13.1 Restriction of Doing Business
(a) No entity shall manufacture, sell or lease, distribute, repair or provide EGS maintenance services of EGS equipment to the Franchise Holder’s EGS operations in the State of Arkansas unless it holds a current Service Industry License issued by the Commission in accordance with these regulations.
13.2 Determining the Need for a Service Industry License
(a) Any entity which satisfies one or more of the following criteria shall, unless it is otherwise set forth in these regulations, obtain a Service Industry License to carry out business with a Franchise Holder in the State of Arkansas.
i. The entity manufactures, sells or leases, supplies or distributes devices, machines, equipment, accessories, objects or articles which:
(1) Are designed specifically for use in EGS operations of the Franchise Holder;
(2) Are needed to carry out the activities of an authorized game;
(3) Have the capacity to affect the result of the play of an authorized game; or
(4) Have the capacity to affect the calculation, storage, collection or control of the gross revenues.
ii. The entity provides maintenance services or repairs gaming equipment for the EGS of the Franchise Holder;
iii. All other suppliers of materials, maintenance and supplies that provide greater than $25,000 worth per year in materials, service and supplies. This would include security systems, gaming devices and money handling/storage devices; or
iv. The entity is conducting more than $150,000 in business with one Franchise Holder or more than $300,000 in business with two or more Franchise Holders during a calendar year.
13.3 General Parameters of Granting a Service Industry License
(a) An applicant for a Service Industry License shall submit to the Commission the information, documentation and guarantees necessary to establish through clear and convincing evidence:
i. The stability, integrity and economic responsibility of the applicant;
ii. The good character (if an individual), honesty and integrity of the applicant;
iii. That the owners, administrative and supervisory personnel, principal employees and sales representatives of the applicant comply with the parameters provided in Section 13.10 Qualifying as a Person Related to a Service Industry of these Regulations;
iv. The integrity of the investors, mortgage creditors, guarantors and holders of bonds, notes and other evidences of debt which are in any way related to the entity; and
v. The integrity of all the officers, directors and trustees of applicant.
13.4 Initial Application for a Service Industry License
(a) The initial application for a Service Industry License shall consist of an original and a copy of the following documents:
i. Arkansas Racing Commission Business Entity Disclosure Form for Service Industry Licensee, to be completed by the applicant and by each company, individual or entity holding an interest in applicant;
ii. Arkansas Racing Commission Personal History Disclosure and Supplemental form of Persons Related with Service Industries, to be completed by each natural person who must be qualified for a license by the Commission in accordance with Section 13.10 of these regulations; and
iii. The fees to be paid to the Commission, as provided in section 13.7 of these regulations.
(b) The Commission shall not evaluate an initial Service Industry License application unless same is accompanied by all the information required in these regulations, including all the documents requested in paragraph (a) above; provided that any incomplete application filed with the Commission shall be deemed to be as if same had not been filed.
(c) Burden of proof - It shall be the responsibility of the Service Industry applicant and its principals to provide information and or documentation and to demonstrate their qualifications by clear and convincing evidence relative to the character, honesty and integrity of its directors, officers, stockholders and principal employees, to the Commission.
(d) No person may sell or otherwise supply electronic games of skill to a franchise holder for the conduct of Wagering thereon as authorized in this chapter unless the person has demonstrated to the satisfaction of the commission that the person has the capability and qualifications necessary to reasonably furnish the equipment and perform the services to be provided by the supplier.
13.5 Duration of Service Industry License
(a) Every Service Industry License shall be issued by the Commission for a period of 3 years.
(b) Notwithstanding the provisions of paragraph (a) above, the Commission may, as it may deem necessary:
i. issue any Service Industry License for a shorter period;
ii. at anytime, void the Service Industry License for reasonable cause.
13.6 Service Industry License Renewal Application
(a) Every Service Industry License renewal application shall be filed no later than ninety (90) days prior to the expiration date of said license.
(b) The Service Industry License renewal application shall include:
i. A duly completed original and a photocopy of:
(5) An Arkansas Racing Commission Business Entity Disclosure form Service Industry Application, which shall contain all the information that has changed from the date of the application for the initial Service Industry License or of the last renewal, to be completed by the applicant and by each holding company of applicant;
(6) An Arkansas Racing Commission Personal History Disclosure and Supplemental form of Persons Related with Service Industry Licensees to be completed by each natural person who must be licensed in accordance with Section 13.9 of these regulations, and who has not been licensed by the Commission; and Arkansas Racing Commission Personal History Disclosure form and Supplemental Personal History Disclosure form of Persons Related with Service Industry Licensee-Renewal to be completed by any natural person required to be licensed in accordance with Section 13.2 of these Regulations and who has already been licensed by the Commission.
13.7 Service Industry License Fees
(a) The fees to be paid for the initial or renewal application for a Service Industry License shall be determined by the Commission; provided that the application fee shall not be more than $1,000 a year. This does not include the actual cost of the investigation(s), which is to be billed to and paid by the applicant to the Commission.
(b) The fees to be paid for the initial application shall cover administrative costs related to the processing of the application.
(c) The renewal application fee shall not be more than $1,000, payable to the Commission and submitted with the Service Industry License Renewal Form.
(d) The license will not be approved until the fees, including the investigative costs, have been paid by the applicant.
13.8 Service Industry Disqualification Criteria
(a) The Commission may deny a Service Industry License to any applicant which, in the opinion of the Commission:
i. Has not proved through clear and convincing evidence that the applicant and any of the persons required to be licensed in accordance with these Regulations are in fact duly qualified;
ii. Has violated any of the provisions of these regulations;
iii. The applicant has failed to provide information or documentation requested in writing by the Commission in a timely manner, which shall not exceed (30) business days from the date of request by the Commission without reasonable justification and an extension granted by the Commission;
iv. The Commission shall deny a Service Industry License to any applicant who does not satisfy the standards for entity licensing in this document.
13.9 Qualification Requirements - Service Industry License
(a) The Commission shall not issue a Service Industry License to any entity unless the applicant has established the individual qualifications of each one of the following entities or persons if applicable:
i. The entity;
ii. The holding company(s) of the entity;
iii. Every owner of the entity who has, directly or indirectly, any interest in or is the owner of more than five percent (5%) of the entity;
iv. Every owner of a holding company of the entity which the Commission deems necessary to promote the purposes of these regulations;
v. Any director of the entity, except such director who, in the opinion of the Commission, is not significantly involved in or related with the administration of the entity;
vi. Every officer of the entity who is significantly involved in or who has authority over the manner in which the business dealing with the activities of Franchise Holder and any officer who the Commission considers necessary to protect the good character, honesty and integrity of the entity;
vii. Any officer of the holding company of the entity who the Commission considers necessary to protect the good character, honesty and integrity of the entity;
viii. Any employee who supervises the regional or local office which employs the sales representatives who shall solicit business from or negotiate directly with a Franchise Holder;
ix. Any employee who shall function as a sales representative or who shall be regularly dedicated to soliciting business from any Franchise Holder in the State of Arkansas;
x. Any other person connected to an entity who the Commission considers should be licensed.
xi. This part does not apply to an institutional investor (as defined by the Federal Securities and Exchange Act of 1934, as amended) that acquires or will acquire 10% or less of the equity securities of an applicant or licensee that is a publicly traded corporation if those holdings were purchased for investment purposes only and the institutional investor files with the Commission a certified statement that it has no intention of influencing or affecting directly or indirectly, the affairs of the licensee; the investor will be permitted to vote on matters put to the vote of the outstanding security holders.
(b) In order to establish the individual qualifications, the persons specified in subparagraphs (a)(i) and (a)(ii) of this section shall complete an Arkansas Racing Commission Business Entity Disclosure.
(c) In order to establish the individual qualifications, the persons specified in subparagraphs (a)(iii) through (a)(x) of this section shall complete an Arkansas Racing Commission Personal History Disclosure form of Persons Related with Service Industry Licensee.
13.10 Qualifying as a Person Related with a Service Industry License
(a) Any natural person who is required to be licensed, because of his/her relationship with a Service Industry License applicant, shall provide to the Commission the information, documentation and assurances necessary to establish through clear and convincing evidence:
i. His/her relationship with the entity;
ii. That he/she is 21 years of age (this only applies to those employees who service gaming machines or work on the Gaming Floor who have access to the machines);
iii. That he/she is of good character and reputation, in addition to being honest and having integrity; and
iv. That he/she has not been convicted including “nolo contendere” and “withheld adjudication” by any state or federal court in the Country for:
(1) Committing, intending to commit or conspiring to commit a crime of moral turpitude, illegal appropriation of funds or robbery, or any violation of a law related to games of chance or skill, or a crime which is contrary to the declared policy of the Arkansas Racing Commission with respect to the gaming industry; or
(2) Committing, intending to commit or conspiring to commit a crime which is a felony in the State of Arkansas or a misdemeanor in another jurisdiction which would be a felony if committed in the State of Arkansas.
(b) Not satisfying with any one of the requirements established in paragraph (a) above shall be sufficient reason for the Commission to deny a Service Industry License.
(c) The Commission shall deny any person required to qualify in conjunction with a Service Industry License that does not satisfy the standards set forth within these regulations.
13.11 Investigations; Supplementary Approval of Change
(a) The Commission or its representatives may, at its discretion, conduct any investigation with respect to an applicant or any person related with an applicant who it deems pertinent, either at the time of the initial application or at any subsequent time.
(b) It shall be the continuous duty of any applicant or holder of a Service Industry License to fully cooperate with the Commission or its representatives during any investigation and provide any supplementary information that the Commission or its representatives requests.
(c) It shall be the duty of any applicant or holder of a Service Industry License to notify the Commission within 10 business days of any proposed changes in the ownership of the applicant or licensee. If the applicant or holder of a Service Industry License is publicly traded company, it does not have to report changes in ownership unless the change represents five percent (5%) or more of the total shares issued and outstanding or ten percent (10%) or more of the total shares issued and outstanding if the change is the result of an institutional investor. In such cases, the licensee shall provide the Commission with copies of the most recent notice filed with the Securities and Exchange Commission. All proposed new owners shall submit to the Commission or its representatives an initial Service Industry License application, which must be approved by the Commission. Any failure to comply with this rule shall be grounds for revocation of an existing license or denial of an application for a license.
13.12 Suspension, Denial of Renewal or Revocation of a Service Industry License
(a) Any of the following reasons shall be considered sufficient cause for the suspension, denial of renewal or revocation of a Service Industry License:
i. Violation of any provision of these regulations;
ii. Conduct which would disqualify the applicant or any other person required to be licensed by the Commission;
iii. Failure to comply with any applicable law, state or federal or regulation, or county or municipal ordinance;
iv. The material misstatement made in the application for the Service Industry License.
(b) Notwithstanding the provisions of subparagraph (a) above, any other cause that the Commission deems reasonable shall be considered sufficient cause for the suspension, denial of renewal or revocation of a Service Industry License.
13.13 Commercial Transaction in the Absence of a Service Industry License
(a) The Commission, at its discretion, may permit any Service Industry license applicant to carry out a commercial Transaction with a Franchise Holder before said Service Industry entity has obtained the Service Industry License required as long as:
i. The applicant has filed with the Commission a completed application for a Service Industry License;
ii. At least thirty (30) days has passed since the filing of said completed application with the Commission; and
iii. The Franchise Holder submits to the Commission a petition for special authorization to carry out a commercial Transaction in the absence of a Service Industry License which contains:
(1) Sufficient reasons to convince the Commission to grant the special authorization to the applicant; and
(2) A description of the commercial Transaction that it desires to carry out.
(b) The Commission shall evaluate said petition for special authorization to carry out a commercial Transaction in the absence of a Service Industry License and shall notify Franchise Holder of its decision in writing within a reasonable period.
13.14 Exemption to Service Industry License
(a) The Commission may exempt an entity from the requirement of obtaining a Service Industry License if the Commission determines that said entity is not operating its business in a regular and continuous manner as defined in (d) below.
(b) Any entity which is interested in obtaining an exemption from the requirement of obtaining a Service Industry License in accordance with this section shall apply in writing to the Commission for said exemption.
(c) The exemption application shall contain the following information:
i. Name, address and detailed description of the service offered by the entity;
ii. Name of the owners, directors, officers and managerial employees of the entity;
iii. Franchise Holder to whom they will provide services and a description of the service to be
provided, including the quantity and cost of the services;
iv. Number and frequency of the Transactions;
v. Dollar amount of the Transactions; and
vi. Sufficient reasons to convince the Commission as to why granting the entity a license is not necessary to protect the public interest or advance the Commission’s policies relating to gaming.
(d) The Commission may determine that an entity is not operating its business in a regular and continuous manner if the applicant demonstrates, to the satisfaction of the Commission, that the goods or services provided by the entity are in minimal or insignificant amounts, and that granting the same a Service Industry License is not necessary to protect the public interest or advance the policies established by the Commission relating to gaming.
(e) In order to determine if an entity operates or will operate in a regular or continuous manner, the Commission may take the following factors into consideration, among others:
i. Number of Transactions;
ii. Frequency of the Transactions;
iii. Dollar amount of Transactions;
iv. Nature of the equipment or services rendered or business carried out;
v. Maximum period of time necessary to provide the equipment, carry out the services or
complete in its entirety the business subject of the Transaction; and
vi. The public interest and the policy established by the Commission relating to gaming.
(f) Any entity which has been exempt by the Commission from the requirement of obtaining a Service Industry License in accordance with this section shall notify the Commission before carrying out any commercial contract or business transaction, with a Franchise Holder.
13.15 Records Requirements for Service Industry Licensee
(a) Any Service Industry entity authorized by the Commission shall maintain in a place secure against robbery, loss or destruction, the records corresponding to the business operations, which shall be available to, and be produced for the Commission in case the Commission requests them. Said records shall include:
i. Any correspondence with the Commission and other governmental agencies at a local, state and federal level;
ii. Any correspondence related to the business with a Franchise Holder, whether proposed or existing;
iii. Copies of any publicity and promotional materials;
iv. The personnel files for every employee of the authorized Service Industry entity, including those for the sales representatives;
v. The financial records for all the Transactions related to the business with a Franchise Holder, whether proposed or existing;
(b) The records listed in Subparagraph (a) above shall at least be kept for a period of five (5) years.
13.16 Business Entity Disclosure for Service Applicant Forms
(a) Arkansas Racing Commission Business Entity Disclosure form shall be completed in the format provided by the Commission.
13.17 Personal History Disclosure form
(a) The Commission may require an Arkansas Racing Commission Personal History Disclosure form from all those natural persons required under Section 13.9, to fill out the same.
13.18 Obligation for Payment of Fees; No Refund of Fees Paid
(a) Any obligation for payment of fees arising from these regulations shall be paid in full to the Commission, even when the entity withdraws its application for a Service Industry License or the license is denied.
(b) No amounts paid for Service Industry License fees shall be refundable.
(c) Any failure to pay fees when due shall result in a late fee penalty established by the Commission, denial or revocation of a license.
13.19 Responsibility of the Franchise Holder
(a) Any Franchise Holder that will be receiving a service shall be responsible for confirming that the entity with which it will carry out the business holds a Service Industry License or has obtained a special authorization in accordance with Section 13.14 of these regulations, or an exemption in accordance with these Regulations.
(b) Any violation of subparagraph (a) above shall be sufficient cause for sanctions by the Commission.
13.20 Transitory provisions
(a) Any entity which manufactures, sells or leases, distributes or repairs or provides maintenance services or any other service to Franchise Holder with respect to EGS shall comply with the provisions of these regulations beginning on the effective date the same.
13.21 Vendor’s List
(a) The Commission or its representatives shall also maintain a Prohibited Vendor List, which shall include all vendors who are prohibited from conducting business with a Franchise Holder. The Commission shall provide this list to the Franchise Holders.
(b) Engaging in business with a vendor on the Prohibited Vendor List by the Franchise Holder may result in monetary fines not to exceed $5,000.
13.22 Temporary Service Industry Licensing
(a) If an applicant for a manufacturer, distributor or entity providing services to a Franchise Holder holds a similar license in another jurisdiction in the United States, the applicant may submit a written request with its application for the Commission to grant a temporary Service Industry license. The Commission may use the temporary licensing process if:
i. The Commission determines, after investigation, that the licensing standards in a jurisdiction in which the applicant is licensed are similarly comprehensive, thorough and provide equal, if not greater, safeguards as provided in Act 1151 or these regulations and that granting the request is in the public interest;
ii. A completed application has been filed by the applicant;
iii. The applicant has provided current, updated information to the Commission associated with the similar license in the other jurisdiction related to its financial viability and suitability.
iv. The applicant has no administrative or enforcement actions pending in another jurisdiction or the applicant has adequately disclosed and explained the action to the satisfaction of the Commission;
v. There are no pending or ongoing investigations of possible material violations by the applicant in another jurisdiction or the applicant has adequately disclosed and explained the investigation to the satisfaction of the Commission;
vi. This section shall not be construed to waive fees associated with obtaining a license through the application process in this State.