Gaming promoters in Macau: current regulation and perspectives of reform Jorge Godinho Visiting Professor, University of Macau (jgodinho@umac.mo) (jg.macau@gmail.com) A presentation to the International Association of Gaming Regulators 2015 Conference, Lima, Peru, 14 October 2015, jointly located with the International Masters of Gaming Law 2015 Autumn conference 1
Legislative history - summary 1976 to 2001 no regulation 2001 - Law 16/2001 recognized gaming promoters (GPs) 2002 - Administrative Regulation 6/2002 regulated GPs in detail 2004 - Law 5/2004 allowed GPs to grant credit 2009 cap on commissions paid to GPs 2015 September: major reforms announced 2 Annual since 2005 - List of currently authorized gaming promoters published in the Official Bulletin
General points 3 Gaming promoters are in many places essentially marketing agents (networks of agents) that try to sell the gaming product of a gaming sub/concessionaire, against the payment of a commission But
More than just agents.. 4 In Macau they may be more than just agents, and also: grant credit collect unpaid credit help with money transfers/arrangements Sometimes share in the revenue of gaming tables or rooms in casinos (VIP rooms) All this in relation to the VIP market..
VIP market 5 Gaming promoters are very important for the baccarat VIP market brings in the majority of gaming revenue the scale of the Macau Baccarat VIP market is huge since the 1970s, dwarfs all other games Main functions: GPs help to transfer the money out of China and into the casinos: they move the money, issue credit and collect. They take the risk: junkets know who their customers are, based on a personal relation
Regulation basics 6 Administrative Regulation 6/2002, of 1 April 2002 (as amended in 2009) regulates namely the following key points: licensing process Not just a registration Suitability requirements Maximum commission rates (since 2009)
Legal definition of gaming promoters (unchanged since 2002) 7 agents for the promotion of casino games of chance who exercise their activity by granting facilities to players, particularly regarding transport, accommodation, food and entertainment, receiving a commission or other remuneration paid by a concessionaire
Legal definition vs business models 8 The legal definition of 2002 is essentially that of a travel agent specialized in organizing gambling trips (gaming tourism), assists with comps and receives a commission There may be junkets who only do this ( minijunkets ) and do not grant credit; but
Credit for gaming and 9 GP s The Legal definition of article 2 of Administrative Regulation 6/2002 did not mention the role of gaming promoters in granting credit for gaming Credit for gaming was regulated in 2004: the law says from 2004 that gaming promoters can grant credit Today, the two laws (gaming promoters and credit) should be seen together
Market structure envisaged: open market with competition between concessionaires for gaming promoters Each gaming promoter must register at least with one concessionaire, but gaming promoters are free to work with more than one concessionaire if they wish to Gaming promoters may move from one concessionaire to another 10
GGR games of chance 2002-2014 11 400 000 350 000 300 000 250 000 200 000 150 000 100 000 50 000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
The biggest expansion of gaming in world history? 12 Gross gaming revenue Casinos Table games Slot machines (10 3 MOP) (no.) (no.) (no.) 2002 22 842 627 11 339 808 2003 29 475 855 11 424 814 2004 42 305 640 15 1 092 2 254 2005 46 046 926 17 1 388 3 421 2006 56 623 468 24 2 762 6 546 2007 83 022 245 28 4 375 13 267 2008 108 772 000 31 4 017 11 856 2009 119 369 000 33 4 770 14 363 2010 188 343 000 33 4 791 14 050 2011 267 867 000 34 5 302 16 056 2012 304 139 000 35 5 485 16 585 2013 360 749 000 35 5 750 13 106 2014 351 521 000 35 5 711 13 018
Licensing of gaming 13 promoters The procedure for granting gaming promoter licenses has been regulated in 2002 Many gaming promoters have been licensed Annual list is published Last count (Jan 2015): 183 promoters
Licensing of gaming 14 promoters done by means of administrative licenses Not by means of concessions The process is ongoing; anyone can apply at anytime: there are no application periods
Business forms allowed 15 Gaming promoters may be: Individuals private companies single shareholder private companies public companies
Gaming promoter 16 companies If the GP is a company, all shareholders must be individuals In addition, if the GP is a public company: all shares must be nominative in 2015 bearer shares were banned by an amendment to the Commercial Code
Market evolution 17 Large gaming promoters listed in the HK stock market This structure worked well: commissions paid to gaming promoters kept rising But commissions apparently rose too much
Amendments of 2009 18 Legislation was passed to control the war on commissions that was taking place Announced in 2008, the laws were passed in 2009 As a result, it is illegal for the concessionaires to pay commissions which exceed the amount set by law
The cap was set at 1,25% of net rolling 19 comissions or any other forms of remuneration of gaming promotion activity cannot exceed a limit corresponding to 1,25% of the total amount bet (net rolling), regardless of the respective basis of calculation
Basis of calculation of the 20 cap The law stresses that the cap of 1,25% of the total amount bet (net rolling) shall apply regardless of the respective basis of calculation There are two main methods of remuneration being applied Fixed commission on the basis of net rolling win/loss split of the operation of the VIP room or table
Subsequent evolution 21 From 2009 to 2013 the market grew considerably and peaked in 2013 But apparently some gaming promoters started accepting deposits of funds, paying 1% interest breach of banking laws, with criminal law potential implications
Shrinking VIP market and 22 the Dore scandal After peaking in 2013, since 2014 the GGR of the VIP sector has been slowing, due to a conjunction of factors including more AML controls from China In mid-2015 a scandal broke out after funds were taken from one of the large junkets (Dore)
Reforms in the pipeline 23 In September 2015, immediately after the Dore scandal, the regulator DICJ announced legal reforms of the regulation on gaming promoters The reform shall focus on points relating directly to the Dore case; but not only, and goes further
Reforms in the pipeline 24 Reform points mentioned by DICJ: new requirements relating to capital and shares, guarantee deposit, accounting and auditing increase of public disclosure and transparency, namely a list of directors, shareholders, key employees and employees To consider employees of gaming promoters who exercise functions of a financial nature as key employees
new requirements 25 capital and shares Currently standard company law rules apply to capital guarantee deposit This sounds like a system like that in force for travel agents: require a cash payment or a bank guarantee on first demand. This accommodates emergencies. What will be the amount? accounting and auditing
Reforms in the pipeline 26 This may amount to a major expansion of the regulation Overall, this increase in the regulation is justified and probably should have been done a few years ago already Gaming promoters are necessary and will continue to be for the foreseeable future, so the way forward is to improve and expand the regulation. This goes together with stricter enforcement of the AML laws, a point that DICJ also stresses.
Reforms in the pipeline 27 The legislative process should unfold in 2016 Some further questions I would like raise: Done by means of Law of the Legislative Assembly or via Administrative Regulation of the Chief Executive? Revise the definition of gaming promoter? Have different categories of gaming promoters ( big vs small ) or just a one-size-fits-all solution? Are they basically all the same? How are gaming promoters complying with the AML legislation? Are adaptations needed?
Gaming promoters in Macau: current regulation and perspectives of reform Jorge Godinho Visiting Professor, University of Macau (jgodinho@umac.mo) (jg.macau@gmail.com) 28 A presentation to the International Association of Gaming Regulators 2015 Conference, Lima, Peru, 14 October 2015, jointly located with the International Masters of Gaming Law 2015 Autumn conference