11VAC5-31 Licensing Regulations

REGULATIONS

Vol. 28 Iss. 26 - August 27, 2012

TITLE 11. GAMING

STATE LOTTERY BOARD

Chapter 31

Final Regulation

Title of Regulation: 11VAC5-31. Licensing Regulations (amending 11VAC5-31-10 through 11VAC5-31-50, 11VAC5-31-70 through 11VAC5-31-100, 11VAC5-31-130, 11VAC5-31-150, 11VAC5-31-160, 11VAC5-31-180, 11VAC5-31-190; repealing 11VAC5-31-110, 11VAC5-31-120).

Statutory Authority: § 58.1-4007 of the Code of Virginia.

Effective Date: September 26, 2012.

Agency Contact: Mitch Belton, Contract and Project Coordinator, State Lottery Department, 900 East Main Street, 9th Floor, Richmond, VA 23219, telephone [phone], FAX [phone], or email [e-mail].

Summary:

The amendments (i) establish a new "special retailer" license, (ii) allow the department to increase or decrease initial and annual renewal license fees within certain limits, (iii) authorize the department to set retailer compensation at lower rates, (iv) remove the limits of what the department may require in terms of retailer bonding amounts, and (v) allow retailers to offer cash in lieu of traditional bonding instruments.

11VAC5-31-10. Definitions.

The following words and terms when used in any of the department's regulations shall have the same meanings as defined in this chapter unless the context clearly indicates otherwise:

"Board" means the State Lottery Board established by the State Lottery Law (Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia).

"Department" means the State Lottery Department created by the State Lottery Law (Chapter 40 (§ 58.1-4000 et seq.) of Title 58.1 of the Code of Virginia).

"Director" means the Director of the State Lottery Department or his designee.

"License" means the certificate issued by the department to a retailer who has met the requirements established by the department to sell lottery products.

"Lottery retailer," "lottery sales agent" or "retailer" means a person licensed by the director to sell and dispense lottery tickets or shares products and act as the department's representative to collect, preserve, and account for Commonwealth of Virginia trust funds.

"Person," for purposes of licensing, means an individual, association, partnership, corporation, club, trust, estate, society, company, joint stock company, receiver, trustee, assignee, referee, or any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, and any combination of individuals, as well as all departments, commissions, agencies and instrumentalities of the Commonwealth, including its counties, cities, municipalities, political subdivisions, agencies and instrumentalities thereof.

"Vacuum fluorescent display" means a player display unit that, when connected to the lottery terminal, presents messages to the customer, such as customer transaction totals, validation and cancellation amounts, and jackpot drawing messages.

11VAC5-31-20. Eligibility.

A. Any person who is 18 years of age or older and who is bondable may submit an application for licensure as a lottery retailer in accordance with the provisions and requirements of the department's licensing procedures, except no person may submit an application for licensure:

1. Who will be engaged primarily in the business of selling lottery tickets;

2. Who is a board member, officer, or employee of the State Lottery Department or who resides in the same household as a board member, officer, or employee of the department; or

3. Who is a board member, officer, or employee of any vendor to the department of lottery ticket goods or services, working directly on a contract with the department, or whose business owns, is owned by or controlled by, or affiliated with that vendor.

B. The submission of an application, forms or data for licensure does not in any way entitle any person to receive a license to act as a lottery retailer.

11VAC5-31-30. Application procedure.

A. Any eligible person shall first file an application with the department by completing all information requested on forms supplied for that purpose, along with submitting the any required fees.

B. The submission of application forms or data for licensure does not in any way entitle any person to receive a license to act as a lottery retailer.

C. The [ retailer person ] shall submit all required forms and information to the department to be considered for licensing. Failure to submit required forms within the department's licensing procedures may result in the loss of opportunity to become or remain a licensed retailer.

11VAC5-31-40. General standards for licensing.

A. The director or his designee may license those persons who, in his opinion, will best serve the public interest and convenience and public trust in the lottery and promote the sale of lottery tickets. Before issuing or renewing a license, the director may consider factors including, but not limited to, the following:

1. The financial responsibility and security of the applicant and his business or activity;

2. The accessibility of his place of business or activity to the public;

3. The sufficiency of existing lottery retailers to serve the public convenience;

4. The volume of expected lottery ticket sales;

5. The ability to offer a high level of customer service to lottery players;

6. Whether the place of business caters to or is frequented predominantly by persons under 18 years of age;

7. Whether the nature of the business constitutes a threat to the health or safety of prospective lottery patrons;

8. Whether the nature of the business is consonant with the probity of the Commonwealth; and

9. Whether the applicant or retailer has committed any act of fraud, deceit, misrepresentation, or conduct prejudicial to public confidence in the state lottery.

1. Those factors set out in § 58.1-4009 of the Code of Virginia, these regulations, and the department's licensing procedures;

2. The ability to offer a high level of customer service to lottery players;

3. The person's prior history, record, and performance with the department;

4. Whether the place of business caters to or is frequented predominately by persons under 18 years of age;

5. Whether the nature of the business constitutes a threat to the health or safety of prospective patrons;

6. Whether the nature of the business is consonant with the probity of the Commonwealth; and

7. Whether the person or retailer has (i) committed any act of fraud, deceit, misrepresentation, moral turpitude, or illegal gambling or (ii) engaged in conduct prejudicial to public confidence in the state lottery.

B. The director may develop and, by director's order, publish additional criteria which, in his judgment, are necessary to serve the public interest and public trust in the lottery.

C. After notification of selection as a lottery retailer, the retailer shall submit all required forms and information to the department to be considered for licensing. Failure to submit required forms and information within the times specified by the department's licensing procedures may result in the loss of the opportunity to become or remain a licensed retailer.

B. Special retailer licensing.

1. The director may license special lottery retailers subject to such conditions or limitations as the director may deem prudent and if the director finds there is a need to develop alternative business models to engage in partnerships with certain retailers that are consistent with the laws of the Commonwealth of Virginia and these regulations. These limitations or conditions may include, but are not limited to:

a. Length of license period;

b. Hours or day of sale;

c. Selling of only limited products;

d. Specific persons who are allowed to sell lottery tickets;

e. Specific sporting, charitable, social, or other special events where lottery tickets may be sold if in conformity with law; or

f. Different commission and payment structures and bonding requirements.

2. Special licensed agents will be subject to these regulations.

11VAC5-31-50. Bonding of lottery retailers.

A. A lottery retailer shall have and maintain a surety bond from a surety company entitled to do business in Virginia this Commonwealth. The surety bond shall be in the amount and penalty of up to $50,000 for instant game retailers and $100,000 per clerk-activated terminal for on-line game retailers and shall be payable to the State Lottery Department and conditioned upon the faithful performance of the lottery retailer's duties an amount as deemed necessary to secure the interests of the Commonwealth and the department, in the sole discretion of the director, and shall be payable to the department and conditioned upon the faithful performance of the lottery retailer's duties.

B. The department may establish a sliding scale for surety bonding requirements based on the average volume of lottery ticket sales by a retailer to ensure that the Commonwealth's interest in tickets to be sold by a licensed lottery retailer is adequately safeguarded.

C. Prior to issuance of a license, every lottery sales agent shall either (i) be bonded by a surety company entitled to do business in this Commonwealth in such amount and penalty as may be prescribed by the regulations of the department or (ii) provide such other surety as may be satisfactory to the director, payable to the department, and conditioned upon the faithful performance of his duties. Such alternate surety instruments or arrangements may include, but not be limited to, a combination of surety instruments, including cash.

11VAC5-31-70. License term and periodic review.

A. A general license for an approved lottery retailer sales agent shall be issued for a specific term and is thereafter subject to a periodic determination of continued retailer eligibility and the payment of any fees fixed by the board.

B. The director may issue special licenses to persons for specific events and activities in accordance with the requirements of the department's licensing procedures.

11VAC5-31-80. License fees.

The initial general license fee shall be $50 and the periodic review fee shall be $35, or as otherwise determined from time to time by the board, and shall be paid in accordance with the department's licensing procedures. The license fees, where applicable, shall be paid for each location An initial licensing fee up to [ $100.00 $100 ] and an annual license fee up to  [ $70.00 $70 ] shall be collected from each lottery sales agent and shall be paid in accordance with the department's licensing procedures. These fees are nonrefundable, unless otherwise determined by the director in his sole discretion or specified in the department's procedures. The license fees shall be paid for each location.

11VAC5-31-90. Transfer of license prohibited.

A license issued by the director authorizes a specified person to act as a lottery retailer sales agent at a specified location as set out in the license or locations. The license is not transferrable or assignable to any other person or persons or location or locations.

11VAC5-31-100. Display of license.

Each licensed lottery retailer shall conspicuously display his lottery license in an area visible to the general public where lottery tickets are sold upon request by any member of the general public.

11VAC5-31-110. Reporting requirements and settlement procedures. (Repealed.)

Before a retailer may begin lottery sales, the director will issue to him instructions and report forms that specify the procedures for (i) ordering tickets; (ii) paying for tickets purchased; (iii) reporting receipts, transactions and disbursements pertaining to lottery ticket sales; and (iv) settling the retailer's account with the department.

11VAC5-31-120. Training of retailers and their employees. (Repealed.)

Each retailer or his designated representative or representatives and anyone that operates an on-line terminal at the retailer's location is required to participate in training. The director may consider nonparticipation as grounds for suspending or revoking the retailer's license.

11VAC5-31-130. Retailers' conduct.

A. Each retailer shall comply with all applicable state and federal laws and regulations, as well as all rules, policies and procedures of the department, license terms and conditions, specific rules for all applicable lottery games, directives and instructions that may be issued by the director, and licensing and equipment agreements and contracts signed by the retailer.

B. Retailers shall sell lottery tickets at the price fixed by the board. No retailer or his employee or agent shall attempt through any means whatsoever to identify or otherwise determine whether any unsold ticket creates a winning play. This includes, but is not limited to, trying to determine the numbers or symbols appearing under the removable latex or electronically produced coverings or otherwise attempting to identify unsold winning tickets. However, this shall not prevent the removal of the covering over the validation code or validation number after the ticket is sold.

C. Tickets shall be sold during all normal business hours of the lottery retailer and when the equipment is available, unless the director approves otherwise. No retailer or his employee or agent shall impose a fee or additional charge for selling a lottery game ticket or for cashing a winning lottery game ticket.

D. Tickets shall be sold only at the location listed on each retailer's license from the department. No retailer or his employee or agent shall purchase a winning lottery game ticket from a player at a discounted price.

E. Retailers shall not exchange instant ticket packs or tickets or on-line ticket stock with one another, but may transfer instant ticket packs or tickets between or among locations under the same ownership.

F. No retailer or his employee or agent shall try to determine the numbers or symbols appearing under the removable latex or electronically-produced coverings or otherwise attempt to identify unsold winning tickets. However, this shall not prevent the removal of the covering over the validation code or validation number after the ticket is sold.

G. Unsupervised retailer employees who sell or otherwise vend lottery tickets must be at least 18 years of age. An employee not yet 18 years of age, but who is at least 16 years of age, may sell or otherwise vend lottery tickets at the retailer's place of business so long as the employee is supervised by the manager or supervisor in charge at the location where the tickets are being sold.

11VAC5-31-150. Licensed retailers' compensation.

A. A licensed retailer shall receive up to 5.0% compensation based on his net ticket sales and up to 1.0% of the cash value of all prizes which the retailer paid.

B. The Except as provided pursuant to the State Lottery Law (§ 58.1-4000 et seq. of the Code of Virginia), the board shall approve any bonus or incentive system for payment to retailers. The director may then award such cash bonuses or other incentives to retailers.

C. Retailers may not accept any compensation for the sale of lottery tickets other than compensation approved under this section, regardless of the source.

D. Nothing in this regulation shall be inconsistent with §§ 58.1-4006 D and 58.1-4007 A 11 of the Code of Virginia.

11VAC5-31-160. Denial, suspension, revocation or noncontinuation of license.

A. The director may refuse to issue a license to a person if the person does not meet the eligibility criteria and standards for licensing as set out in § 58.1-4009 of the Code of Virginia, these regulations, and in the department's licensing procedures, or if:

1. The person's place of business caters to or is frequented predominantly by persons under 18 years of age, but excluding family-oriented businesses;

2. The nature of the person's business constitutes a threat to the health or safety of prospective lottery patrons;

3. The nature of the person's business is not consonant with the probity of the Commonwealth;

4. The person has committed any act of fraud, deceit, misrepresentation, moral turpitude, or illegal gambling or engaged in conduct prejudicial to public confidence in the state lottery; or

5. The person has been suspended permanently from a federal or state licensing or authorization program and that person has exhausted all administrative remedies pursuant to the respective agency's regulations or procedures. The person falsifies or misrepresents a material fact on any application, form, document, or data submitted during the licensure process;

6. The person has an unsatisfactory prior history, record, or performance with the lottery;

7. The person's place of business represents a substantial risk for the collection, deposit, preservation, accounting, or safeguarding of Commonwealth of Virginia Trust Funds, irrespective of the bond or surety provided by the person;

8. The person has been suspended permanently from a federal or state licensing or authorization program and that person has exhausted all administrative remedies pursuant to the respective agency's regulations or procedures; or

9. The proposed retailer's licensed location or locations does not comply with the requirements of the department's Retailer Accessibility Guidelines effective January 1, 2011, as applicable.

B. The director may suspend, revoke, or refuse to continue a license for any of the reasons enumerated in § 58.1-4012 of the Code of Virginia, in subsection A of this section, in the department's procedures, or for any of the following reasons:

1. Failure to maintain the required lottery trust account;

2. Failure to comply with lottery game rules;

3. Failure to properly care for, or prevent the abuse of, the department's equipment, or failure to properly position and display the vacuum fluorescent display or LED device;

4. Failure to meet minimum point-of-sale standards; or

5. Failure to continue to meet the eligibility criteria and standards for licensing.; or

6. Failure to comply with (i) any applicable law or statute, rule, policy, or procedure of the department; (ii) license terms and conditions; (iii) specific rules for all applicable department games; (iv) directives and instructions that may be issued by the director; and (v) licensing and equipment agreements and contracts signed by the retailer.

C. Any person refused a license under subsections A or B of this section may appeal the director's decision in the manner provided by 11VAC5-20-150.

D. Before taking action under subsection C A or B of this section, the director will notify the retailer in writing of his intent to suspend, revoke or deny continuation of the license. The notification will include the reason or reasons for the proposed action and will provide the retailer with the procedures for requesting a conference. Such notice shall be given to the retailer in accordance with the provisions of the department's regulations.

E. If the director deems it necessary in order to serve the public interest and maintain public trust in the lottery, he may temporarily suspend a license without first notifying the retailer. Such suspension will be in effect until any prosecution, hearing, or investigation into alleged violations is concluded.

F. A retailer shall surrender his license to the director by the date specified in the notice of revocation or suspension. The retailer shall also surrender the lottery property in his possession and give a final lottery accounting of his lottery activities by the date specified by the director.

11VAC5-31-180. Inspection of premises.

Each lottery retailer shall provide access during normal business hours or at such other times as may be required by the director or state lottery department representatives to enter the premises of the licensed retailer. The premises include the licensed location where lottery tickets are sold or any other location under the control of the licensed retailer where the director may have good cause to believe lottery materials, equipment, or tickets are stored or kept in order to inspect the licensed premises and inspect, or if necessary remove lottery materials, equipment, or tickets and the licensed premises.

11VAC5-31-190. Examination of records and equipment; seizure of records and equipment.

A. Each lottery retailer shall make all books and records pertaining to his lottery activities available for inspection, auditing and copying, and make all equipment related to his lottery activities available for inspection, as required by the director or department representatives, between the hours of 8 a.m. and 5 p.m. Mondays through Fridays during the normal business hours of the licensed retailer during normal business hours of the licensed retailer.

B. All books, records and equipment pertaining to the licensed retailer's lottery activities may be seized with good cause by the director or department representatives without prior notice.

NOTICE: The following forms used in administering the regulation were filed by the agency. The forms are not being published; however, online users of this issue of the Virginia Register of Regulations may click on the name to access a form. The forms are also available from the agency contact or may be viewed at the Office of the Registrar of Regulations, General Assembly Building, 2nd Floor, Richmond, Virginia 23219.

FORMS (11VAC5-31)

Retailer License Application, SLD-0062 (rev. 8/97).

Retailer Location Form, SLD-0055 (rev. 3/99).

Personal Data Form, SLD-0061 (rev. 4/99).

On-Line Game Survey, SLD-0120.

Licensed Retailer Certificate (rev. 9/94).

Instant Ticket Game/Contest Product Licensing Application (rev. 7/96).

Retailer Contract (rev.12/99).

Retailer Contract Addendum (rev. 12/00).

Authorization Agreement for Preauthorized Payments, SLD-0035A.

A/R Online Accounting Transaction Form, X-0105 (eff. 11/00).

Retailer Activity Form, SLD-0081 (rev.2/95).

On-Line Weekly Settlement Envelope, SLD-0127.

Cash Tickets Envelope, SLD-0125.

Cancelled Tickets Envelope, SLD-0124.

Ticket Problem Report, SLD-0017 (eff. 9/92).

Weekly Settlement Form, SLD-0128 (eff. 2/89).

Retailer License Application, SLD-0062 (rev. 10/07).

Retailer Contract (rev. 5/10).

VA.R. Doc. No. R12-3032; Filed August 9, 2012, 10:02 a.m.