(1) (a) Except as otherwise provided in this subsection (1), each approved applicant shall furnish a corporate surety bond in the principal sum of one million dollars, by a bonding company or insurance company authorized to do business in this state, in which the applicant is named as obligor, that runs to the state of Colorado for the use and benefit of the state and of any creditor of the licensee for any liability incurred on money transmission by the licensee. The bond must be approved by the banking board and be conditioned that the obligor will faithfully conform to and abide by the provisions of this article 110, will honestly and faithfully apply all funds received for the performance of all obligations and undertakings for money transmission subject to this article 110, and will pay to the state and to any person all money that becomes due to the state or to the person under this article 110 because of money transmission. The bond shall remain in force until the surety is released from liability by the banking board or until the bond is canceled by the surety; except that a cancellation may be had only upon ninety days' written notice to the banking board. The cancellation does not affect any liability incurred or accrued prior to the termination of the ninety-day period. If the banking board finds, at any time, a bond to be exhausted, the licensee shall obtain and file a replacement bond in an equal amount within thirty days after the written demand is received. (b) The banking board shall by rule establish financial standards: (I) By which to evaluate the financial condition or solvency of licensees; and (II) For the bond amount set under subsection (1)(a) of this section to be decreased to not less than two hundred fifty thousand dollars, following application by the licensee and an opportunity for hearing before the banking board, in such amounts as necessary up to the amount provided in subsection (1)(a) of this section to protect purchasers of money transmission. (c) The banking board shall by rule establish financial standards by which to evaluate the financial condition or solvency of licensees and for the bond amount to be increased above the amount provided in subsection (1)(a) of this section if the banking board determines, following notice to the licensee and an opportunity for hearing before the banking board, that the customers of the licensees are at undue risks, but in no case shall the total bond required of a licensee be greater than two million dollars. In promulgating the rules, the banking board shall utilize and adopt generally accepted accounting principles for the evaluation and determination of the financial condition of licensees. (2) (a) In lieu of the surety bond required by subsection (1) of this section, the licensee may deposit with the board securities with a par value equal to the amount of the surety bond. (b) Securities under this subsection (2) must be rated in one of the three highest grades as defined by a nationally recognized organization that rates securities and must consist of: (I) General obligations of, or securities fully guaranteed by, the United States of America or any agency or instrumentality of or corporation wholly owned by the United States of America directly or indirectly; or (II) Direct general obligations of the state of Colorado, or of any county, town, city, village, school district, or other political subdivision or municipal corporation of the state of Colorado. (c) The board shall hold the securities to secure the same obligations as would any surety bond required by this article 110. The licensee may exchange the securities so deposited from time to time for other securities that qualify under this subsection (2) upon written notification to, and written approval by, the commissioner. All of the securities are subject to sale and transfer, and the board may dispose of the proceeds only on the order of a court of competent jurisdiction. The licensee is entitled to receive the interest or dividends on the securities unless prohibited by a court of competent jurisdiction. The board may provide for custody of the securities by any qualified trust company or bank located in the state of Colorado. The depositing licensee shall pay the compensation of any person acting as custodian under this section. (3) In addition to the bond required under subsection (1) of this section, the commissioner, pursuant to rules promulgated by the banking board, may require a licensee to possess investments having an aggregate market value at least equal to the amount of outstanding payment instruments issued or sold by the licensee. For the purposes of this subsection (3), permissible investments shall be: (a) Cash; (b) Certificates of deposit or other debt obligations of a financial institution, either domestic or foreign; (c) Bills of exchange or time drafts drawn on and accepted by federally insured financial depository institutions; (d) Any investment bearing a rating of one of the three highest grades as defined by a nationally recognized organization that rates such securities; (e) Investment securities that are obligations of the United States, its agencies or instrumentalities, or obligations that are guaranteed fully as to principal and interest of the United States, or any obligations of any state, municipality, or any political subdivision thereof; (f) Shares in a money market mutual fund, interest-bearing bills or notes or bonds, debentures, or stock traded on any national securities exchange or on a national over-the-counter market; (g) Such other investments as may be approved by the banking board. (4) It is the intent of the general assembly that in applying the provisions of this section the purpose of the required bond and permissible investments is to protect the Colorado purchasers of money transmission, and the amount of the bond and investments that are required of any licensee should not be more than is necessary to afford the protection given the financial condition of the licensee as determined under generally accepted accounting principles. (5) Permissible investments, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of the purchasers and holders of the licensee's outstanding payment instruments in the event of the bankruptcy of the licensee.
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