisal foundation.
Sec. 337. Section 32-3662, Arizona Revised Statutes, is amended to read:
32-3662. Registration
A. A person shall not directly or indirectly engage or attempt to engage in business as an appraisal management company, directly or indirectly perform or attempt to perform appraisal management services or advertise or hold itself out as engaging in or conducting business as an appraisal management company without first obtaining a registration issued by the superintendent deputy director pursuant to this article, regardless of the entity's use of the term "appraisal management company" or "mortgage technology company" or any other name.
B. A person who wishes to be registered as an appraisal management company in this state must file a written application with the superintendent deputy director on a form prepared and furnished by the superintendent deputy director and pay a fee in an amount to be determined by the superintendent deputy director. The registration required by subsection A of this section shall include:
1. The name, residence address, business address and telephone number of the applicant and the location of each principal office and branch office at which the appraisal management company will conduct business in this state.
2. The name under which the applicant will conduct business as an appraisal management company.
3. The name, residence address, business address and telephone number of each person who will have at least a ten percent ownership interest in the appraisal management company as a principal, partner, officer, director or trustee, specifying the capacity and title of each person.
4. If the person seeking registration is a corporation that is not domiciled in this state, the name and contact information for the company's agent for service of process in this state.
5. A certification that the person seeking registration has a system and process in place to verify that a person being added to the appraiser panel for the appraisal management company's appraisal management services in this state holds a license or certification in good standing in this state.
6. A certification that the person seeking registration has a system in place to review the work of all independent appraisers that are performing real property appraisal services for the appraisal management company on a periodic basis to confirm that the real property appraisal services are being conducted in accordance with uniform standards of professional appraisal practice.
7. A certification that the person maintains a detailed record of each service request that it receives and the independent appraiser that performs the real property appraisal services for the appraisal management company.
8. A certification that the person seeking registration has a system in place to train those who select individual appraisers for real property appraisal services in this state to ensure that the selectors have appropriate training in placing appraisal assignments.
9. An irrevocable consent to service of process.
10. A certification that allows the superintendent deputy director to examine the books and records of the appraisal management company and a written agreement that requires the appraisal management company to submit reports, information and documents to the superintendent deputy director as required by rule.
11. Any other information required by the superintendent deputy director deemed reasonable in scope and content and necessary for the implementation and administration of this chapter.
C. The superintendent deputy director may deny the application for an initial issuance or renewal of an appraisal management company registration if the applicant has been convicted of a felony or as otherwise prescribed by this chapter.
Sec. 338. Section 32-3663, Arizona Revised Statutes, is amended to read:
32-3663. Exemptions
This article does not apply to:
1. A department or unit within a financial institution that is subject to direct regulation by an agency of the United States government or of this state and that receives requests for the performance of real estate appraisals from the financial institution and then assigns such requests to an appraiser who is part of the financial institution's appraiser panel.
2. A federally regulated appraisal management company.
2. 3. A corporation, partnership, sole proprietorship, subsidiary or other business entity that employs real estate appraisers exclusively on an employer and employee basis for the performance of all real property appraisal services in the normal course of its business and that is responsible for ensuring that the real property appraisal services being performed by its employees are being performed in accordance with the uniform standards of professional appraisal practice and federal and state law.
3. 4. A relocation management company in the course of employee relocation pursuant to its relocation policy.
Sec. 339. Section 32-3664, Arizona Revised Statutes, is amended to read:
32-3664. Registration forms
An applicant for initial and renewal registration as an appraisal management company shall submit to the superintendent deputy director an application on a form prescribed by the superintendent deputy director.
Sec. 340. Section 32-3666, Arizona Revised Statutes, is amended to read:
32-3666. Consent to service of process
Each entity applying for registration as an appraisal management company shall complete and execute an irrevocable consent to service of process form as prescribed by the superintendent deputy director.
Sec. 341. Section 32-3667, Arizona Revised Statutes, is amended to read:
32-3667. Fee; bond
A. The superintendent deputy director shall establish the fee for appraisal management company registration by rule.
B. The appraisal management company shall show proof of a surety bond of at least twenty thousand dollars $20,000 but not more than fifty thousand dollars $50,000.
Sec. 342. Section 32-3668, Arizona Revised Statutes, is amended to read:
32-3668. Owner requirements
A. An appraisal management company applying for registration may not be owned by a person or have any principal of the company who has had any financial, real estate or mortgage lending industry license or certificate refused, denied, canceled, revoked or voluntarily surrendered in this state or in any other state. This requirement may be waived at the discretion of the superintendent deputy director.
B. Each person that owns, is an officer of or has a financial interest in an appraisal management company in this state shall:
1. Be of good moral character.
2. Apply for a valid fingerprint clearance card issued pursuant to section 41-1758.03.
3. Certify to the superintendent deputy director that the person has never had any financial, real estate or mortgage lending industry license or certificate refused, denied, canceled, revoked or voluntarily surrendered in this state or in any other state. This requirement may be waived by appeal and at the discretion of the superintendent deputy director.
Sec. 343. Section 32-3669, Arizona Revised Statutes, is amended to read:
32-3669. Controlling person
A. Each appraisal management company applying to the superintendent deputy director for registration in this state shall designate one controlling person who will be the main contact for all communication between the superintendent deputy director and the appraisal management company.
B. To serve as a controlling person of an appraisal management company, a person shall:
1. Certify to the superintendent deputy director that the person has never had any financial, real estate or mortgage lending industry license or certificate issued by this state, or any other state, refused, denied, canceled, revoked or voluntarily surrendered. This requirement may be waived by appeal and at the discretion of the superintendent deputy director.
2. Be of good moral character.
3. Apply for a valid fingerprint clearance card issued pursuant to section 41-1758.03.
Sec. 344. Section 32-3671, Arizona Revised Statutes, is amended to read:
32-3671. Agreements with independent appraisers; limitations
An appraisal management company registered in this state pursuant to this article may not enter into contracts or agreements with an independent appraiser for the performance of real property appraisal services in this state unless that person is licensed or certified in good standing with the superintendent deputy director.
Sec. 345. Section 32-3672, Arizona Revised Statutes, is amended to read:
32-3672. Certification on registration renewal
Each appraisal management company seeking registration renewal in this state shall certify to the superintendent deputy director on a form prescribed by the superintendent deputy director that the appraisal management company has complied with all of the following:
1. Has a system and process in place to verify that a person being added to the appraiser panel of the appraisal management company holds a license or certificate in good standing in this state pursuant to the superintendent deputy director.
2. Has a system in place to review the quality of appraisals of all independent appraisers that are performing real property appraisal services for the appraisal management company on a periodic basis to confirm that the real property appraisal services are being conducted in accordance with uniform standards of professional appraisal practice.
3. Maintains a detailed record of each service request that it receives and the name of the independent appraiser that performs the real property appraisal services for the appraisal management company. The appraisal management company shall maintain a detailed record for the same time period that an appraiser is required to maintain an appraisal record for the same real property appraisal activity.
4. Has a system in place to train those who select individual appraisers for real property appraisal services in this state to ensure that the selectors have appropriate training in placing appraisal assignments.
Sec. 346. Section 32-3677, Arizona Revised Statutes, is amended to read:
32-3677. Review of disputes
A. An appraisal management company shall not remove an appraiser from its appraiser panel, or otherwise refuse to assign requests for real property appraisal services to an independent appraiser, without notifying the appraiser in writing of the reasons for the appraiser being removed from the appraiser panel of the appraisal management company.
B. An independent appraiser that is removed from the appraiser panel of an appraisal management company for alleged illegal conduct, a violation of the uniform standards of professional appraisal practice or a violation of state licensing standards may file a complaint with the superintendent deputy director for a review of the decision of the appraisal management company, except that the superintendent deputy director may not make any determination regarding the nature of the business relationship between the appraiser and the appraisal management company that is unrelated to the actions specified in subsection A of this section.
C. If an independent appraiser files a complaint against an appraisal management company pursuant to subsection B of this section, the superintendent deputy director shall investigate the complaint within a reasonable time.
D. If the superintendent deputy director determines that an independent appraiser did not commit a violation of law, a violation of the uniform standards of professional appraisal practice or a violation of state licensing standards:
1. The superintendent deputy director shall order that the appraiser be added to the appraiser panel of the appraisal management company that was the subject of the complaint without prejudice.
2. The appraisal management company may request a hearing pursuant to title 41, chapter 6, article 10.
Sec. 347. Section 32-3678, Arizona Revised Statutes, is amended to read:
32-3678. Censure, suspension or revocation; civil penalty
The superintendent deputy director may censure an appraisal management company, conditionally or unconditionally suspend or revoke any registration issued under this article or impose civil penalties not to exceed fifteen thousand dollars $15,000 per violation if, in the opinion of the superintendent deputy director, an appraisal management company is attempting to perform, has performed or has attempted to perform any of the following acts:
1. Committing any act in violation of this article.
2. Violating any rule adopted by the superintendent deputy director in the interest of the public and consistent with this article.
3. Knowingly making or causing to be made to the superintendent deputy director any false representation of material fact.
4. Suppressing or withholding from the superintendent deputy director any information that the appraisal management company possesses and that, if submitted by the appraisal management company, would have rendered the appraisal management company ineligible to be registered pursuant to rules adopted by the superintendent deputy director.
5. Violating the federal financial institutions reform, recovery and enforcement act of 1989 (P.L. 101-73; 103 Stat. 183).
Sec. 348. Section 32-3679, Arizona Revised Statutes, is amended to read:
32-3679. Disciplinary hearings
A. The superintendent deputy director or an administrative law judge may conduct disciplinary proceedings in accordance with title 41, chapter 6, article 10.
B. Before censuring any registrant, or suspending or revoking any registration, the superintendent deputy director shall notify the registrant in writing of any charges made at least forty-five days before the date set for the hearing and shall afford the registrant an opportunity to be heard in person or by counsel.
C. The written notice shall be satisfied by personal service on the controlling person of the registrant or the registrant's agent for service of process in this state or by sending the notice by certified mail to the controlling person of the registrant to the registrant's address on file with the superintendent deputy director.
D. The hearing shall be at a time and place prescribed by the superintendent deputy director. Any reasonable request for a delay of a hearing shall not exceed ninety days.
E. The superintendent deputy director may make findings of fact and shall deliver or mail the findings to the registrant charged with a violation of this article.
Sec. 349. Section 32-3680, Arizona Revised Statutes, is amended to read:
32-3680. Rulemaking authority
The superintendent deputy director shall adopt rules that are reasonably necessary to implement, administer and enforce this article, including rules for obtaining copies of appraisals and other documents necessary to audit compliance with this article and rules requiring a surety bond to be posted with each application.
Sec. 350. Section 35-323, Arizona Revised Statutes, is amended to read:
35-323. Investment of public monies; bidding; security and other requirements
A. The treasurer shall invest and reinvest public monies in securities and deposits with a maximum maturity of five years. All public monies shall be invested in eligible investments. Eligible investments are:
1. Certificates of deposit in eligible depositories.
2. Deposits in one or more federally insured banks or savings and loan associations placed in accordance with the procedures prescribed in section 35-323.01.
3. Interest bearing savings accounts in banks and savings and loan institutions doing business in this state whose accounts are insured by federal deposit insurance for their industry, but only if deposits of more than the insured amount are secured by the eligible depository to the same extent and in the same manner as required under this article.
4. Repurchase agreements with a maximum maturity of one hundred eighty days.
5. The pooled investment funds established by the state treasurer pursuant to section 35-326.
6. Obligations issued or guaranteed by the United States or any of the senior debt of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities.
7. Bonds, notes or other evidences of indebtedness of this state or any of its counties, incorporated cities or towns, school districts or special taxing districts, including registered warrants, substitute checks, and electronic funds transfer vouchers that bear interest pursuant to section 11-635.
8. Bonds, notes or evidences of indebtedness of any county, municipal district, municipal utility or special taxing district of any state that are payable from revenues, earnings or a special tax specifically pledged for the payment of the principal of and interest on the obligations, and for the payment of which a lawful sinking fund or reserve fund has been established and is being maintained, but only if a default in payment on principal or interest on the obligations to be purchased has not occurred within five years after the date of investment, or, if such obligations were issued less than five years before the date of investment, a default in payment of principal or interest has not occurred on the obligations to be purchased or any other obligations of the issuer within five years after the investment.
9. Bonds, notes or evidences of indebtedness issued by any county improvement district or municipal improvement district of any state to finance local improvements authorized by law, if the principal and interest of the obligations are payable from assessments on real property within the improvement district. An investment shall not be made if:
(a) The face value of all such obligations, and similar obligations outstanding, exceeds fifty percent of the market value of the real property, and if improvements on which the bonds or the assessments for the payment of principal and interest on the bonds are liens inferior only to the liens for general ad valorem taxes.
(b) A default in payment of principal or interest on the obligations to be purchased has occurred within five years after the date of investment, or, if the obligations were issued less than five years before the date of investment, a default in the payment of principal or interest has occurred on the obligations to be purchased or on any other obligation of the issuer within five years after the investment.
10. Commercial paper of prime quality that is rated within the top two ratings by a nationally recognized rating agency. All commercial paper must be issued by corporations organized and doing business in the United States.
11. Bonds, debentures, notes or other evidences of indebtedness that are denominated in United States dollars and that carry at a minimum an "A" or better rating, at the time of purchase, from at least two nationally recognized rating agencies.
12. Negotiable or brokered certificates of deposit issued by a nationally or state-chartered bank or savings and loan association.
13. Securities of or any other interests in any open-end or closed-end management type investment company or investment trust, including exchange traded funds whose underlying investments are invested in securities allowed by state law, registered under the investment company act of 1940 (54 Stat. 789; 15 United States Code sections 80a-1 through 80a-64), as amended.
B. Certificates of deposit shall be purchased from the eligible depository bidding the highest permissible rate of interest. Monies over $100,000 may not be awarded at any interest rate less than one hundred three percent of the equivalent bond yield of the offer side of United States treasury bills having a similar term. If the eligible depository offering to pay the highest rate of interest has bid only for a portion of the monies to be awarded, the remainder of the monies shall be awarded to eligible depositories bidding the next highest rates of interest.
C. An eligible depository is not eligible to receive total aggregate deposits from this state and all its subdivisions in an amount exceeding twice its capital structure as outlined in the last call of condition of the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions.
D. If two or more eligible depositories submit bids of an identical rate of interest for all or any portion of the monies to be deposited, the award of the deposit of the monies shall be made to the eligible depository among those submitting identical bids having, at the time of the bid opening, the lowest ratio of total public deposits in relation to its capital structure.
E. Each bid that is submitted and not withdrawn before the time specified constitutes an irrevocable offer to pay interest as specified in the bid on the deposit, or portion bid for, and the award of a deposit in accordance with this section obligates the depository to accept the deposit and pay interest as specified in the bid pursuant to which the deposit is awarded.
F. The treasurer shall maintain a record of all bids received and shall make available to the board of deposit at its next regularly scheduled meeting a correct list showing the bidders, the bids received and the amount awarded. These records shall be available to the public and shall be kept in the possession of the treasurer for at least two years after the date of the report.
G. Any eligible depository, before receiving a deposit of more than the insured amount under this article, shall deliver collateral for the purposes of this subsection equal to at least one hundred two percent of the deposit. The collateral shall be any of the following:
1. A bond executed by a surety company that is approved by the treasury department of the United States and authorized to do business in this state. The bond shall be approved as to form by the legal advisor of the treasurer.
2. Securities or instruments of the following character:
(a) United States government or agency obligations.
(b) State, county, school district and other district municipal bonds.
3. The safekeeping receipt of a federal reserve bank or any bank located in a reserve city, or any bank authorized to do business in this state, whose combined capital, surplus and outstanding capital notes and debentures on the date of the safekeeping receipt are $10,000,000 or more, evidencing the deposit therein of any securities or instruments described in this section. A safekeeping receipt shall not qualify as security, if issued by a bank to secure its own public deposits, unless issued directly through its trust department. The safekeeping receipt does shall show on its face that it is issued for the account of the treasurer and shall be delivered to the treasurer. The safekeeping receipt may provide for the substitution of securities or instruments that qualify under this section with the affirmative act of the treasurer.
4. Letters of credit issued by a federal home loan bank if:
(a) The letter of credit has been delivered pursuant to this section or chapter 10, article 1 of this title to the statewide collateral pool administrator.
(b) The letter of credit meets the required conditions of:
(i) Being irrevocable.
(ii) Being issued, presentable and payable at a federal home loan bank in United States dollars. Presentation may be made by the beneficiary submitting the original letter of credit, including any amendments, and the demand in writing, by overnight delivery.
(iii) If the letter of credit is for purposes of chapter 10, article 1 of this title, containing a statement that identifies the statewide collateral pool administrator as the beneficiary.
(iv) Containing an issue date and a date of expiration.
(c) For the purposes of chapter 10, article 1 of this title, the eligible depository, if notified by the statewide collateral pool administrator, is not allowed to use new letters of credit issued by a federal home loan bank if that federal home loan bank fails to pay a draw request as provided for in the letters of credit or fails to properly complete a confirmation of such letters of credit.
H. The securities, instruments or safekeeping receipt for the securities and instruments shall be accepted at market value if not above par, and, if at any time their market value becomes less than the deposit liability to that treasurer, additional securities or instruments required to guarantee deposits shall be deposited immediately with the treasurer who made the deposit and deposited by the eligible depository in which the deposit was made.
I. The condition of the surety bond, or the deposit of securities, instruments or a safekeeping receipt, must be such that the eligible depository will promptly pay to the parties entitled public monies in its custody, on lawful demand, and will, when required by law, pay the monies to the treasurer making the deposit.
J. Notwithstanding the requirements of this section, any institution qualifying as an eligible depository may accept deposits of public monies to the total then authorized insurance of accounts, insured by federal deposit insurance, without depositing a surety bond or securities in lieu of the surety bond.
K. An eligible depository shall report monthly to the treasurer the total deposits of that treasurer and the par value and the market value of any pledged collateral securing those deposits.
L. When a security or instrument pledged as collateral matures or is called for redemption, the cash received for the security or instrument shall be held in place of the security until the depository has obtained a written release or provided substitute securities or instruments.
M. The surety bond, securities, instruments or safekeeping receipt of an eligible depository shall be deposited with the treasurer making the deposit, and the treasurer is the custodian of the bond, securities, instruments or safekeeping receipt. The treasurer may then deposit with the depository public monies then in the treasurer's possession in accordance with this article, but not in an amount of more than the surety bond, securities, instruments or safekeeping receipt deposited, except for federal deposit insurance.
N. The following restrictions on investments apply:
1. Public operating fund monies shall not be invested for a maturity of longer than five years.
2. The board of deposit may order the treasurer to sell any of the securities, and any order shall specifically describe the securities and fix the date on which they are to be sold. Securities so ordered to be sold shall be sold for cash by the treasurer on the date fixed in the order, at the then-current market price. The treasurer and the members of the board are not accountable for any loss occasioned by sales of securities at prices lower than their cost. Any loss or expense shall be charged against earnings received from investment of public monies.
3. Investments shall not be made in companies identified pursuant to section 35-392, subsection A, paragraph 1.
O. If the total amount of subdivision monies available for deposit at any time is less than the maximum coverage amount of the federal deposit insurance corporation, the subdivision board of deposit shall award the deposit of the monies to an eligible depository in accordance with an ordinance or resolution of the governing body of the subdivision. Deposits of less than the maximum coverage amount of the federal deposit insurance corporation are not subject to the requirements of this chapter.
Sec. 351. Section 38-871, Arizona Revised Statutes, is amended to read:
38-871. Deferred compensation governing committee; members; powers and duties
A. The governing committee for deferred compensation plans is established that consists of the following seven members:
1. Three members who are appointed by the governor and who are either of the following:
(a) Individuals who have an account balance in a deferred compensation plan that is overseen by the governing committee. These individuals may be contributing or noncontributing participants in a deferred compensation plan and may be retired or nonretired.
(b) Members of the public who are not deferred compensation plan participants and who have at least ten years of relevant experience in either finance, investment management, pension plans or retirement plans.
2. The director of the department of administration or the director's designee.
3. The superintendent deputy director of the financial institutions division of the department of insurance and financial institutions or the superintendent's deputy director's designee.
4. The director of the department of insurance and financial institutions or the director's designee.
5. The director of the Arizona state retirement system or the director's designee.
B. Governing committee members are subject to the conflict of interest provisions of chapter 3, article 8 of this title.
C. The governing committee may:
1. Investigate and approve deferred compensation plans that give state employees income tax benefits authorized by title 26, United States Code Annotated.
2. In carrying out the purposes of this article, enter into agreements with companies with demonstrable expertise in the areas encompassed by this article.
3. Adopt rules.
D. The governing committee shall:
1. Arrange for consolidated billing and efficient administrative services so that any plans approved operate without cost or contribution from this state except for the incidental expenses of statutorily required administrative duties and the administration of payroll salary deduction or reduction and remittance of the monies to the administrator, trustee or custodian of the plan or plans.
2. Meet quarterly or more frequently as the committee deems necessary.
3. Arrange for an annual financial audit of the plans.
4. Arrange for a performance review of the plans or participation in benchmarking surveys or studies at least every five years.
Sec. 352. Section 41-3451, Arizona Revised Statutes, is amended to read:
41-3451. Automobile theft authority; powers and duties; fund; audit
A. The automobile theft authority is established in the department of insurance and financial institutions consisting of the following members:
1. Two police chiefs who are appointed by an Arizona association of chiefs of police, one of whom represents a city or town with a population of one hundred thousand or more persons and one of whom represents a city or town with a population of less than one hundred thousand persons, or their designees.
2. Two sheriffs who are appointed by an Arizona sheriffs association, one of whom represents a county with a population of five hundred thousand or more persons and one of whom represents a county with a population of less than five hundred thousand persons, or their designees.
3. Two county attorneys who are appointed by the governor, one of whom represents a county with a population of two million or more persons and one of whom represents a county with a population of less than two million persons, or their designees.
4. Two employees of insurers who are licensed to write motor vehicle liability insurance in this state and who are appointed by the governor.
5. Two members of the general public who are appointed by the governor.
6. The assistant director for the motor vehicle division in the department of transportation or the assistant director's designee.
7. The director of the department of public safety or the director's designee.
B. Members serve staggered four-year terms beginning and ending on the third Monday in January. At the first meeting each year, the members shall select a chairman from among the members. The authority shall meet at the call of the chairman or seven members.
C. The authority may:
1. Subject to chapter 4, article 4 of this title, hire staff members as necessary.
2. Provide work facilities and equipment as necessary.
3. Determine the scope of the problem of motor vehicle theft, including particular areas of the state where the problem is greatest.
4. Analyze the various methods of combating the problem of motor vehicle theft.
5. Develop and implement a plan of operation.
6. Develop and implement a financial plan.
7. Solicit and accept gifts and grants.
8. Report by December 31 of each year to the governor, the president of the senate, the speaker of the house of representatives and the secretary of state on its activities during the preceding fiscal year.
D. If the chairman of the authority knows that a potential ground for the removal of a member of the authority exists under this subsection, the chairman shall notify the governor. The governor shall remove the member if the governor finds that any of the following applies:
1. The member was not qualified to serve at the time the member was appointed.
2. The member does not maintain the member's qualifications to serve.
3. The member cannot discharge the member's duties for a substantial part of the term due to illness or other disability.
4. The member is absent from more than one-half of the regularly scheduled meetings during a calendar year unless the member's absence is excused by a majority vote of the authority.
E. The automobile theft authority fund is established consisting of monies deposited pursuant to section 28-2098 and any public or private monies that the authority may receive. The automobile theft authority shall administer make grants awarded from the fund. Subject to legislative appropriation, monies in the fund shall only be used ONLY to pay the administrative expenses of the authority to make grant awards and to carry out the purposes of this section. Monies in the fund are exempt from the provisions of sections 35-143.01 and 35-190 relating to lapsing of appropriations. On notice from the authority, the state treasurer shall invest and divest monies in the fund as provided by section 35-313, and monies earned from investment shall be credited to the fund. All monies appropriated to the department for the automobile theft authority shall be used by the department exclusively for the operation of the automobile theft authority. Monies appropriated from the fund that are included in the general appropriations act shall be included within the following separate line items:
1. Automobile theft authority operating lump sum appropriation.
2. Arizona vehicle theft task force.
3. Local grants.
F. The authority may accept nonmonetary contributions, including the services of individuals, office and secretarial assistance, mailings, printing, office equipment, facilities and supplies, that are necessary to carry out its functions. The nonmonetary contributions shall not be included in the costs of administration limitation prescribed by subsection H of this section.
G. The automobile theft authority shall allocate monies in the fund to public agencies for the purpose of establishing, maintaining and supporting programs that are designed to prevent motor vehicle theft, including:
1. Financial support to law enforcement and prosecution agencies for programs that are designed to increase the effectiveness of motor vehicle theft prosecution.
2. Financial support for programs that are designed to educate and assist the public in the prevention of motor vehicle theft.
H. Pursuant to section 20-466, subsection A, the director of the department of insurance and financial institutions shall appoint an individual to operate the automobile theft authority in conjunction with operating the fraud unit established by section 20-466. Subject to generally applicable department standards and procedures, the department of insurance and financial institutions shall provide all administrative support for the authority. The costs of administration shall not exceed ten percent of the monies in the fund in any one year so that the greatest possible portion of the monies available to the authority is expended on combating motor vehicle theft.
I. Monies expended from the automobile theft authority fund shall be used to supplement, not supplant, other monies that are available for motor vehicle theft prevention.
J. Each insurer issuing motor vehicle liability insurance policies in this state shall pay a semiannual fee of $.50 per vehicle insured under a motor vehicle liability insurance policy issued by the insurer. The fee shall be fully earned and nonrefundable at the time the insurer collects the premium for the motor vehicle liability insurance policy. Each insurer shall transmit the fee on or before January 31 and on or before July 31 of each year to the automobile theft authority for deposit in the automobile theft authority fund. The payment due on or before January 31 shall cover vehicles insured under policies that are issued during the period from July 1 through December 31 of the previous year. The payment due on or before July 31 shall cover vehicles insured under policies that are issued during the period from January 1 through June 30 of the same year.
K. The authority shall cause an audit to be made of the automobile theft authority fund. The audit shall be conducted by a certified public accountant every two years. The authority shall file a certified copy of the audit with the auditor general immediately. The auditor general may make further audits and examinations as the auditor general deems necessary and may take appropriate action relating to the audit pursuant to chapter 7, article 10.1 of this title.
L. Authority members are not eligible to receive compensation but are eligible for reimbursement of expenses pursuant to title 38, chapter 4, article 2.
M. This section does not apply to vehicles or vehicle combinations with a declared gross weight of more than twenty-six thousand pounds. Motor vehicle liability insurance policies issued in this state for vehicles or vehicle combinations with a declared gross weight of more than twenty-six thousand pounds are exempt from subsection J of this section.
Sec. 353. Section 44-281, Arizona Revised Statutes, is amended to read:
44-281. Definitions
In this article, unless the context otherwise requires:
1. "Administrator" means the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions.
2. "Cash sale price" means the price stated in a retail installment contract for which the seller would have sold to the buyer, and the buyer would have bought from the seller, the motor vehicle that is the subject matter of the retail installment contract, if such sale had been a sale for cash instead of a retail installment transaction. The cash sale price may include charges for accessories and their installation and for delivery, and servicing, repairing or improving the motor vehicle, and for charges for other costs that are necessary or incidental to the transaction and that the seller furnishes or agrees to pay on behalf of the buyer, including taxes, assessor's fees, license fees and fees for filing, recording or otherwise perfecting or releasing a reserved title or lien, and may include a reasonable charge for the seller's services.
3. "Finance charge" means the amount agreed on between the buyer and the seller, as limited herein, which in determining the cost of the motor vehicle is added to the aggregate of the following: The cash sale price and the amount, if any, included for insurance and other benefits where a separate cost is assigned thereto.
4. "Holder" of a retail installment contract means the retail seller of the motor vehicle under or subject to the contract or, if the contract is purchased by a sales finance company or other assignee, the sales finance company or other assignee.
5. "Motor vehicle" means any self-propelled device in or by which any person or property is or may be transported or drawn on a public highway, except:
(a) Devices that move on or are guided by a track or travel through the air.
(b) The following, if not designed primarily for highway transportation, but that may incidentally be operated on a public highway:
(i) Tractors.
(ii) Buses.
(iii) Trucks.
(iv) Power shovels.
(v) Road machinery.
(vi) Agricultural machinery.
6. "Person" means an individual, partnership, association, trust, corporation or other legal entity.
7. "Retail buyer" or "buyer" means a person who buys a motor vehicle from a retail seller, not for the purpose of resale, and who executes a retail installment contract in connection therewith.
8. "Retail installment contract" or "contract":
(a) Means an agreement, entered into in this state, pursuant to which the title to or a lien on the motor vehicle, which is the subject matter of a retail installment transaction, is retained or taken by a retail seller from a retail buyer as security for the buyer's obligation.
(b) Includes:
(i) A conditional sales contract and a contract for the bailment or leasing of a motor vehicle by which the bailee or lessee contracts to pay as compensation for its use a sum substantially equivalent to or in excess of its value and by which it is agreed that the bailee or lessee is bound to become, or has the option of becoming, the owner of the motor vehicle for no other or a nominal consideration on full compliance with the provisions of the contract.
(ii) A secondary motor vehicle finance transaction.
9. "Retail installment transaction" means any transaction evidenced by a retail installment contract entered into between a retail buyer and a retail seller wherein the retail buyer buys a motor vehicle from the retail seller at a cost payable in one or more deferred installments. The cash sale price of the motor vehicle, the amount included for insurance if a separate charge is made and the finance charge shall together constitute the cost of the motor vehicle.
10. "Retail seller" or "seller" means a person who sells a motor vehicle to a retail buyer for purposes other than resale under or subject to a retail installment contract. For the purposes of paragraph 12 of this section "seller" means a person who sells and retains the use of the motor vehicle.
11. "Sales finance company":
(a) Means a person engaged, in whole or in part, in the business of purchasing retail installment contracts from one or more retail sellers.
(b) Includes a person engaged, in whole or in part, in the business of creating or holding retail installment contracts that exceed a total aggregate outstanding indebtedness of $50,000.
(c) Does not include:
(i) The pledgee of an aggregate number of retail installment contracts to secure a bona fide loan thereon.
(ii) A motor vehicle dealer who creates retail installment contracts and assigns the retail installment contracts to third party third-party lenders or financial institutions.
12. "Secondary motor vehicle finance transaction":
(a) Means any contract that includes provisions for either:
(i) Obtaining a security interest in or lien on a motor vehicle other than in connection with the sale of that motor vehicle.
(ii) The sale or conditional sale of a motor vehicle and the seller's right to retain use of the motor vehicle after the sale or conditional sale.
(b) Includes any conditional sales contract or contract for the bailment or leasing of a motor vehicle in which the bailee or lessee agrees to pay for use of the motor vehicle and the bailee or lessee is required to become or has the option of becoming the owner of the vehicle for any or no compensation.
(c) Does not include any commercial transaction as defined in section 44-291.
Sec. 354. Section 48-101, Arizona Revised Statutes, is amended to read:
48-101. State certification board
A. The state certification board consists of the attorney general, the director of water resources and the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions.
B. The board shall elect one of its members chairman, and appoint a secretary who shall keep the records and minutes of the board. One or more members of the board shall from time to time, as may be required, designate from the member's regularly employed personnel the secretary and such clerks and assistants as are necessary to perform the duties of the board but without extra compensation.
C. The governor shall be an ex officio member of the board without additional compensation. The office of the board shall be at Phoenix, where records concerning all proceedings taken under this article shall be kept.
D. The board shall meet on a call of the chairman or on the written request of three of its members at a fixed time within official business hours, on not less than two days' prior written notice, but notice may be waived in writing. Meetings may be recessed or adjourned from time to time without giving further notice and continuances may be granted for good cause. A majority constitutes a quorum and matters pending before the board shall be decided by majority vote. The board may adopt necessary rules of procedure and regulations for the conduct of its affairs and discharge of its duties under this article. Fees other than for necessary stenographic services, printing or publication, may not be charged or collected from the applicant by the board.
E. The scope and subjects of the board’s examination, consideration and determination are confined to the matters prescribed and embraced in the record filed by the applicant in support of its application and its proposed bond issue, proof offered in respect thereto, and the adequacy, weight and sufficiency thereof to justify the proposed bond issue.
Sec. 355. Section 48-3204, Arizona Revised Statutes, is amended to read:
48-3204. Issuance of certificate; form
A. When any bond of a district, including any bond authorized but not sold, that is eligible for certification by the director of the department of administration as provided by section 48-3202 is presented to the director of the department of administration, the director of the department of administration shall attach a certificate to the bond in substantially the following form:
Phoenix, Arizona
________________________
(insert date)
I, __________________________ director of the department of administration of the state of Arizona, do hereby certify that the within bond, number _______________, of series number ______________ of the _________________ district, issued _______________________ (insert date), is, in accordance with an act of the legislature of the state of Arizona, approved _____________________ (insert date), a legal investment for the funds of savings banks in the state of Arizona, and may be deposited to secure public monies, it being entitled to such privilege by virtue of an examination by the director of water resources, the attorney general and the superintendent deputy director of the financial institutions division of the department of insurance and financial institutions of the state of Arizona in pursuance of said act.
_____________________________
Director of the department of
administration of the state
of Arizona.
B. A facsimile of the signature of the director of the department of administration impressed on the certificate shall be a sufficient signing thereof, provided that the imprint of the seal of the director of the department of administration shall appear on both the certificate and the bond over the facsimile signature.
Sec. 356. Retroactivity
Section 41-3451, Arizona Revised Statutes, as amended by this act, applies retroactively to from and after June 30, 2020.