BILL NUMBER: AB 1048 CHAPTERED
BILL TEXT
CHAPTER 264
FILED WITH SECRETARY OF STATE SEPTEMBER 10, 2001
APPROVED BY GOVERNOR SEPTEMBER 8, 2001
PASSED THE ASSEMBLY AUGUST 23, 2001
PASSED THE SENATE JULY 21, 2001
AMENDED IN SENATE JUNE 11, 2001
AMENDED IN ASSEMBLY MARCH 29, 2001
INTRODUCED BY Assembly Member Frommer
FEBRUARY 23, 2001
An act to amend Sections 25247, 25607, 25608, 25608.2, and 25612.5
of, to repeal and add Section 25604 of, and to repeal Section 25205
of, the Corporations Code, relating to securities.
LEGISLATIVE COUNSEL'S DIGEST
AB 1048, Frommer. Securities.
The Corporate Securities Law of 1968 provides for the licensing of
agents and broker-dealers and the registration of investment
advisers and investment adviser representatives by the Department of
Corporations, subject to certain exceptions. Existing law requires
these persons to pay certain fees and assessments to the department.
This bill would delete a provision that exempts from certification
requirements a licensed broker-dealer who acts as an investment
adviser. The bill would require the Commissioner of Corporations to
make certain information concerning investment advisers that is in
the possession of the commissioner available to the public on
request. The bill would revise various fee provisions and would make
other related changes.
Existing law prohibits a state or local public agency from asking
or requiring an applicant for a license, certificate, or registration
to reveal a record of arrest that did not result in a conviction or
plea of nolo contendere.
This bill would provide that this prohibition is not applicable to
the department relative to persons regulated by the department when
using a national, uniform application that is required by the
Securities and Exchange Commission and other entities for
participation in certain national registration depositories. The
bill would authorize the department to participate in those
depositories.
Existing law prohibits the Commissioner of Corporations and his or
her assistants, clerks, or deputies from having certain interests in
entities regulated by the department. Existing law authorizes the
holding or purchasing of securities by these public officials under
certain conditions.
This bill would revise the provisions governing the holding or
purchasing of securities by the commissioner, as specified.
Existing law requires that the Department of Corporations'
administration be supported from the State Corporations Fund.
This bill would instead require that the administration and
enforcement of, and the education of the public relative to, the laws
and programs of the department be supported from the fund.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 25205 of the Corporations Code is repealed.
SEC. 2. Section 25247 of the Corporations Code is amended to read:
25247. (a) Upon written or oral request, the commissioner shall
make available to any person the information specified in Section
6254.12 of the Government Code with respect to any broker-dealer or
agent licensed or regulated under this part. The commissioner shall
also make available the current license status and the year of
issuance of the license of a broker-dealer. Any information
disclosed pursuant to this subdivision shall constitute a public
record. Notwithstanding any other provisions of law, the
commissioner may disclose either orally or in writing that
information pursuant to this subdivision. There shall be no
liability on the part of and no cause of action of any nature shall
arise against the State of California, the Department of
Corporations, the Commissioner of Corporations, or any officer,
agent, or employee of the state or of the Department of Corporations
for the release of any false or unauthorized information, unless the
release of that information was done with knowledge and malice.
(b) Any broker-dealer or agent licensed or regulated under this
part shall upon request deliver a written notice to any client when a
new account is opened stating that information about the licensure
status or disciplinary record of a broker-dealer or an agent may be
obtained from the Department of Corporations, or from any other
source that provides substantially similar information.
(c) The notice provided under subdivision (b) shall contain the
office location or telephone number where the information may be
obtained.
(d) A broker-dealer or agent shall be exempt from providing the
notice required under subdivision (b) if a person who does not have a
financial relationship with the broker-dealer or agent, requests
only general operational information such as the nature of the
broker-dealer's or agent's business, office location, hours of
operation, basic services, and fees, but does not solicit advice
regarding investments or other services offered.
(e) Upon written or oral request, the commissioner shall make
available to any person the information filed with the Investment
Adviser Registration Depository with respect to any investment
adviser, investment adviser representative, or associated person of
an investment adviser licensed or regulated under this part. The
commissioner shall also make available the current license status and
the year of issuance of the license of an investment adviser. Any
information disclosed pursuant to this subdivision shall constitute a
public record. Notwithstanding any other provision of law, the
commissioner may disclose that information either orally or in
writing pursuant to this subdivision. There shall be no liability on
the part of and no cause of action of any nature shall arise against
the State of California, the Department of Corporations, the
Commissioner of Corporations, or any officer, agent, or employee of
the state or of the Department of Corporations for the release of any
false or unauthorized information, unless the release of that
information was done with knowledge and malice.
(f) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Corporations when using a national,
uniform application adopted or approved for use by the Securities and
Exchange Commission, the North American Securities Administrators
Association, or the National Association of Securities Dealers
Regulation, Inc. that is required for participation in the Central
Registration Depository or the Investment Adviser Registration
Depository.
SEC. 3. Section 25604 of the Corporations Code is repealed.
SEC. 4. Section 25604 is added to the Corporations Code, to read:
25604. The administration and enforcement of, and the education
of the public relative to, the laws and programs of the Department of
Corporations shall be supported from the State Corporations Fund.
SEC. 5. Section 25607 of the Corporations Code is amended to read:
25607. (a) Neither the commissioner nor any of the commissioner's
assistants, clerks or deputies shall be interested as a director,
officer, shareholder, member (other than a member of an organization
formed for religious purposes), partner, agent, or employee of any
person who, during the period of the official's or employee's
association with the Department of Corporations, (1) was licensed or
applied for license as a broker-dealer or investment adviser under
this division, or (2) applied for or secured the qualification of the
sale of securities under this division.
(b) Nothing contained in subdivision (a) of this section shall
prohibit the holding or purchasing of any securities by any
assistant, clerk, or deputy in accordance with such rules as the
commissioner shall adopt for the purpose of protecting the public
interest and avoiding conflicts of interest.
(c) Nothing contained in subdivision (a) shall prohibit the
holding or purchasing of any securities by the commissioner if any of
the following criteria is met:
(1) The securities held or purchased by the commissioner are
exempt from the qualification requirements of Sections 25110, 25120,
and 25130 by virtue of Section 25100, provided that the holding or
purchasing of those securities is in accordance with rules adopted
for the purpose of protecting the public interest and avoiding
conflicts of interest.
(2) The securities held or purchased by the commissioner are not
subject to Sections 25110, 25120, and 25130 by virtue of Section
25100.1, provided that the holding or purchasing of those securities
is in accordance with rules adopted for the purpose of protecting the
public interest and avoiding conflicts of interest.
(3) The holding or purchasing of any securities by the
commissioner meets each of the following requirements:
(A) The securities are held or purchased through a management
account or trust administered by a bank or trust company authorized
to do business in this state, and the bank or trust company has sole
investment discretion regarding the holding, purchase, and sale of
securities.
(B) The commissioner did not, directly or indirectly, advise,
counsel, command, or suggest the holding, purchase, or sale of any
such security or furnish any information relating to such security to
the bank or trust company.
(C) The account or trust does not at any time have more than 10
percent of its total assets invested in the securities of any one
issuer or hold more than 5 percent of the outstanding shares or units
of any class of securities of any one issuer.
(D) The commissioner shall report to the Attorney General not less
often than quarterly all holdings, purchases, and sales of
securities by him or her as authorized in paragraph (3), which
reports shall be retained by the Attorney General as public
documents.
SEC. 6. Section 25608 of the Corporations Code is amended to read:
25608. (a) The commissioner shall charge and collect the fees
fixed in this section and Section 25608.1. All fees charged and
collected under this section and Section 25608.1 shall be transmitted
to the Treasurer at least weekly, accompanied by a detailed
statement thereof and shall be credited to the State Corporations
Fund.
(b) The fee for filing an application for a negotiating permit
under subdivision (c) of Section 25102 is fifty dollars ($50).
(c) The fee for filing a notice pursuant to paragraph (5) of
subdivision (h) of Section 25102 and the fee for filing a notice
pursuant to paragraph (4) of subdivision (f) of Section 25102, in
addition to the fee prescribed in those paragraphs, if applicable,
shall be determined based on the value of the securities proposed to
be sold in the transaction for which the notice is filed and in
accordance with subdivision (g), and shall be as follows:
Value of Securities
Proposed to be Sold Filing Fee
$25,000 or less $ 25
$25,001 to $100,000 $ 35
$100,001 to $500,000 $ 50
$500,001 to $1,000,000 $150
Over $1,000,000 $300
(d) The fee for filing an application for designation of an issuer
pursuant to subdivision (k) of Section 25100 is fifty dollars ($50).
(e) The fee for filing an application for qualification of the
sale of securities by notification under Section 25112 or by permit
under paragraph (1) of subdivision (b) of Section 25113 (except
applications for qualification by permit of the sale of any guarantee
of any security, the fees for which applications are fixed in
subdivision (k)) is two hundred dollars ($200) plus one-fifth of 1
percent of the aggregate value of the securities sought to be sold in
this state up to a maximum aggregate fee of two thousand five
hundred dollars ($2,500).
The fee for filing a small company application for qualification
of the sale of securities by permit under paragraph (2) of
subdivision (b) of Section 25113 is two thousand five hundred dollars
($2,500). In the case where the costs of processing a small company
application exceed the filing fee, an additional fee shall be
charged, not to exceed one thousand dollars ($1,000), over and above
the filing fee based on the costs of the salary or other compensation
paid to persons processing the application plus overhead costs
reasonably incurred in the performance of the work. In determining
the costs, the commissioner may use the estimated average hourly cost
for all persons processing applications for the fiscal year.
(f) The fee for filing an application for qualification of the
sale of securities by coordination under Section 25111 or a notice of
intention to sell under subdivision (t) of Section 25100 is two
hundred dollars ($200) plus one-fifth of 1 percent of the aggregate
value of the securities sought to be sold in this state up to a
maximum aggregate fee of two thousand five hundred dollars ($2,500).
(g) For the purpose of determining the fees fixed in subdivisions
(e) and (f):
(1) The value of the securities shall be the price at which the
company proposes to sell the securities, or the value, as alleged in
the application, or the actual value, as determined by the
commissioner, of the consideration (if other than money) to be
received in exchange therefor, or of the securities when sold,
whichever is greater.
(2) Interim or voting trust certificates shall have a value equal
to the aggregate value of the securities to be represented by the
interim or voting trust certificates.
(3) The value of a warrant or right to purchase or subscribe to
another security of the same or another issuer shall be an amount
equal to the consideration to be paid for that warrant or right plus
an amount equal to the consideration to be paid upon purchase of the
additional securities, provided that if the latter amount is not
determinable at the time of qualification, that amount shall then be
the value of the additional securities as determined by the
commissioner.
(4) In the case of a share dividend where the shareholders are
given an option to accept either cash or additional shares of common
stock, the value of the securities to be sold shall be the maximum
amount of cash that would be payable in the event that all
shareholders elected to accept cash.
(h) The fee for filing an application for qualification of the
sale of securities by permit under Section 25121 is:
(1) Two hundred dollars ($200) in connection with any change
(including any stock split or reverse stock split or stock dividend,
except a stock dividend where the shareholders are given an option to
accept either cash or additional shares of common stock) in the
rights, preferences, privileges, or restrictions of or on outstanding
securities.
(2) Two hundred dollars ($200) plus one-fifth of 1 percent of the
value, as alleged in the application, or the actual value, as
determined by the commissioner, of the consideration to be received
in exchange therefor, up to a maximum aggregate fee of two thousand
five hundred dollars ($2,500), in any exchange of securities by the
issuer with its existing security holders exclusively, or in any
exchange in connection with any merger or consolidation or purchase
of corporate assets in consideration of the issuance of securities.
(i) The fee for filing an application for qualification of the
sale of securities by notification under Section 25131 shall be one
hundred dollars ($100).
(j) The fee for an application for the removal of any condition
under Section 25141 is fifty dollars ($50).
(k) The fee for filing any application for a permit to execute or
issue any guarantee of any security is fifty dollars ($50).
(l) The fee for acting as escrowholder for securities under
Section 25149 is fifty dollars ($50). In addition, a fee of two
dollars and fifty cents ($2.50) shall be paid for the deposit with
the commissioner of each new certificate or other document resulting
from a transfer in escrow.
(m) The fee for filing an application for an order (1) consenting
to the transfer in escrow of securities or (2) consenting to the
transfer of securities subject to any condition imposed by the
commissioner requiring the commissioner's consent to the transfer is
twenty dollars ($20) for each transfer.
(n) The filing fee for an amendment to an application filed after
the effective date of the qualification of the sale of securities is
fifty dollars ($50) plus any additional fee that would have been
required to be paid with the original application for qualification
of the sale of securities under this section if the matters set forth
in the amendment had been included in the original application.
(o) (1) The fee for filing an application for a broker-dealer
certificate under Section 25211 is three hundred dollars ($300).
(2) Each broker-dealer shall pay to the commissioner its pro rata
share of all costs and expenses, reasonably incurred in the
administration of the broker-dealer program under this division, as
estimated by the commissioner for the ensuing year and any deficit
actually incurred or anticipated in the administration of the program
in the year in which the assessment is made. The pro rata share
shall be the proportion that the broker-dealer and the number of its
agents in this state bears to the aggregate number of broker-dealers
and agents in this state as shown by records maintained by or on
behalf of the commissioner. The pro rata share may include the costs
of any examinations, audit, or investigation provided for in
subdivision (r).
(3) Every broker-dealer who has secured from the commissioner a
certificate shall, in order to keep the certificate in effect for an
additional period, pay a minimum assessment of seventy-five dollars
($75) on or before the 31st of December in each year.
(4) The commissioner may assess and levy against each
broker-dealer any additional amount above the minimum assessment
amount of seventy-five dollars ($75) that is reasonable and necessary
to support the broker-dealer program under this division. If an
additional amount is assessed, the commissioner shall notify each
broker-dealer by mail of any additional amount assessed and levied
against it on or before the 30th day of May in each year, and that
amount shall be paid within 20 days thereafter. If payment is not
made within 20 days, the commissioner shall assess and collect a
penalty in addition to the assessment of 1 percent of the assessment
for each month or part of a month that the payment is delayed or
withheld.
(5) If a broker-dealer fails to pay any assessment on or before
the 30th day of the month following the day upon which payment is
due, the commissioner may by order summarily suspend or revoke the
certificate issued to the broker-dealer. If, after that order is
made, a request for hearing is filed in writing and a hearing is not
held within 60 days thereafter, the order is deemed rescinded as of
its effective date. During any period when its certificate is
revoked or suspended, a broker-dealer shall not conduct business
pursuant to this division except as may be permitted by order of the
commissioner; provided, however, that the revocation, suspension, or
surrender of a certificate shall not affect the powers of the
commissioner as provided under this division.
(6) In determining the amount assessed, the commissioner shall
consider all appropriations from the State Corporations Fund for the
support of the broker-dealer program under this division and all
reimbursements applicable to the administration of the broker-dealer
program under this division.
(p) The commissioner shall charge a fee of twenty-five dollars
($25) for the filing of a notice or report required by rule adopted
pursuant to subdivision (b) of Section 25210 or subdivision (b) of
Section 25230.
(q) (1) Except as provided for in paragraph (2), the fee for
filing an application for an investment adviser under Section 25231
is one hundred twenty-five dollars ($125), and payment of this amount
shall keep the certificate, if granted, in effect during the
calendar year during which it is granted. Every investment adviser
who has secured from the commissioner a certificate shall, in order
to keep the certificate in effect for an additional period, pay a
renewal fee of one hundred twenty-five dollars ($125) on or before
the 31st day of December.
(2) Paragraph (1) shall not apply to a broker-dealer licensed
under Section 25210.
(r) (1) Except as provided for in paragraph (2), the fee for any
routine or nonroutine regulatory examination, audit, or investigation
is the amount of the salary or other compensation paid to the
persons making the examination, audit, or investigation plus the
amount of expenses including overhead reasonably incurred in the
performance of the work. In determining the costs associated with an
examination, audit, or investigation, the commissioner may use the
estimated average hourly cost for all persons performing
examinations, audits, or investigations for the fiscal year.
(2) An investment adviser licensed under Section 25230 pursuant to
the Investment Adviser Registration Depository shall not be subject
to paragraph (1) only in regard to the fee for a routine regulatory
examination of its investment advisory services for which it is
licensed under Section 25230.
(s) The fee for any hearing held by the commissioner pursuant to
Section 25142 shall be the sum determined by the commissioner to
cover the actual expense of noticing and holding the hearing.
(t) The commissioner may fix by rule a reasonable charge for any
publications issued under his or her authority. The charges shall
not apply to reports of the commissioner in the ordinary course of
distribution.
(u) The fee for filing an offer under subdivision (b) of Section
25507 shall be the amount of filing fee payable under subdivision
(e), (f), (h), or (i) of this section if an application had been
filed to qualify the transaction in which the securities upon which
the offer is to be made were sold in violation of the qualification
provisions of this law.
(v) The fee for filing an application for exemption pursuant to
subdivision (l) of Section 25100 is two hundred fifty dollars ($250).
(w) The commissioner may by rule require payment of a fee for
filing a notice or report required by a rule adopted pursuant to
Section 25105. The fee required in connection with a transaction as
defined by that rule shall not exceed the fees specified in
subdivision (c) based on the value of the securities sold, but the
commissioner may permit a single notice for more than one
transaction.
(x) The fee for filing the first notice of transaction under
subdivision (n) of Section 25102 is six hundred dollars ($600).
(y) The fee for filing a notice of transaction under subdivision
(o) of Section 25102 shall be the fee for filing an application for
qualification of the sale of securities by permit under paragraph (1)
of subdivision (b) of Section 25113 as set forth in subdivision (e)
of this section.
(z) The fee for filing a notice of transaction under subdivision
(h) of Section 25103 shall be six hundred dollars ($600).
SEC. 7. Section 25608.2 of the Corporations Code is amended to
read:
25608.2. Commencing July 1, 2000, the fee provisions of
subdivision (c) of Section 25608, as they apply to the fee for filing
a notice pursuant to paragraph (4) of subdivision (f) of Section
25102, and the fee provisions of subdivisions (a), (b), and (c) of
Section 25608.1, shall be the maximum fees that may be levied on a
notice filing under subdivision (b) of Section 25100.1, subdivision
(f) of Section 25102, and subdivisions (a), (c), and (d) of Section
25102.1. The commissioner, however, may set the notice filing fee
under subdivision (c) of Section 25608, as it relates to a notice
filing under subdivision (f) of Section 25102, and the notice filing
fees under subdivisions (a), (b), and (c) of Section 25608.1, at
amounts below the maximum fees set forth in those sections. The
commissioner shall set the notice filing fees under those sections
for the upcoming fiscal year on or about June 1 of each year. If the
commissioner fails to set the notice filing fees for the upcoming
fiscal year, then the filing fees shall be the maximum fees that may
be levied under those sections for the upcoming fiscal year.
SEC. 8. Section 25612.5 of the Corporations Code is amended to
read:
25612.5. (a) To encourage uniform interpretation and
administration of this law and effective securities regulation and
enforcement, the commissioner may cooperate with the securities
agencies or administrators of one or more states, Canadian provinces
or territories, or other countries, the Securities and Exchange
Commission, the Commodity Futures Trading Commission, the Securities
Investor Protection Corporation, any self-regulatory organization,
any national or international organization or securities officials or
agencies, and any governmental law enforcement or regulatory agency.
(b) The cooperation authorized by subdivision (a) includes, but is
not limited to, the following actions:
(1) Prescribing rules and forms with a view to achieving maximum
uniformity in the form and content of registration statements,
applications, and reports wherever practicable.
(2) Participating in a nationwide central depository for
qualification or registration of securities under this law and for
documents or records required or allowed to be maintained under this
law.
(3) Participating in the Central Registration Depository, or any
successor or alternative nationwide or regional depository, for the
registering, certifying, or licensing of broker-dealers or agents, or
both.
(4) Participating in the Investment Adviser Registration
Depository, or any successor or alternative nationwide or regional
depository, for the registering, certifying, or licensing of
investment advisers or investment adviser representatives, or both.
(c) Notwithstanding any other provision of law, any application
for qualification, amendment to the application or related securities
qualification or registration document or notice under Sections
25100.1, 25101.1, 25102.1, and 25230.1 or record otherwise required
to be signed that is filed in this state by means of electronic
technology pursuant to a nationwide central depository for
qualification or registration of securities shall be deemed to be a
valid original document upon reproduction to paper form by the
Department of Corporations.
(d) "Electronic technology" includes, but is not limited to,
computer modem, magnetic media or optical disk, but does not include
a digital signature that does not meet the requirements of California
law.