Producer Questions & Answers for Applicants
Q. One of our principals has a tax return that is 1,000 pages long for a total of 3,000 pages for three years. Is it possible to submit just that one tax return on a CD only?
Q. Is it permissible to use different security vehicles to meet the total escrow requirement?
A. Yes, so long as the total package fully meets all the escrow requirements (e.g., surety company is willing to write the production facility construction bond, and an escrow account is used to secure the ongoing producer business obligation).
Q. Can DCP clarify whether or not both producer applicants would be disqualified should they each list the same proposed production location on their application?
A. Producer applicants vying for the same business location would not be disqualified, so long as each applicant provides evidence that it has a right to occupy such location at the time of the application. Only one applicant, however, would be awarded a license.
Q. Will the State allow an application to have two locations identified, allowing the State to select a more desirable location? BOTH proposed locations will be identical with regards to capacity, design and security as well as meeting all other requirements spelled out in the RFA.
A. Yes, but only one location would be selected and a single license would be issued.
Q. Considering generally accepted flower times for marijuana range from 7-10 weeks and vegetative periods prior to flower generally range from 4 to 6 weeks, what would the DCP consider as an acceptable date for product to be available to retail patients?
A. Any applicant who’s been awarded a producer license has 180 days to commence operation of a production facility. A producer shall be deemed to have commenced operation if the production facility is fully constructed and capable of operating in accordance with the producer’s approved application. Producers are also required to maintain a substantially uninterrupted supply to dispensary facilities. Upon commencement of operations, the Department will expect producers to act diligently to fulfill this requirement.
Q. What are the acceptable forms of “initial production stock” for a licensed production facility at the time of the first inventory with stock present i.e. seeds, seedlings, clones at 6 inches, clones at 12 inches or plants of any specified height?
A. The regulations do not limit a producer’s discretion in selecting the type of production stock it will use. Producers are required to create written policies and procedures for taking inventory and submit them to the Commissioner for approval.
Q. Do you have to have reusable child proof containers for edibles?
A. The packaging must be resealable in a manner that maintains the child-resistant features.
Q. Can chocolates or candies containing marijuana be produced?
Q. In Appendix A, can you put the applicant business address as the proposed business site if no other current address is available (i.e. business was formed within the last year to apply)?
A. The business address must be the location where official business correspondence and documents can be received.
Q. If we have two companies working together to do security do we need to find a backup?
A. Separate security companies are required. However, the separate companies are permitted to coordinate implementation of the security plan.
Q. Is the Sales and Tax permit a sufficient document to establish that an applicant is authorized to conduct business in CT?
A. No. Appropriate documentation showing that the applicant is registered with the Secretary of the State and authorized to conduct business in the state is required.
Q. Does the proposed business plan, including "any ability of the applicant to expand capacity within the approved production facility" mean without changing the footprint of the building? If a proposed site is 57,000 square feet but approved for up to 250,000 square feet, are we entitled to exercise expansion potential if needed?
A. The applicant should include information regarding its ability to expand capacity. Any such future expansion, however, will have to be done in accordance with the regulations.
Q. Is it correct that the 9 copies of the application do not need the tax returns attached if the tax returns are attached to the original application and provided in electronic format?
Q. Do you want information regarding the construction company proposed to do the build out?
A. Only to the extent it is relevant to specific questions in the RFA.
Q. For this application purpose, what is the distinguishing definition of the following terms: "certified financial statements" and "audited financial statements"?
A. The terms are synonymous.
Q. Does the medical marijuana program allow dispensaries to provide tinctures or infused marijuana-based products? Does the law permit the in-state separate manufacture of such products by a company, for sale to dispensaries?
A. Only a licensed producer may produce marijuana-based products, including tinctures and marijuana-infused products.
Q. In the Producer RFA Section E, do the Operating and/or Compensation Agreements as outlined in Section E.1 and E.3 have to be fully executed or may we submit the documents without signatures?
A . Any executed agreements need to be provided with signatures at the time of application submission. Unexecuted copies should be provided if the applicant anticipates that they will be executed if a license is awarded. If a license is awarded, any outstanding agreements need to be executed and complete copies including signatures need to be filed with the department before a license will be issued.
Q. Are the regulations defined in Section 21a-408-62 the only requirements for Security Alarm systems that must be used?
A . All security requirements outlined in the regulations need to be met. If the security alarm works in conjunction with other security features, then other specific sections would also apply.
Q. Once an application is submitted to the State, including all required copies, will the information be made public? Will the application results be made public? Will copies of the application be returned to the applicant? If so, what will the procedure be for this?
A. Once a decision is reached, the Department intends to publicly announce the names of applicants that will be awarded producer and dispensary facility licenses. Additionally, the Department will disclose all or parts of applications to the extent required by the Freedom of Information Act. Please refer to the specific RFA section under the heading “Freedom of Information Act” regarding claims of exemption from disclosure under the Act. Any documents submitted to the state as part of the application will not be returned to the applicant.
Q. Producer applicants are required to provide information regarding all state licenses, permits or registrations ever held, current or expired. Does this include all personal licenses such as a driver’s license and car registration?
A. This section is referring to professional, occupational and business licenses held by the applicant(s).
Q. In the Section regarding “Other Relevant Business Experience,” producer applicants are asked whether such business “was ever alleged to have violated the laws or regulations of the state or country in which it operates...” How in-depth does the state want the applicant to be on this question? For example, does this include motor vehicle violations and tickets?
A. The applicant needs to submit information concerning allegations that such business violated laws or regulations related to the operation of the business; minor traffic violations may be excluded.
Q. If you own a security company, can you both own and secure your producer company?
A. No. The security company designated as the security provider for a production facility must be independent of anyone with a significant stake in the ownership of the production facility.
Q. Is it necessary for a production facility to be located in a county where dispensary facility zoning has been approved?
Q. If there is no affiliation with a dispensary then Section E on the Producer application is left blank, will there be points taken away from the applicant in the scoring process for this, and or will there be points added if there is an affiliation?
A. An applicant will be neither penalized nor advantaged merely due to whether there is an association with a dispensary facility.
Q. Are there any restrictions to out-of-state individuals or corporations from applying? If not, is there going to be any consideration/preference to local CT businesses/owners?
A. There are no restrictions on out-of-state applicants so long as such applicants are authorized to do business in the State of Connecticut. All applicants, however, must have a local presence because the production or dispensary facility must be located in Connecticut. All evaluation criteria are set out in the RFA. Points will only be awarded based on how well an application meets either the mandatory or the bonus point elements of the RFA. An applicant may present whatever material it believes meets the RFA criteria.
Q. Are there any rules or regulations in regards to special consideration from the state to minority applicants/businesses?
A. All evaluation criteria are set out in the RFA. Points will only be awarded based on how well an application meets either the mandatory or the bonus point elements of the RFA. An applicant may present whatever material it believes meets the RFA criteria.
Q. We have a follow-up question regarding the newly posted bonding forms. We are finding some Surety companies unwilling to accept this language without a right to cure and or a cancellation clause. Will this language be added to the posted bond forms?
A. The posted bond forms are the preferred bond forms as stated in the RFA Questions and Answers. There is no plan to change the forms. Producer facility applicants can choose to use the preferred bond forms or submit a form provided by their Surety Company so long as it meets the Producer RFA requirements and the substantive terms of the preferred bond forms.
Q. If a producer license application is not accepted will the $25,000 application fee be returned?
A. No. The application fee is nonrefundable.
Q. Should the responses to the questions in each of the Producer License/Dispensary License Applications be double spaced?
A. This is left to the discretion of the applicant.
Q. This question refers to the department’s determination of "good" character for an applicant. Would an applicant who has an experienced grower be disqualified, if the grower has publicly admitted in interviews to funding their current legal grows with funds from illegal grows in the states where medical marijuana is not legal?
A. Engaging in any unlawful drug activity outside a state-regulated system or obtaining financing from illegal sources will weigh negatively in determining the character and fitness of an applicant.
Q. If 6 producer facility applications were submitted to your office and only 3 producer facility licenses were awarded, what happens to the other three? Will you start a wait list of approved potential producers? Or will you throw the list away and require applicants to pay an additional fee in order to reapply, in the event the number of producer facilities increases from 3 to 6?
A. Applications submitted pursuant to this Request for Applications would need to be resubmitted in response to a subsequent Request for Applications and a new application fee would be required. However, if a license issued pursuant to this Request for Applications is rescinded pursuant to section 21a-408-20 (h) of the regulations, a license will be awarded without the submission of a new application fee to another qualified applicant that applied for a license pursuant to this Request for Applications.
Q. Does the Department have a preference for submitting voluminous copies of tax returns for Producer backers?
A. At least one paper copy of all backer tax returns needs to accompany the original submission. Additionally, the applicant must submit copies of such tax returns electronically on a CD in a searchable PDF format.
Q. Section D, Proposed Marketing Plan: Provide a copy of proposed marketing plan and include any web templates and educational materials such as brochures, posters or promotional items. Who is the producer marketing their product to? Will the marketing be towards the dispensaries and doctors?
A. The Department is interested in any marketing plans, regardless of the targeted audience.
Q. How many patients have been certified to use medical marijuana?
A. General patient information is now posted on the Medical Marijuana Statistics webpage .
Q. What specifically is required to be stored in the Production facility's safe?
A. Marijuana products.
Q. What is the current number of submitted applications for producers?
A. The Department will post the number of applications received after the submission deadline.
Q. Section 21a-408-53 of the regulations requires ”pocketless” clothing for all production facility employees working in an area containing marijuana…” Does the regulation require pocketless clothing for all security personnel?
A. Yes, if they are working in an area of the production facility that contains marijuana.
Q. Does the Department have a preferred security bond form?
A. The Department has posted preferred bond term forms on the Medical Marijuana Producer License Page. There are two forms posted on the RFA Producer License webpage. The first is for the Construction of a Production Facility and the second is for the Operation of a Production Facility. In responding to the RFA, an applicant that intends to use a security bond must provide documents sufficient to evidence an ability to establish a surety bond agreement that contains the substantive terms in both of the preferred forms.
Q. Can DCP provide a projection on the number of medical marijuana patients the state expects over time?
A. DCP does not provide estimates. The Department anticipates that the number of patients certified by physicians will rise as production and dispensary facilities become available. Beyond that, the Department has no estimates for future numbers of certified patients.
Q. How many producer license applications has the state received?
A. As of October 10, 2013, the Department has not received any producer RFA responses.
Q. What areas are currently designated/zoned for producer/dispensary facility within the state of CT?
A. Each town sets its own zoning requirements and the department is not provided with such information.
Q. If a producer/dispensary facility license is granted, what is the duration of time that the license is valid and what is the renewal fee?
A. Each license must be renewed annually. The fees for all license applications and renewals are set forth in section 21a-408-28 of the regulations.
Q. Must we own property at the time of application submission in order to be considered for a producer/dispensary facility license or can we be in the process of acquiring property to build the facility?
A. It is not necessary to own the property at the time of applying for a producer license or dispensary facility license. You must, however, provide documents evidencing a right to occupy the proposed location in the event a license is awarded. If your acquisition or lease agreement, for example, is subject to certain conditions before the transaction will be complete, you should provide documentation sufficient to demonstrate that, upon receiving a license, all conditions precedent to the closing will be satisfied.
Q. How would the “$750,000 fee” for the producer license be paid? Does it have to be paid in one lump sum or can it be paid over a course of time?
A. The $75,000 (not $750,000) fee for a producer license would only be payable upon your selection as a producer. Licensing fees need to be paid in full at that time.
Q. Has there been any change in the Commissioner’s determination of the definition for a “one-month supply”?
A. The department has no immediate plans to increase or decrease the determination that 2.5 ounces is an appropriate one-month supply.
Q. If a producer operates an "in-house" lab on their premises, will the state have any quality assurance measures in place to assure labeling of the products are accurate and not "misbranded"?
A. Although a producer may have an in-house laboratory on its premises for its own internal testing, all labeling must be based on laboratory testing conducted by a laboratory that, among other things, is: (i) located in Connecticut; (ii) licensed or registered by the department to provide analysis of controlled substances pursuant to section 21a-246 of the Connecticut General Statutes; and (iii) independent from all other persons involved in the marijuana industry in Connecticut. For a more detailed description of the laboratory requirements, please review sections 21a-408-57 and 58 of the regulations and the definition of laboratory set forth in section 21a-408-1.
Q. Section 21a-408-61 of the regulations states that a producer must “store all marijuana products in an approved safe or approved vault and in such a manner as to prevent diversion, theft or loss.” Does the DCP currently have a list of approved safes and/or vaults that they can provide?
A. The requirements for an approved vault and approved safe are set forth in section 21a-262-1 of the Regulations of Connecticut State Agencies, which can be found on DCP’s website on the “Laws & Regulations” page under Drug and Pharmacy. The standards set forth in these regulations apply to all pharmacies in the State.
The Department does not maintain a list of all companies offering an approved safe or vault, but any safe or vault meeting the requirements in the pharmacy regulations is acceptable for a dispensary facility as well.
Q. Section 21a-408-62 states that a producer must have a “back-up alarm system approved by the commissioner.” Does the commissioner have a list of approved alarm systems that we could review?
A. The department does not have a list of approved alarm systems. As set forth in the regulations, the company used by the producer for its back-up alarm system should be one that is in the business of supplying commercial grade equipment. Applications will be judged on a competitive basis with regard to how well the entirety of an application meets the full range of the evaluation criteria.
Q. It looks like the regulations do not prohibit a producer and dispensary facility from being affiliated. Won't a dispensary facility not affiliated with a producer be at a competitive disadvantage since the producer may provide preferential pricing to the affiliated dispensary facility?
A. The regulations do not prohibit a producer and dispensary facility from being affiliated. The regulations, however, do prohibit a producer from unfairly favoring one dispensary facility over another (see, for example, sections 21a-262-52(5) – (7) of the regulations). In addition, the antitrust laws are applicable to this industry and are available to the State or private parties.
Q. My insurance agent tells me that the State of Connecticut usually has a form of terms that the insurance companies follow to write surety bonds. What specific bond form will be accepted?
A. The department has heard from a number of potential producer applicants that insurance companies are requiring a state surety bond form before they will agree to write a surety bond.
The department is working on such a form, which will be posted to the website when it is available.
Q. May a producer license and register two managers for a production facility?
A. The regulations do not require a producer to license or register anyone with the specific title of production facility manager. Dispensary facilities, by comparison, must designate a dispensary facility manager. The producer must identify all high-level employees as part of its RFA response, which may include one or more individuals that are identified as managers.
Q. Sec. 21a–408-59 requires each brand name be associated with specific laboratory tests that include terpene profiles as well as a list of all active ingredients. The terpene and cannabinoid profiles for a cloned strain will vary from one harvest to another and from one lab to another. Does this mean that the “same” strain must be registered after each harvest or will DCP allow for fluctuations?
A. The regulations permit a limited amount of fluctuation within a strain. For details regarding which active ingredients must remain consistent within a brand and for the permitted level of fluctuation, please carefully review section 21a-408-59 of the regulations, particularly subpart (b).
Q. What determines an applicant’s “good” character?
A. An applicant’s good character will primarily be assessed on the basis of the criminal background check of the applicant, and those associated with the applicant, such as its backers, officers, directors and high-level employees in accordance with Section 46a-80(c) of the Connecticut General Statutes.
Q. What is the definition of child resistant?
A. As set forth in section 21a-408-56, a package shall be deemed child-resistant if it satisfies the standard for “special packaging” as set forth in the Poison Prevention Packaging Act of 1970 Regulations, 16 CFR 1700.1(b)(4).
Q. Must marijuana packaging remain child-resistant after being opened and resealed by the patient or caregiver?
A. Yes, the packaging must be resealable in a manner that maintains the child-resistant features.
Q. Section E (#5) asks for audited financial statements. Our LLC was formed within this past year. Up to what date do the certified financial statements need to include? (Ex. September 30, 2013 or October 31, 2013?)
A. The certified financial statements should include information up to the last full month before the application was submitted.
Q. In a previous FAQ, it was stated that DCP would allow a dispensary facility (with no producer affiliation) to lease space for its operation in a building that is owned or leased by a producer as long as the security and other requirements of the regulations and the RFA are met with regard to each location. Would DCP allow a dispensary facility to lease space from a producer, which is a separate LLC and separate entity yet shares members in common, thus has some level of affiliation? The dispensary and production sites would be on the same property but separate structures with no shared entrance or exits.
A. The regulations do not prohibit overlapping ownership interests between a dispensary facility and producer. A dispensary facility with common ownership with a producer may lease space under the same conditions as a non-affiliated dispensary facility. Any financial arrangements between an affiliated producer and dispensary facility, however, cannot circumvent the requirements of the regulations, particularly Section 21a-408-52, that prohibit a producer from discriminating in their dealings with dispensary facilities.
Q. May the producer operate as a non-profit corporation?
Q. Of the involved parties to the application, from whom are copies of tax returns required? Would this extend to backers and those named as consultants to or employees of the applicant?
A. In accordance with Section E. 7 of the RFA, tax returns must be provided for the applicant, the applicant's backers and members of the backer as set forth in Section B of Appendix B.
Q. Must a corporate applicant be incorporated for the sole purpose of Medical Marijuana or would it be acceptable for a previously existing company to adopt the distribution and production of Medical Marijuana as its sole purpose?
A. The Department's regulations would not require the company to be re-incorporated for the sole purpose of participating in the Medical Marijuana Program. The Department, however, cannot provide advice on any other laws or regulations that may be implicated by the decision to change a company's corporate purpose.
Q. What are the chances for being licensed as a producer? Is there a ratio of applicants?
A. The Department anticipates awarding three producer licenses following this RFA. There is no limit on the number of potential applicants and, therefore, a ratio of successful applicants cannot be determined.
Q. The language in the RFA suggests that a facility need only produce proof that it qualifies for local zoning approval, not that it actually has that approval in hand. What is the actual requirement?
A. In accordance with Section B of the producer RFA, the applicant must provide "documents sufficient to establish that the applicant is authorized to conduct business in Connecticut and that state and local building, fire and zoning requirements and local ordinances are met for the proposed location of the production facility." The exact form of the documentation is left to the discretion of the applicant and the local authority.
Q. What is the current number of submitted applications for producers?
A. As of October 1, 2013, the Department has not received any applications.
Q. What does “back-up security” in the application mean?
A. “Back-up security” refers to the requirements of Section 21a-408-62 (c) of the regulations.
Q. What is the total number of applications DCP plans to hand out for producers?
A. The number of applicants is unlimited. The number of producer licenses anticipated to be awarded as a result of the current RFA is three.
Q. How many applications have been handed out so far for producers?
A. Applications are downloaded from our website. We do not track the number of times the application has been downloaded.
Q. What is the process once applications are submitted?
A. The evaluation and selection process is set out in the Producer RFA on pages 10-13. No timeline has been established for the selection process.
Q. When is the deadline for all applications to be turned in to DCP?
A. As stated in the Producer RFA, the deadline for RFA submissions is November 15, 2013 by 3:00 PM EST.
Q. Is there consideration for veterans and farmers?
A. One of the evaluation criteria is the applicant’s “Agricultural and Production Experience.” See pages 8 and 12 of the Producer RFA. There is no special evaluation criterion for veterans.
Q. For the application, will IRS tax transcripts suffice or are complete copies required?
A. Applicants are required to submit complete copies of their tax return.
Q. My company was formed just a few months back, are certified financial statements necessary? Is there a State form available to be filled out by my CPA for certification?
A. Section E, item 5 of the RFA states: “If the applicant was formed within the year preceding this application, provide certified financial statements for the period of time the applicant has been in existence and any pro forma financials used for business planning purposes.” There is no State-devised form for this purpose.
Q. DCP estimates 190 patients in Hartford County will be eligible for medical marijuana. What is the anticipated number of patients in the second year of the program?
A. DCP does not provide estimates. The number of patients listed by county posted in an answer to a previous question represents the actual number of patients certified by their physicians as eligible to use medical marijuana as of September 16, 2013. Dispensary facilities are not limited to serving patients within the county in which the facility is located. The Department anticipates that the number of patients certified by physicians will rise as the production and distribution facilities are available. Beyond that, the Department has no estimates for future number of certified patients.
Q. I have a question regarding the escrow account/letter of credit listed in the producer RFA under terms and conditions. If we elect to obtain a $2,000,000 letter of credit, does the irrevocable letter have to be in place at the time of application, or do we need a letter from our bank stating that we have the "ability" to obtain an irrevocable letter?
A. In accordance with Section 21a-408-21(b)(ll) of the regulations and Section F of the Producer
License Information Form (Appendix A), at the application stage, the applicant need only submit documentation evidencing an ability to establish and maintain an escrow account, letter of credit or surety bond in the amount of two million dollars ($2,000,000.00), if you are awarded a producer license. Be sure to consult the Terms and Conditions of the RFA for further details on the terms of an acceptable escrow account, letter of credit or surety bond.
Q. How is the State going to protect legal growers from federal prosecution? If the federal government decides to shut down a legal grow facility, what will happen to the $2 million bond?
A. DCP will enforce the medical marijuana regulations that are in place so as to assure that the rigorous requirements of the program are implemented, not just on paper, but in actual practice. Beyond that, DCP cannot influence federal prosecution decisions. Before any bond is payable to the State, the licensee would be given an opportunity to be heard at a hearing at which time the licensee could raise any defense it believes justifies an elimination of the bond obligation.
Q. Will the number of applicants be made public?
A. If requested, the Department will release the current number of submitted applications for each license type. All complete applications submitted prior to the submission deadline will be fully considered. Early applicants will not get different consideration in the selection process.
Q. Is there any provision in the state application evaluation process for participation by either private citizens or municipalities?
A. Application evaluations will be conducted by DCP staff only. Applicants, however, must provide documents sufficient to establish that state and local building, fire and zoning requirements and local ordinances are met for the proposed location of the production facility.
Q. Would the Commission allow a dispensary facility (with no producer affiliation) to lease space for its operation in a building that is owned or leased by a producer?
A. The regulations do not prohibit a dispensary facility from operating in a building that is owned or leased by the production facility, or from being located adjacent to the producer, so long as the security and other requirements of the regulations and the RFA are met with regard to each location.
Q. Is the state going to provide initial seedlings/seeds to the producers? How many different strains is the state going to require each producer to grow?
A. The state will not be providing seeds or seedlings. DCP intends to let physician and patient requirements dictate which strains producers choose to cultivate.
Q. Is the state going to set/regulate pricing on what producers can charge dispensaries, and on what dispensaries can charge patients? If so, what are those values? If not, how is the state going to protect against collusion (e.g. price fixing)?
A. DCP will not be regulating price. The antitrust laws prohibiting collusion are applicable to this industry and are available to the State or private parties.
Q. Are there any safeguards in place at the state level to assure that those granted licenses will have an equal opportunity to succeed?
A. DCP only intends to award licenses to applicants it believes have an opportunity to succeed. Beyond that, the State cannot guarantee business success in this industry any more than in any other line of business. Section 21a-408-52(b)(7) of the regulations provides that a producer shall not: "directly or indirectly discriminate in price between different dispensary facilities that are purchasing a like grade, strain, brand, and quality of marijuana or marijuana product, provided nothing herein shall prevent differentials which only make due allowance for differences in the cost of manufacture, sale or delivery resulting from the differing methods or quantities in which such marijuana or marijuana products are sold or delivered to such dispensary facilities." The industry is also subject to laws governing unfair trade practices and anti-competitive behavior.
Q. What if it is learned that demand for medical marijuana cannot keep up with the production from the licensed producers, and the licensed producers lose money in the venture. Is their $2 million escrow account, letter of credit or surety bond at risk? Would the producers be able to get a refund for the application and license fees?
A. A producer's escrow account, letter of credit or surety bond will only be at risk if it fails to satisfy the conditions set out in Section 21a-408-29 of the regulations. The producer will be afforded a hearing in accordance with the Uniform Administrative Procedures Act prior to any bond becoming payable to the State. The application and license fee are non-refundable.
Q. I was reviewing Section 21a-408-29 of the regulations, and it looks like item (b)(3) & (b)(4) are identical? I assume that item (b)(4) should read "after three consecutive years?"
A. The regulatory requirements are not identical. Section 21a-408-29(b) of the regulations sets out four milestones, which if met, will result in a five hundred thousand dollar ($500,000) reduction in the escrow account, letter of credit or surety bond per milestone, such that after all four milestones are met, the full obligation could be eliminated. Those milestones are as follows: (1) the production facility becomes fully operational and able to commence production as provided for in the producer's license application; (2) the facility remains operational without substantial interruption or a violation of the Act or regulations for a one-year period; (3) the facility remains operational without substantial interruption or a violation of the Act or regulations for an additional two consecutive years (the start of this two-year period would begin after the one-year milestone was met); and (4) the facility remains operational without substantial interruption or a violation of the Act or regulations for a second period of two consecutive years (this second two year period would commence after the prior two-year milestone was met).
Q. I f a producer decides to close its operations prematurely, will that business entity be at risk of losing the $2 million escrow account, letter of credit or surety bond, or the balance on it?
A. Pursuant to Section 21a-408-29(c) of the regulations, "if a producer voluntarily chooses not to renew the producer license and provides notice of this decision in accordance with Section 21a-408-23(f) of the regulations, the commissioner shall extinguish the obligations under the escrow account, letter of credit or surety bond at the end of the license term."
Q. What surety bond form will be acceptable to the state and what would cause a claim?
A. Section 21a-408-29 of the RCSA details the escrow and alternative instrument requirements and the criteria and procedure by which a determination will be made if any or all of the secured funds should be payable to the state. Page 2 of the producer RFA lists the minimum required terms of the escrow arrangement or security instrument.
Q. What are acceptable alternative instruments to the escrow account and what must be presented?
A. Section 21a-408-29 of the RCSA details the escrow and alternative instrument requirements. Section 21a-408-21(a)(11) requires that at the time of the application an applicant must submit proof that, if a license is granted, the escrow or alternative instrument requirement will be met. The RFA on pages 2 and Section F of Appendix A of the Producer License Application set out what needs to be provided as part of the application.