BILL NUMBER: AB 1268 CHAPTERED
BILL TEXT
CHAPTER 532
FILED WITH SECRETARY OF STATE SEPTEMBER 29, 2010
APPROVED BY GOVERNOR SEPTEMBER 29, 2010
PASSED THE SENATE AUGUST 12, 2010
PASSED THE ASSEMBLY AUGUST 18, 2010
AMENDED IN SENATE AUGUST 9, 2010
AMENDED IN SENATE AUGUST 17, 2009
AMENDED IN ASSEMBLY MAY 11, 2009
AMENDED IN ASSEMBLY APRIL 13, 2009
INTRODUCED BY Assembly Members Gaines and Nava
FEBRUARY 27, 2009
An act to amend Sections 110, 1210, 1211, 1212, 1501.2, 1583,
14250, 14313, and 14315 of, to add Sections 220, 221, 222, 223,
230.5, 236, 250.5, 291, 292, 292.5, 352, 353, 354, 355, 356, 357,
511, 770, 1339, 3828, and 14212 to, to add Article 7 (commencing with
Section 295), Article 8 (commencing with Section 305), and Article 9
(commencing with Section 335) to Chapter 2 of Division 1 of, to
repeal Sections 100, 101, 107.5, 116, 117, 118, 684, 1910, 1911,
1911.5, 1912, 1913, 1913.5, 1951, and 1952 of, to repeal Chapter 17
(commencing with Section 3100) of Division 1 of, and to repeal
Chapter 11 (commencing with Section 31700) of Division 15 of, the
Financial Code, relating to financial institutions.
LEGISLATIVE COUNSEL'S DIGEST
AB 1268, Gaines. Financial institutions.
Existing law provides for the regulation and licensure by the
Commissioner of Financial Institutions of state-chartered banks and
credit unions, money transmitters, persons engaged in the business of
issuing travelers checks, business and industrial development
corporations, and corporations engaging in the business of selling,
in this state, payment instruments issued by it. Each of the laws
regulating these licensees establishes various enforcement provisions
for violations of those laws.
This bill would repeal specified portions of those enforcement
provisions. The bill would recast, in one body of law, the
enforcement provisions applicable to those licensees and would also
recast various other provisions applicable to those licensees. The
bill would recast provisions establishing the Deputy Commissioner of
Financial Institutions for the Division of Credit Unions. The bill
would recast provisions making it a crime for the deputy commissioner
to fail to report to the commissioner information regarding the
insolvency or unsafe condition of a licensee, if the deputy
commissioner has knowledge of those facts. The bill would make other
related changes, and would make other changes related to bank and
trust company depositaries and stock acquisitions.
Existing law authorizes the commissioner to examine the books,
accounts, records, files, and any office of a credit union. Existing
law authorizes the commissioner to take possession of the property
and business of a credit union if the commissioner finds, among other
things, that the credit union has inadequate capital or is
insolvent.
This bill would require the officers and employees of a credit
union to exhibit the securities, books, records, and accounts to the
examiners, on request. The bill would authorize the commissioner to
take possession of the property and business of the credit union if
the commissioner finds that the credit union has inadequate net
worth, as defined, or is insolvent. The bill would also authorize the
commissioner to call a meeting of the board of directors of a credit
union, as specified.
Existing law prohibits a corporation from engaging in the trust
business unless it complies with specified requirements. Existing law
exempts from those requirements, among others, certain persons or
corporations acting as a trustee or any person appointed as a
receiver, trustee, or other fiduciary by the court.
This bill would exempt professional fiduciaries from those
requirements.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 100 of the Financial Code is repealed.
SEC. 2. Section 101 of the Financial Code is repealed.
SEC. 3. Section 107.5 of the Financial Code is repealed.
SEC. 4. Section 110 of the Financial Code is amended to read:
110. "Office" includes head office, branch office, and any other
authorized place of business of a licensee.
"Head office" means the principal place of business of a licensee.
SEC. 5. Section 116 of the Financial Code is repealed.
SEC. 6. Section 117 of the Financial Code is repealed.
SEC. 7. Section 118 of the Financial Code is repealed.
SEC. 8. Section 220 is added to the Financial Code, to read:
220. The powers of supervision and examination of all licensees
are vested in the commissioner.
SEC. 9. Section 221 is added to the Financial Code, to read:
221. The commissioner may promulgate or waive such rules and
regulations as may be reasonable or necessary to carry out his or her
duties and responsibilities.
SEC. 10. Section 222 is added to the Financial Code, to read:
222. (a) The commissioner, whenever in his or her opinion such
action is necessary or appropriate to carry out his or her duties,
may call a meeting of the board of directors of a licensee.
(b) A meeting of the board of a licensee called by the
commissioner shall be held upon four days' notice by first class mail
or 24 hours' notice delivered personally or by telephone. The notice
shall be given by the commissioner or, if the commissioner so
orders, by an officer of the licensee.
(c) A meeting of the board of a licensee called by the
commissioner shall be held at a place within this state as may be
designated by the commissioner and specified in the notice of the
meeting.
(d) The expenses of a meeting of the board of a licensee called by
the commissioner shall be paid by the licensee.
SEC. 11. Section 223 is added to the Financial Code, to read:
223. The commissioner may, at any time, require a licensee to
write down any asset held by the licensee to a valuation that will
represent the asset's then fair market value.
SEC. 12. Section 230.5 is added to the Financial Code, to read:
230.5. The Chief Officer of the Division of Credit Unions is the
Deputy Commissioner of Financial Institutions for the Division of
Credit Unions. The Deputy Commissioner of Financial Institutions for
the Division of Credit Unions shall administer the laws of this state
relating to credit unions or the credit union business under the
direction of the commissioner. The Deputy Commissioner of Financial
Institutions for the Division of Credit Unions shall be appointed by
the Governor and shall hold office at the pleasure of the Governor.
The Deputy Commissioner of Financial Institutions shall receive an
annual salary as fixed by the Governor.
SEC. 13. Section 236 is added to the Financial Code, to read:
236. If a deputy commissioner or any examiner has knowledge of
the insolvency or unsafe condition of any licensee and willfully
fails to report that fact to the commissioner in writing, he or she
is guilty of a felony.
SEC. 14. Section 250.5 is added to the Financial Code, to read:
250.5. There is in the Department of Financial Institutions, the
Division of Credit Unions. The Division of Credit Unions has charge
of the execution of the laws of this state relating to credit unions
and to the credit union business.
SEC. 15. Section 291 is added to the Financial Code, to read:
291. Any debt due a licensee on which interest is past due and
unpaid for the period of one year shall be charged off, unless the
debt is well secured or is in process of collection.
SEC. 16. Section 292 is added to the Financial Code, to read:
292. Any person that provides services to any licensee, at the
request of the commissioner, shall submit to an examination by the
commissioner. Should the commissioner deem it necessary or desirable
that an examination be made of a person, the examination shall be
made at the expense of the person examined. If the person refuses to
permit an examination to be made, the commissioner may order every
licensee receiving services from that person to discontinue receiving
those services or otherwise conducting business with that person,
and the licensees shall comply with that order.
SEC. 17. Section 292.5 is added to the Financial Code, to read:
292.5. (a) All references in this code and the Corporations Code
to financial statements, balance sheets, income statements, and
statements of changes in financial position of a licensee, and all
references to assets, liabilities, earnings, retained earnings,
shareholders' equity, net worth, and similar accounting items of a
licensee, mean those financial statements or those items prepared or
determined in conformity with generally accepted accounting
principles then applicable in the United States, fairly presenting in
conformity with generally accepted accounting principles accepted in
the United States the matters which they purport to present, subject
to any specific accounting treatment required by any applicable
provision of the Corporations Code, this code, or any regulation,
order issued by the commissioner, or agreement entered into by the
commissioner and a licensee.
(b) The commissioner may, by regulation or order, require that any
financial statement or accounting item of a licensee be prepared or
determined in a manner other than in conformity with generally
accepted accounting principles accepted in the United States if the
commissioner finds that such other manner is necessary or appropriate
to carry out the purposes or provisions of this code.
SEC. 18. Article 7 (commencing with Section 295) is added to
Chapter 2 of Division 1 of the Financial Code, to read:
Article 7. Enforcement
295. In this article:
(a) "Appropriate licensee business" means the business that a
licensee may conduct in accordance with the charter or license that
the commissioner has issued to that licensee.
(b) "Customer" means a depositor of a bank, a member of a credit
union, or a customer of any other licensee.
(c) "Holding company" shall have the meaning set forth in Section
3700.
(d) "Officer of a subject institution" means any director,
officer, official, or employee of the subject institution.
(e) "Person" means a subject institution or a subject person.
(f) "Subject institution" means any of the following:
(1) Licensee.
(2) Subsidiary of a licensee.
(3) Foreign (other state) or foreign (other nation) bank or credit
union that maintains an office in this state, with respect to any
such office other than a national bank or federal credit union.
(4) Any other person lawfully conducting the business of a bank or
credit union in this state other than a national bank or federal
credit union.
(g) "Subject person," when used with respect to a subject
institution, means any of the following:
(1) Director, officer, employee, or agent of the subject
institution.
(2) Member, consultant, joint venture partner, or other person
that participates in the affairs of a subject institution.
(3) Independent contractor, including any attorney, appraiser, or
accountant, who knowingly or recklessly participates in any of the
following acts if the act caused or is likely to cause more than a
minimal financial loss to, or a significant adverse effect on, the
subject institution:
(A) A violation of any applicable law, regulation, or order.
(B) A breach of fiduciary duty.
(C) An unsafe or unsound act.
(h) "Violation" includes any act performed, alone or with other
persons, for or toward causing, bringing about, participating in,
counseling, aiding, or abetting a violation of any applicable
statute, regulation, provision of a written order issued by the
commissioner, or provision of a written agreement made between the
commissioner and a subject institution or subject person.
295.1. Any subject person who is entitled to a hearing pursuant
to this article may waive that right at any time. A waiver under this
section shall relieve the commissioner from having to issue a formal
notice of hearing that would otherwise be required by this article.
295.2. (a) Within 30 days after an order is issued pursuant to
Section 297, 298.1, 299, 300.1, or 301.1, or subdivision (c) of
Section 300.2, the person to whom the order is issued may file with
the commissioner an application for a hearing on the order.
(b) If the commissioner fails to commence the hearing within 15
business days after the application is filed with the commissioner or
within any longer period to which the person subject to the order
consents, the order shall be deemed rescinded.
(c) Within 30 days after the hearing, or within any longer period
to which the person consents, the commissioner shall affirm, modify,
or rescind the order. If the commissioner fails to affirm, modify, or
rescind the order within that time limit, the order shall be deemed
rescinded.
(d) The right to petition for judicial review of the order shall
not be affected by the failure of the person subject to the order to
apply to the commissioner for a hearing on the order pursuant to
subdivision (a).
295.3. In addition to any other action or requirement the
commissioner deems necessary or advisable, an order issued pursuant
to Section 297.1, 298, 298.1, 299, 300, 300.1, or 300.2 may require
the person subject to the order to do any of the following:
(a) Make restitution or provide reimbursement, indemnification, or
guarantee against loss, if the subject institution, subject person,
or holding company was unjustly enriched by the action or violation
or if the action or violation involved a reckless disregard for any
provision of this division, of any regulation or order issued under
this division, of any other applicable law, or of any agreement with
the commissioner.
(b) Restrict the growth of the subject institution.
(c) Dispose of any loan or other asset.
(d) Correct violations of law.
(e) Employ qualified officers or employees, who may be subject to
approval of the commissioner.
(f) Limit the activities or functions of the subject institution,
subject person, or holding company.
295.4. If the commissioner takes possession of a subject
institution without a prior notice or hearing, or takes action
against a subject person without prior notice or hearing, the
commissioner shall, upon taking possession or taking that action,
concurrently provide to the subject institution or subject person a
written order. The order shall set forth the condition or conditions
of the subject institution or action or actions of the subject person
that constitute the basis or bases for the commissioner's action. In
any case where the commissioner takes possession of a subject
institution, the commissioner shall establish, by clear evidence, the
basis for his or her action.
296. (a) The commissioner may bring an action in the name of the
people of this state in superior court to enjoin any violation of, to
enforce compliance with, or to collect any penalty or other
liability imposed under, any law subject to the jurisdiction of the
commissioner. The commissioner may bring an action in the name of the
people of this state in superior court to enjoin any violation of,
to enforce compliance with, or to collect any penalty or other
liability imposed under, any regulation promulgated under the power
of the commissioner. The commissioner may bring an action in the name
of the people of this state in superior court to enjoin any
violation of, to enforce compliance with, or to collect any penalty
or other liability imposed under, any (1) agreement entered into with
the commissioner or (2) order issued by the commissioner. Upon a
proper showing, a permanent or preliminary injunction, restraining
order, or writ of mandate shall be granted, and a monitor, receiver,
conservator, or other designated fiduciary or officer of the court
may be appointed for the defendant or the defendant's assets, or
other relief may be granted as appropriate.
(b) A receiver, monitor, conservator, or other designated
fiduciary officer of the court appointed by the court pursuant to
this section may, with the approval of the court, exercise all of the
powers of the defendant's officers, directors, partners, trustees,
or persons who exercise similar powers and perform similar duties. No
action at law or in equity may be maintained by any party against
the commissioner or a receiver, monitor, conservator, or other
designated fiduciary or officer of the court by reason of his or her
exercise of those powers or performing these duties pursuant to the
order of, or with the approval of, the court.
(c) If the commissioner finds that it is in the public interest,
the commissioner may include in any action authorized by subdivision
(a) a claim for ancillary relief, including a claim for restitution,
disgorgement, or damages on behalf of the person injured by the act
or practice constituting the subject matter of the action, and the
court shall have jurisdiction to award ancillary relief.
(d) Neither the provision of subdivision (a) that authorizes the
appointment of a monitor, receiver, conservator, or other designated
fiduciary or officer of the court nor any provision of subdivision
(b) or (c) applies to any of the following:
(1) A licensee that is authorized by the commissioner to transact
appropriate licensee business.
(2) A foreign (other state) or foreign (other nation) bank or
credit union that maintains an office in this state in accordance
with federal law, the law of this state, and the law of the bank or
credit union's domicile.
(e) The provisions of this section that authorize the commissioner
to bring actions and seek relief are not intended to, and do not,
affect any right that any other person may have to bring the same or
similar actions or to seek the same or similar relief.
297. If the commissioner finds that a person has conducted, or
that there is reasonable cause to believe that a person is about to
conduct, business that requires a license issued by the commissioner
and that person has not been issued the required license, the
commissioner may, without any prior notice or hearing, order the
person to cease and desist from conducting any unauthorized business
unless and until the person is issued a license to engage in
appropriate licensee business.
298. If, after notice and an opportunity to be heard, the
commissioner finds any of the factors set forth in subdivision (a) or
(b) with respect to any subject institution, subject person, or any
holding company, the commissioner may order the subject institution,
subject person, or holding company to cease and desist from the act
or violation:
(a) That the subject institution, subject person, or holding
company has engaged or participated, is engaging or participating, or
that there is reasonable cause to believe that the subject
institution, subject person, or holding company is about to engage or
participate, in any unsafe or unsound act with respect to the
business of the subject institution.
(b) That the subject institution, subject person, or holding
company has violated, is violating, or that there is reasonable cause
to believe that the subject institution, subject person, or holding
company is about to violate any:
(1) Provision of any division subject to the jurisdiction of the
commissioner.
(2) Provision of any regulation promulgated by, or subject to the
jurisdiction of, the commissioner.
(3) Provision of any other applicable law.
(4) Provision of any written agreement between the subject
institution, subject person, or holding company, and the
commissioner.
298.1. If the commissioner finds that any of the factors set
forth in Section 298 is true with respect to any subject institution,
subject person, or holding company, and that the action, omission,
or violation is likely to have any of the consequences set forth in
subdivisions (a) to (d), inclusive, the commissioner may, without any
prior notice or opportunity to be heard, order the subject
institution or subject person to cease and desist from the following:
(a) Any act, omission, or violation that may cause the insolvency
of the subject institution.
(b) Any act, omission, or violation that may cause significant
dissipation of the assets or earnings of the subject institution.
(c) Any act, omission, or violation that may weaken the condition
of the subject institution.
(d) Any act, omission, or violation that may otherwise prejudice
the interests of the customers of the subject institution.
299. If the commissioner finds that a subject institution's books
or records are so incomplete or inaccurate that the commissioner is
unable through the normal supervisory process to determine the
financial condition of the subject institution or the details or
purpose of any transaction or transactions that may materially affect
the financial condition of the subject institution, the commissioner
may, without any prior notice or hearing, order the subject
institution to do either of the following:
(a) Cease any activity or practice that gave rise, in whole or in
part, to the incomplete or inaccurate state of the books or records.
(b) Take affirmative action to restore the books or records to a
complete and accurate state.
300. If, after notice and an opportunity to be heard, the
commissioner finds that any of the factors set forth in subdivision
(a), any of the factors set forth in subdivision (b), and any of the
factors set forth in subdivision (c) are true with respect to a
subject person of a subject institution or holding company, the
commissioner may issue an order suspending or removing the subject
person from the subject person's office, if any, with the subject
institution or holding company, and prohibiting the subject person
from participating in any manner in the conduct of the affairs of the
subject institution or holding company without the approval of the
commissioner:
(a) (1) That the subject person has, directly or indirectly,
violated, or has caused a subject institution to violate, any
provision of any:
(A) Division subject to the jurisdiction of the commissioner.
(B) Regulation promulgated by, or subject to the jurisdiction of,
the commissioner.
(C) Other applicable law.
(D) Order issued by the commissioner or under the commissioner's
authority.
(E) Written agreement between the subject institution, subject
person, or holding company and the commissioner.
(2) That the subject person has, directly or indirectly, engaged
or participated in any unsafe or unsound act in connection with the
business of the subject institution, holding company, or any other
business institution.
(3) That the subject person has, directly or indirectly, engaged
or participated in any act that constitutes a breach of the subject
person's fiduciary duty.
(b) That, by reason of the act, violation, or breach of fiduciary
duty described in subdivision (a):
(1) The subject institution, holding company, or business
institution has suffered or will probably suffer financial loss or
other harm.
(2) The rights or interests of the customers or members of the
subject institution have been or could be prejudiced.
(3) The subject person has received financial gain or other
benefit.
(c) That the act, violation, or breach of fiduciary duty described
in subdivision (a) either involves dishonesty on the part of the
subject person or demonstrates the subject person's willful or
continuing disregard for the safety or soundness of the subject
institution, holding company, or business institution.
300.1. If the commissioner finds that any of the factors set
forth in subdivision (a) of Section 300, any of the factors set forth
in subdivision (b) of Section 300, and any of the factors set forth
in subdivision (c) of Section 300 are true with respect to a subject
person of a subject institution, and that it is necessary or
advisable for the protection of the subject institution or holding
company, or the rights or interests of the customers or members of
the subject institution, the commissioner may, without any prior
notice or opportunity to be heard, issue an order suspending the
subject person from the subject person's office, if any, with the
subject institution or holding company, and prohibiting the subject
person from participating in any manner in the conduct of the affairs
of the subject institution or holding company without the prior
approval of the commissioner.
300.2. (a) If the commissioner finds that any of the factors set
forth in paragraph (1) and the factor set forth in paragraph (2) are
true with respect to a subject person or former subject person of a
subject institution or holding company, the commissioner may, without
any prior notice or opportunity to be heard, issue an order
suspending the subject person or former subject person from his or
her office, if any, with the subject institution or holding company
and prohibiting him or her from further participating in any manner
in the conduct of the affairs of the subject institution or holding
company without the approval of the commissioner:
(1) That the subject person or former subject person has been
charged in an indictment issued by a grand jury or in an information,
complaint, or similar pleading issued by a United States attorney,
district attorney, or other governmental official or agency
authorized to prosecute crimes, with commission of or participation
in any of the following:
(A) A crime that involves dishonesty or breach of trust and that
is punishable by imprisonment for a term exceeding one year.
(B) A criminal violation of any provision of this division.
(C) A criminal violation of Section 1956, 1957, or 1960 of Title
18 of, or Section 5322 or 5324 of Title 31 of, the United States
Code.
(D) A criminal violation of a law of any jurisdiction other than
the United States that is substantially similar to any of the
statutes specified in subparagraph (C).
(2) That continued or resumed service or participation by the
subject person or former subject person may pose a threat to the
rights or interests of the customers or members of the subject
institution or may threaten to impair public confidence in the
subject institution.
(b) An order issued pursuant to subdivision (a) shall remain in
effect until the indictment or the information, complaint, or similar
pleading is finally disposed of or, if the order is earlier
terminated by the commissioner, until the order is so terminated.
(c) If the commissioner finds that the factors set forth in
paragraphs (1) and (2) are true with respect to a subject person or
former subject person of a subject institution or holding company,
the commissioner may, without any prior notice or opportunity to be
heard, issue an order suspending or removing the subject person or
former subject person from his or her office, if any, with the
subject institution or holding company and prohibiting him or her
from further participating in any manner in the affairs of the
subject institution or holding company without the approval of the
commissioner:
(1) That the subject person or former subject person has been
finally convicted of any crime of the type described in paragraph (1)
of subdivision (a). For purposes of this paragraph, an agreement to
enter a pretrial diversion or similar program is deemed to be a
conviction.
(2) That continued or resumed service or participation by the
subject person or former subject person may pose a threat to the
interests of the customers of the subject institution or may threaten
to impair public confidence in the subject institution.
(d) The fact that any subject person of a subject institution
charged with a crime of the type described in paragraph (1) of
subdivision (a) is not finally convicted of the crime does not
preclude the commissioner from issuing an order regarding the subject
person pursuant to any other provision of this article.
300.3. (a) Any subject institution, subject person of a subject
institution, or former subject person of a subject institution to
whom an order is issued under Sections 300 to 300.2, inclusive, may
apply to the commissioner to modify or rescind the order. In deciding
whether to grant or deny the application, the commissioner shall
consider whether it is in the public interest to modify or rescind
the order and whether it is reasonable to believe that the subject
person or former subject person will, if and when he or she becomes a
subject person of a subject institution or holding company, comply
with all applicable provisions of law, or any regulation or order
issued by the commissioner.
(b) The right of any subject person or former subject person of a
subject institution or holding company to whom an order is issued
under Sections 300 to 300.2, inclusive, to petition for judicial
review of the order shall not be affected by the failure of the
subject institution or holding company to apply to the commissioner
pursuant to subdivision (a) to modify or rescind the order.
300.4. (a) In this section, "subject depository institution"
means any:
(1) Licensee or any bank or credit union that maintains an office
in this state.
(2) Affiliate of any of the institutions specified in paragraph
(1).
(3) Subsidiary of any of the institutions specified in paragraph
(1).
(4) Holding company of any of the institutions specified in
paragraph (1).
(b) It is unlawful for any subject person or former subject person
of a subject institution to whom an order is issued under Sections
300 to 300.2, inclusive, willfully to do, directly or indirectly, any
of the following without the approval of the commissioner, so long
as the order is in effect:
(1) Act as a subject person of any subject depository institution.
(2) Vote any shares or other securities having voting rights for
the election of any person as a director of a subject depository
institution.
(3) Solicit, procure, transfer or attempt to transfer, or vote any
proxy, consent, or authorization with respect to any shares or other
securities of a subject depository institution having voting rights.
(4) Otherwise to participate in any manner in the affairs of any
subject depository institution.
301. The commissioner may revoke or suspend any license issued
by, or under the authority of, the commissioner, if, after notice and
opportunity to be heard, the commissioner finds any of the
following:
(a) The licensee
has violated, is violating, or that there is reasonable cause to
believe that the licensee is about to violate, any provision of any
of the following:
(1) Any division subject to the jurisdiction of the commissioner.
(2) Any regulation promulgated by, or subject to the jurisdiction
of, the commissioner.
(3) A provision of any other applicable law.
(4) A provision of any order issued by the commissioner.
(5) A provision of any written agreement between the licensee and
the commissioner.
(6) A condition imposed on any written approval granted by the
commissioner.
(b) Any fact or condition exists which, if it had existed at the
time of the original application for the license, would be grounds
for denying the application for the license.
(c) The licensee is conducting its business in an unsafe manner.
(d) The licensee is in such condition that it is unsafe or unsound
for the licensee to transact appropriate licensee business.
(e) The licensee has inadequate capital or net worth or is
insolvent.
(f) The licensee failed to pay any of its obligations as they came
due or is reasonably expected to be unable to pay its obligations as
they come due.
(g) The licensee is the subject of an order for relief in
bankruptcy, or has sought other relief under any bankruptcy,
reorganization, insolvency, or moratorium law, or any person has
applied for any such relief under any such law against the licensee
and the licensee has by any affirmative act approved of, or consented
to, the action or the relief has been granted.
(h) The licensee has ceased to transact appropriate licensee
business.
(i) The licensee refuses to submit its books, papers, and affairs
to the inspection of any examiner.
(j) Any officer of the licensee refuses to be examined upon oath
touching the concerns of the licensee.
(k) The licensee has, with the approval of its board, requested
the commissioner to take possession of its property and business.
301.1. If the commissioner finds that any of the factors set
forth in Section 301 is true with respect to any licensee and that it
is necessary for the protection of the public interest, the
commissioner may issue an order immediately suspending or revoking
the licensee's license.
302. If the commissioner finds that any of the factors set forth
in subdivisions (a) to (k), inclusive, is true with respect to a
licensee, the commissioner may by order, without any prior notice or
opportunity to be heard, take possession of the property and business
of the licensee:
(a) The licensee has violated any provision of (1) any division
subject to the jurisdiction of the commissioner, (2) any regulation
promulgated by, or subject to the jurisdiction of, the commissioner,
(3) any provision of any other applicable law, (4) any provision of
any order issued by the commissioner, (5) any provision of any
written agreement made between the commissioner and the licensee, or
(6) a condition imposed on any written approval granted by the
commissioner.
(b) The licensee is conducting its business in an unsafe or
unsound manner.
(c) The licensee is in such condition that it is unsafe or unsound
for the licensee to transact appropriate licensee business.
(d) The licensee has inadequate capital or net worth or is
insolvent.
(e) If the licensee is a bank, the tangible shareholders' equity
of the bank is less than the following:
(1) If the bank is a commercial bank or industrial bank, the
greater of three percent of the bank's total assets or one million
dollars ($1,000,000).
(2) If the bank is a trust company other than a commercial bank
authorized to engage in trust business, one million dollars
($1,000,000).
(f) The licensee failed to pay any of its obligations as they came
due or is reasonably expected to be unable to pay its obligations as
they come due.
(g) The licensee has applied for an adjudication of bankruptcy,
reorganization, arrangement, or other relief under any bankruptcy,
reorganization, insolvency, or moratorium law, or that any person has
applied for any such relief under any such law against the licensee
and the licensee has by any affirmative act approved of or consented
to the action or the relief has been granted.
(h) The licensee has ceased to transact the business the licensee
is authorized to conduct pursuant to its license.
(i) The licensee refuses to submit its books, papers, and affairs
to the inspection of any examiner.
(j) Any officer of the licensee refuses to be examined upon oath
touching the concerns of the licensee.
(k) The licensee has, with the approval of its board, requested
the commissioner to take possession of its property and business.
302.1. (a) If the commissioner takes possession of the property
and business of a licensee pursuant to Section 302, the licensee may,
within 10 days, apply to the superior court in the county where its
head office is located to enjoin further proceedings. The court may,
after citing the commissioner to show cause why further proceedings
should not be enjoined and after a hearing, dismiss the application
or enjoin the commissioner from further proceedings and order the
commissioner to surrender the property and business of the licensee
to the licensee or make any further order as may be just. The
judgment of the court may be appealed by the commissioner or by the
licensee as allowed by law.
(b) At any time after the commissioner takes possession of the
property and business of a licensee pursuant to Section 302, the
licensee may, with the approval of the commissioner, resume business
upon conditions as the commissioner may prescribe.
302.2. (a) Upon taking possession of the property and business of
any licensee, the commissioner shall give notice of that fact to all
persons holding or having in their possession any assets of the
licensee. No person knowing of the taking, or who has been notified
thereof, shall have a lien or charge upon any assets of the licensee
for any payment, advance, or clearance thereafter made or for any
liability thereafter incurred.
(b) The giving of notice in accordance with this section shall not
be deemed to be a prerequisite to the taking of possession of the
property and business of the licensee.
302.3. The commissioner is deemed to take possession of the
entire property and business of a licensee when the commissioner
takes possession of the business and property of the head office of
the licensee.
SEC. 19. Article 8 (commencing with Section 305) is added to
Chapter 2 of Division 1 of the Financial Code, to read:
Article 8. Liquidation and Conservation
305. In this article, "Federal Insurance Agency" means the
Federal Deposit Insurance Corporation or the National Credit Union
Administration, as appropriate, or their respective
successors-in-interest.
305.1. Upon taking possession of the property and business of any
licensee, the commissioner has authority, and it is his or her duty,
to collect all moneys due to the licensee and to do other acts as
are necessary or expedient to collect, conserve, or protect the
licensee's assets, property, and business, and he or she shall
proceed to conserve or liquidate the affairs of the licensee as
provided in this article.
305.2. No attachment shall be issued against the property of any
licensee subject to conservation or liquidation pursuant to this
article.
305.3. Upon taking possession of the property and business of any
licensee pursuant to Section 302, the commissioner may proceed to
liquidate or conserve the licensee in the manner provided by this
article.
305.4. Upon taking possession of the property and business of a
licensee pursuant to Section 302, the commissioner may tender to any
person or persons an appointment as conservator, liquidator,
receiver, or liquidating committee of the licensee.
305.5. The commissioner shall supervise the acts of the
conservator, liquidator, receiver, or liquidating committee appointed
under this article and may remove the conservator, liquidator,
receiver, or any or all members of the liquidating committee in his
or her discretion.
305.6. If required by the commissioner, the conservator,
liquidator, receiver, or members of the liquidating committee
appointed under this article shall provide proof of bond coverage
that extends to the conservator, liquidator, receiver, or members of
the liquidating committee. The bond shall include fraud, dishonesty,
and faithful performance coverage. The premium for that bond shall be
paid out of the assets of the licensee.
305.7. (a) If the commissioner retains possession of the assets
of the licensee for the purpose of liquidation or conservation, the
commissioner shall, to the extent possible, use the services of civil
service employees of the commissioner's office, and the attorneys
employed by the commissioner or the Department of Justice shall
render all necessary legal services, as the commissioner may request.
(b) The commissioner, from time to time, under his or her official
seal, may appoint one or more special deputy commissioners as his or
her agent or agents with the powers specified in the certificate of
appointment to assist him or her in the duties of conservation or of
liquidation and distribution. The certificate of appointment shall be
filed in the office of the commissioner and a certified copy in the
office of the clerk of the county in which the head office of the
licensee is located. The commissioner may employ counsel and procure
expert assistance and advice as may be necessary in the liquidation
and distribution of the assets of the licensee and for that purpose
may retain any of the officers or employees of the licensee as the
commissioner may deem necessary.
305.8. The compensation of civil service employees, special
deputies, counsel, and other employees and assistants appointed to
assist in the conservation or liquidation of any licensee and the
distribution of its assets and all expenses of supervision and
liquidation shall be fixed by the commissioner and shall be paid out
of the funds of the licensee in the hands of the commissioner. The
expenses of liquidation shall be reported to the court upon each
application for payment of a dividend.
305.9. If a licensee is not insured by a Federal Insurance
Agency, upon the commissioner taking possession of the business and
property of the licensee, the superior court of the State of
California for the county in which the head office of the licensee is
located shall have exclusive original jurisdiction of all
proceedings relating thereto and of any action or other proceedings
brought under the provisions of this article. All papers relating to
the proceeding, including copies of the certificate of appointment of
any special deputy and the inventories required to be filed, shall
be filed and be made a part of the record of the proceeding without
the payment of any additional fees. No damages may be awarded in the
proceeding but, if sought, may only be recovered in a separate
action.
310. If the licensee whose property and business has been taken
pursuant to Section 302 is insured by a Federal Insurance Agency, the
commissioner may tender to the appropriate Federal Insurance Agency
an appointment as conservator, liquidator, or receiver of the
licensee. The commissioner shall determine whether the licensee whose
property and business has been taken shall be liquidated or
conserved. If the Federal Insurance Agency accepts the appointment,
the Federal Insurance Agency shall have, in addition to any powers
conferred by applicable federal law, the powers conferred on the
commissioner pursuant to this article.
310.1. The Federal Insurance Agency may be, and act as, a
conservator, liquidator, or receiver without bond.
310.2. If the Federal Insurance Agency accepts the appointment in
accordance with Section 310.1, the rights of customers and other
creditors of the insured licensee shall be determined in accordance
with the applicable provisions of the laws of this state.
310.3. The Federal Insurance Agency conservator, liquidator, or
receiver shall possess with respect to the insured licensee all the
powers, rights, and privileges given the commissioner under this
article with respect to the conservation or liquidation of a
licensee, as appropriate, and the property and assets of which he or
she has taken possession, except insofar as the same may be in
conflict with the provisions of applicable federal law.
310.4. (a) The commissioner may sell to any other licensee any
part or the whole of the business of a licensee that is subject to
liquidation or conservatorship. The purchase and sale shall be
approved by the purchasing licensee, as follows:
(1) If the purchasing licensee is organized under the laws of this
state, by two-thirds of all of its directors.
(2) If the licensee is any licensee other than a licensee
organized under the laws of this state, in accordance with the laws
of the jurisdiction under which the licensee is organized.
(b) (1) Subject to any applicable federal statutes and
regulations, any bank or credit union organized under the laws of
this state may, with the approval of two-thirds of all of its
directors, purchase from the receiver of a national banking
association or a federal credit union the whole or any part of the
business of the national banking association or federal credit union.
(2) Subject to any applicable federal statutes and regulations and
any applicable laws of the jurisdiction under which a foreign
corporation is organized, any foreign corporation or office of a
foreign corporation that is licensed by the commissioner to transact
business in this state and that is authorized to accept shares or
deposits in this state, may purchase from the receiver of a national
banking association or federal credit union the whole or any part of
the business of the national banking association or federal credit
union.
(c) The provisions of Chapter 12 (commencing with Section 1200)
and Chapter 13 (commencing with Section 1300) of Division 1 of Title
1 of the Corporations Code shall not apply to any purchase and sale
of the type described in subdivision (a) or (b).
(d) When a purchase and sale of the type described in subdivision
(a) or (b) becomes effective, the licensee shall, ipso facto and by
operation of law and without further transfer, substitution, act, or
deed, to the extent provided in the agreement of the purchase and
sale or in the order of the court approving the purchase and sale and
except as withheld or limited by the agreement or by the order:
(1) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the
licensee whose business is sold, subject to the right of every
customer of a licensee to withdraw his or her shares or deposit in
full on demand after the sale, irrespective of the terms under which
the share or deposit was made.
(2) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the
licensee whose business is sold under all trusts, executorships,
administrations, guardianships, conservatorships, agencies, and other
fiduciary or representative capacities, to the same extent as though
the purchasing licensee had originally assumed, acquired, or owned
the same, subject to the rights of trustors and beneficiaries under
the trusts so sold to nominate another or succeeding trustee of the
trust so sold after the sale.
(3) Succeed to and be entitled to take and execute the appointment
to executorships, trusteeships, guardianships, conservatorships, and
other fiduciary and representative capacities to which the licensee
whose business is sold is or may be named in wills, whenever
probated, or to which it is or may be named or appointed by any other
instrument.
(e) For purposes of subdivision (d), any purchase and sale of the
type referred to in subdivision (d) shall be deemed to be effective
at the time provided in the agreement of the purchase and sale or in
the order of the court approving the purchase and sale.
315. Whenever the commissioner deems it necessary in order to
conserve the assets of any licensee that does not have federal
deposit or share insurance for the benefit of the customers and other
creditors, he or she may appoint a conservator of the licensee and
require the conservator to post a bond as the commissioner deems
proper. The conservator, under the direction of the commissioner,
shall take possession of the books, records, and assets of every
description of the licensee and take any action as the conservator
may deem necessary to conserve the assets of the licensee pending
further disposition of its business.
315.1. A conservator appointed in accordance with Section 315 has
all of the powers and rights with relation to the business and the
property of the licensee for which he or she is appointed conservator
as are possessed by the commissioner under this article with
relation to a licensee of which the commissioner has taken
possession, and the conservator is subject to the same obligations as
are imposed upon the commissioner under this article. During the
time that the conservator remains in possession of the licensee the
rights of the licensee, and of all persons with respect thereto,
subject to the other provisions of this article, are the same as if
the commissioner had taken possession of the property and business of
the licensee for the purposes of liquidation. All expenses of the
conservatorship shall be paid out of the assets of the licensee and
shall be a lien thereon which shall be prior to any other lien. The
conservator shall receive a salary in an amount no greater than that
which would be paid by the commissioner to a special deputy in charge
of the liquidation of a licensee.
315.2. The commissioner may order an examination at the earliest
possible date of a licensee for which the commissioner has appointed
a conservator.
315.3. While any licensee is in the hands of a conservator, the
commissioner may require the conservator to set aside and make
available for withdrawal by customers and for payment to other
creditors on a ratable basis such amounts as in the opinion of the
commissioner may safely be used for that purpose.
315.4. The commissioner, in his or her discretion, may permit the
conservator to receive shares or deposits, but any shares or
deposits received while the licensee is in the hands of a conservator
shall be held as trust funds and shall not be subject to any
limitation as to payment or withdrawal. The shares or deposits shall
be segregated and shall not be used to liquidate any indebtedness of
the licensee existing at the time the conservator was appointed or
for the payment of any later indebtedness incurred for the purpose of
liquidating any indebtedness of the licensee existing at the time
the conservator was appointed. The shares or deposits shall be kept
on hand in cash, invested in direct obligations of the United States,
or deposited with the Federal Reserve Bank.
315.5. If the commissioner is satisfied that it may be done
safely and that it would be in the public interest, he or she may
terminate a conservatorship and permit the licensee for whom a
conservator was appointed to resume the transaction of its business
under the direction of its board, subject to any terms, conditions,
restrictions, and limitations as the commissioner may prescribe.
315.6. The conservator of a licensee that has been permitted to
resume accepting member shares or deposits shall first cause a notice
to be published in a newspaper of local circulation. The notice
shall state the date on which the affairs of the licensee will be
returned to its board and that the provisions of Section 315.4 will
not be effective after 30 days from that date. The form of the notice
and the newspaper in which the same is to be published shall be
first approved by the commissioner. On the date of the publication of
the notice, the conservator shall mail a copy of the notice to every
person who made any deposit in the licensee after the date of the
appointment of the conservator. The conservator shall address the
copy of the notice to the persons who have made the deposits at the
addresses appearing upon the books of the licensee. The conservator
shall also mail a similar notice to every person making a deposit in
the licensee after the date of the publication of the notice and
before the affairs of the licensee are returned to its board.
315.7. The commissioner may assess and collect from all licensees
for whom a conservator is appointed their ratable share of the costs
incurred in the administration of this article.
315.8. Any licensee that the commissioner has taken possession of
pursuant to Section 302, and for which a conservator has been
appointed pursuant to this article, may be reorganized under a plan
that requires the consent of any of the following:
(a) Customers and other creditors of the licensee representing at
least 75 percent in amount of its total member shares or deposits and
other liabilities as shown by the books of the licensee, excluding
member shares or deposits and other liabilities which are to be
satisfied in full under the provisions of the plan.
(b) Stockholders owning at least two-thirds of the outstanding
stock as shown by the books of the licensee.
(c) Members of the licensee.
(d) Customers and other creditors of the licensee representing at
least 75 percent in amount of its total shares or deposits and other
liabilities as shown by the books of the licensee, excluding shares
or deposits and other liabilities that are to be satisfied in full
under the provisions of the plan, and, if applicable to the licensee,
of stockholders owning at least two-thirds of its outstanding stock
as shown by the books of the licensee.
315.9. All customers, creditors, stockholders, if applicable, and
other interested persons shall be given notice of any proposed plan
of reorganization in the manner and at the times as the commissioner
directs.
315.10. No plan of reorganization shall become effective until
the commissioner finds that the plan is fair and equitable to all
customers, creditors, and stockholders, if applicable, and is in the
public interest and until the commissioner approves the same in
writing, subject to any conditions, restrictions, and limitations as
the commissioner may prescribe.
315.11. No creditor having security for the payment of his, her,
or its claim shall be affected in his, her, or its right to enforce
the security by the provisions of any plan for the reorganization of
the licensee. Any plan of reorganization involving the reduction of
claims of creditors shall apply only to that portion of a secured
creditor's loan that is not covered by the pledged security.
315.12. When any plan of reorganization becomes effective, all
books, records, and assets of the licensee shall be disposed of in
accordance with the provisions of the plan and the affairs of the
licensee shall be conducted by its board in the manner provided by
the plan and under the conditions, restrictions, and limitations that
may have been prescribed by the commissioner. When any plan of
reorganization adopted and approved as herein provided becomes
effective, all customers and other creditors and, if applicable,
stockholders of the licensee, whether or not they have consented to
the plan of reorganization, shall be fully and in all respects
subject to and bound by the plan's provisions and the claims of all
customers and other creditors shall be treated as if they had
consented to the plan of reorganization.
320. Upon taking possession of the property and business of a
licensee that does not have federal deposit or share insurance, the
commissioner may sell, compromise, or compound any bad or doubtful
debt owing the licensee for a principal sum not exceeding ten
thousand dollars ($10,000), upon those terms as the commissioner may
deem proper. If the principal sum thereof exceeds ten thousand
dollars ($10,000), the commissioner may compromise, compound, or sell
the debt upon those terms as the court may approve. If it appears
improbable that a recovery on a debt can be had, and that the costs
of an action to collect would be lost, and the principal sum thereof
does not exceed five hundred dollars ($500), the commissioner may
determine that no suit thereon shall be brought. If the principal sum
of that debt exceeds ten thousand dollars ($10,000), the
commissioner may determine that no suit thereon be brought after
obtaining approval of the court.
320.1. The commissioner may sell any real or personal property of
the licensee for cash or on credit and on any other terms and
conditions as the commissioner may deem proper, subject to the
approval of the court.
320.2. (a) The commissioner may, with the approval of the court,
sell any part or the whole of the business of a licensee to any other
licensee. The purchase and sale shall be approved by the purchasing
licensee, as follows:
(1) If the purchasing licensee is organized under the laws of this
state, by two-thirds of all of its directors.
(2) If the licensee is any licensee other than a licensee
organized under the laws of this state, in accordance with the laws
of the jurisdiction under which the licensee is organized.
(b) (1) Subject to any applicable federal statutes and
regulations, any bank or credit union organized under the laws of
this state may, with the approval of two-thirds of all of its
directors and of the commissioner, purchase from the receiver of a
national banking association or a federal credit union the whole or
any part of the business of the national banking association or
federal credit union.
(2) Subject to any applicable federal statutes and regulations and
any applicable laws of the jurisdiction under which a foreign
corporation is organized, any foreign corporation or any office of a
foreign corporation that is licensed by the commissioner to transact
business in this state and that is authorized to accept shares or
deposits in this state, may, with the approval of the commissioner,
purchase from the receiver of a national banking association or
federal credit union the whole or any part of the business of the
national banking association or federal credit union.
(c) The provisions of Chapter 12 (commencing with Section 1200)
and Chapter 13 (commencing with Section 1300) of Division 1 of Title
1 of the Corporations Code shall not apply to any purchase and sale
of the type described in subdivision (a) or (b).
(d) When a purchase and sale of the
type described in subdivision (a) or (b) becomes effective, the
purchasing licensee shall, by operation of law and without further
transfer, substitution, act, or deed, to the extent provided in the
agreement of the purchase and sale or in the order of the court
approving the purchase and sale and except as withheld or limited by
the agreement or by the order:
(1) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the
licensee whose business is sold, subject to the right of every
customer of the licensee whose shares or deposit is sold to withdraw
his or her shares or deposit in full on demand after the sale,
irrespective of the terms under which the deposit was made.
(2) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the whose
business is sold under all trusts, executorships, administrations,
guardianships, conservatorships, agencies, and other fiduciary or
representative capacities, to the same extent as though the
purchasing licensee had originally assumed, acquired, or owned the
same, subject to the rights of trustors and beneficiaries under the
trusts so sold to nominate another or succeeding trustee of the trust
so sold after the sale.
(3) Succeed to and be entitled to take and execute the appointment
to executorships, trusteeships, guardianships, conservatorships, and
other fiduciary and representative capacities to which the licensee
whose business is sold is or may be named in wills, whenever
probated, or to which it is or may be named or appointed by any other
instrument.
(e) For purposes of subdivision (d), any purchase and sale of the
type referred to in subdivision (d) shall be deemed to be effective
at the time provided in the agreement of the purchase and sale or in
the order of the court approving the purchase and sale.
320.3. Within six months after taking possession of the property
and business of any licensee that does not have federal deposit or
share insurance, the commissioner may terminate or adopt any
executory contract to which the licensee may be a party, including
leases of real or personal property. Claims for damages resulting
from the termination of any contract or lease may be filed and
allowed, but no claim of a landlord for damages resulting from the
rejection of an unexpired lease of real property or under any
covenant of the lease shall be allowed in an amount exceeding the
rent reserved by the lease, without acceleration, for the year
succeeding the date of the surrender of the premises plus the amount
of any unpaid accrued rent without acceleration. Any claim shall be
filed within 30 days of the date of the termination or within the
time that claims are to be filed under Section 320.10, whichever is
longer.
320.4. The commissioner, in his or her own name or in the name of
the licensee, may execute, acknowledge, and deliver any and all
conveyances and other instruments necessary or appropriate to
effectuate the sale of any real or personal property or to effectuate
any other transaction in connection with the liquidation of a
licensee or the distribution of its assets. Any conveyance or other
instrument executed by the commissioner pursuant to this authority
shall be valid and effectual for all purposes as though the same had
been executed by the officers of the licensee by authority of its
board of directors. Whenever the commissioner sells any real property
of the licensee a certified copy of the order of the court approving
the sale shall be recorded in the county in which any part of the
real property is located.
320.5. The commissioner, in the name of the delinquent licensee
or in his or her own name, may prosecute and defend any and all
actions and other legal proceedings appropriate or necessary to the
liquidation of the licensee.
320.6. The commissioner from time to time shall deposit all
moneys coming into his or her hands in the course of the liquidation
of the licensee in one or more state banks or state credit unions and
in the event of the suspension or insolvency of the depositary shall
be preferred before all other deposits.
320.7. The commissioner shall make an inventory of the assets of
the licensee in duplicate and file one in the office of the
commissioner and one with the clerk of the county in which the head
office of the licensee is located to be filed with the papers in the
liquidation proceedings. The inventory shall be open for inspection
at all reasonable times.
320.8. When the time fixed for the presentation of claims has
expired, the commissioner shall make in duplicate a full and complete
list of all claims presented, including and specifying claims that
have been rejected by the commissioner, and a list of all claims of
customers as shown by the books or records of the licensee for which
claims have not yet been presented, and shall file one copy of the
list in the commissioner's office and one with the clerk of the
county in which the head office of the licensee is located to be
filed with the papers in the liquidation proceedings. Before each
application to the court for leave to declare a dividend, the
commissioner shall file a supplemental list of claims presented since
the last preceding list was filed, including and specifying any
claims that have been rejected by him or her. The list of claims and
of claims of customers as shown by the books or records of the
licensee shall be open for inspection at all reasonable times.
320.9. The commissioner shall cause notice to be given by
advertisement in any newspapers of general circulation as he or she
may select weekly for three consecutive months, calling on all
persons who have claims against the licensee to present the same to
the commissioner and make legal proof thereof at a place to be
specified therein and within four months of the date of the first
publication of the notice, which date shall be specified in the
notice. The notice shall also state that all claims other than those
of customers appearing upon the books or records of the licensee
shall be forever barred if not filed within the four months' period
and that all claims of customers appearing upon the books or records
of the licensee will be forever barred, except as herein provided, if
not filed prior to the filing of a petition for a final dividend.
The commissioner shall also mail a similar notice to all persons,
including customers whose names appear as creditors upon the books of
the licensee and whose addresses appear upon the books or records of
the licensee, and shall enclose therewith a printed form of notice
of claim.
320.10. All claims of every kind against the licensee or against
any property owned or held by the licensee shall be presented to the
commissioner in writing verified by the claimant or someone on his or
her behalf within four months of the date of the first publication
of the notice to creditors. Any claim, other than the claim of a
customer whose claim appears upon the books or records of the
licensee, not presented within the four months' period shall be
forever barred and any claim of a customer whose claim appears upon
the books or records of the licensee that is not so presented prior
to the date of the filing of the petition of the commissioner with
the court for approval of the payment of the final dividend shall be
forever barred except as to any moneys remaining after all debts for
which claims were duly filed have been paid in full with interest. If
the commissioner doubts the validity of any claim, he or she may
reject the claim and serve notice of the rejection upon the claimant
either by mail or personally. An affidavit of the mailing or personal
service of the notice shall be prima facie evidence of the receipt
thereof and shall be filed with the commissioner. Any action upon a
rejected claim shall be brought within three months after the date of
mailing or personal service of the notice of rejection.
320.11. At any time and from time to time after the expiration of
the time fixed for the presentation of claims, the commissioner,
after obtaining approval of the court, may declare and pay one or
more dividends upon all approved claims out of the funds remaining in
his or her hands after the payment of expenses and after setting
aside an amount sufficient to pay to all customers, who have not yet
filed claims but whose claims appear upon the books or records of the
licensee, their pro rata share of the funds then available for the
payment of a dividend. At any time after the expiration of one year
from the date of the first publication of notice to creditors and
after obtaining the approval of the court, the commissioner may
declare and pay a final dividend.
320.12. (a) Expenses and claims of unsecured creditors have
priority in the following order:
(1) Expenses of liquidation and approved claims for fees and
assessments due the department.
(2) Approved claims given priority under other provisions of state
or federal law, including, but not limited to, Sections 320.6 and
330.
(3) Approved claims for "deposits," as that term is defined in 12
U.S.C. Section 1813(l), but including obligations of the type
described in 12 U.S.C. Section 1813(l)(5)(A) and (B).
(4) Approved claims for other general liabilities.
(5) Approved claims for obligations subordinated to deposits and
other general liabilities.
(b) Interest shall be given the same priority as the claim on
which it is based, but no interest shall be paid on any claim until
the principal of all claims within the same class has been paid or
adequately provided for in full.
(c) Any funds remaining shall be paid to the members or
shareholders, as appropriate.
320.13. Objections to any claim not rejected by the commissioner
may be made by any person interested by filing a copy of the
objection with the commissioner, who shall present the copy to the
court at the time of the next application for approval of the
declaration of a dividend. The court shall thereupon dispose of the
objections or may order a reference for that purpose, and should the
objections to any claim be sustained by the court or by the referee,
the claim shall not be allowed by the commissioner until the claimant
has established the claim by judgment.
320.14. Dividends remaining unpaid and any sums available for
payment of shares or deposits for which no claim was filed, which
remain in the hands of the commissioner six months after the order
for the payment of a final dividend, shall be deposited in the State
Treasury. The shares or deposits shall be deemed to have been
received under Chapter 7 (commencing with Section 1500) of Title 10
of Part 3 of the Code of Civil Procedure, and shall be subject to
claim or other disposition as provided in that chapter. The
commissioner may pay over the moneys held by him or her to the
persons respectively entitled thereto at any time prior to depositing
the shares or deposits in the State Treasury, upon being furnished
satisfactory evidence of the persons' right to the same.
320.15. Whenever, under the provisions of this article, the
commissioner is required to transmit unclaimed money or other
unclaimed property to any state officer for deposit in the State
Treasury, the commissioner, upon request of the Controller, shall
transmit to the Controller all signature cards and any other
identifying information available from the records of the licensee,
covering the money or other property. Upon receipt by the Controller
of the signature cards or other identifying information, the licensee
and the commissioner shall be relieved of all responsibility
therefor. The signature cards and other identifying information may
be destroyed or otherwise disposed of by the Controller whenever, in
his or her discretion, their further retention by him or her is no
longer required in the interest of the customers or the state.
320.16. All approved claims of customers and other creditors
shall bear interest at the rate provided by law on judgments from the
date that the commissioner takes possession of the property and
business of the licensee.
320.17. If the licensee has in its possession for safekeeping or
storage any jewelry, plate, money, specie, bullion, stocks, bonds,
securities, valuable papers, or other valuable personal property, or
has rented any vaults, safes, or safe-deposit boxes, the commissioner
shall cause to be mailed, by registered mail, postage prepaid, to
any known person claiming to be or appearing on the books of the
licensee to be the owner of the property or to the person in whose
name the safe, vault, or box stands a notice notifying the person to
remove all of the personal property within a specified fixed period
of not less than 60 days.
320.18. On the last day fixed in the notice for the removal of
the property or on the date when the property is removed or the box
surrendered, any contract between the person owning the property or
holding the box and the licensee shall cease and the amount of the
unearned prepaid rent or charges, if any, shall become a debt of the
licensee to the person.
320.19. If any property is not removed within the time fixed by
the notice mailed by the commissioner, the commissioner may dispose
of the property as the court, on application thereto, shall direct.
The commissioner may cause any safe, vault, or box to be opened in
his or her presence or in the presence of one of the special deputy
commissioners and of a notary not an officer or employee of the
licensee or of the commissioner. The contents thereof, if any, shall
be sealed by the notary in a package upon which the notary shall
distinctly mark the name and address of the person in whose name the
safe or box stands upon the books of the licensee and shall attach
thereon a list and a description of the property within the package.
The package so sealed and addressed, together with the list and
description may be kept by the commissioner in one or more of the
safes or boxes of the licensee or elsewhere until delivered to the
person whose name it bears or until otherwise disposed of as directed
by the court.
320.20. (a) When the commissioner has completed the liquidation
of the licensee, he or she shall petition the court for an order
declaring the licensee duly wound up and dissolved.
(b) After any notice as the court may direct and a hearing, the
court may make an order declaring the licensee duly wound up and
dissolved. The order shall declare all of the following:
(1) The licensee has been duly wound up.
(2) A final franchise tax return, if any, as described by Section
23332 of the Revenue and Taxation Code, has been filed with the
Franchise Tax Board as required under Part 10.2 (commencing with
Section 18401) of Division 2 of the Revenue and Taxation Code, and
any tax or penalty due under the Corporation Tax Law has been paid,
and the licensee's known debts and liabilities have been paid or
adequately provided for, or any taxes, penalties, debts, and
liabilities have been paid so far as the licensee's assets permitted,
as the case may be. If there are known debts or liabilities for the
payment of which adequate provision has been made, the order shall
describe the provision, setting forth any information necessary to
enable the creditor or other person to whom payment is to be made to
appear and claim payment of the debt or liability.
(3) All known assets of the licensee have been distributed to its
shareholders or wholly applied on account of the licensee's debts and
liabilities.
(4) The licensee is dissolved.
(c) The court may make additional orders and grant further relief
as it deems proper upon the evidence submitted.
(d) Upon the making of the order declaring the licensee dissolved,
the corporate existence of the licensee shall cease, except for the
purposes of any necessary further winding up.
(e) Upon the making of the order declaring the licensee dissolved,
the commissioner shall file with the Secretary of State a copy of
the order, certified by the clerk of the court.
320.21. Whenever this article requires court approval of any step
in the liquidation proceedings, approval shall be given after a
hearing upon notice as the court may direct. At the hearing, the
court may by order approve the actions of the commissioner for which
he or she has petitioned the court's approval or it may, by
appropriate order, otherwise direct the commissioner in the matter in
connection with which the petition was filed.
320.22. Whenever, in the opinion of the commissioner, the
liquidation or reorganization of any licensee taken in charge by him
or her would be facilitated, or the public interests and the
interests of customers or stockholders would be served, the
commissioner may borrow money on behalf of the licensee from any
federal agency authorized to lend money to receivers, trustees,
liquidating agents, or other agents or supervisory authorities in
charge of licensees that are closed or in process of liquidation and,
with approval of the court, the commissioner may secure any
borrowings by the pledge of the assets of the licensee in any manner
and amount the commissioner deems necessary, proper, or expedient.
325. Whenever any licensee is being liquidated or whenever the
trust business of any licensee has been discontinued and the licensee
has in its possession money or other property held by it in trust or
for safekeeping and the beneficiaries or persons entitled thereto
are unknown or cannot be found, the commissioner or the licensee,
upon obtaining approval of the superior court of the county in which
the liquidation proceedings are pending or in which the head office
of the licensee is situated, may do the following:
(a) In the case of money, deliver it to the Treasurer.
(b) In the case of other property, deliver it to the Controller
for deposit in the State Treasury.
325.1. Upon the delivery of any money to the Treasurer or upon
the delivery of any property to the Controller, a certified copy of
the order of the court approving the delivery shall be given to the
Controller, and upon the delivery of any money to the Treasurer a
notice giving the amount delivered shall be filed with the
Controller. Upon the receipt of any money or other properties, the
Treasurer or the Controller, as the case may be, shall issue a
receipt for the same and the receipt shall be deemed a voucher in
favor of the licensee to the same extent as though executed by the
beneficiary or other person entitled thereto.
325.2. All money or other property delivered to the Treasurer or
Controller pursuant to this article shall be deemed to be delivered
for deposit in the State Treasury under the provisions of Chapter 7
(commencing with Section 1500) of Title 10 of Part 3 of the Code of
Civil Procedure and shall be subject to claim or other disposition as
provided in that chapter.
330. The holder or transferor of a negotiable instrument
transferred to a licensee for collection has a preferred claim in the
amount of the liability of the licensee on the instrument if the
instrument was forwarded to the licensee by any person or by any
other financial institution for collection and remittance, if payment
therefor has not been made and if the same has been collected either
in whole or in part by the licensee, unless the holder or transferor
is a voluntary depositor in the licensee and the proceeds of the
collection, at his or her request, have been credited by the licensee
to his or her account.
SEC. 20. Article 9 (commencing with Section 335) is added to
Chapter 2 of Division 1 of the Financial Code, to read:
Article 9. Voluntary Liquidation
335. Any licensee that voluntarily has ceased to do the business
for which it is licensed shall immediately notify the commissioner
and proceed to liquidate its affairs. Any share or deposit or other
sum that has not been paid to the person entitled thereto within six
months after the licensee ceased to conduct a business shall be paid
into the State Treasury. The deposits with the State Treasury shall
be deemed to have been received under the provisions of Chapter 7
(commencing with Section 1500) of Title 10 of Part 3 of the Code of
Civil Procedure and shall be subject to claim or other disposition as
provided in that chapter. If the commissioner has reason to conclude
that the liquidation of the licensee is not being safely or
expeditiously conducted, he or she may take possession of the
business and property of the licensee in the same manner and with the
same effect and subject to the same rights accorded the licensee as
if he or she had taken possession pursuant to Article 8 (commencing
with Section 305), and he or she may proceed to liquidate the
licensee's affairs in the same manner as provided in that article.
When the licensee has been completely liquidated, its corporate
existence shall be dissolved in the manner provided by law.
335.1. If the licensee referred to in Section 335 is a
state-chartered credit union and the commissioner has taken
possession of the business and property of the credit union, the
commissioner may appoint a liquidating agent or a liquidating
committee of three members of the credit union to liquidate the
business and assets of the credit union in the manner provided in
Article 2 (commencing with Section 15250) of Chapter 9 of Division 5,
except that, in lieu of the certificate required under Section
15252, the commissioner shall prepare and file in the office of the
Secretary of State a certificate of commencement of liquidation
proceedings upon taking possession of the business and assets, and
the commissioner or his or her authorized deputy shall countersign
the certificate referred to in Sections 15257 and 15258 whenever
liquidation is involuntary. The commissioner may, however, prepare
and file a final certificate whenever he or she retains possession of
the assets of any credit union for the purpose of liquidation. The
liquidating agent need not be a member of the credit union to be
liquidated and may be a person, firm, or corporation, as determined
by the commissioner.
SEC. 21. Section 352 is added to the Financial Code, to read:
352. Except where explicitly stated or the context provides
otherwise, this division is applicable to the following:
(a) All corporations engaging in commercial banking, industrial
banking, or the trust business.
(b) All national banking associations authorized to transact
business in this state to the extent that the provisions of this
division are not inconsistent with and do not infringe paramount
federal laws governing national banking associations.
(c) All other corporations that subject themselves to the special
provisions and sections of this division.
(d) All other persons, associations, copartnerships, or
corporations who, by violating any of its provisions, become subject
to the penalties provided for in this division.
SEC. 22. Section 353 is added to the Financial Code, to read:
353. (a) A California state bank is a corporation incorporated
under Division 1 (commencing with Section 100) of Title 1 of the
Corporations Code that is, with the approval of the commissioner,
incorporated for the purpose of engaging in, or that is authorized by
the commissioner to engage in, the commercial or industrial banking
business.
(b) All provisions of law applicable to corporations generally,
including, but not limited to, the General Corporation Law (Division
1 (commencing with Section 100), Title 1 of the Corporations Code)
shall apply to banks. However, whenever any provision of this
division or any regulation or order issued under any provision (other
than this section) of this division applicable to banks is
inconsistent with any provision of law applicable to corporations
generally, that provision of this division or that regulation or
order shall apply and the provision of law applicable to corporations
generally shall not apply.
SEC. 23. Section 354 is added to the Financial Code, to read:
354. It shall be unlawful for any person, corporation, limited
liability company, partnership, firm, or any other form of business
entity allowed by law, to engage in or transact commercial banking
business, industrial banking business, or trust business within this
state except by means of a corporation duly organized for that
purpose.
SEC. 24. Section 355 is added to the Financial Code, to read:
355. No corporation shall hereafter be organized under the laws
of this state to transact the business of a commercial bank,
industrial bank, or trust company, except as provided in this
chapter.
SEC. 25. Section 356 is added to the Financial Code, to read:
356. Neither the enactment of this code nor the amendment or
repeal thereof, nor the repeal of any statute affected thereby, shall
take away or impair any liability or cause of action existing or
incurred against any bank or trust company, or the shareholders,
directors, or officers thereof.
SEC. 26. Section 357 is added to the Financial Code, to read:
357. The amount of funds of a bank or trust company that are
deposited in any other financial institution (other than a Federal
Reserve Bank) shall not at any time exceed 10 percent of the sum of
shareholders' equity, allowance for loan and lease losses, capital
notes, and debentures of the depositing bank or trust company unless
the financial institution has been designated as a depositary for the
funds of the depositing bank or trust company by a vote of the
majority of the directors of the depositing bank or trust company,
and unless the financial institution has been approved by the
commissioner as a depositary for the purposes of this section. The
commissioner may, in his or her discretion, revoke his or her
approval of any such depositary and may, in his or her discretion,
limit the amount of funds that may be deposited by any bank or trust
company with any other financial institution. A deposit by one bank
or trust company with another financial institution shall not be
regarded as a loan.
SEC. 27. Section 511 is added to the Financial Code, to read:
511. A bank, with the approval of its board, may discontinue a
facility office. Within 10 days of the date of the closure of the
facility office, the bank shall file a notice of that discontinuance
with the commissioner. The notice shall contain the information
required by Section 506. There shall be no fee associated with the
discontinuance of a facility office.
SEC. 28. Section 684 of the Financial Code is repealed.
SEC. 29. Section 770 is added to the Financial Code, to read:
770. A bank, or the agent of a bank, that has received a notice
pursuant to Section 7507.6 of the Business and Professions Code,
shall not make a subsequent assignment to skip trace, locate, or
repossess a vehicle without simultaneously, and in the same manner by
which the assignment is given, advising the assignee of the
assignment of the information contained in the notice. As used in
this section, "assignment" has the same meaning set forth in Section
7500.1 of the Business and Professions Code.
SEC. 30. Section 1210 of the Financial Code is amended to read:
1210. (a) In this article and in Article 4 (commencing with
Section 3860) of Chapter 22, "affiliate," when used with respect to a
specified person, means any person controlling, controlled by, or
under common control with, the specified person, directly or
indirectly, through one or more intermediaries.
(b) "Control" has the meaning set forth in Section 700.
(c) "Regulated corporation" means any corporation or limited
liability company or similar entity in which a bank makes an equity
investment and which the bank controls.
(d) "Securities issued by a person" means any debt, equity, or
other security issued by a person, and any and all affiliates of that
person, issued for the benefit of that person or for the benefit of
an affiliate of that person.
SEC. 31. Section 1211 of the Financial Code is amended to read:
1211. (a) Subject to the limitations and exceptions in Sections
1221 and 1330, a bank may hold both obligations made by a person, and
securities issued by that same person.
(b) The total amount of obligations and securities held by a bank
pursuant to subdivision (a) shall not exceed 25 percent of the sum of
the shareholders' equity, allowance for loan and lease losses,
capital notes and debentures of the bank.
SEC. 32. Section 1212 of the Financial Code is amended to read:
1212. Subject to prior approval by the commissioner and to any
limitations the commissioner may impose, the limitations in Sections
1211, 1221, and 1330 shall not apply to loans made by a bank to, and
the bank's investments in securities of, its regulated corporations.
SEC. 33. Section 1339 is added to the Financial Code, to read:
1339. A bank or trust company may acquire stock in settlement or
reduction of a loan or in exchange for an investment previously made
in good faith where the acquisition of the stock is necessary in
order to minimize or avoid loss arising out of the loan or
investment. The limitation in Section 1330 shall not apply to the
stock acquired in accordance with this section. Whenever any stock
that is acquired in accordance with this section can be sold for an
amount sufficient to reimburse the bank or trust company for all loss
arising out of the loan for which the stock was security or arising
out of the original investment by the bank or trust company, the bank
or trust company shall sell the same or shall convert the stock to
an investment subject to Section 1330.
SEC. 34. Section 1501.2 of the Financial Code is amended to read:
1501.2. The following persons are exempt from Section 1500:
(a) Any natural person serving as trustee of one or more trusts
where at least one trustor is a family member of that trustee. For
purposes of this section, "family member" means any lineal ancestor,
lineal descendant, person having a common lineal ancestor of not more
than four generations distant, spouse, father-in-law, mother-in-law,
sister-in-law, brother-in-law, stepparent, or stepchild.
(b) Any member of the State Bar, as specified in Section 6002 of
the Business and Professions Code, any certified public accountant,
as defined in Section 5033 of the Business and Professions Code, and
any professional corporation of one or more members of the State Bar
or certified public accountants, where these professionals are acting
as trustee of a trust established by them for their respective
clients, provided that the member of the State Bar, certified public
accountant, or professional corporation engages in no advertising for
trust business in this state.
(c) Subject to all applicable limitations and restrictions in law
for nonprofit corporations, any nonprofit corporation acting as
trustee incidental to the purposes for which it was organized.
(d) Any person appointed as receiver, trustee, or other fiduciary
by a court of competent jurisdiction acting pursuant to that
authority.
(e) Any person licensed as a professional fiduciary pursuant to
Chapter 6 (commencing with Section 6500) of Division 3 of the
Business and Professions Code.
SEC. 35. Section 1583 of the Financial Code is amended to read:
1583. The commissioner shall examine the court trust business of
a trust company at least once every 24 months and shall examine the
private trust business at such times and to such extent as he or she
may deem necessary or advisable.
SEC. 36. Section 1910 of the Financial Code is repealed.
SEC. 37. Section 1911 of the Financial Code is repealed.
SEC. 38. Section 1911.5 of the Financial Code is repealed.
SEC. 39. Section 1912 of the Financial Code is repealed.
SEC. 40. Section 1913 of the Financial Code is repealed.
SEC. 41. Section 1913.5 of the Financial Code is repealed.
SEC. 42. Section 1951 of the Financial Code is repealed.
SEC. 43. Section 1952 of the Financial Code is repealed.
SEC. 44. Chapter 17 (commencing with Section 3100) of Division 1
of the Financial Code is repealed.
SEC. 45. Section 3828 is added to the Financial Code, to read:
3828. Notwithstanding Section 3824, a foreign (other state) bank
that does not maintain offices in California may merge with or
purchase the whole business unit of a foreign (other state) bank that
already maintains one or more offices in California in accordance
with Section 3824 pursuant to federal law and the law of the domicile
of the surviving or purchasing bank. The surviving or purchasing
bank may retain the offices established in this state by the
disappearing or selling bank. Thereafter, the surviving or purchasing
bank may establish and maintain additional offices as if it were the
disappearing or selling bank.
SEC. 46. Section 14212 is added to the Financial Code, to read:
14212. (a) The commissioner, whenever in his or her opinion such
action is necessary or appropriate to carry out his or her duties,
may call a meeting of the board of directors of a credit union.
(b) A meeting of the board of a credit union called by the
commissioner shall be held upon four days' notice by first class mail
or 24 hours' notice delivered personally or by telephone. The notice
shall be given by the commissioner or, if the commissioner so
orders, by an officer of the credit union.
(c) A meeting of the board of a credit union called by the
commissioner shall be held at the head office of the credit union,
the department office closest to the head office of the credit union,
or any other place within a reasonable distance to the head office
of the credit union as may be designated by the commissioner and
specified in the notice of that meeting.
(d) The expenses of the credit union pertaining to a meeting of
the board of a credit union called by the commissioner shall be paid
by the credit union.
SEC. 47. Section 14250 of the Financial Code is amended to read:
14250. (a) (1) The commissioner may at any time investigate into
the affairs and examine the books, accounts, records, files, and any
office within or outside of this state used in the business of every
credit union, whether it acts or claims to act under or without
authority of this division.
(2) The commissioner and the commissioner's duly designated
representatives shall have free access to the offices and places of
business, books, accounts, papers, records, files, safes, and vaults
of every credit union referred to in paragraph (1).
(3) The officers and employees of every credit union being
examined shall exhibit to the examiners, on request, any or all of
its securities, books, records, and accounts and shall otherwise
cooperate with the examination so far as it may be in their power.
(b) (1) The commissioner shall examine every credit union
organized under the laws of this state to the extent and whenever and
as often as the commissioner shall deem it advisable, but in no case
less than once every two years.
(2) For purposes of this subdivision, an examination made by the
commissioner in conjunction with or with assistance from the National
Credit Union Administration or a credit union regulatory agency of
another state of the United States is deemed to be an examination
made by the commissioner.
(3) No provision of this subdivision shall be deemed to require
that the commissioner make an examination onsite at the offices of a
credit union.
SEC. 48. Section 14313 of the Financial Code is amended to read:
14313. If the commissioner finds that any of the factors set
forth in subdivisions (a) to (g), inclusive, are true with respect to
a California credit union, the commissioner may by order, without
any prior notice or hearing, take possession of the property and
business of the California credit union:
(a) That the California credit union has violated any provision of
this division, of another applicable law, of any order issued under
this division, or of any written agreement with the commissioner, or
has committed a material violation of any regulation of the
commissioner.
(b) That the California credit union is conducting its business in
an unsafe or unsound manner.
(c) That the California credit union is in such condition that it
is unsafe or unsound for it to transact credit union business.
(d) That the California credit union has inadequate net worth or
is insolvent. The net worth of the credit union shall be considered
inadequate if it is less than 2 percent of the credit union's total
assets.
(e) That the California credit union failed to pay any of its
obligations as they came due or is reasonably expected to be unable
to pay its obligations as they come due.
(f) That the California credit union has ceased to transact credit
union business.
(g) That the California credit union has, with the approval of its
board, requested the commissioner to take possession of its property
and business.
SEC. 49. Section 14315 of the Financial Code is amended to read:
14315. (a) On taking possession of the business and assets of any
credit union as provided in this chapter, the commissioner may
proceed to liquidate the credit union in the manner provided by
Article 8 (commencing with Section 305) of Chapter 2 of Division 1,
and the provisions of that article, except Sections 325, 325.1,
325.2, and 330, shall apply as if the California credit union were a
California state commercial bank, or he or she may appoint a
liquidating agent or a liquidating committee of three members of the
credit union to liquidate the business and assets of the credit union
in the manner provided in Article 2 (commencing with Section 15250)
of Chapter 9, except that in lieu of the certificate required under
Section 15252 the commissioner shall prepare and file in the office
of the Secretary of State a certificate of commencement of
liquidation proceedings upon taking possession of the business and
assets, and the commissioner or his authorized deputy shall
countersign the certificate referred to in Sections 15257 and 15258
whenever liquidation is involuntary. The commissioner may, however,
prepare and file a final certificate whenever he or she retains
possession of the assets of any credit union for the purpose of
liquidation. The liquidating agent need not be a member of the credit
union to be liquidated, and may be a person, firm, or corporation as
determined by the commissioner.
(b) If the commissioner takes possession of the property and
business of a California credit union pursuant to Section 14313, the
commissioner may tender to the National Credit Union Administration
an appointment as conservator or receiver of the California credit
union. If the National Credit Union Administration accepts the
appointment, the National Credit Union Administration shall have, in
addition to any powers conferred by federal law, the powers conferred
on the commissioner pursuant to subdivision (a).
SEC. 50. Chapter 11 (commencing with Section 31700) of Division 15
of the Financial Code is repealed.