BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2167|
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THIRD READING
Bill No: AB 2167
Author: Correa (D)
Amended: 6/29/04 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 6-0, 6/22/04
AYES: Escutia, Ackerman, Cedillo, Ducheny, Kuehl, Sher
NO VOTE RECORDED: Morrow
ASSEMBLY FLOOR : 74-0, 5/17/04 (Passed on Consent) - See
last page for vote
SUBJECT : Unlicensed securities brokers
SOURCE : Conference of Delegates of California Bar
Associations
DIGEST : This bill provides for a private cause of action
against unlicensed securities broker-dealers for damages or
rescission of any purchase or sale involving that
broker-dealer.
ANALYSIS : Existing law, the Corporate Securities Law of
1968, provides for the certification (licensure),
oversight, and regulation of broker-dealers and investments
advisors by the State Department of Corporations.
Existing law defines "broker-dealer" as any person engaged
in the business of effecting transactions in securities in
this state for the account of others or for his own
account. "Broker-dealer" also includes a person engaged in
CONTINUED
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the regular business of issuing or guaranteeing options
with regard to securities not of his own issue.
Existing law provides for various private rights of action
against licensed broker-dealers who engage in various forms
of fraudulent or unlawful conduct.
This bill provides a person who purchases a security from
or sells a security to an unlicensed broker-dealer with an
action for rescission of the sale or purchase or, if the
security is no longer owned by one of the parties, for
damages.
This bill provides that upon rescission, a purchaser may
recover the consideration paid for the security plus
interest, less the amount of any income received on the
security. This bill provides that upon rescission, a
seller may recover consideration paid for the security plus
interest, plus the amount of any income received by the
defendant on the security.
This bill provides that in an action for damages, damages
recoverable by a purchaser shall be equal to the difference
between the purchase price plus interest at the time of
purchase and the value of the security at the time it was
disposed of by the plaintiff. For a seller, damages
recoverable will be equal to the difference between the
value of the security at the time the complaint was filed
plus income received by the defendant and the price at
which the security was sold plus interest.
Existing law provides for a statute of limitations for
private rights of action under the Corporate Securities Law
of four years after the act or transaction constituting the
violation or one year after the discovery by the plaintiff
of the facts constituting the violation, whichever comes
first.
Existing federal law provides for a private right of action
for claims of fraud, deceit, manipulation, or contrivance
in contravention of a securities regulation, which may be
brought not later than the earlier of two years after the
discovery of the facts constituting the violation or five
years after such violation.
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This bill instead provides for a statute of limitations for
private rights of action under the Corporate Securities Law
of five years after the act or transaction constituting the
violation or two years after the discovery by the plaintiff
of the facts constituting the violation, whichever comes
first.
This bill states that it is the intent of the Legislature
that the remedies provided by this act are cumulative and
that they shall not be construed as restricting any remedy
that is otherwise available.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/29/04)
Conference of Delegates of California Bar Associations
(source)
American Insurance Association
California Business Roundtable
California Chamber of Commerce
ARGUMENTS IN SUPPORT : This bill is sponsored by the
Conference of Delegates of California Bar Associations,
which writes that:
"Under current law, an unlicensed broker can be subject
to action by the Department of Corporations, the
Securities and Exchange Commission and self-regulated
organizations. California is one of only a handful of
states that has not adopted the Uniform Securities Act,
which serves to protect the investor. Consequently,
although we require brokers to be licensed, there is no
provision in California that allows the injured party
to bring an action for recession [sic] or seek damages
against a broker for failing to comply with their
license."
ASSEMBLY FLOOR :
AYES: Aghazarian, Bates, Benoit, Berg, Bermudez, Bogh,
Calderon, Campbell, Canciamilla, Chan, Chu, Cogdill,
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Cohn, Corbett, Correa, Cox, Daucher, Diaz, Dutra, Dutton,
Dymally, Frommer, Garcia, Goldberg, Hancock, Harman,
Haynes, Jerome Horton, Shirley Horton, Houston, Jackson,
Keene, Kehoe, La Malfa, La Suer, Laird, Leno, Leslie,
Levine, Lieber, Liu, Longville, Lowenthal, Maddox,
Maldonado, Matthews, Maze, McCarthy, Mountjoy, Mullin,
Nakanishi, Nakano, Nation, Negrete McLeod, Pacheco,
Parra, Pavley, Plescia, Reyes, Richman, Ridley-Thomas,
Runner, Salinas, Samuelian, Simitian, Spitzer, Steinberg,
Strickland, Vargas, Wesson, Wiggins, Wyland, Yee, Nunez
NO VOTE RECORDED: Chavez, Firebaugh, Koretz, Montanez,
Oropeza, Wolk
RJG:mel 6/28/04 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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