BILL ANALYSIS
AB 2167
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2167 (Correa)
As Amended August 4, 2004
Majority vote
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|ASSEMBLY: |74-0 |(May 17, 2004) |SENATE: |29-1 |(August 11, |
| | | | | |2004) |
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Original Committee Reference: JUD.
SUMMARY : Revises state law with regard to securities
transactions. Specifically, this bill :
1)Authorizes a person who purchases a security from or sells a
security to an uncertified broker-dealer, who is required to
be licensed, to bring an action for rescission of the sale or
purchase, or damages, if any, and specifies the measure of
monetary recovery in such cases.
2)Allows for the trebling of any damages awarded against such
unlicensed broker-dealers.
3)Extends by one year the periods for filing a civil action
against a person who willfully violates provisions of the
Corporate Securities Act.
The Senate amendments :
1)Add a treble damages provision consistent with existing law
regarding actions against individuals acting without a license
required by the Business and Professions Code, capped at
$10,000.
2)Clarify that this bill applies only to unlicensed
broker-dealers who are required to be licensed.
AS PASSED BY THE ASSEMBLY , this bill was substantially the same,
but for the treble damages provision.
FISCAL EFFECT : None
COMMENTS : The author states, "Current law prohibits any person
or entity from acting as a broker, investment adviser, or agent
AB 2167
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thereof if not so licensed by the Corporations Commissioner.
However, there is no expressly stated private right of action
for rescission or damages from an unlicensed broker, investment
adviser, or agent. This bill would specifically provide that a
person who transacts with an unlicensed person or entity would
be entitled to rescind the transaction and recover any amounts
or securities provided, or to recover damages if rescission was
no longer possible because the security had since changed
hands." The author further states, "Current law provides that
an action for securities fraud under state law must be brought
within one year of the plaintiff's discovery of the wrongful
act, and in no event later than four years after the wrongful
act itself. This bill would change the California statute of
limitations for securities fraud to conform to the federal
statute of limitations, which was amended by the Sarbanes-Oxley
Act of 2002 to provide for filing suit within two years of
discovery, and no later than five years after commission, of the
wrongful act."
The sponsor, Conference of Delegates of California Bar
Associations, explains that this bill is designed to address the
problem of "bucket shops" or "boiler rooms" that engage in
securities fraud. According to the sponsor, it specifically
targets "disreputable brokers who victimize consumers by
operating illegally; unlicensed persons who sell products such
as viaticals, mortgage pools, and pyramid or 'Ponzi' schemes;
and persons licensed in a related field, like insurance, who
sell securities to their existing clients without obtaining the
proper securities licenses."
Existing law allows for the trebling of any damages awarded
against individuals acting without a license required by the
Business and Professions Code, capped at $10,000. This bill
would add unlicensed broker-dealers to the list of persons
subject to possible treble damages awards.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
FN: 0007361