BILL ANALYSIS                                                                                                                                                                                                    

                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           1155 (Dutton/Price)
          Hearing Date:  04/26/2010           Amended: 04/12/2010
          Consultant:  Maureen Ortiz      Policy Vote: BFI: 11-0
          BILL SUMMARY:   SB 1155 makes changes to the Capital Access  
          Company Law in order to streamline and increase access to  
          early-stage funding to small businesses.
                            Fiscal Impact (in thousands)

           Major Provisions         2010-11      2011-12       2012-13     Fund
          Application process          ------------unknown, likely less  
          than $100---------      Special*
          potentially offset by fee revenue
          Audits                               ------------unknown, paid  
          by licensees------------       Special*

          *Corporations Fund

          STAFF COMMENTS: 
          Applicants pay a fee of $2,000 to the Department of Corporations  
          (DOC), and are responsible for the costs of the audits.  The  
          exact costs for this program are unknown and will be dependent  
          on the number of capital access companies that are formed and  
          apply for state licensure.  For example, assuming 25 companies  
          apply for licensure under the program, the department might need  
          one personnel position, and fee revenue in this instance would  
          be $50,000.  The DOC would also incur some minor costs for  
          developing the examination protocol. There will not be any  
          additional costs for promulgating regulations since they were  
          established when the program was first created in 1999.

          The federal Investment Company Act of 1940 regulates capital  
          access companies with more than 100 shareholders.  The National  
          Securities Market Improvement Act, enacted by Congress in 1996,  


          exempted certain business venture companies from the 1940 Act  
          provided that a state program is enacted to provide licensing  
          and oversight.

          No other states currently provide a licensing scheme for capital  
          access companies. The Capital Access Company Law was established  
          in California by SB 2189 (Vasconcellos) Chapter 668, Statutes of  
          1998.  The program provides for the licensure and regulation of  
          capital access companies by the Commissioner of Corporations.   
          However, this program is currently dormant as no companies have  
          to date been licensed.    A company could apply for licensure if  
          it had, among other criteria, a tangible net worth of at least  
          $250,000 and funds of at least $5 million.  The intent was to  
          allow certain businesses seeking to become a Capital Access  
          Company to submit an application to the Department of  
          Corporations (DOC) in order to sell securities under the  
          exemption granted to specified companies under the Investment  
          Company Act of 1940.

          SB 1155 (Dutton/Price)
          Page 2

          SB 1155 redefines a "small business firm" for purposes of the  
          CAC Law as one that proposes to transact, or transacts, business  
          on a regular and continuous basis in California and which,  
          together with its affiliates, has a net worth of not more than  
          $18 million and average net income as specified of no greater  
          than $6 million during the preceding two years.  The bill also  
          adds a definition of "smaller business firm", as a person that  
          has a net worth of not more than $6 million and average net  
          income after federal income taxes no greater than $2 million.   
          At least 20% of all financing assistance provided by a licensee  
          must be through the purchase of securities of smaller business  
          firms proposing to do business wholly or substantially in  

          SB 1155 also authorizes the transfer or assignment of a CAC  
          license upon approval of the Commissioner, updates the conflict  
          of interest provisions, removes a prohibition against providing  
          financing assistance to a small business firm whose primary  
          business is providing financing assistance, and makes other  
          technical related changes.