Current through Register Vol. 48, No. 10, October 25, 2024
Section 62-7 - Bond RequirementA. Before an institution is licensed, a surety bond must be provided by the institution. The obligation of the bond will be that the institution, its officers, agents, and employees will faithfully perform the terms and conditions of contracts for tuition and other instructional fees entered into between the institution and persons enrolling as students. The bond shall be issued by a company authorized to do business in the State. The bond shall be to the Commission, in such form as approved by the Commission, and is to be used for the benefit of students who suffer financial losses of tuition and fees prepaid to an institution. The losses must be as a result of the closing of the institution. The Commission may use the funds to pay refunds of unearned tuition and fees, to pay for or subsidize the cost of providing facilities and instruction for students to complete their programs, or to pay expenses to store and maintain records of these students.B. The bond company may not be relieved of liability on the bond unless it gives the institution and the Commission ninety days notice by certified mail of the company's intent to cancel the bond. If at any time the company that issued the bond cancels or discontinues the coverage, the institution's license is revoked as a matter of law on the effective date of the cancellation or discontinuance of bond coverage unless a replacement bond is obtained and provided to the Commission.C. Before an original license is issued, the institution shall have executed a surety bond in an amount not less than ten percent of the projected annualized gross income of the proposed program(s) to be licensed, in ten thousand dollar increments. However, if the projected annualized gross tuition income of the proposed program(s) is less than five thousand dollars, the initial bond must be in an amount at least equal to the projected income, but in no event will the bond be less than five thousand dollars.D. The minimum amount of bond to be submitted with a renewal application will be based on the annual gross tuition income from licensed programs for the previous year. No additional programs may be offered without appropriate adjustment to the bond amount.(1)Previous year's annual gross tuition income Minimum bond
$ 0 - $100,000 $10,000
$101,000 - $200,000 $20,000
$201,000 - $300,000 $30,000
$301,000 and above 10%, calculated at $100,000
increments
(2) For out-of-state institutions licensed to offer their program(s) to residents of the State, gross tuition income means that income generated from students enrolled in the State. The bond for an out-of-state institution shall not be less than $20,000, unless otherwise specified by the Commission, but in no event shall be less than $10,000.E. Institutions shall provide a statement by a school official and written evidence confirming that the amount of the bond meets the requirements of this regulation. The Commission may require that such statement be verified by an independent certified public accountant if the Commission determines that the written evidence confirming that the amount of the bond is questionable.F. Instead of the surety bond, the institution may pledge other means of collateral acceptable by the State Treasurer, in an aggregate market value of the required bond. The Commission shall deliver a safekeeping receipt of collateral to the State Treasurer to be held until the Commission serves notice for its release to the Commission.Former Regulation 62-7 added by State Register Volume 2, effective April 10, 1978. Amended by State Register Volume 17, Issue No. 7, eff July 23, 1993; State Register Volume 20, Issue No. 2, eff February 23, 1996; State Register Volume 32, Issue No. 6, eff June 27, 2008.