Report Title:

Escrow Depositories; Licensing and Regulation

Description:

Amends and updates procedures for the licensing and regulation of escrow depositories. Allows licensing as LLC, strengthens confidentiality requirements, allows criminal background checks of license applicants, increases bonding requirement, and establishes receivership procedures. (SD1)

THE SENATE

S.B. NO.

2904

TWENTY-SECOND LEGISLATURE, 2004

S.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to escrow depositories.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Chapter 449, Hawaii Revised Statutes, is amended by adding five new sections to be appropriately designated and to read as follows:

"§449-   Informational and comment proceeding. (a) An informational and comment proceeding on the application shall not be mandatory and the decision to hold an informational and comment proceeding shall be within the commissioner's sole discretion, regardless of whether any person has requested one.

(b) If the commissioner decides to hold an informational and comment proceeding, the commissioner shall notify the applicant and every person who has requested an informational and comment proceeding of the time, date, and place of the proceeding at least ten days prior to the proceeding.

§449-   Conversion to another type of organization. (a) An escrow depository that has been incorporated as a Hawaii corporation may convert to a Hawaii limited liability company, and an escrow depository that has been organized as a Hawaii limited liability company may convert to a Hawaii corporation if the escrow depository has complied with all requirements of this section and of chapter 414 or 428, as applicable.

(b) The converting escrow depository shall file an application to convert in the form prescribed by the commissioner. Unless waived by the commissioner, the application shall contain the following:

(1) A copy of the articles of conversion that the converting escrow depository will deliver to the director of commerce and consumer affairs if the application to convert is approved by the commissioner;

(2) Information concerning any proposed changes in persons owning ten per cent or more of the voting securities of the resulting escrow depository, directors, officers, designated principal escrow officer, and any branch escrow officers; and

(3) Any other information that the commissioner may require.

(c) The director of commerce and consumer affairs shall not file the articles of conversion until the application to convert is approved by the commissioner in writing. The commissioner may impose any restrictions and conditions on the operation of the converted escrow depository as the commissioner deems appropriate and consistent with this chapter.

(d) The commissioner shall reissue the main office license and any branch office license of the escrow depository to reflect the name of the converted escrow depository effective as of the date of filing of the certificate of conversion by the director of commerce and consumer affairs upon receipt of:

(1) Evidence that the converted escrow depository is in compliance with sections 449-5.5, 449-9, 449-11, and 449-12; and

(2) A copy of the filed certificate of conversion.

§449-   Receivership. (a) A receiver may be appointed to take possession and control of an escrow depository if the escrow depository:

(1) Is insolvent or has failed to maintain the net worth required in section 449-5.5;

(2) Has violated or is violating laws, rules, or has committed or is committing an unsafe or unsound practice, and such violation or practice is likely to cause insolvency or substantial dissipation of assets, or is likely to severely weaken the escrow depository's condition or otherwise seriously prejudice the interests of the parties to an escrow;

(3) Has violated or is violating any order issued by the commissioner;

(4) Has concealed from or has refused to provide to the commissioner without lawful cause the escrow depository's books, records, information, or assets for examination by the commissioner or by any lawful agent of the commissioner; or

(5) Has engaged in conduct constituting fraudulent or dishonest dealings.

(b) Upon application by the commissioner demonstrating grounds for the appointment of a receiver, the circuit court may appoint a receiver to take over, operate, or liquidate any escrow depository in this State.

(c) The commissioner, deputy commissioner, or other qualified person may serve as a receiver. Except for the commissioner or deputy commissioner, every receiver shall consent in writing to serve in such capacity and shall sign an engagement agreement with the commissioner before assuming such position.

(d) Upon assuming office, the receiver may:

(1) Immediately take possession of the assets, escrow accounts, books, and records of the escrow depository with all the rights and powers of the shareholders, directors, and officers, with the authority to conduct all business of the escrow depository; and

(2) Take such action as may be necessary to carry out the purposes of the receivership, consistent with the receiver's appointment order, and as may be required by law, by the commissioner, or by any court having jurisdiction over the matter. The receiver shall at all times be subject to the direction and supervision of the commissioner.

§449-   Main office and branch office violations. Failure to comply with the requirements to establish, close, or relocate a main office or a branch office pursuant to this chapter shall be grounds for the commissioner to impose an administrative penalty of not more than $100 per day for each day that the escrow depository is in violation of this chapter.

§449-   Termination of escrow depository operations. (a) When the main office of an escrow depository terminates escrow depository operations, all branch offices shall terminate escrow depository operations.

(b) A solvent escrow depository that meets the net worth requirement in section 449-5.5 and that has not received a notice of charges and proposed suspension or revocation order pursuant to section 449-17 may terminate its escrow depository operations and surrender its license in the following manner:

(1) The board of directors shall adopt a resolution approving a plan to terminate escrow depository operations. The plan shall comply with this chapter. If applicable, the plan shall include provisions for the sale, exchange, or disposition of all outstanding escrow accounts or other business for which an escrow depository license is required. The board of directors shall designate a responsible person to implement the plan. "Responsible person" means an officer, director, designated principal escrow officer, or person holding ten per cent or more of the voting securities of the escrow depository. The commissioner may allow a person other than a responsible person as defined in this paragraph to assume these duties;

(2) At least thirty days before closing its main office, the escrow depository shall provide, to all parties to each escrow whose account has an outstanding balance, written notice of the termination of the escrow depository's operations and the specific arrangements to handle the particular escrow;

(3) At least thirty days before closing its main office, the escrow depository shall provide written notice to the commissioner. The notice shall include:

(A) The intended date of closing the main office and intended date escrow depository operations will be terminated;

(B) The name, address, and telephone number of the responsible person designated to implement the plan to terminate escrow depository operations;

(C) A copy of the plan to terminate escrow depository operations, certified by one officer of the escrow depository as having been duly adopted by the board of directors;

(D) Any application that may be required pursuant to section 449-8.6, if applicable;

(E) A copy of the notice sent by the escrow depository to all parties to each escrow whose account had an outstanding balance; and

(F) Any other information that the commissioner may require;

(4) Within five days after closing its main office, the escrow depository shall surrender all escrow depository licenses to the commissioner;

(5) Within thirty days after closing its main office, the escrow depository shall submit to the commissioner:

(A) An itemized accounting of funds held in trust at the time of closure, including the names of the parties to the escrow, the escrow number, the amount of funds held, and the purpose of the funds;

(B) The location, including street address, where the books and records are stored; and

(C) The name, address, and telephone number of a contact person who shall be responsible for answering questions and providing documents on closed escrows. This individual, or any successor, shall continue to perform this task, and shall notify the commissioner of any changes in the information concerning the contact person and the location of the escrow records until the applicable statutes of limitations have lapsed;

(6) If any escrow account has an outstanding balance on the date of closing the main office, the responsible person shall provide the commissioner with monthly reconciliations of the escrow account to the trial balance, until the earlier of:

(A) Six months after the date of closing the main office; or

(B) The date the escrow account balance is zero.

The reconciliations shall be submitted to the commissioner within twenty days of the end of the period;

(7) Any balance remaining in an escrow account six months after the date of closing the main office shall be presumed abandoned, and shall be reported and paid or delivered to the director of finance in accordance with chapter 523A; and

(8) All escrow records shall be maintained in accordance with section 449-21.

(c) Nothing in this section shall preclude the commissioner at any time from seeking any relief or sanction from the courts that may otherwise be permitted by law."

SECTION 2. Section 449-1, Hawaii Revised Statutes, is amended to read as follows:

"§449-1 Definitions. As used in this chapter:

["Acquisition of control" means acquisition by a person or persons acting in concert of the power to vote fifty-one per cent or more of any voting securities of a licensee.]

"Commissioner" means the commissioner of financial institutions of this State.

"Control" means owning or having the power to vote more than fifty per cent of any class of voting securities of an escrow depository, whether directly or indirectly, solely or through another person or transaction, or in concert with another.

"Director" means a director of a corporation, or a manager of a limited liability company, or other person who has authority substantially similar to that of a director of a corporation.

"Division" means the division of financial institutions of the department of commerce and consumer affairs.

"Escrow" means any transaction affecting the title to real property, including leaseholds, proprietary leaseholds, and condominiums, in which a person not a party to the transaction and neither having nor acquiring any interest in the title receives from one party to the transaction, holds until the happening of an event or performance of a condition and then delivers to another party to the transaction, any money or other consideration or any instrument affecting the title to that real property, all in accordance with the terms of the agreement between the parties to the transaction.

"Escrow account" means any escrow depository account with a financial institution to which cash or items are deposited with respect to any escrow.

"Escrow depository" means the corporation or limited liability company which, in an escrow, and for compensation, receives, holds, and delivers the money, other consideration, or instrument affecting title to real property.

"Financial institution" means any bank, savings bank, savings and loan association, financial services loan company, or credit union doing business in the State whose accounts are insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or other similar or successor program of federal insurance.

"Item" means any check (including a cashier's or certified check), negotiable order of withdrawal, draft, traveler's check, or money order.

"Net worth" means total assets less total liabilities.

"Officer" means an officer of a corporation or of a limited liability company, or other person who has authority substantially similar to that of an officer of a corporation.

"Person" means[, in addition to the singular, persons, group of persons, cooperative association, company, firm, partnership, corporation, or other legal entity, and includes the agents and employees of any person.] a natural person, entity, or organization, including without limitation, an individual, corporation, joint venture, partnership, sole proprietorship, association, cooperative, estate, trust, or governmental unit.

"Shareholder" means an owner of any interest in a corporation or in a limited liability company, including a member of a limited liability company.

"Voting securities" means certificates or other evidence of the voting stock of a corporation or of the voting ownership interests in a limited liability company."

SECTION 3. Section 449-1.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-1.5[]] Applicability of chapter. This chapter shall apply to all escrow depositories and to any [other corporations] persons that, by violating any of the provisions of this chapter, shall be subject to the penalties and fines provided in this chapter."

SECTION 4. Section 449-1.6, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-1.6[]] Name of escrow depository. The name of every escrow depository licensed to engage in business in this State shall be subject to the approval of the commissioner, and shall have the following characteristics:

(1) It shall be unique;

(2) It shall not be confusing or likely to mislead the public into believing that the escrow depository is related to or part of another company, if it is not so related; and

(3) It shall contain the words "escrow" or "escrow depository"[; and

(4) It may but need not contain the words "Corporation", "Incorporated", "Corp.", "Inc.", "Limited" or "Ltd."].

This section shall not apply to escrow depositories which were licensed on January 1, 1992. Where an escrow depository that is not required to comply with this section is subsequently sold or acquired, the commissioner may require the acquired company to comply with this section."

SECTION 5. Section 449-1.7, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-1.7[]] Indicia of escrow depository prohibited. Unless licensed under this chapter to engage in the business of an escrow depository, no person may use the [word] terms "escrow", "escrow depository", or words of similar import, or translations of those words, [as a facetious or fanciful name, or] in a manner that might suggest or tend to lead others into believing that the person is an escrow depository."

SECTION 6. Section 449-1.8, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-1.8[] Confidential portion of application or] Confidentiality of records. (a) Information contained in any application or record shall be made available to the public [unless that information may be withheld from public disclosure by the commissioner under chapter 92F.], except for information that:

(1) Is related to an examination performed by or on behalf of the commissioner or contained in any report of examination;

(2) Is related to the business, personal, or financial affairs of any individual and is furnished to or for the use of the commissioner in confidence;

(3) Is related to commercial or trade secrets obtained from a person and is privileged or confidential; or

(4) May be withheld from public disclosure by the commissioner under chapter 92F.

(b) The report of examination and its contents shall remain the property of the commissioner and shall not be disclosed to any person who is not an officer, director, employee or authorized auditor, attorney, or other consultant or advisor of the escrow depository. Any person that has received the report from the escrow depository shall be bound by the confidentiality provisions of this part. Subpoenas of or other legal process to obtain reports of examination or information contained therein shall be directed to the commissioner and not to the escrow depository that is the subject of the examination.

(c) The commissioner may furnish reports of examination and other information relating to the examination of an escrow depository to:

(1) The governor, attorney general, and the heads of other state governmental agencies having regulatory authority over the escrow depository; and

(2) Agencies of the United States or a state for use where the requesting agency agrees to use the information only for functions directly related to the exercise of its appropriate supervisory authority or where necessary to investigate civil or criminal charges in connection with the affairs of any escrow depository under the supervision of the commissioner.

(d) Any person who violates this section shall be guilty of a misdemeanor punishable pursuant to sections 706-663 and 706-640. Such person shall also be subject to an administrative penalty pursuant to section 449-4. If such person is an employee, contractor, or appointee of the State, such person shall be subject to immediate dismissal or termination proceedings without violating such person’s contract, if any."

SECTION 7. Section 449-3, Hawaii Revised Statutes, is amended to read as follows:

"§449-3 Excepted from this chapter. This chapter does not apply to any of the following when acting as escrow depositories:

(1) Banks, trust companies, savings banks, and savings and loan associations, authorized under any law of this State or of the United States to do business in the State;

(2) Any person licensed as a real estate broker in the State who is the broker for a party to the escrow, provided the person does not charge any escrow fee; and

(3) Any person licensed to practice law in the State who, in escrow, does not charge any escrow fee and is not acting as the employee of a corporation[, provided the person does not charge any escrow fee.] or a limited liability company."

SECTION 8. Section 449-4, Hawaii Revised Statutes, is amended to read as follows:

"§449-4 Administrative penalty. Any person who wilfully violates any of the provisions of this chapter, shall be subject to an administrative [fine] penalty of $5,000 for each violation. No [licensee] escrow depository shall be subject to this penalty for a violation of section [449-16(b) or (c)] 449-16(c) or (d) if the violation was not intentional or resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adopted to avoid that error. Examples of bona fide errors include, but are not limited to, clerical miscalculations, computer malfunction, printing errors, and computer programming errors."

SECTION 9. Section 449-5, Hawaii Revised Statutes, is amended to read as follows:

"§449-5 License required to act as escrow depository. No person shall act as an escrow depository in this State unless [it is a corporation] licensed to do so by the commissioner.

[No person subject to the provisions of this chapter not licensed or exempted under this chapter shall transact any business under any name, title or descriptive term which contains the words "escrow", "escrow depository" or any other word or phrase having the same or similar meaning.]"

SECTION 10. Section 449-5.5, Hawaii Revised Statutes, is amended to read as follows:

"§449-5.5 Net [capital.] worth. The net [capital] worth of any [corporation] escrow depository engaging in [the escrow depository] business under this chapter shall be not less than $50,000. [A corporation in] In lieu of the net [capital] worth requirement, an escrow depository may [alternatively] file a bond for $50,000 that is made conditional upon [its] the escrow depository's satisfactory performance of escrow conditions and satisfaction of all escrow liabilities. The amount of the minimum net [capital] worth of $50,000[,] or the bond[, or a combination of both net capital or bond totalling $50,000] shall be maintained at all times by the [licensee.

Licensees in operation on May 24, 1973, pursuant to this chapter with a net capital of less than $50,000 shall increase its net capital to $50,000 or file a bond for $50,000, or take action so that a combination of its net capital and bond totals $50,000, before May 24, 1978.] escrow depository."

SECTION 11. Section 449-6, Hawaii Revised Statutes, is amended to read as follows:

"§449-6 Application for license. (a) Any corporation or limited liability company desiring to be licensed as an escrow depository shall file an application [upon forms to be furnished] in the form prescribed by the commissioner. The application shall be accompanied by a filing fee no part of which shall be refundable.

(b) [The] Unless waived by the commissioner, the application shall contain the following information:

(1) The [corporate] name[, amount of capital,] and main office address of the applicant;

(2) The applicant's net worth, of which a minimum of $50,000 initially shall be in cash;

(3) The terms of the acquisition or lease of the proposed site of the main office and any branches, including the names and addresses of the parties, the size of the premises in square feet, and, if applicable, the duration of the lease, the monthly rent, and details of any option for a lease extension;

[(2)] (4) The names of [the stockholders,] shareholders holding ten per cent or more of the voting securities of the applicant, officers, [and] directors, and proposed designated principal escrow officer and any branch escrow officers of the applicant;

[(3)] (5) Evidence of the character, financial responsibility, experience, and ability of the officers [and], directors[; and

(4) The names of the proposed escrow officers and their qualifications.], and proposed designated principal escrow officer and any branch escrow officers;

(6) The fingerprints of the officers, directors, proposed designated principal escrow officer, and any branch escrow officers of the applicant, submitted on a fingerprint card to be obtained from the division and accompanied by payment of the applicable fee for each criminal history record check; and

(7) Any other information that the commissioner may require.

(c) The commissioner may request a criminal history record check of the officers, directors, designated principal escrow officer, and any branch escrow officers of an applicant for a license as an escrow depository in accordance with section 846-2.7."

SECTION 12. Section 449-7, Hawaii Revised Statutes, is amended to read as follows:

"§449-7 [Investigation and ruling. The commissioner shall make an investigation into the information furnished by the applicant and may require the applicant to furnish additional information. If the commissioner is satisfied, with or without a hearing upon the application, that the applicant has met all the criteria set forth for approval, the commissioner shall approve the application.] Publication of notice. (a) When the application for a license is complete and has been accepted by the commissioner, the applicant shall publish a notice at least once in a newspaper of general circulation in this State.

(b) The notice shall be in a form prescribed by the commissioner and shall state:

(1) The fact that an application has been filed;

(2) The name of the applicant;

(3) The location or locations at which the applicant proposes to engage in business; and

(4) That within fifteen days after the publication of the notice, any person may file with the commissioner:

(A) Written comments on the application; or

(B) A request for an informational and comment proceeding to present information and comments to the commissioner, which request shall be accompanied by a brief statement of the person's interest in the application, the matters to be discussed at the informational and comment proceeding, and the reasons why written comments will not suffice in lieu of an informational and comment proceeding."

SECTION 13. Section 449-7.4, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-7.4[]] Grant of approval. (a) Following the hearing on the application, if any, the commissioner shall issue a written decision and order. If the commissioner decides in favor of the application, the commissioner shall issue a license to act as an escrow depository pursuant to section 449-8.

(b) Approval shall be granted only if the commissioner finds that the character, financial responsibility, experience, ability, and general fitness of the officers [and], directors, designated principal escrow officer, and any branch escrow officers are such as to command the confidence of the community in the State and to warrant the [beliefs] belief that the officers [and], directors, designated principal escrow officer, and any branch escrow officers are competent to successfully manage an escrow business and the applicant will be an honest and efficient escrow depository.

(c) In granting approval, the commissioner may impose such conditions and restrictions as shall be in the public interest, including without limitation requiring an applicant to fulfill representations contained in its application and agreements made during the application process.

(d) After approval of the application, and payment of the license fee, the commissioner shall issue to the applicant a license to act as an escrow depository. The license shall be effective only upon the applicant's filing with the commissioner an escrow depository's bond and evidence that fidelity bonds or fidelity insurance, and errors and omissions insurance, or cash, an unconditional and irrevocable letter of credit, or securities deposits permitted in lieu thereof, have been obtained, as provided in sections 449-9, 449-11, and 449-12."

SECTION 14. Section 449-7.5, Hawaii Revised Statutes, is amended to read as follows:

"§449-7.5 Licensing requirements[.]; principal escrow officer. (a) Every corporation or limited liability company desiring to be licensed as an escrow depository shall be incorporated or organized in this State and shall have and maintain a principal place of business in the State for the transaction of its escrow depository business.

(b) An escrow depository that is a limited liability company shall be managed by one or more managers who shall be natural persons, and its articles of organization and operating agreement shall not include any provision for the automatic termination, dissolution, or suspension of the company upon the happening of some event including the death, disability, bankruptcy, expulsion, or withdrawal of a member.

(c) Every escrow depository licensed under this chapter shall establish and maintain adequate procedures to ensure that the character and background of every officer, director, and employee is commensurate with that individual's duties and responsibilities with the escrow depository.

[(b)] (d) A license issued under this chapter shall be prominently displayed in the place or places of business of the escrow depository.

[(c)] (e) The escrow depository business shall be under the direct management of an officer, or an employee, designated by its board of directors as the company's principal escrow officer [for the corporation and if the designated escrow officer terminates the escrow officer's employment with the escrow depository, the licensee]. The designated principal escrow officer shall possess experience and knowledge commensurate with the officer's duties and responsibilities and with the size and complexity of the operations to be supervised.

(f) The escrow depository shall [notify] give the commissioner [in writing] written notice at least fifteen days before the [termination] effective date of any change of the designated principal escrow officer. The [licensee shall also inform the commissioner in writing of] notice shall specify:

(1) The effective date of any change of the designated principal escrow officer;

(2) The name of the [new] successor designated principal escrow officer [for the corporation] designated by [its] the board of directors [before the present escrow officer terminates the present escrow officer's employment with the company, setting forth the];

(3) The experience, integrity, and competency of the [new] successor designated principal escrow officer in handling escrow transactions[,]; and [such]

(4) Any other information [as required by] that the commissioner[.] may require."

SECTION 15. Section 449-8, Hawaii Revised Statutes, is amended to read as follows:

"§449-8 [Issuance and renewal] Renewal of license. [After approval of the application, and payment of the license fee, the commissioner shall issue to the applicant a license to act as an escrow depository. The license shall be effective only upon the applicant's filing with the commissioner an escrow depository's bond and evidence that fidelity bonds and errors and omissions insurance, or cash or securities deposits permitted in lieu thereof, have been obtained, all as provided in sections 449-9, 449-11, and 449-12.] (a) The escrow depository license shall be renewed annually, as of July 1[, upon payment of the annual].

(b) The renewal [fee and the finding of the commissioner, from] application shall be filed in the form prescribed by the commissioner, shall be accompanied by the annual license renewal fee, and shall contain the following information [contained in the annual corporate exhibit of the licensee or investigation or hearing,] unless waived by the commissioner:

(1) The name, main office address, telephone number, and main office license number of the applicant;

(2) The name of the designated principal escrow officer;

(3) The effective date of the principal escrow officer's designation by the board of directors;

(4) The address and license number of every branch office;

(5) A detailed description of any dispute resolution proceeding including litigation, arbitration, or mediation involving the applicant in the preceding twelve months;

(6) Evidence of each bond and insurance coverage required by this chapter, showing the bond or insurance policy number, the type of bond or insurance coverage, the amount of coverage including the amount of any deductible, and the period of coverage; and

(7) Any other information that the commissioner may require.

(c) If the commissioner is satisfied that the [licensee] applicant continues to meet the qualifications for licensing and has continued in force the bonds and insurance or the cash or securities deposits permitted in lieu thereof[.], the commissioner shall renew the license.

(d) If the commissioner is not satisfied that the applicant meets all the criteria set forth for approval, the commissioner shall issue a written decision denying the application for renewal of license and shall require the immediate return of all outstanding licenses, the termination of all escrow depository operations, and compliance with any other conditions that the commissioner deems appropriate. An applicant who is denied license renewal may request a hearing before the commissioner in accordance with chapter 91. Any final decision of the commissioner denying an applicant a license renewal may be appealed to the circuit court as provided in chapter 91."

SECTION 16. Section 449-8.5, Hawaii Revised Statutes, is amended to read as follows:

"§449-8.5 Denial of license. If the commissioner is not satisfied that an applicant meets all the criteria set forth for approval, the commissioner shall issue a written decision denying the applicant's application. An applicant who is denied approval may request a hearing before the commissioner in accordance with chapter 91. Any final decision of the commissioner denying a license may be appealed to the circuit court as provided in chapter 91."

SECTION 17. Section 449-8.6, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-8.6[]] Sale or transfer of license or change in control. (a) No escrow depository license shall be sold or transferred.

(b) A bona fide sale of all or substantially all of the ongoing operations of [a licensee] an escrow depository shall not result in the assignment or transfer of the escrow depository license. The purchaser of all or substantially all of the ongoing operations of [a licensee] an escrow depository shall file an application for approval in accordance with this chapter and shall not act as an escrow depository unless it has been licensed by the commissioner.

(c) [If the licensee is a corporation, any intended transfer of its voting stock which may result in the acquisition of control of the licensee may be considered a transfer of license. Any intended transfer of the voting stock which may result in the acquisition of control shall be reported to the commissioner in writing. Upon determination by the commissioner that the intended transfer will result in the acquisition of control, the transferee of the stock shall file an application for approval to act as an escrow depository and shall not acquire control of an escrow depository until the transferee has been approved by the commissioner.] A person who is not already in control of an escrow depository shall not acquire control without the prior approval of the commissioner. To request the commissioner's approval, the person shall file a written application containing the following unless waived by the commissioner:

(1) Information regarding the proposed acquirer;

(2) Details concerning the proposed acquisition;

(3) The names and fingerprints of any proposed new officers, directors, designated principal escrow officer, and branch escrow officers of the escrow depository, submitted on a fingerprint card to be obtained from the division and accompanied by payment of the applicable fee for a criminal history record check for each such person; and

(4) Any other information that the commissioner may require.

(d) The commissioner may request a criminal history record check of the officers, directors, designated principal escrow officer, and any branch escrow officers of an applicant for a license as an escrow depository in accordance with section 846-2.7."

SECTION 18. Section 449-9, Hawaii Revised Statutes, is amended to read as follows:

"§449-9 Escrow depository's bond. (a) Before an escrow depository's license becomes effective, the escrow depository shall give a bond to the commissioner in the penal sum of not less than $100,000 executed by a surety insurer authorized in this State, conditioned:

(1) That the escrow depository will honestly, faithfully, and with diligence apply all funds, other consideration, or property and instruments affecting title in accordance with the instructions under which the same were deposited with it, and will promptly account for the same; and

(2) That the escrow depository will satisfy all judgments and decrees which may be recovered against it in any action or proceeding brought under this chapter.

(b) The amount of the escrow depository bond shall be $100,000 plus $5,000 for each branch office of the escrow depository. Any increase or decrease in the amount of the escrow depository bond that is required as the result of the opening or closing of branch offices shall be effective upon the next annual renewal of the escrow depository license.

(c) The aggregate liability of the surety for all breaches of the conditions of the bond shall, in no event, exceed the penal sum of the bond. In lieu of the bond, an escrow depository may deposit cash, [a] an unconditional and irrevocable letter of credit, or securities under such terms and conditions as are acceptable to the commissioner."

SECTION 19. Section 449-11, Hawaii Revised Statutes, is amended to read as follows:

"§449-11 Fidelity bonds[;] or fidelity insurance; deposit. [A] For all of its directors, officers, and employees who have access to money or negotiable securities or instruments in their possession or under their control, a licensed escrow depository shall at all times either:

(1) Maintain a fidelity bond [executed] or fidelity insurance issued by a surety insurer authorized to do business in the State in an amount not less than $25,000; [provided that any bond which is subject to a deductible thereunder in excess of $5,000 per occurrence shall require the prior approval of the commissioner, who may take into consideration, among other factors, the amount of the proposed bond;] or

(2) Deposit an equivalent amount of cash, an unconditional and irrevocable letter of credit, or securities under such terms and conditions as are acceptable to the commissioner[,

upon all of its directors, officers, and employees who have access to money or negotiable securities or instruments in its possession or under its control. Notwithstanding the above provision, the escrow depository may carry bonds or deposit cash or securities above the amounts required by the commissioner]."

SECTION 20. Section 449-12, Hawaii Revised Statutes, is amended to read as follows:

"§449-12 Errors and omissions insurance; deposit. A licensed escrow depository shall at all times either:

(1) Maintain a policy of errors and omissions insurance executed by an insurer authorized to do business in the State in an amount not less than $100,000; [provided that any policy which is subject to a deductible thereunder in excess of $10,000, per occurrence, shall require the prior approval of the commissioner, who may take into consideration, among other factors, the amount of the proposed coverage;] or

(2) Deposit an equivalent amount of cash, an unconditional and irrevocable letter of credit, or securities under such terms and conditions as are acceptable to the commissioner."

SECTION 21. Section 449-13, Hawaii Revised Statutes, is amended to read as follows:

"§449-13 Cancellation of bonds or insurance; withdrawal of deposits. None of the bonds or insurance or deposits in lieu thereof required by this chapter shall be [cancelled] canceled or withdrawn as to future accruing liability except upon prior written notice to the commissioner: sixty days' notice for the bonds or deposits, and thirty days' notice for the insurance. The license of any [licensee] escrow depository shall be suspended upon cancellation of any bond or insurance or upon withdrawal of any deposit in lieu thereof."

SECTION 22. Section 449-14, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The following fees shall be paid [by licensed escrow depositories] to the commissioner and, together with any administrative penalty or other charge assessed under this chapter, shall be deposited into the compliance resolution fund established pursuant to section 26-9(o):

(1) For filing and investigation of an [escrow depository's] application for an escrow depository license, $2,000;

(2) For an application for approval to establish a branch office;

(3) For an application for approval to relocate an existing main office or branch[;] office;

(4) For initial issuance [and] of an escrow depository's license, $100;

(5) For annual renewal of an escrow depository's license, $100;

(6) For an application for approval to convert an escrow depository to a corporation or a limited liability company;

[(5)] (7) For initial issuance [and] of a branch office license, $50;

(8) For annual renewal of a branch office license, $50; and

[(6)] (9) For reissuance of a license [for the change in the business address of its office], $25[; and

(7) For an application for approval to cease business as an escrow depository]."

SECTION 23. Section 449-15, Hawaii Revised Statutes, is amended to read as follows:

"§449-15 Audited statements. (a) Each escrow depository, at its own expense, shall submit to the commissioner within ninety days after the close of its fiscal year its annual financial statements accompanied by a report of an independent certified public accountant who has [prepared or] examined those statements. For good cause, the commissioner may grant [a licensee] an escrow depository an extension of an additional thirty days to file the reports required by this section.

(b) The audited financial statements shall be prepared in accordance with generally accepted accounting principles and the examination by the independent certified public accountant shall be performed in accordance with generally accepted auditing standards. The financial statements and the independent certified public accountant's report shall include but not be limited to the following:

(1) An unqualified opinion on the fair presentation of the financial statements taken as a whole[. To the extent that this is not possible, then a detailed footnote explaining the reason why an unqualified opinion could not be given shall suffice;] or, if the opinion is other than unqualified, then an explanation required under generally accepted accounting principles;

(2) A direct verification of escrow funds and escrow liabilities. If less than a one hundred per cent verification is performed, there shall be a separate letter from the independent certified public accountant indicating: the number of accounts verified; the percentage of the verification; the basis for determining the sample size; the method used in selecting the sample items to verify; a description of the sampling technique used; the discrepancies noted; and how the discrepancies were resolved;

(3) Footnotes to the audited financial statement showing the escrow funds and escrow liabilities and, to the extent that these amounts differ, a reconciliation of the amounts; and

(4) A statement as to whether the escrow depository is in compliance with this chapter[.] and chapter 523A. If the independent certified public accountant reports any incident involving noncompliance, the statement shall address whether the noncompliance may have a material adverse impact on the ongoing operations of the [company.] escrow depository.

(c) Except with the written approval of the commissioner, an escrow depository shall not be deemed in compliance with this section if the independent certified public accountant expresses a qualified or adverse opinion or a disclaimer of opinion. A request for approval shall be filed by the escrow depository concurrently with the filing of the audited financial statements and the independent certified public accountant's report. The request shall be in letter form and shall [contain the arguments as to] explain why the audited financial statements and the independent certified public accountant's report should be considered acceptable.

(d) Failure to comply with this section shall be grounds for the [suspension] commissioner to:

(1) Suspend or [revocation of] revoke the escrow depository's license in accordance with section 449-17[. Failure to comply with this section shall authorize the commissioner to order];

(2) Order an independent audit at the expense of the escrow depository[.]; and

[(d) Failure to furnish any report or information as and when required under this section shall be grounds for the commissioner to impose]

(3) Impose an administrative penalty of $200 per day for each day that the [audit is overdue. In addition, if] escrow depository is not in compliance with this section.

(e) If the audited financial statements and report [or information is] are not filed within thirty days of the required deadline, the commissioner may prohibit the escrow depository from accepting new business until the audited financial statements and report [or information is] are filed."

SECTION 24. Section 449-16, Hawaii Revised Statutes, is amended to read as follows:

"§449-16 Accounting for moneys, property, etc. (a) Every [licensee under this chapter] escrow depository shall have the responsibility of a trustee for all moneys, other consideration, or instruments received by it. No [licensee] escrow depository shall mingle any such moneys or other property with its own moneys or other property, or with moneys or other property held by it in any other capacity. All moneys held by [a licensee] an escrow depository in escrow [as herein defined] shall be deposited in financial institutions, payable on demand. Under this chapter, deposits in financial institutions are limited to sweep accounts as described in this section, checking accounts, money market deposit accounts, and savings accounts with no specified maturity date. Deposits at financial institutions may be held in sweep accounts, provided that:

(1) The [licensee] escrow depository using the sweep account shall have a net worth of not less than $1,000,000;

(2) The sweep account is a deposit account administered by a financial institution in which the moneys over a minimum balance are periodically transferred into a money market mutual fund account invested only in obligations of:

(A) The United States government;

(B) Agencies backed by the full faith and credit of the United States government; or

(C) Agencies originally established or chartered by the United States government to serve public purposes; and

periodically recredited to the sweep account; [and]

(3) The escrow depository shall make the following disclosure in writing to all parties to an escrow:

"Funds received in this escrow may periodically be transferred to and from a money market mutual fund account which (1) is not federally insured and (2) may involve various risks, including the possible loss of value."

The disclosure shall be made in bold text in a font size 2 points larger than that used in the escrow agreement; and

[(3)] (4) The [licensee] escrow depository is liable for all moneys transferred to the money market mutual fund account under the sweep account, including any loss of value.

(b) No [licensee] escrow depository shall disburse funds from an escrow account until cash and or items sufficient to fund any disbursements from the account have been received and deposited to the account, and with respect to such items the [licensee] escrow depository complies with the provisions of either [paragraphs] paragraph (1) or (2) hereof.

(1) Where an item has been received and submitted for collection, no [licensee] escrow depository shall disburse funds from an escrow account with respect to the item until final settlement of the item has been received by the financial institution to which the item has been submitted for collection.

(2) No [licensee] escrow depository shall disburse funds from the escrow account with respect to an item drawn on a financial institution until the [licensee] escrow depository confirms that sufficient collected funds are on deposit in the drawer's account.

(c) [A licensee] An escrow depository may deliver any money, consideration, or instrument affecting the title to real property prior to funds becoming available for disbursement under subsection (b) if it has received the written consent of the parties to the transaction."

SECTION 25. Section 449-17, Hawaii Revised Statutes, is amended to read as follows:

"§449-17 Revocation and suspension of licenses. (a) The commissioner may revoke any license issued hereunder, or suspend the right of [the licensee] an escrow depository to use the license, for any of the following causes:

(1) Making any misrepresentation concerning any escrow [transaction];

(2) Making any false promises concerning any escrow [transaction] of a character likely to mislead another;

(3) Pursuing a continued and flagrant course of misrepresentation, or making of false promises, through advertising or otherwise;

(4) [Without first having obtained the written consent so to do of both parties involved in any escrow transaction, acting] Acting for both parties in connection with [such transaction,] an escrow, or collecting or attempting to collect commissions or other compensation for its services from [both of] the parties[;] without having obtained the written consent of the parties involved in the escrow;

(5) Failing, within a reasonable time, to account for any moneys belonging to others which may be in the possession or under the control of the [licensee;] escrow depository;

(6) [Any] Engaging in any other conduct constituting fraudulent or dishonest dealings;

(7) Violating any of the provisions of this chapter or the rules [promulgated pursuant thereto;] adopted under this chapter;

(8) Splitting fees with or otherwise compensating others not licensed hereunder for referring business;

(9) Commingling the moneys or other property of [others] an escrow with its own[;] moneys or other property, or with moneys or other property held by it in any other capacity;

(10) Engaging in an unsafe or unsound practice that is likely to cause insolvency or substantial dissipation of assets or earnings of the [licensee;] escrow depository;

(11) Failing to maintain books and records that are sufficiently complete and accurate so as to permit the commissioner to determine the financial condition of the [licensee; and] escrow depository;

(12) Violating any order issued by the commissioner; and

[(12)] (13) Ceasing, for a period of six consecutive months or more, to engage in the business for which its license was granted.

(b) No license shall be suspended for longer than five years and no [corporation] escrow depository whose license has been revoked shall be eligible to apply for a new license until the expiration of five years. An escrow depository whose license has been suspended or revoked may request a hearing before the commissioner in accordance with chapter 91. Any final decision of the commissioner suspending or revoking a license may be appealed to the circuit court as provided in chapter 91.

(c) The commissioner shall have discretion to issue a new license to an escrow depository whose license has been revoked after no less than five years from the date of revocation or to reinstate any suspended license, if the grounds for ordering the suspension or revocation are no longer present."

SECTION 26. Section 449-20, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-20[]] Branch offices. (a) No escrow depository may establish a branch office without [first] obtaining prior written approval from the commissioner. [The]

(b) Each branch office shall have a designated branch escrow officer who shall supervise and be responsible for all activities at that branch office. A designated branch escrow officer shall possess experience and knowledge commensurate with the officers duties and responsibilities and with the size and complexity of the operations to be supervised.

(c) An application to establish a branch office shall [set forth the reasons for the branch office and other] be filed in the form prescribed by the commissioner and shall contain the following information [that may be required by the commissioner.]:

(1) The exact location of the proposed branch office, including street address;

(2) The terms of the acquisition or lease for the proposed branch office including the names and addresses of the parties, the size of the premises in square feet, and, if applicable, the duration of the lease, the monthly rent, and details of any option for a lease extension;

(3) The name and qualifications of the proposed designated branch escrow officer who will supervise the branch office;

(4) The reasons for establishing the branch office; and

(5) Any other information that the commissioner may require.

(d) The application shall be accompanied by any required application fee no part of which shall be refundable."

SECTION 27. Section 449-20.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-20.5[]] Closing branch office. (a) An escrow depository shall give the commissioner notice of its intent to close any branch office at least thirty days prior to the closing. The notice shall:

(1) State the intended date of closing;

(2) Specify the reasons for the closing; and

(3) Contain a certification by the secretary or other authorized officer of the escrow depository that the decision to close was duly approved by its board of directors.

(b) After closing a branch office, the escrow depository shall promptly [thereafter] surrender to the commissioner the branch office license for that location."

SECTION 28. Section 449-21, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) Every escrow depository shall preserve all of its records for a minimum of six years or for such greater or lesser period as the commissioner may prescribe. For the records of any escrow handled by or through the escrow depository, the six years shall begin from the completion of the escrow, which includes, but is not limited to, disbursement of all funds, distribution of all documents, and conclusion of all other matters required by the transaction."

SECTION 29. Section 449-22, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-22[]] Examinations. (a) The commissioner may conduct examinations of escrow depositories as often as the commissioner deems necessary for the purpose of assuring that the escrow depository is in compliance with all laws, rules, or orders issued by the commissioner.

(b) The commissioner shall have full access to the vaults, books, and [papers] records of the escrow depository and may make such inquiries as may be necessary to ascertain the condition of the [corporation.] escrow depository. All directors, [incorporators,] officers, employees, and agents of an [institution] escrow depository being examined shall cooperate fully with the commissioner and the commissioner's examiners, and shall answer all inquiries and furnish all information pertaining to the same, to the best of their knowledge and ability.

(c) The [licensee] escrow depository shall bear the expenses of any examination [or investigation] by the commissioner."

SECTION 30. Section 449-23, Hawaii Revised Statutes, is amended to read as follows:

"[[]§449-23[]] Removal of officers or directors[.] or prohibition. (a) The commissioner may order either the removal of any officer or director from office or employment with an escrow depository [and prohibit], or the prohibition of the person's affiliation or participation in the affairs of the escrow depository, or both, if the commissioner determines that any of the following circumstances exist:

(1) The person has violated [a state law regulating escrow depositories, violated a cease and desist order,] this chapter or any rules issued pursuant to this chapter, engaged or participated in an [unsafe or] unsound practice in connection with the escrow depository, or breached a fiduciary duty;

(2) As a result of a statutory or regulatory violation, unsound practice, or breach of fiduciary duty, the escrow depository has suffered or will probably suffer financial loss or other damage, the interests of the escrow depository's clients have been or may be prejudiced, or the person has received financial gain or other benefit as a result of [such] the violation, unsound practice, or breach[;] of fiduciary duty; or

(3) [The] A statutory or regulatory violation, unsound practice, or breach of fiduciary duty involves the person's personal dishonesty, or demonstrates the person's wilful or continuing disregard for the safety or soundness of the escrow depository.

(b) The commissioner may also order either the removal of any person from office or employment with an escrow depository, or the prohibition of the person's affiliation or participation in the affairs of the escrow depository, or both, if the commissioner determines that:

(1) The person has been charged in any information, indictment, or complaint authorized by a United States attorney, state attorney general, or similar legal officer, with the commission of, or participation in, a crime involving dishonesty or breach of trust that is punishable by imprisonment for a term exceeding one year under state or federal law; and

(2) The continued service by the person may pose a threat to the interests of the escrow depository's clients or may threaten to impair public confidence in the escrow depository.

[(b)] (c) The commissioner shall serve the officer or director and the board of directors of the escrow depository with written notice containing the alleged violations, unsound practices, or breaches[,] of fiduciary duty, a summary of the facts upon which the allegations are based, and a statement of the commissioner's intention to remove the person from office or prohibit the person's affiliation with the escrow depository, or both. If the commissioner deems it necessary for the protection of the escrow depository or its clients, the notice may also suspend the officer or director from office or prohibit the party from further participation in any manner in the conduct of the affairs of the escrow depository, or both.

[(c)] (d) Upon request of the person made within ten days after service of notice, the commissioner shall hold a hearing at which any pertinent evidence may be presented and after which the commissioner shall issue findings and a determination. If no hearing is timely requested, the commissioner may proceed to issue orders of removal or prohibition, or both, on the basis of the facts set forth in the written notice.

[(d)] (e) No officer or director whose removal or prohibition has been ordered pursuant to this section shall thereafter participate in any manner in the conduct of the affairs of the [affiliated] escrow depository as long as the order remains in effect. Any violation of the order shall constitute a violation of law[, and shall be sufficient for the issuance of a cease and desist order to the escrow depository]."

SECTION 31. Section 846-2.7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Criminal history record checks may be conducted by:

(1) The department of health on operators of adult foster homes or developmental disabilities domiciliary homes and their employees, as provided by section 333F-22;

(2) The department of health on prospective employees, persons seeking to serve as providers, or subcontractors in positions that place them in direct contact with clients when providing non-witnessed direct mental health services on behalf of the child and adolescent mental health division, as provided by section 321-171.5;

(3) The department of education on employees, prospective employees, and teacher trainees in any public school in positions that necessitate close proximity to children as provided by [[]section[]] 302A-601.5;

(4) The counties on employees and prospective employees who may be in positions that place them in close proximity to children in recreation or child care programs and services;

(5) The county liquor commissions on applicants for liquor licenses as provided by section 281-53.5;

(6) The department of human services on operators and employees of child caring institutions, child placing organizations, and foster boarding homes as provided by section 346-17;

(7) The department of human services on prospective adoptive parents as established under [[]section 346-19.7[]];

(8) The department of human services on applicants to operate child care facilities, prospective employees of the applicant, and new employees of the provider after registration or licensure as provided by section [[]346-154[]];

(9) The department of human services on persons exempt pursuant to section 346-152 to be eligible to provide child care and receive child care subsidies as provided by section [[]346-152.5[]];

(10) The department of human services on operators and employees of home and community-based case management agencies and operators and other adults, except for adults in care, residing in foster family homes as provided by section 346-E;

(11) The department of human services on staff members of the Hawaii youth correctional facility as provided by section 352-5.5;

(12) The judiciary on employees and applicants at detention and shelter facilities as provided by section 571-34;

(13) The department of public safety on employees and prospective employees who are directly involved with the treatment and care of persons committed to a correctional facility or who possess police powers including the power of arrest as provided by section 353C-5;

(14) The department of commerce and consumer affairs on applicants for private detective or private guard licensure as provided by section 463-9;

(15) Private schools and designated organizations on employees and prospective employees who may be in positions that necessitate close proximity to children; provided that private schools and designated organizations receive only indications of the states from which the national criminal history record information was provided as provided by section 302C-1;

(16) The public library system on employees and prospective employees whose positions place them in close proximity to children as provided by section 302A-601.5;

(17) The State or any of its branches, political subdivisions, or agencies on applicants and employees holding a position that has the same type of contact with children, dependent adults, or persons committed to a correctional facility as other public employees who hold positions that are authorized by law to require criminal history record checks as a condition of employment as provided by section 78-2.7; [and]

(18) The department of commerce and consumer affairs on officers, directors, the designated principal escrow officer, and branch escrow officers of an applicant for a license as an escrow depository as provided by section 449-6;

(19) The department of commerce and consumer affairs on proposed new officers, directors, the designated principal escrow officer, and branch escrow officers of an escrow depository named in an application for change of control as provided by section 449-8.6; and

[(18)] (20) Any other organization, entity, or the State, its branches, political subdivisions, or agencies as may be authorized by state law."

SECTION 32. Section 449-24, Hawaii Revised Statutes, is repealed.

["§449-24 Termination of escrow depository operations. (a) A solvent escrow depository whose capital is not impaired and that has not received a notice of charges and proposed suspension or revocation order pursuant to section 449-17 may cease its business and surrender its license in the following manner:

(1) The board of directors shall adopt a resolution approving a plan to cease activity for which a license to operate as an escrow depository is required. If applicable, the plan shall include provisions for the sale, exchange, or disposition of all outstanding escrow accounts or other business for which an escrow depository license is required by this chapter;

(2) The escrow depository shall:

(A) Notify in writing all buyers and sellers whose accounts still contain outstanding balances of the termination of the escrow depository's operations and the specific arrangements to handle the particular transaction; and

(B) Submit to the commissioner, in writing, the name, address, and telephone number of a contact person who shall be responsible for answering questions and providing documents on closed accounts. This individual or the successor thereof shall continue to perform this task, and shall notify the commissioner of any changes in the information concerning the contact person, until the applicable statutes of limitations have lapsed;

(3) The escrow depository shall file an application with the commissioner in the prescribed form for approval to cease activity for which a license to operate as an escrow depository is required. The application shall be accompanied by:

(A) A copy of the plan to cease activity for which a license to operate as an escrow depository is required, certified by two executive officers of the escrow depository as having been duly adopted by the board;

(B) Any application that may be required pursuant to section 449-8.6, if applicable;

(C) A copy of the notice sent by the escrow depository to all buyers and sellers whose accounts still contain outstanding balances; and

(D) Any other information that the commissioner may require;

(4) The commissioner may require that an audit report, prepared by a certified public accountant at the expense of the escrow depository, be submitted showing the final accounting of the company's operations, should circumstances so warrant;

(5) The commissioner shall approve the application to cease activity for which a license to operate as an escrow depository is required if:

(A) The commissioner is satisfied with the plan;

(B) The conditions for approval contained in section 449-8.6 have been met, if applicable; and

(C) No other reason exists to deny the application; provided that the commissioner may impose any restrictions and conditions that the commissioner deems appropriate; and

(6) Upon receipt of the commissioner's approval, an escrow depository that has filed:

(A) A plan attesting that the company does not retain any outstanding escrow accounts or other business for which an escrow depository license is required by this chapter, shall forthwith surrender to the commissioner all of its escrow depository licenses; or

(B) A plan that includes provisions for the sale, exchange, or disposition of outstanding escrow accounts or other business, upon receipt of the commissioner's approval, shall proceed with its plan to cease activity for which a license to operate as an escrow depository is required. Upon completion of its plan, the escrow depository shall file a written notification with the commissioner, signed by its president and secretary, certifying that there are no outstanding escrow liabilities. Filing of the written notification shall be accompanied by the surrender of all escrow depository licenses.

(b) Nothing in this section shall preclude the commissioner at any time from seeking any relief or sanction from the courts that may otherwise be permitted by law."]

SECTION 33. All acts passed by the legislature during this regular session of 2004, whether enacted before or after the effective date of this Act, shall be amended to conform to this Act unless such acts specifically provide that this Act is being amended.

SECTION 34. There is appropriated out of the state criminal history record improvement revolving fund the sum of $240 or so much thereof as may be necessary for fiscal year 2004-2005 to effectuate the purposes of this Act. The sum appropriated shall be expended by the department of the attorney general for the purposes of this Act.

SECTION 35. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 36. This Act shall take effect on January 1, 2005; provided that section 34 shall take effect on July 1, 2004.