Vermont Legislature SmartTranscripts:

[Michael Marcotte (Chair)]: Good morning, everyone. This is the White House Committee on Commerce and Economic Development. It is Thursday, 01/15/2026 at 09:07 in the morning. So we're beginning our day. It'll be consumed which will consume our day today on H six forty eight, which is a banking insurance and securities. It's the DFR, known as the DFR Housekeeping Bill. Aaron, are you gonna join us, or is Joe?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Joe, and I think Amanda's on.

[Michael Marcotte (Chair)]: Yeah. Great. So, Joe, if you'd like to join us. Amanda, good morning.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Good morning.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Morning. Joe Valenti, director of policy at DFR, and I'll be the cruise leader, or whatever term you want to use, for the day.

[Committee Member (Unknown)]: Tour guide.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Yes, tour guide, through the housekeeping bill. I am able I have it up. I can share my screen if I have access. Hopefully everybody can see that. We do have two people from DFR who are here virtually, one from securities, one from legal. In the interest of keeping them on virtually for a relatively short period of time, I thought we could start with the security sections, which is section 48. We'll go through there to the end, and then we'll start again at the beginning with Aaron. Securities and insurance are both pretty short. Banking is long. It's not as long as it appears. There are a lot of repetitive sections in there, but you can think of it as we'll do securities as the appetizer, banking is the main course, and insurance will

[Committee Member (Unknown)]: be the the dessert. So

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: with that, section 48, I will turn it over to deputy commissioner for securities, Amanda Smith.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Thank you, Joe, and thank you for the opportunity to present virtually. I'm sorry I cannot be down there today. So I'm gonna kick it off by starting in section 5,202 regarding exempt transactions, and we have two specific areas in here that we're seeking to amend. So, this section pertains to the exemption of certain offerings from state registration requirements and also contains a de minimis exemption in 14A. Specifically in A, what we're looking to do is decrease the de minimis exemption. So currently there's an exemption of 25 purchasers and we're wanting to revise that number down to 10, which would be appropriate to the size of Vermont small market. So Vermont is a Uniform Securities Act state like the majority of other states, and this 25 purchaser threshold de minimis is typically something we see implemented in much larger states. So we again are trying to wanting to reduce that number down to 10 by reducing this number. We don't expect an increase in the number of filings due to the change. I guess that's, you know, it's an option, but we just believe that a reset is necessary that reflects Vermont's small market. And then Joe, for some reason I've lost the screen here, but as long as you guys can see me and hear me in 14 E. The current de minimis exemption also conflicts with our securities regulation in four dash three b one and that regulation pertains to notice filing requirements for rule five zero six offerings. A five zero six offering allows a company to raise capital through a private placement. So per our Regulation in four(three) sales of the offering in Vermont require the company to file with the Commissioner a Form D filing and pay a fee of $820 within fifteen calendar days of the first sale. So by adding E, we are indicating that five zero six filings are not exempt from this de minimis exemption. All five zero six filings need to be filed with the Commissioner. There's no exemption allowed. So there's a conflict between the reg and the statute. So does anybody have any questions about either of those?

[Committee Member (Unknown)]: I didn't quite catch what the rule five or six offerings were that we would be not exempting. What kind of offerings again?

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: The five zero six offerings, those are those allow a company to raise capital through a private placement. And when those sales are being offered in Vermont, they're required to notice file with the with the commissioner and pay a fee to do that within fifteen calendar days of the sale. So because there is you have to pay your submit your paperwork and pay your fee, there's no exemption allowed so that our regulation in four three regarding the five zero six offering is conflicting with this statute, which is why we need to add e to say the issuer is not offering to sell securities pursuant to exemptions provided by rule five zero six.

[Committee Member (Unknown)]: The the this is, to be consistent with federal law. Is that what you're talking about?

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Yes. Yes. Yep. Yep. So we're we're fixing the hole in the boat with number two there. And that clears that up.

[Committee Member (Unknown)]: Thank you.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Yep.

[Michael Marcotte (Chair)]: Okay.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Okay. Thank you. And then section forty nine five thousand three hundred two regarding notice filings. What we're seeking to do here is clarify that our fees charged are based on per share class. Always have been not based on portfolio. So making sure that that's accurate and also adding NF that the fees that we receive are nonrefundable. Okay. Okay. Section 50, securities registration filings. What we're doing here in little b is open ended investment companies are federal covered securities and those are exempt from state registration. We want to strike this sentence open end investment companies because it has no place being in this section as 5,305 pertains to securities registration filings.

[Michael Marcotte (Chair)]: Okay.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Okay, and then also in K also clarifying that these fees received are also non refundable. In section 51, I think you're there, Joe. Yep, all we're doing here is clarifying the name of the court to be consistent with the rest of the Vermont Securities Act to indicate Superior Court of Washington County. And then also continuing that in the last paragraph to also say Superior Court of Washington County on page 74 there. And then section 52, what we're trying to do, we're correcting a typo in 33 VSA, the correct reference is 34, not 14. And 69,234 defines vulnerable adult. Correctly. Yep. And then it's section 53. I'm going to have Jennifer Rutland, our assistant general counsel, talk to you about the change to this section. And I believe she's on.

[Jennifer Rutland (Assistant General Counsel, Vermont Department of Financial Regulation)]: I'm here, Amanda. Thank you.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: And good morning, everyone. Good morning. Good morning.

[Michael Marcotte (Chair)]: Good morning.

[Jennifer Rutland (Assistant General Counsel, Vermont Department of Financial Regulation)]: The requested change in section 5,604 e Jennifer,

[Michael Marcotte (Chair)]: just for the record, can you state your name and affiliation?

[Jennifer Rutland (Assistant General Counsel, Vermont Department of Financial Regulation)]: Oh, of course. Jennifer Rutland, assistant general counsel of Vermont Department of Financial Regulation.

[Michael Marcotte (Chair)]: Thank you.

[Jennifer Rutland (Assistant General Counsel, Vermont Department of Financial Regulation)]: Okay. The requested change to section 5,604 e really is intended to codify existing practice. Under the current version of the statute, the commissioner is allowed to and in fact routinely does consider other factors, especially equitable factors. In other words, those designed to protect the public welfare rather than solely to punish. But the factors aren't spelled out unlike other administrative penalty provisions in the Vermont statutes. And we started to realize this might be a problem when the US Supreme Court issued a decision in 2024, SEC versus Jarkassee, which held that when the SEC was seeking civil penalties in the securities fraud case, the defendant was entitled to a jury trial pursuant to the seventh amendment. And in that case, the court was looking at the SEC's penalty provisions and found that they appeared to be principally punitive in nature. So we started looking at what would happen if this issue came up in Vermont. And what would happen is the Vermont Supreme Court would look at it under the Vermont Constitution. Vermont Supreme Court in a couple of cases, looking at the penalty provisions in title 10, which is environmental penalties and title 30 public utilities. Those two statutes have identical penalty provisions and we are seeking to conform the securities penalties to those two statutes. The Vermont Supreme Court in two different cases found that those penalty provisions were primarily equitable in nature, so there was no right to a jury trial. It allows the department really to continue running administrative proceedings efficiently and consistent with prior practice. It just makes the penalty factors much more clear. It makes the department a little less vulnerable to jury trial claims, really don't enhance administrative proceedings at all and make things much more efficient.

[DFR Staff (Unknown)]: And so what we have here are the specific factors,

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Jennifer, I have this right, that are consistent with the other state statutes.

[Jennifer Rutland (Assistant General Counsel, Vermont Department of Financial Regulation)]: Correct. Each statute is number one is subject matter specific. You know, the environmental one has an environmental specific, factor in in the securities one where we're factoring considering the extent the violation harmed or might have harmed investors access to capital markets or public confidence in the securities industry and the integrity of capital markets. That one is subject matter specific. All the rest of them are identical to the factors in titles ten and thirty, which have been found by the Vermont Supreme Court to be primarily equitable in nature. And again, the department's always trying to protect the public welfare. So we think it's best if we spell out those factors and don't leave any ambiguity about what we're doing.

[Committee Member (Unknown)]: I'm sorry, can you repeat what was the Vermont statute that was the genesis for these factors?

[Jennifer Rutland (Assistant General Counsel, Vermont Department of Financial Regulation)]: There are two statutes that have identical penalty provisions. One is Title 10. It's 10 VSA Section eight ten and the other is Title 30 which is public utilities and it's 30 VSA Section 30 are identical factors except for the first one.

[Michael Marcotte (Chair)]: Thank you.

[Jennifer Rutland (Assistant General Counsel, Vermont Department of Financial Regulation)]: Any other questions?

[Michael Marcotte (Chair)]: Nope, we're good to go. Go ahead.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Section 54. Back to Amanda.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: All right. Thank you, Joe. So Section 54 pertains to our Financial Services Education Victim Restitution Fund, and we're seeking to clarify some of the victim restitution requirements. So specifically down to one and claimant, we are amending the definition of claimant and striking the rest of that language, which which has been moved to the eligibility section. And then in item number two, we are defining a dependent child based on the federal tax code, which will also is a part of the eligibility requirements on the next page. In number three, you'll see through all of this. We're just cleaning up the language that final order means an order issued by the Commissioner disposes of securities violations or claims. Changing the name to say Superior Court of Washington County to be consistent Down in number seven, we're indicating vulnerable adult versus person, which is consistent with Title 33 regarding vulnerable adults. And also in seven, as we I mentioned earlier, correcting a typo there for the reference to be sixty nine thousand two and thirty four versus 14. And then in C, we've cleaned up the eligibility requirements to make it a little cleaner to read. And number two, we're saying that the Commissioner shall not award securities restitution assistance under this section unless in a the victim is a natural person who is a resident of Vermont at the time of that violation. Scrolling down to e. All we're doing is consolidating this the statement further down, to say if there is no reward of restitution in the final order or if the victim has X, Y, or Z. I got some renumbering and re lettering there. And then down to four, replacing claimant with victim was a vulnerable again adult at the time of that securities violation. And then in number five A through C, all we're doing here is wanting to be very clear that we're protecting the information that we receive in that application. This can the applications that we receive contain PII, and we're just clearing up that that information we receive is confidential. And I think the last one we scroll down, Joe, to G, the state's liability for the award, we are again clarifying the commissioner's discretion with his ability to suspend applications and the discretion to be able to distribute award amounts based on the solvency of that fund.

[Michael Marcotte (Chair)]: Amanda, the protection of DII, does that also are any of these any of that information obtainable in for you?

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: No. It would not be.

[Michael Marcotte (Chair)]: Okay. Thank you.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: It would not. Yep. You're welcome. Great question. I'm trying to see, Joe, where you are. The subrogation okay. The subrogation rights. Again, clarifying order to pay restitution to the victim. And number I adding a new section here regarding forfeiture of that restitution award. If a person, you know, a person shall not engage dishonesty, forgery, fraud, and a person found by the Commissioner or in a court to have engaged in those activities will be subject to penalties, etc. So, Joe, I think that's that's it for securities.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: We're in 58. Okay.

[Michael Marcotte (Chair)]: Go ahead. One question, Amanda. Okay. Person found by the commissioner ordered for. If the person is found by the commissioner, the court's still open to that person to to read that?

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: That's a great question. I think that's something I should run by legal and get back to you on. Can do that this morning.

[Michael Marcotte (Chair)]: Thank you.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Okay. You're welcome.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Any other questions on section 54? I think we're good. Okay. The one other securities item is section 58, but I will walk through 55 through 57 really quickly, then I'll let Amanda take section 58. So, 55 and these are truly miscellaneous. This is a change. You'll see a reference here to the banking supervision fund. Maria had identified this one for us. In this section, we make reference to both a financial institution supervision fund and a banking supervision fund in different places. We only have one fund for these purposes. It's the financial institution supervision fund. We checked there is no banking fund with anything in it, and so this is just adopting the same name for both since they are referring to the same fund. And so that's all we have in section 55. Section 56, we are moving the insurance regulatory and supervision fund. That is that happens in section 57. The insurance regulatory and supervision fund was in section 80 of Title VIII. It was the only item in Chapter three. There were several other items in Chapter three that had all been repealed. Where it was located, it was very close to the banking language, but it was just kind of lonely in its own chapter. And we went back and looked, and each of the divisions has its fund language in the administrative section or close to it for that particular division. And so we are proposing to move the insurance regulatory and supervision fund language to the end of the administrative section in Chapter 101, so it will be with the rest of the insurance administrative language. The other one, as we were looking at how data laws and thank you, Maria, for flagging this for us in 56B, Back in the 1960s, when the age of consent was 21, there was a state law passed that a minor 18 years of age or older would be eligible to take out a mortgage. That is simply outdated and clearly not necessary anymore, so we are proposing to repeal that. And then 57 is just moving the insurance regulatory and supervision fund that had been in the last item in chapter three to the end of chapter 101.

[Committee Member (Unknown)]: Same text? Yes. Same provisions? Yes.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: And then back to Amanda for section 58.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Thank you, Joe. In section 58, all throughout we are updating the federal reference as what we had was outdated. And then Joe in down to letter F. We are right right there. We are adding the requirement for our investment advisory firms to maintain adequate insurance for the risk of a cybersecurity breach. In 2016, we included this requirement in our securities regulations and recently realized that it's also important to have this requirement codified in statute. So that's what this change is in addition to updating the federal references. And that is it for this section.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Any other questions on securities?

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Good. Thank you all.

[Michael Marcotte (Chair)]: Okay. Thank you. Thank you, Amanda and Jennifer. Great. Haven't been through a bill so far.

[Committee Member (Unknown)]: Thank you, Janelle.

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: Take care.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: I know. I hate to

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: start over from the beginning. And then the Why not?

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: We're done.

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: Last item under that, section 59 effective date for everything here is July 1. But now that we'll go back to section one with banking, I'll keep scrolling, but I

[Michael Marcotte (Chair)]: will hand over to Aaron to walk through the language. Great. Thank you.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Good morning, everyone. Aaron Ferrence, Deputy Commissioner for the Banking Division at DFR. Just to get started, give you some themes. There's a lot of sections in our bill. A lot of them are sort of repetitive. We're essentially changing one term to another term. So for example, we have a license or registration currently for a consumer litigation funding company. All of our enforcement activities and work is related to licenses, so we want to switch that from a registration to a license. We maintain it within the nationwide multistate licensing system. So there's a lot of themes like that where we're just essentially changing that one term for another. And there are a few other bigger, deeper pieces that we can talk about later. So, Joe, in in section number one, this is title eight twenty one zero two. This is one of those examples where we're changing the the term from a a registration to a license. And then in section twenty one zero three, we've also added some language which strengthens our regulatory oversight of all of our entities. So we've added the language which says, and otherwise indicate that it is in the public interest to permit the applicant to provide services in this state. So this is before we have a licensee, we want to make sure that it is in the fullest interest to allow them to do that business. There are some changes in terms of how the drafting works with corporations and the etcetera. Stylistic changes about his or her in terms of person. At the bottom of page four, there's an addition of a word paragraph B there, which is consumer litigation funding company registration. We actually, that's something we missed. So that registration should be changed to license. Do you see that Maria? In section three, we have the change of control. So we've granted a company a license. We've granted that company a license based on our vetting of who owns the company or what company does. If there is someone else, person who would like to acquire that entity or otherwise change who owns it, this gives the commissioner power to to re vet and go through a lot of those changes before it's. So we're adding the seeking to acquire control of the licensee language to strengthen that. And this is in a section that applies to all of our licensee universe, not just the consumer funding section. So mortgage lenders, money transmitters, mortgage brokers, all of the licensees within the banking division. Subparagraph b, we've added a specific reference to section 2,202 a of title eight, which is related to commercial lender licenses. That was just something that was overlooked. Paragraph C, we've added the financial and business qualifier to experience just to clarify that that's the type of experience we're going to be evaluating. And then at the bottom of the page there, paragraph E, we've added the language unless exempted by subsection F of this section. Subsection F is language which is related to money transmitters. Some of you were on the committee two years ago when we adopted the Money Transmitter Model Act. This is language that conforms to that Model Act. In this section and not the Money Transmitter section specifically because this is how we handle all of our general licensing requirements. And so it's more important for it to be in section than elsewhere. These are just exceptions that the commissioner by order or rule used to extend. These are part more routine transactions that we don't need the power to go ahead and vet. So whether or not someone's acting as a proxy for voting shares, we don't need any sort of oversight of that transaction.

[Committee Member (Unknown)]: So the exemption, was that in regulation or what's the genesis of the changes?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: We adopted the Money Transmitter Model Act two years ago, and this is from that Model Act. I believe it was just an oversight that it did not get added. In section 2,109, again, that's another example of the swapping registration for a licensee or license, excuse me. Paragraph e, again, more stylistic changes made where we're saying, you know, notwithstanding any other provision of this title to the contrary, etcetera.

[Michael Marcotte (Chair)]: What page are you? Going

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: too fast. Still got a couple of couple of copy. Questions on that one?

[Committee Member (Unknown)]: Section

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: five, which is subsection 21.1. And this is language which is designed to give us more control over if someone has pled guilty or had some sort of interaction with the court, which we would ultimately find detrimental that if they have applied for us and then we find out this information about the court order or the adjudication has occurred, gives us the powers to then take action as if it had happened prior to the decision. So this is more about, you know, do they have the responsibility and the character and the confidence to conduct activity. There on page 11, Joe, subsection D, paragraph one, that really lays out sort of the due process rights that if we were to deny a license or revoke or somewhat take that from an entity, this would explain how they would appeal that. It would go to the commissioner and sort of give them all of those rights up to and including, I think, a failing to Washington County Superior Court of Appeal to. One significant fear, and d,

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: two is reason or reasons for instead of denial

[Michael Marcotte (Chair)]: of the

[Committee Member (Unknown)]: refusal of renewal.

[Committee Member (Unknown)]: Just going back up to the the to money laundering, are there any felonies that wouldn't impact their ability to be in, I guess, just trying to understand, like it was very

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: simple, but super broad. I

[Committee Member (Unknown)]: don't know our statutes well enough to know what is about and what isn't about, right?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah, I think the language that we've removed there is a violation of a state or federal anti money laundering statute. What if they were violating a state or federal fraud provision? We would wanna know that and be able to take action. That's why we've made it more broad in this particular case. I'm wondering if it's too broad. Okay.

[Committee Member (Unknown)]: It's a question. It's not a

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah. Routinely, have a license for mortgage loan originators. So that's for the actual loan officer. Routinely, have people within the last seven years who maybe added DUI or some other really very civil action, which we will just say, all right, that's not related to fraud or dishonesty or any of these other serious things. So we will not take an action against them or not permit them to have that activity. This strengthens our ability to say no to someone coming into Vermont to providing services or activities based on

[Committee Member (Unknown)]: these activities. Yeah, somebody who's already licensed and it's conviction, right? There's something.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah, this is specifically pre licensure. So it's the period between they've applied for a license, but we haven't done anything yet. Then we can go ahead and still take action to the negative if we need to or feel we should.

[Committee Member (Unknown)]: So it's optional? Yeah, it's not a shall. Correct. It's correct. May.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah, the commissioner may deny suspend, terminate, revoke, or condition.

[Committee Member (Unknown)]: Thank you. Sure.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Section six. This is still in the general licensing provisions. This is in our exams and investigations powers. Paragraph K is referring to reports required pursuant to section 2,120. These include the default call reports from our licensees. And that call report includes data that that they report to us in terms of their activities within Vermont. We would like to make that confidential subject to our exam powers because that's how we're using the data. We want that subject to public records requests because that is, again, exam related data that we're collecting on a regular basis. It helps us monitor the markets, helps us identify entities that may be doing things that we'll want to look into, either conducting the investigation or increase the frequency of the examinations that we conduct.

[Committee Member (Unknown)]: 2020. 2120 is the section of

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: statute that requires public works or any other things. It's a bunch of proprietary data from the licensee about their

[Michael Marcotte (Chair)]: Any further questions?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: We'll take a chat.

[Michael Marcotte (Chair)]: That just the the language seems funding on line eight, the new language. Information obtained during or four.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah. I think I think we've added the or four just in terms of like I said, we collect this this material routinely. So it may be

[Michael Marcotte (Chair)]: Maybe that comma after the g.

[Committee Member (Unknown)]: Or maybe you don't need during.

[Jennifer Rutland (Assistant General Counsel, Vermont Department of Financial Regulation)]: Maybe you should obtain it for.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah, mean, during, exams can go on for weeks or maybe months, it's just that during them. Yes.

[Michael Marcotte (Chair)]: We got a comma. Good. Was for me. I don't know. That's I think this has been through editing. Right, Marie?

[Amanda Smith (Deputy Commissioner for Securities, Vermont Department of Financial Regulation)]: It has, but whatever it

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: is. Yeah.

[Michael Marcotte (Chair)]: Yeah. I think I would read that in it. Yeah.

[Committee Member (Unknown)]: Okay. Yeah. Okay. Or if you could figure out if if during is relevant. If it's anything that's for an investigation, is that proper, all other than that? I don't know the answer.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah, I mean, I think maybe a question for legal, I don't know the true difference, but information we obtained during an examination certainly should be confidential. But that is again, going to be proprietary information of a lot of PI, etcetera, etcetera. This would be or if

[Committee Member (Unknown)]: information was or an official investigation was started, but information was being gathered so that it wouldn't actually be during.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah. Yeah. Exactly. That's why I said. Yeah. Alright. Section seven. Again, this is one of those instances where we're doing a few different things. A lot of it though involves, at least one of them involves changing registration to license, changing company to person, and then just clarifying that this license this is sorry, I should back up. This particular statute is specific to the consumer litigation funding license that we'd hope to change from the registration. So this just says that a person shall not engage in the business of consumer litigation funding without first obtaining a license under this check. And then we clarify that in addition to the information required by section 2,102, which is again our general licensing provisions, An applicant for this license shall provide and the licensee shall make at all times surety bond or revocable letter of credit. Stuff that's already in statute. We're just clarifying. Section eight is the consumer litigation funding company annual report requirements. We changed it from registration to registered to licensed. We're proposing to change, I should say. Moving on, Joe, to section number nine. These statutes are in our money transmission licensing. So very specific rules and statutes about how money transmitters should be operating at the moment. First paragraph, number eight, eligible rating means from shall meet the status change. Same in paragraph nine. The language in paragraph 10 looks like it's brand new. That language is already in a definition, which is elsewhere within the statute. We've just moved it forward from that specific subsection to the beginning of this entire statute because it is then referred to later on in other words. That's all existing language there. Let's see. On page 16, paragraph number 19 at the bottom, a money transmission kiosk. I had a lot of discussion about currency kiosks in this committee. This is a little different. So this is like a virtual currency kiosk would be specific to virtual currency transactions with for cash. A money transmission kiosk would be something a step above. So it wouldn't necessarily have to involve virtual currency, but it could allow you maybe Western Union puts up a machine that allows you to put in money to then send to a machine somewhere in Europe so your son or daughter could could remove it. So this is clarifying the definition of what the money transmission kiosk is. It I do believe it it it does include the term so a virtual currency kiosk would also be a money transmission kiosk for this language. Again. The term virtual currency kiosk based on this new definition language would also be considered a money transmission kiosk, and that's relevant to later on within the chapter. Still that we add in?

[Committee Member (Unknown)]: I just wanna fire away. Also,

[Committee Member (Unknown)]: virtual cryptocurrency isn't regulated anyway by federally, right?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Well, there's a lot of actual federal legislation being debated as we speak, right?

[Committee Member (Unknown)]: Technically right

[Joe Valenti (Director of Policy, Vermont Department of Financial Regulation)]: now, it's not. A getting It's there.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Of legislation around stablecoins, but Bitcoin itself, no, it's not regulated by any. So any questions on that definition? Page 17, paragraph 20, shall mean change to means, shall include change to includes. Page 19, another definition which has been moved forward, number 27, transfer. All that language is already in statute. We just, again, moved it to the entire definition section. Page 22, paragraph 33, another example. This is the virtual kiosk language, and it's just been moved elsewhere. Paragraph 34, we've strengthened and changed the definition of a virtual currency kiosk operator. So that means a person that offers, facilitates, or engages in, in whole or in part directly or indirectly, virtual currency business activity via a virtual currency kiosk. As you might be aware, there's a lot of interesting business models on how these machines are being used. And so we're attempting to try and get as many of those varying business models within the definition so we can still regulate that activity. Sometimes the company that you're exchanging the cash for virtual currency may not own the machine, so we want to make sure this is all all sort of clarified exactly how it's going on.

[Committee Member (Unknown)]: So I'm just being on this morning. Terms of the crypto kiosk, that whole statute that we enacted, is that totally separate from this, or is this interplay between what we're talking about with virtual currency kiosk and crypto?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: These definitions are from that particular statute that we've already worked on. We've just moved them up here, and this is just strengthening those definitions as they're used in that statute that we've already worked on.

[Committee Member (Unknown)]: Right. And I I can't remember the exact language of what we passed last year. But that chapter or sub chapter, I can't remember. Those are the rules for for Kirkville.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: That's correct.

[Committee Member (Unknown)]: Yeah. That's correct. Not not what this money transmission is. I'm not, that's close.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: To be an operator of a virtual currency kiosk in Vermont, you need to be a money transmitter. So that's why it's within the money transmitter section. Right, but this statute

[Committee Member (Unknown)]: granting the authority to money transmitter to a crypt crypto kiosk operator that isn't isn't dealt with in the statute past last year. I'm trying to understand the the gain of likely to remotely last year and this, you know, general.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah. It's my understanding that this just modifies that existing language that would have already been adopted last year.

[Committee Member (Unknown)]: This wouldn't necessarily justify the justify, say, Bitcoin or okay. Coinbase is what I'm thinking of. I mean, if they wanted to be a TL, then they would need to use a machine that's registered use someone registered here, even though they're a completely legitimate company, you get stuff over the Internet. Right. They have an app for it, things like that. But this would allow a company like that to contract with a registered money transmitter so I can go to an ATM and access money out of my Bitcoin account or not my bit my Coinbase account.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yes. This would this would cover those unique business models that that may crop up. That's correct.

[Michael Marcotte (Chair)]: Yeah. I guess what I'm

[Committee Member (Unknown)]: trying to make sure I understand is this this is independent of where you're getting to where you're getting

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: to. I see.

[Committee Member (Unknown)]: It this is just a a transmitter. This is just the it's like like a credit card company. You have a There's a clearing house there, and that's what we're talking about here, right? All they do is they transmit the money. They don't worry so much about where it's coming from or where it's going to.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: So if you are exchanging money for crypto that can be then transferred to someone else, that is a money transmitter in the state of Vermont according to existing statute. We're not changing that. Yeah. We're just clarifying the definition of who a kiosk operator would be. The moratorium would expire June 30 without any other legislation. So just anticipating that we wanna strengthen this language. K. On page 23, paragraph 36, again, another definition which we've moved forward from elsewhere within. 10. Another of the themes that we're attempting to accomplish with a lot of these changes is to clear throughout Title VIII, the term financial institution isn't necessarily used the same in all areas. So we're trying to clean that up so that when we say financial institution, we don't mean other things than bank. So in this particular statute, which is section 10 and it's subsection twenty five zero six, we're declaring excuse me. This is, again, within the money transmitter statute. That we need the name and address of any financial institution or credit union through which the applicant, plans to conduct their money services business. So we're looking for, in this particular case, this should be a depository. We need to know about it. Let's see. In 2507, we were clarifying the money transmission kiosk registration requirements. And so we've stricken some language and then added through which money transmission is offered, facilitated or engaged in, in whole or in part, directly or indirectly by or on behalf of the licensee. That's similar to a few sections ago where we were clarifying based on those business model changes. Then on page 25, Joe, is at paragraph one. On a money transmission kiosk, we'd like the Vermont license number of the owner of, excuse me, of the licensee displayed so that the consumer knows exactly who is the person that they have an issue with so that when they bring it to our attention, we can work on that, address those concerns.

[Michael Marcotte (Chair)]: Determine how you want that to look?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: No. I mean, it should be on the kiosk itself or on the screen. It I think there's language elsewhere that says it should be legible and in a generic size.

[Michael Marcotte (Chair)]: Do you have a section that actually tells them that? Do we need it?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Believe we do. I'd have to double check.

[Committee Member (Unknown)]: Aaron, you said on the machine itself or on the screen, but this only talks about on the screen. Does it say somewhere else?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: It says on or at the location of the money transmission kiosk, so on or at the location. So it could be like a sign on the wall above it. It could be on the machine on the outside or on the first screen. So it could be in your whatever, and it shows up there, but it should be displayed.

[Committee Member (Unknown)]: And we're finding right now that the other information is where it's supposed to be. So we're just saying wherever you have all of the rest of that information.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: That's correct. Yeah. This is more specifically about what type of information you want displayed. Section 12, this is another change related to the financial institution or credit union. This is in a section about our our check cashers or currency exchangers. It's a sub form of the money transmission license. And same similar changes are made throughout. Section 13 of paragraph b, we're just striking that because we've already covered that by moving those definitions to the front of this chapter. Page 28, again, this is one of the this language that was moved forward. And again, on 29, that was also moved forward. In section 15, these are the banking consumer protection statutes that we have. And again, this is a good example of the fact that the term financial institution is used sort of, I would say incorrectly, not completely, or it's different than it's used elsewhere. So what we've done is we've attempted to fix that by exchanging the term financial institution for regulated entities. So we then define regulated entities in Section 17 as person required to be licensed or chartered pursuant to Part two of this title, an entity organized under the laws of another state that is regulated by its home state in an equivalent manner to an independent trust company chartered to Chapter 77 of this title, a financial institution, a credit union, branches, and agency of foreign banks and subsidiaries of any such person. So essentially, if the banking division regulates you, you're subject to these statutes. And on page 31, Joe, to go back a second, paragraph five, we've stricken the definition of financial institution again in place of this regulated entity definition. Questions on that with the further reasons why we're doing that?

[Committee Member (Unknown)]: Sorry,

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: yeah, thanks Maria. Going back to section 15, the start of these consumer protection statutes is 10.101. By making these changes, it's sort of superfluous. It's a little bit redundant, and so that's why we've repealed it here. Probably dates back to your time at the Department Herb.

[Committee Member (Unknown)]: Very much. So in other ways, are the same provisions that used to be in ten one hundred one incorporated in the various sections?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: They're essentially yes. They're incorporated as they need to in the other various sections. Exactly.

[Committee Member (Unknown)]: Same stuff? Correct. Good old days, Herb.

[Michael Marcotte (Chair)]: Was a good game.

[Committee Member (Unknown)]: Did you find that there was confusion around who was regulated, or are you preempting?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: It was certainly confusing for the non legal folks, even within the division of like, alright, it says financial institution. What financial institution do we mean at this point? Again, it's more of a theme that we're trying to clarify specifically what we're asking for than just refer to everything as a financial institution.

[DFR Staff (Unknown)]: I would also say at times it creates confusion across divisions in that sometimes a financial institution could be an insurance company, but it also could be a bank or credit union and with those conflicting definitions, it's hard to know exactly who you're talking about. Whereas we know regulated entity we know that it is someone in our jurisdiction.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: So I forgot where we were, but Section 18. Section 18. I believe all these changes are just related to regulated entity and they are. Section 19 is the same. So a lot of references there. Section 20, we've stricken some language there which references the authority provided by sections elsewhere within this consumer protection body of statute and just referred to in this title. Because there are also other protections found elsewhere that would be applicable for us to use, and powers, etcetera. Section 21 is about LEED solicitation. So if any of you have ever applied for a mortgage over the last couple of years, the moment that that mortgage lender pulls your credit, you probably get inundated with phone calls and other communications from other lenders trying to essentially steal that business away. So this statute attempts to address a lot of those concerns for the ultimate lender, and we've mostly made changes, I believe, regarding the change in terms from financial institution to regulated entity. On page 38, we've just again added some clarifications on how you might resolve that by having civil division of the Superior Court language and Washington County, etcetera, because that's where we are. Questions on any of that language?

[Committee Member (Unknown)]: Can you talk about how that might change customers' experience with the lead solicitation?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Well, just as someone who applied for mortgage recently, it would definitely clarify who I'm talking to when I'm on the phone. Because as you can get multiple, multiple inquiries and phone calls, which makes it confusing. If we're trying to protect our personal information, I don't want to disclose it to someone who doesn't actually work for them, but has slyly tried to sound like they are from the mortgage company. So a lot of these protections are for the bank or the credit union that is also doing that so that their information is not misused and it gives them particular rights about what they can do in that particular case.

[Committee Member (Unknown)]: I'm wondering if there's something that we can provide for the consumer also, right?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah. So those leads are essentially being sold by the credit bureaus. So I think we get into FICRA, JO, FICRA language that might that govern how those leads are sold. I don't I'd I'd have to think through probably in a separate way what we might be able to do in that regard.

[Michael Marcotte (Chair)]: I kind of like secondary business that credit bureaus are operating. So I know that initially they're needed by financial institutions, regulated entities, but then they're leaving that information to a secondary business of theirs and selling it?

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Yeah. They're they're essentially selling the the information that I've applied for a loan to anyone who'd like to buy it that are just trying to trying to fish and get customers for their own line of business.

[DFR Staff (Unknown)]: Federally, there is a provision in the Fair Credit Reporting Act that the information can be used to contact people about credit and insurance offers. There is an ability for an individual to opt out with the individual credit bureaus if they do not want to receive credit or insurance solicitations, but it is a permissible purpose under federal law. The point that Aaron was getting at, so Fair Credit Reporting Act, the preemption of state law is very complicated. There are some things that the states can do. There's some that they can't, and that's been sort of ever evolving. And so it is challenging to figure out with regard to the credit bureaus exactly what authorities states would have.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Okay. Moving on to section 22. This particular section is a specific thing only for banks. So that in the drafting, it got caught up in the financial institution regulated entity change. We would actually rather it be left alone or more importantly change the term person. So every person subject to the Federal Community Reinvestment Act would be a better fix. But the language as written should stricken or fixed. What language should we speak? In section 22, up on the screen it says every financial institution is crossed off and put in regulated entity. We don't want it to say either of those. We want it to say person. We've just clarified where the Community Reinvestment Act is found in federal law. Let's see. Sorry. Section 24, lending reports, disclosures, and standards. So this is specific to lending activity, so it's gonna be someone who's granting credit. So a regulated entity may not be the best term here as well. So in its place, we've used the term lending institution, and it's sub any person licensed, chartered, or otherwise authored, or required to be licensed, chartered, or otherwise authorized under parts two, four, or five of this title is subject to it. So essentially, it's any licensed lender regulated by us or bank or credit union, depending on the day, federal credit unions and national banks as well. Questions on why we've changed that? Again, as part of that theme of the financial institution term is used inaccurately in some spots. On page 42, we've added paragraph six, which is just the definition of what a lending institution is, And we've referenced Vermont Financial Institution or Vermont Credit Union. Hang on. Section 25.

[Michael Marcotte (Chair)]: Aaron, we say Vermont financial institution or Vermont credit union was talking about both state and national charges.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: You know, there's a dual banking system. So, again, depending on the day, I don't know how the OCC, the Office of the Confidential and the Currency, will actually interpret their federal preemption standards. So it likely is not something we could enforce on a national bank or a federal credit union. To my understanding, there are equivalent language within the National Bank Act or the NCUA rules and regulations, would essentially prohibit the same types of discrimination.

[Michael Marcotte (Chair)]: Okay. So we're pretty much mirroring what the Fed does? Correct. But

[Committee Member (Unknown)]: but But I think the original question, we're talking about, from our chart, is it? Yes.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: Let's see here. So section 25 is a body of law that's referring to home loan escrow accounts. So when you make your mortgage payment, you also add in an amount for the property taxes or the insurance. This just clarifies where those accounts need to be held. There's references federal definitions for banks insured by the FDIC or credit unions insured by AFCRI. In section 26, we are clarifying subparagraph two that this is for financial institutions, and we don't need to have that language clarifying the definition further. Let's see. Paragraph 27, basic banking rules. And again, we're clarifying that this is related to only the Vermont financial institutions, the Vermont banks, and other stylistic changes. Section 28, returned check charges. So a returned check would be if someone writes me a check and I go to deposit, it bounces, I cannot be charged a fee. That's a great trade.

[Committee Member (Unknown)]: I write them all.

[Committee Member (Unknown)]: I do too. I'm old.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: I just had to order something. Anyway, so just clarifying, no depository institution and putting in place financial institution. And then let's see, section 29, just talking about who this subchapter applies to, and it's any persons licensed, chartered, or otherwise, authored, or required to be licensed, chartered, or otherwise pursuant to parts two, four, and five. Section 30, that is on that whole section is on reverse mortgage loans. Does does everyone understand what a reverse mortgage loan is?

[Committee Member (Unknown)]: I do.

[Michael Marcotte (Chair)]: Very well.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: I wouldn't necessarily say they're bad, but it's only be used for specific purposes. So what we've done here is we have just clarified the terms used throughout that particular body of statute. Again, theme financial institution to regulated entity. Any questions on the first section here? Section 30. Section 31. Before you can get a reverse mortgage in Vermont, you need to go through a counseling session, which explains the terms of the transaction and why it could be costly, etcetera, etcetera. So we've just changed the term from financial institution to person because there are non banks that do offer these loans as well.

[Committee Member (Unknown)]: So what what's the interplay between federal law and the first mortgage and and what we have in our statute? The I don't if the preemption issue or

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: There there is no preemption issue here. Vermont only allows what are called HACMs or Home Equity Conversion Mortgages, and those are offered as sort of a subset of HUD. There are other states that allow private label reverse mortgages. So, you know, JPMorgan could do it with only their program, but Vermont only allows the federal sort of related version. Does make sense? Let's see. Section 31, changing a reference again to person, clarifying the department. Section 32, This section just essentially says that you cannot sell someone a reverse mortgage and then require them to buy an annuity. We want our older folks to be taken advantage of in these situations. So this is a consumer protection or just clarifying that no person and adding the term loan in there. Section 33, more limitations on reverse mortgage, just changing the term to person. Any questions on that? That ends the sort of general consumer protection area. We get to 34, we're moving into the actual sort of banking statutes themselves. K. In section 34, this is a definitional change and just a style change there in the first yeah.

[Michael Marcotte (Chair)]: This might be a good time to take a break. Okay. Sure. So we'll take fifteen minutes, give everybody a break, and take your back at ten thirty years. Mhmm. Well, I think it's protected a whole lot left.

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: No. No.

[Michael Marcotte (Chair)]: There

[Aaron Ferrence (Deputy Commissioner, Banking Division, Vermont Department of Financial Regulation)]: is not. There