INFORMATION BULLETIN No. 080
Under certain circumstances, lottery licensees may be required by the licensing authority to provide a letter of credit as a guarantee that the prizes approved by the licence will be awarded as offered.
As of February 10, 2017, the Lottery Licensing Policy Manual (LLPM) is updated to emphasize that when lottery licensees are required to provide a financial guarantee, they must do so in the form of an irrevocable standby letter of credit and not any other form of purported financial guarantee.
To that end, in addition to the existing requirements, the revised policy specifies that the letter of credit:
- must be an “irrevocable standby” letter of credit;
- must be made payable on presentation of the original letter of credit at the issuing financial institution;
- must be made payable independent of any occurrence of default on any obligation by the licensee;
- must permit partial draws (that is, can be cashed in part);
- upon presentation must not require the Minister of Finance or municipal licensing authority to provide a statement that amounts paid will be retained or used in connection with any obligation or pursuant to any agreement between the licensing authority and the licensee;
- may be set up and paid for by a third party to secure the licensee’s obligations.
The clarification of the letter of credit policy also states that a “letter of guarantee” is not an acceptable financial guarantee for these purposes.
A letter of credit for a municipal licence must be made payable to the municipality (licensees should ask the municipality for the specific payee) and a letter of credit for a licence issued by the Registrar must be made payable to the Minister of Finance.
Revisions to the Lottery Licensing Policy Manual
The policy revisions described above are now included in the Lottery Licensing Policy Manual, sections 3.6.7 and 3.6.8.