Passed by the Senate February 13, 2012 YEAS 49   BRAD OWEN ________________________________________ President of the Senate Passed by the House February 27, 2012 YEAS 97   FRANK CHOPP ________________________________________ Speaker of the House of Representatives | I, Thomas Hoemann, Secretary of the Senate of the State of Washington, do hereby certify that the attached is SUBSTITUTE SENATE BILL 6295 as passed by the Senate and the House of Representatives on the dates hereon set forth. THOMAS HOEMANN ________________________________________ Secretary | |
Approved March 7, 2012, 2:46 p.m. CHRISTINE GREGOIRE ________________________________________ Governor of the State of Washington | March 7, 2012 Secretary of State State of Washington |
State of Washington | 62nd Legislature | 2012 Regular Session |
READ FIRST TIME 02/01/12.
AN ACT Relating to exchange facilitator requirements; amending RCW 19.310.040, 19.310.120, and 19.310.150; creating new sections; prescribing penalties; and providing an expiration date.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1 The legislature finds that exchange
facilitators are a specialized business in Washington state that
involves the transfer of certain assets of citizens for investment
purposes. In 2009 legislation was passed that provided enhanced
reporting requirements, as well as civil and criminal penalties, to
serve as additional protections for citizens involved in these types of
transactions. The legislature finds that current law is still
inadequate to protect those who trust these companies with assets they
may have spent a lifetime accumulating. Additional protections are
required to properly regulate the companies engaged in these
transactions.
Sec. 2 RCW 19.310.040 and 2009 c 70 s 5 are each amended to read
as follows:
(1) A person who engages in business as an exchange facilitator
((shall)) must:
(a)(i) Maintain a fidelity bond or bonds in an amount of not less
than one million dollars executed by an insurer authorized to do
business in this state for the benefit of a client of the exchange
facilitator that suffers a loss as a result of the exchange
facilitator's covered dishonest act. Such fidelity bond must cover the
acts of employees of an exchange facilitator and owners of a
nonpublicly traded exchange facilitator; or
(((b) Deposit an amount of cash or securities or irrevocable
letters of credit in an amount of not less than one million dollars
into an interest-bearing deposit account or a money market account with
the financial institution of the exchange facilitator's choice.
Interest on that amount accrues to the exchange facilitator; or)) (ii) Deposit all exchange funds in a qualified escrow account
or qualified trust, as both terms are defined under treasury regulation
section 1.1031(k)-1(g)(3), with a financial institution ((
(c)and)). The
qualified escrow account or qualified trust must provide that a
withdrawal from that escrow account or trust requires the exchange
((facilitator's and the client's written authorization.)) facilitator and the client to independently authenticate a
record, as defined under RCW 62A.9A-102, of the transaction;
(2) A person who engages in business as an exchange facilitator may
maintain a bond or bonds or deposit an amount of cash or securities or
irrevocable letters of credit in excess of the minimum required amounts
under this section.
(3) The requirements under subsection (1)(a) of this section are
satisfied if the person engaging in business as an exchange facilitator
is listed as a named insured on one or more fidelity bonds that have an
aggregate total of at least one million dollars.
(4)
(b) Disclose on the company web site and contractual agreement the
following statement in large, bold, or otherwise conspicuous typeface
calculated to draw the eye: "Washington state law, RCW 19.310.040,
requires an exchange facilitator to either maintain a fidelity bond in
an amount of not less than one million dollars that protects clients
against losses caused by criminal acts of the exchange facilitator, or
hold all client funds in a qualified escrow account or qualified
trust." If recommending other products or services, the exchange
facilitator must disclose to the client that the exchange facilitator
may receive a financial benefit, such as a commission or referral fee,
as a result of such recommendation. The exchange facilitator must not
recommend or suggest to a client the use of services of another
organization or business entity in which the exchange facilitator has
a direct or indirect interest without full disclosure of such interest
at the time of recommendation or suggestion.
(2) An exchange facilitator must provide evidence to each client
that the requirements of this section are satisfied before entering
into an exchange agreement.
(((5))) (3) Upon request of a current or prospective client, or the
attorney general under chapter 19.86 RCW, the exchange facilitator must
offer evidence proving that the requirements of this section are
satisfied at the time of the request.
NEW SECTION. Sec. 3 (1) A stakeholder task force comprised of
the department of financial institutions, the office of the insurance
commissioner, exchange facilitators, and title holders shall convene to
identify effective regulatory procedures for the exchange facilitator
industry. Issues for discussion must include, but not be limited to:
The feasibility and cost of regulation; regulatory and enforcement
standards; certification or licensing options; and the feasibility of
adopting provisions within the escrow agency act. Specific
recommendations on these issues are due to the legislature by December
1, 2012.
(2) This section expires December 1, 2012.
Sec. 4 RCW 19.310.120 and 2009 c 70 s 13 are each amended to read
as follows:
(1) Failure to fulfill the requirements under RCW 19.310.040
constitutes prima facie evidence that the exchange facilitator intended
to defraud a client who suffered a subsequent loss of the asset
entrusted to the exchange facilitator.
(2) A person who engages in business as an exchange facilitator and
who violates RCW 19.310.100 (1) through (8) or fails to comply with the
requirements under RCW 19.310.040 is guilty of a class B felony under
chapter 9A.20 RCW. However, an exchange facilitator is not guilty of
a class B felony for failure to comply with the requirements under RCW
19.310.040 if: (a) Failure to comply is due to the cancellation or
amendment of the fidelity bond by the bond issuer; and (b) the exchange
facilitator:
(i) Within thirty days, takes all reasonable steps to comply with
the requirements under RCW 19.310.040; and
(ii) Deposits any new exchange funds into a qualified escrow
account or qualified trust until a fidelity bond is obtained that meets
the requirements under RCW 19.310.040(1)(a)(i).
Sec. 5 RCW 19.310.150 and 2009 c 70 s 16 are each amended to read
as follows:
(1) A person who violates this chapter is subject to civil suit in
a court of competent jurisdiction.
(2) Damages awarded to a current client for a civil suit filed for
a violation of the requirements under RCW 19.310.040 include treble
damages and attorneys' fees.