(a)

1. (1) A licensee shall not issue any chips for use in its gaming establishment, or redeem any such chips, unless the chips have been approved in writing by the Arkansas Racing Commission.
2. (2) A licensee shall not issue any chips for use in its gaming establishment, or redeem any such chips, that are modifications of chips previously approved by the commission, unless the modifications have been approved in writing by the commission.

(b)

1. (1) Applications for approval of chips and modifications to previously approved chips must be made, processed, and determined in such manner and using such forms as the commission may prescribe.
2. (2) Only casino licensees, or the manufacturer authorized by these licensees to produce the chips, may apply for such approval.

3. (3) Each application must include, in addition to such other items or information as the commission may require:

   1. (A) An exact drawing, in color or in black-and-white, of each side and the edge of the proposed chip, drawn to actual size or drawn to larger than actual size and in scale, and showing the measurements of the proposed chip in each dimension;
   2. (B) Written specifications for the proposed chips;
   3. (C) The name and address of the manufacturer;
   4. (D) The licensee’s intended use for the proposed chips; and
   5. (E) A verification upon oath or notarized affirmation, executed by the chief operating officer of the chip manufacturer, or a person with equivalent responsibilities, that it has a written system of internal control, approved by the commission, which describes in detail the current administrative, accounting, and security procedures which are utilized in the manufacture, storage, and shipment of the chips and related material.

4. (4) The written system must include at a minimum a detailed, narrative description of the procedures and controls implemented to ensure the integrity and security of the manufacturing process, from design through shipment, including but not limited to those procedures and controls designed specifically to:

   1. (A) Provide for the secure storage or destruction of all preproduction prototypes, samples, production rejects, and other nonsalable product;
   2. (B) Provide security over the finished artwork, hubs, plates, dies, molds, stamps, and other related items which are used in the manufacturing process;
   3. (C) Prevent the unauthorized removal of product from the production facility through the utilization of security devices such as metal detectors and surveillance cameras;
   4. (D) Restrict access to raw materials, work-in-process, and finished goods inventories to authorized personnel;
   5. (E) Establish procedures for documenting approval of production runs;
   6. (F) Establish and maintain a perpetual inventory system which adequately documents the flow of materials through the manufacturing process;
   7. (G)

(i) Establish procedures which reconcile the raw material used to the finished product on a job-by-job basis.

1. (ii) Significant variances are to be documented, investigated by management personnel, and immediately reported to the commission and to the licensee who authorized the manufacturer to produce the chips;

   1. (H)

      1. (i) Provide for quarterly physical inventory counts to be performed by an individual or individuals independent of the manufacturing process which are reconciled to the perpetual inventory records.
      2. (ii) Significant variances are to be documented, investigated by management personnel, and immediately reported to the commission;
   2. (I) Establish a framework of procedures which provide for the security and accountability of products and materials sent to or received from subcontractors or satellite production facilities;
   3. (J) Document controls over the shipment of finished product; and

   4. (K)

      1. (i) Provide such other or additional information as the commission may require.
      2. (ii) The commission may in writing approve variations from the specific requirements of this subpart if in the opinion of the commission the alternative controls and procedures meet the objectives of this subpart.
      3. (c)
2. (1) If, after receiving and reviewing the items and information described by this subpart, the commission is satisfied that the proposed chips and related information conform to the requirements of this subpart, the commission shall notify the licensee or the manufacturer authorized by the licensee to produce the chips in writing and shall request, and the licensee or the manufacturer shall provide, a sample of the proposed chips in final, manufactured form.
3. (2) If the commission is satisfied that the sample conforms with the requirements of this subpart and with the information submitted with the licensee’s application, the commission shall approve the proposed chips and notify the licensee in writing.
4. (3) As a condition of approval of chips issued for use at the licensee’s race book, sports pool, or specific table or counter game, the commission may prohibit the licensee from using the chips other than at the book, pool, or specific game.
5. (4) The commission may retain the sample chips submitted pursuant to this subsection.