1. A. With each application for a new permit and renewal for an existing permit, a permit holder or an applicant shall provide proof of a surety bond with the Office.

2. B. Surety Bond.

   1. (1) The bond shall run to the Office, as obligee, for the benefit of:

      1. (a) The State; and
      2. (b) Any consumer who has been damaged by a violation committed by a permit holder of any law or regulation governing the activities of reduction facilities.

   2. (2) The bond shall be:

      1. (a) In an amount determined by the Office under §C of this regulation; and

      2. (b) Issued by a surety company that:

         1. (i) Is authorized to do business in the State;
         2. (ii) Holds a certificate of authority issued by the Maryland Insurance Commissioner; and
         3. (iii) Conditioned that the licensee shall comply with all Maryland laws regulating the activities of natural organic reduction.

   3. (3) The liability of the surety:

      1. (a) Shall be continuous;
      2. (b) May not be aggregated or cumulative, whether or not the bond is renewed, continued, replaced, or modified;
      3. (c) May not be determined by adding together the penal sum of the bond, or any part of the penal sum of the bond, in existence at any two or more points in time;
      4. (d) Shall be considered to be one continuous obligation, regardless of increases or decreases in the penal sum of the bond;

      5. (e) May not be affected by:

         1. (i) The insolvency or bankruptcy of the permit holder;
         2. (ii) Any misrepresentation, breach of warranty, failure to pay a premium, or any other act or omission of the permit holder or an agent of the permit holder; or
         3. (iii) The suspension of the permit;
      6. (f) May not require an administrative enforcement action by the Office as a prerequisite to liability; and

      7. (g) Shall continue for 3 years after the later of the date on which:

         1. (i) The bond is canceled; or
         2. (ii) The permit holder, for any reason, ceases to be permitted.

   4. (4) A bond may be canceled by the surety or the licensee by giving notice of cancellation to the Office. Notice of cancellation shall:

      1. (a) Be in writing; and
      2. (b) Be sent by certified mail, return receipt requested.
      3. (c) A cancellation of a bond is not effective until 90 days after receipt of a notice of cancellation by the Office.

   5. (5) A claim against the bond may be filed with the surety by:

      1. (a) A claimant; or
      2. (b) The Office for the benefit of a claimant or the State.

   6. (6) If the amount of claims against a bond exceeds the amount of the bond, the surety:

      1. (a) Shall pay the amount of the bond to the Office for pro rata distribution to claimants; and
      2. (b) Is relieved of liability under the bond.
   7. (7) If the penal amount of a bond is reduced by payment of a claim or judgment, the permit holder shall file a new or additional bond with the Office.
   8. (8) A penalty imposed against a permit holder under Business Regulation Article, §5-905, Annotated Code of Maryland may be collected and paid from the proceeds of a bond required under this section.

3. C. Annuity and Surety Bond.

   1. (1) The amount of the surety bond under §B of this regulation shall be in an amount of not less than $10,000 and not more than $20,000, as determined by the Office for each vessel used for natural organic reduction by the permit holder.

   2. (2) In setting the amount of the surety bond, the Office may consider:

      1. (a) The nature and volume of the business or proposed business of the permit holder or applicant;

      2. (b) The financial condition of the permit holder or applicant, including:

         1. (i) The amount, nature, quality, and liquidity of the assets of the permit holder or applicant;
         2. (ii) The amount and nature of the liabilities, including contingent liabilities, of the permit holder or applicant;
         3. (iii) The history of and prospects for the permit holder or applicant to earn and retain income;
         4. (iv) The potential harm to consumers if the applicant or permit holder becomes financially impaired; and
         5. (v) Any other factor that the Office considers relevant.
4. D. Subject to approval by the Office, an applicant for a permit who files an application for a new permit or renewal of a permit may satisfy the bonding requirement under this section by establishing a trust account with or obtaining an irrevocable letter of credit from a financial institution insured by the Federal Deposit Insurance Corporation in an amount equal to the bond required under this section.

5. E. If a permit holder is subject to a receivership proceeding, the Office or a court-appointed receiver without regard to any priorities, preferences, or adverse claims, may:

   1. (1) Reduce the bond or the deposit in lieu of a bond to cash; and
   2. (2) Use the cash to defray the costs associated with the receivership.

Authority: Business Regulation Article, §5-204, Annotated Code of Maryland

Effective date: March 30, 2026 (53:6 Md. R. 287)