Prohibition and Reporting of Certain Transactions

PURPOSE: This rule prohibits certain transactions and establishes the procedures for reporting of certain transactions. (1) No gaming licensee or occupational licensee may pledge, hypothecate or transfer in any way any license issued by the commission or any interest in a license issued by the commission. Upon any purported pledge, hypothecation or transfer of such a license or interest in such a license, the license shall automatically become null and void and of no legal effect. (2) Ownership interest in a gaming licensee that is not a publicly held entity or a holding company that is not a publicly held entity— (A) May not be pledged or hypothecated in any way to, or otherwise be subject to any type of security interest held by, any entity or person other than a financial institution without prior approval of the commission; and (B) May not be pledged or hypothecated in any way, or otherwise subject to any type of security interest except in compliance with 11 CSR 45-10.040(3)(B). (3) Any reporting party must notify the commission of its intention to consummate any of the following transactions at least sixty (60) days prior to such consummation; and, during such period, the commission may disapprove the transaction or require the transaction to be delayed pending further investigation: (A) Any transfer or issuance of an ownership interest in a gaming licensee that is not a publicly held entity or a holding company that is not a publicly held entity; or (B) Subject to 11 CSR 45-10.040(2)(A), any pledge or hypothecation of, or grant of any type of security interest in, an ownership interest in a gaming licensee that is not a publicly held entity or a holding company that is not a publicly held entity; provided that no such ownership interest may be transferred in any way pursuant to any pledge, hypothecation or security interest without separate notice to the commission at least thirty (30) days prior to such transfer, which restriction must be specifically included in the grant of the pledge, hypothecation or security interest. (4) Any reporting party must notify the commission of its intention to consummate any of the following transactions at least fifteen (15) days prior to such consummation, and the commission may reopen the licensing hearing of the applicable gaming licensee prior to or following the consummation date to consider the effect of the transaction on the gaming licensee’s suitability: (A) Any issuance of ownership interest in a publicly held gaming licensee or a publicly held holding company, if such issuance would involve, directly or indirectly, an amount of ownership interest equaling five percent (5%) or greater of the ownership interest in the gaming licensee or holding company after the issuance is complete, assuming that all of the ownership interest in the issuance is issued and outstanding; (B) Any private incurrence of debt equal to or exceeding one (1) million dollars by a gaming licensee that is the holder of a Class A or Class B license or any holding company that is affiliated with the holder of a Class A or Class B licensee; (C) Any public issuance of debt by a gaming licensee that is the holder of a Class A or Class B license or any holding company that is affiliated with the holder of a Class A or Class B licensee; and (D) Any significant related party transaction. (5) Any entity required to report a transaction prior to consummation or obtain approval of a transaction under 11 CSR 45-10.040(2), (3) or (4) must submit the following as part of the required notice and before any approval shall be considered: (A) An executed copy of the Corporate Securities and Finance Transaction Information Sheet included in Appendix A to this rule; and (B) An executed copy of the Corporate Securities and Finance Compliance Affidavit included in Appendix A to this rule from each other party to the transaction or a representative authorized to act on behalf of such parties. (6) Not later than seven (7) days after the consummation of any of the following transactions, any reporting party must report such consummation to the commission: (A) Any transfer or issuance of ownership interest in a publicly held gaming licensee or publicly held holding company, if such transfer or issuance has resulted in an entity or group of entities acting in concert owning, directly or indirectly, holding a total amount of ownership interest equaling five percent (5%) or greater of the ownership interest in the gaming licensee or holding company. (B) Any pledge or hypothecation of, or grant of a security interest in, five percent (5%) or more of the ownership interest in a publicly held gaming licensee or a publicly held holding company; provided that if any part of such ownership interest is transferred voluntarily or involuntarily pursuant to such a pledge, hypothecation or security interest, separate notice to the commission is required not later than seven (7) days after the consummation of such transfer. (7) Any gaming licensee that is the holder of a Class A or Class B license must notify the commission of its intention or the intention of any entity affiliated with it to consummate any transaction that involves or relates to the gaming licensee and has a dollar value equal to or greater than one (1) million dollars; provided that such notice must be given no later than seven (7) days following such consummation. (8) The following definitions apply to the terms used in 11 CSR 45-10.040: (A) Material change in ownership or control: 1. Any transfer or issuance of ownership interest in a gaming licensee or holding company or other contract or arrangement resulting in a person or group of persons acting in concert, directly or indirectly: A. Owning, controlling, or having power to vote twentyfive percent (25%) or more of the voting ownership interest in the gaming licensee or holding company, if the acquiring person or group of persons did not previously hold twenty-five percent (25%) or more of the voting ownership interest of the gaming licensee or the holding company prior to the change in control; or B. Controlling in any manner the election of a majority of the directors or managers of a gaming licensee or holding company, if the controlling person or group of persons did not previously exercise such control; 2. Any sale, transfer, or lease by a licensee of all or any portion of the real estate upon which a riverboat gaming operation is conducted or located; provided, however, that this section shall not apply to leases in the normal course of business related to restaurants, bars, entertainment venues or other retail space, as long as it does not include any portion of the gaming floor. (B) Financial institution: Any bank, savings institution or trust company organized and supervised under the laws or any state or the laws of the United States, or other entity specifically approved in writing by the commission; (C) Gaming licensee: A person who holds a Class A, Class B, key person/key business entity or supplier’s license; (D) Holding company: A person or entity which, directly or indirectly, or acting in concert with one (1) or more other persons, owns, controls, or holds twenty-five percent (25%) or more of the outstanding ownership interest of any gaming licensee or holding company; (E) Ownership interest: An interest which shall include, but not be limited to, any corporation stock, partnership interest, limited liability company interest, or any warrant, option or other right to subscribe to or purchase any of the foregoing; (F) Private incurrence of debt: An agreement or series of related agreements to obtain money or property in exchange for the promise or obligation to make deferred payments therefore, including but not limited to, loans and credit facilities, but not including ordinary commercial installment contracts with time payment schedules of less than one hundred eighty (180) days; (G) Related party: Any key person or holding company of a gaming licensee; any person under the control of a gaming licensee or any of its key persons; or any person sharing a holding company in common with a gaming licensee; (H) Reporting party: Any applicant for or holder of any license issued by the commission issuing, transferring, acquiring, pledging or hypothecating ownership interest in a gaming licensee or holding company, or proposing to take such action, and any applicant for or holder of any license issued by the commission proposing to incur debt through a public issuance of debt or a private incurrence of debt. Any gaming licensee shall be deemed a reporting party with regard to any transaction for which any of its holding companies or other affiliated entities is a reporting party. Reporting parties shall be jointly and severally responsible for the reporting requirements under 11 CSR 45-10.040; (I) Significant related party transaction: A transaction involving a related party and a gaming licensee which involves any of the following: 1. Consideration paid for services provided by the related party or personnel working on behalf of the related to the party, including but not limited to management service contracts; 2. Any arrangement in which consideration paid to the related party is based upon revenue generated by the gaming licensee or other measure of financial or business production of the gaming licensee; 3. Any allocation of expenses between related parties; or 4. Any loan or credit issued from the related party to the gaming licensee at a rate of interest that is at least one percent (1%) higher than the “bank prime loan rate” as reported by the Federal Reserve System Board of Governors on Form H.15. (9) Any action or decision to refrain from acting by the commission under this 11 CSR 45-10.040 shall not indicate or suggest that the commission has considered or passed in any way on the marketability of any securities of a gaming licensee or holding company, or any other matter, other than the suitability of the pertinent licensee company for licensure by the commission under Missouri law. (10) All notices required under 11 CSR 45-10.040 must be addressed to the director of the commission and must clearly contain the following language in bold type and all capital letters on the top of the first page: “CORPORATE SECURITIES AND FINANCE NOTICE REQUIRED UNDER 11 CSR 45-10.040”; provided, however, that the commission may waive this language requirement for notices that it deems in its discretion to be effective hereunder that were received prior to the effective date of 11 CSR 45-10.040(9). The commission or the director of the commission may waive or reduce any notice period required under 11 CSR 45-10.040 if such waiver or reduction is determined by the commission or the director to be in the best interest of the public. If the director exercises the authority to waive or reduce a notice period, s/he shall report action to the commission. Any notice or report required under 11 CSR 45-10.040 shall be in addition to any required application update or submission. (11) Violations of this 11 CSR 45-10.040, including, but not limited to, consummation of transactions prohibited by the commission hereunder, may be grounds for discipline against any licensee or grounds for denial of any application. This 11 CSR 45-10.040 shall not be construed as making any asset inalienable in nature, but shall provide a regulatory penalty enforcement mechanism for certain types of asset transfers as set forth herein. (12) Upon any voluntary material change in ownership or GAMING COMMISSION control, the license held by the gaming licensee that is the subject of the material change in ownership or control or that is a direct or indirect subsidiary of the holding company that is the subject of the material change in ownership or control, shall automatically become null and void and of no legal effect, unless the commission has approved such material change in ownership or control by vote of the commissioners prior to its consummation. The commission may grant a petition to approve a material change in ownership or control if the petitioner proves by clear and convincing evidence that— (A) The transfer is in the best interest of the state of Missouri; (B) The transfer is not injurious to the public health, safety, morals, good order, or general welfare of the people of the state of Missouri, and that it would not discredit or tend to discredit the gaming industry or the state of Missouri; (C) It would have no material negative competitive impact; (D) It would have no potential to affect the licensee’s suitability to hold a gaming license; and (E) It would not potentially result in any significant negative changes in the financial condition of the licensee. (13) Upon an involuntary material change in ownership or control (including, but not limited to, death, appointment of a guardian by a court of competent jurisdiction, or involuntary bankruptcy) the executive director with the concurrence of the chairman may, within ten (10) days, extend the license held by the gaming licensee that is the subject of the material change in ownership or control, or that is a direct or indirect subsidiary of the holding company that is the subject of the material change in ownership or control, until the next commission meeting, at which time the commission may extend the license until such time as a material change in ownership or control is approved. In the event the executive director does not extend the license within ten (10) days of the involuntary material change in ownership or control, or the commission does not extend it at their next meeting, the license shall become null and void. GAMING COMMISSION GAMING COMMISSION AUTHORITY: sections 313.800, 313.004, 313.805, 313.807, and 313.812, RSMo Supp. 2014.* Emergency rule filed Sept. 1, 1993, effective Sept. 20, 1993, expired Jan. 17, 1994. Emergency rule filed Jan. 5, 1994, effective Jan. 18, 1994, expired Jan. 30, 1994. Original rule filed Sept. 1, 1993, effective Jan. 31, 1994. Emergency amendment filed Feb. 23, 1995, effective March 5, 1995, expired July 2, 1995. Amended: Filed Feb. 23, 1995, effective Aug. 30, 1995. Amended: Filed April 18, 1996, effective Dec. 30, 1996. Amended: Filed Jan. 21, 1997, effective Aug. 30, 1997. Amended: Filed Nov. 10, 1997, effective June 30, 1998. Amended: Filed May 13, 1998, effective Oct. 30, 1998. Amended: Filed Dec. 3, 2007, effective May 30, 2008. Amended: Filed Dec. 2, 2009, effective June 30, 2010. Amended: Filed Aug. 28, 2014, effective March 30, 2015. *Original authority: 313.004, RSMo 1993, amended 1994, 2014; 313.800, RSMo 1991, amended 1993, 1994, 2005, 2014; 313.805, RSMo 1991, amended 1993, 1994, 2000, 2008, 2010; 313.807, RSMo 1991, amended 1993, 2000, 2012; and 313.812, RSMo 1991, amended 1993, 1994, 2000, 2014.