Cash Reserve and Segregated Account Requirements

Cash Reserve and Segregated Account Requirements. (a) The licensed operator shall maintain in the form of cash or cash equivalents, payment processor reserves and receivables, an irrevocable letter of credit, a bond, or a combination thereof, in the amount of the deposits made to the accounts of Mississippi fantasy contest players for the benefit and protection of the funds held in such accounts. For purposes of this rule cash equivalents are investments with an original maturity of three (3) months or less. (b) Funds held in player accounts of Mississippi residents shall be protected as set forth herein. A fantasy contest operator shall maintain a reserve in the form of cash, cash equivalents, or a combination thereof to protect player funds in one (1) of the following ways: 1. Cash Reserve i. The amount of the reserve shall be equal to, at a minimum, the sum of all registered players’ funds held in player accounts of Mississippi residents. ii. The reserve agreements must reasonably protect the reserve against claims of the operator’s creditors other than the authorized players for whose benefit and protection the reserve is established, and must provide the following: 1. The reserve shall be established and held in trust for the benefit and protection of authorized players to the extent the licensed operator holds money in player accounts for players; 2. The reserve must not be released, in whole or in part, except upon written instruction or approval of the Commission. The reserve must be available within ninety (90) days of written demand or written instruction. If the reserve is released to the Commission, the Commission may interplead the funds in the Hinds County Circuit Court for distribution to the authorized players for whose protection and benefit the account was established and to the other such persons as the court determines are entitled thereto, or shall take such other steps as necessary to effect the proper distribution of the funds, or may do both; 3. The licensed operator may receive income accruing on the reserve, without obtaining permission from the Commission; and 4. The licensed operator has no interest or title to the reserve. iii. The reserve must be held or issued by a federally insured financial institution and must be established pursuant to a written agreement between the licensed operator and the financial institution. iv. The proposed reserve arrangement is not effective until the Commission’s written approval has been obtained. v. The reserve arrangement agreements may be amended only with the prior written approval of the commission. 2. Special Purpose Segregated Account with a Separate Corporate Entity i. A fantasy contest operator may establish a special purpose segregated account that is maintained and controlled by a properly constituted corporate entity that is not the fantasy contest operator and whose governing board includes one (1) or more corporate directors who are independent of the fantasy contest operator. ii. The special purpose segregated account with a separate corporate entity must hold, at a minimum, the sum of all authorized player funds held in player accounts of Mississippi residents for use in fantasy contests. iii. The special purpose segregated account must reasonably protect the funds against claims of the operator’s creditors other than the authorized players for whose benefit and protection the special purpose segregated fund is established, and must provide that: 1. The segregated account is established and held for the benefit and protection of authorized players; 2. The fantasy contest operator may receive income accruing on the segregated account. However, the fantasy contest operator has no interest in or title to the segregated account; and 3. The funds in the segregated account held for the benefit of Mississippi residents may only be distributed for the following: i. Payment to players upon completion of fantasy contests or otherwise for the reconciliation of player accounts; ii. For income earned on the account, to the fantasy contest operator; iii. To the Commission in the event that the fantasy contest operator’s license expires, is surrendered, or is otherwise revoked. The Commission may interplead the funds in the Hinds County Circuit Court for distribution to the authorized players for whose protection and benefit the account was established and to other such persons as the court determines are entitled thereto, or shall take such other steps as necessary to effect the proper distribution of the funds, or may do both; or iv. As authorized in writing in advance by any agreement approved by the Commission. iv. The corporate entity must require a unanimous vote of all corporate directors to file bankruptcy. v. The corporate entity must obtain permission from the Commission prior to filing bankruptcy or entering into receivership. vi. The corporate entity must have articles of incorporation that prohibit commingling of funds with that of the fantasy contest operator except as necessary to reconcile the accounts of players with sums owed by those players to the fantasy contest operator. vii. The corporate entity must be restricted from incurring debt other than to players pursuant to the rules that govern their accounts for contests. viii. The corporate entity must receive written approval from the Commission prior to taking on obligations of the fantasy contest operator other than obligations to players pursuant to the rules that govern their accounts for contests. ix. The corporate entity must be prohibited from dissolving, merging, or consolidating with another company without the written approval of the Commission while there are unsatisfied obligations to fantasy contest players. 3. Irrevocable letter of credit, or other method as approved by the Commission. (c) If, at any time, the licensed operator’s total available cash and cash equivalent reserve is less than the amount required, the licensee shall notify the Commission of this deficiency within forty-eight (48) hours. (d) Each licensed operator shall continuously monitor and maintain a record of all player deposits and its cash reserves to ensure compliance with the cash reserves requirement. (e) The licensed operator shall provide the Commission with documentation of both the amount of deposits in players’ accounts and the amount in cash reserves as of the last day of each month by the twentieth (20th) day of the following month.