Activity Desks

Prohibits activity desks from receiving under-the-table
compensation for selling a specific activity provider; requires
activity desks to have both a trust account and a bond.

HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Section 468M-3, Hawaii Revised Statutes, is
 2 amended to read as follows:
 3      "[[]468M-3[]]  Prohibited acts.  No activity desk shall
 4 engage in any of the following practices:
 5      (1)  Covering, concealing, or obscuring the name, address,
 6           or telephone number of an activity provider in any card
 7           or brochure;
 8      (2)  Placing a telephone number, address, or other
 9           information on any card, brochure, or other advertising
10           material produced or published by an activity provider,
11           whether by decal, sticker, stamp, or otherwise, without
12           identifying the activity desk by name and address;
13      (3)  Using a promotional card or brochure that does not
14           clearly display the name and telephone number of the
15           activity provider whose activity is being sold or
16           booked when the activity is located in this State;
17      (4)  Withdrawing any funds of a consumer from a client trust
18           account, other than a sales commission up to a maximum
19           of fifteen per cent or to make a refund to the
20           consumer, until the activity provider has been paid;

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 1           [or]
 2      (5)  Accepting moneys, gifts, certificates, or any other
 3           form of compensation as a result of selling the
 4           services of a specific activity provider; or
 5     [(5)] (6)  Failing to possess a current and valid
 6           registration prior to engaging in business or
 7           advertising as an activity desk."
 8      SECTION 2.  Section 468M-9, Hawaii Revised Statutes, is
 9 amended by amending subsection (d) to read as follows:
10      "(d)  At the time of registration, the activity desk shall
11 file with the department the account number and the name of the
12 financial institution at which the trust account is held [or] and
13 submit a bond or letter of credit as provided in section 468M-10.
14 The activity desk shall notify the department of any change in
15 the account number or location within one business day of the
16 change."
17      SECTION 3.  Section 468M-10, Hawaii Revised Statutes, is
18 amended as follows:
19      1.  By amending the title and subsection (a) to read:
20      "[[]468M-10[]]  Performance bond and irrevocable letter of
21 credit [as alternative to client trust account required of
22 activity desks]; coverage amount and computation; annual report
23 and option; adjustments; coverage upon transfer.  (a)  [If a

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                                     H.B. NO.           

 1 client trust account is not established and maintained as
 2 required under section 468M-9, no] No activity desk shall be
 3 permitted to operate in the State unless the activity desk[:]
 4 establishes and maintains a trust account, and:
 5      (1)  Posts a bond which is a performance or financial
 6           guaranty type bond naming the director as the obligee
 7           and which may be canceled only if the activity desk
 8           gives sixty days prior written notice to the surety or
 9           if the surety gives thirty days prior written notice to
10           the director of cancellation of the bond; or
11      (2)  Obtains an irrevocable letter of credit which is a
12           guarantee of payment for a term of one year naming the
13           director as beneficiary, with a provision for automatic
14           extension for additional annual periods, and which may
15           be canceled only if the activity desk gives prior
16           written notice by certified mail to the director and to
17           the issuer at least ninety days before the letter's
18           expiration date or the date on which the activity desk
19           intends the letter to cease being effective or the
20           issuer gives prior written notice by certified mail to
21           the director at least sixty days before the expiration
22           date."
23      2.  By amending subsections (f) and (g) to read:

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                                     H.B. NO.           

 1      "(f)  The amount of coverage shall be equal to the average
 2 monthly net sales revenues of the activity desk as determined for
 3 the twelve-month period ending on the last sales period ending
 4 date of the fifth month prior to the anniversary date of the bond
 5 or the irrevocable letter of credit; provided that the amount of
 6 coverage of the bond or irrevocable letter of credit shall not be
 7 less than $50,000 [and shall not be more than $100,000.  Any
 8 activity desk providing a bond or irrevocable letter of credit
 9 for the first time during the period beginning on September 1,
10 1992, and ending on March 31, 1993, shall base its initial
11 coverage amount on the twelve-month period ending on June 30,
12 1992].  If an activity desk does not have a full twelve-month
13 period on which to base the amount, the amount shall not be less
14 than the average monthly net sales revenues as determined for the
15 months available; provided that this amount shall not be less
16 than $75,000, notwithstanding the minimum amount of $50,000 for
17 regularly computed coverage.
18      (g)  No later than four months before the anniversary date
19 of coverage, each activity desk shall submit a notarized annual
20 report to the department verifying the monthly net sales revenue
21 figures for the twelve-month period upon which the amount of the
22 bond or irrevocable letter of credit is based.  [However, each
23 activity desk shall have the option not to submit the annual

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 1 report if the activity desk provides a bond or an irrevocable
 2 letter of credit for the maximum amount of $100,000.]"
 3      3.  By amending subsection (j) to read:
 4      "(j)  Failure to have in effect a client trust account[, or]
 5 and current bond or letter of credit shall result in automatic
 6 forfeiture of the registration.  An activity desk whose
 7 registration is forfeited shall apply as a new applicant for
 8 registration."
 9      SECTION 4.  Section 468M-12, Hawaii Revised Statutes, is
10 amended to read as follows:
11      "[[]468M-12[]]  Restitution.  Any person who engages in an
12 act or practice that violates any provision of this chapter or
13 rules adopted pursuant hereto may be ordered by a court of proper
14 jurisdiction to make restitution to all persons injured by the
15 act or practice[.]; provided that an activity provider shall have
16 the right to claim restitution from the bond or letter of credit
17 should an activity desk cease operations or claim bankruptcy."
18      SECTION 5.  Statutory material to be repealed is bracketed.
19 New statutory material is underscored.
20      SECTION 6.  This Act shall take effect upon its approval.
22                           INTRODUCED BY:  _______________________