Congratulations! Your money service business (MSB) has gone through the grueling process of building out all business functions, writing and implementing policies and procedures, and acquiring licenses for your covered activities; the hard part is over!
Well, not quite.
While most companies anticipate the heavy lift of standard periodic reporting, many underestimate how cumbersome making a change can be. In some states, making changes is nearly as much work as a new application – and for some changes, your company may actually be required to file a whole new application. Whether it is a new officer, owner, or product, you need to be sure you are following the reporting requirements for your company's proposed change.
1. Assess the change and whether it needs to be reported to the states.
Identify the change and the scope of its impact, and then review requirements in each licensed jurisdiction. Not every change needs to be reported, so do not make things more difficult for yourself by not taking the time to review them. Be thorough - and when in doubt, just reach out.
2. Look at the timelines for notification and/or requesting prior approval from all licensed jurisdictions.
Each jurisdiction has its own requirements, starting with whether a licensee needs to simply notify the regulator of the change or request prior approval. Ensure your company is meeting the requirements not only on the type of communication needed but also the time in which it must be provided to regulators. For example, a licensed money transmitter may have some changes that require notice within 15 days of the change and others that require them to request approval at least 120 days prior to the change's effective date. Keep in mind that some changes, such as a complicated change in ownership, may take even longer than this. In these cases, flexibility is going to be your friend.
3. Look at the submission requirements associated with the change for each state.
There are some general requirements for changes that are congruent across most jurisdictions, but just like the application process itself, many states have additional state-specific requirements, too. States present on the Nationwide Mortgage Licensing System (NMLS) provide amendment checklists that include the minimum requirements you will need to submit for your change. Ensure you know what is needed for each state in which your company is licensed, paying special attention to those requirements that may take more time or resources to complete.
4. Prepare the filing requirements, starting with general requirements needed by multiple states, then work on state-specific requirements.
The best way to begin here is to ensure you begin preparing general requirements as soon as you know a change is coming. You will also want to add the more cumbersome items to the top of the list. If you rely on a vendor, need to gather complex information, or have to prepare detailed documentation, make sure you build in enough time to do all the necessary prep work.
5. There is a time for everything, so plan accordingly.
You do not always have the luxury of delaying a change, but you should still be cognizant of when you are submitting a change request. If you are submitting a change that requires a state's prior approval, keep in mind that factors such as renewals and holidays can affect the change process. If you submit during a time of year when regulators are especially busy – such as during renewals or near the holidays – you may want to plan for the process to take some additional time.
6. Communicate, communicate, communicate!
Of course, this is not exclusive to change reporting, but it is absolutely crucial for a smooth process! Always be sure to keep an open line of communication with your regulators, whether you need clarity on a request, have questions about the state's requirements, or just want to check in on the status as your effective date draws near. As long as you are not calling their cellphones weekly, your regulators will probably be glad that you checked in – and sometimes you will even save them the effort of making another follow-up request.
7. Be pleasant with your regulators and your change team.
Juggling tight deadlines, responding to state requests, and gathering all the requisite documentation needed for a change can be stressful. Oftentimes, the same team handling the change is also still performing their full-time day-to-day duties. The process will go so much smoother if you maintain a positive attitude. You might think this goes without saying, but the fast pace of a tough change can wear down even the most optimistic teammates. Remember that you are on the same side and that your regulators are not your adversaries.
8. Verify all approvals before the change becomes effective.
Once you have given notice and provided all required documentation, you still need to get the requisite approvals. For states that do not have a presence on the NMLS or states that communicate approvals via letter or email, you will want to keep a copy of the approval for your records. I also recommend keeping a PDF copy of the approvals in the Advance Change Notice section of the NMLS.
9. Confirm with your regulators that the change has become effective or if there has been a change of plan.
In line with tip number three, you will want to follow up with your regulators once the change becomes effective. This not only ensures that they are aware the change has been consummated but also gives them the opportunity to start in motion any post-change requirements (e.g., signed documents, change fees, etc.). On the other hand, if you have a change in plan that either delays or altogether cancels the change, communicate that to your regulators.
10. Do not be afraid to phone a friend!
Changes in the money services industry can be tricky and time-consuming, so there is no shame in asking for help. In fact, often it is a major factor in getting the approvals you need in a timely manner. In addition to effective counsel with experience in the industry, you may want to consider bringing in outside help in the form of an independent compliance professional when facing big changes. Having someone on your side who has worked through this process with regulators in the past can smooth out the process significantly.
I hope these tips help you navigate the change process. It can be a daunting task, but with patience, thoroughness, and sometimes a bit of help, you can find success.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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