California Legislature—2013–14 Regular Session

Assembly BillNo. 786


Introduced by Assembly Member Dickinson

February 21, 2013


An act to amend Sections 2010, 2040, and 2084 of, and to add Sections 2154 and 2155 to, the Financial Code, relating to money transmissions.

LEGISLATIVE COUNSEL’S DIGEST

AB 786, as introduced, Dickinson. Money transmissions.

Existing law, the Money Transmission Act, provides for the regulation of money transmissions by the Department of Financial Institutions and the Commissioner of Financial Institutions. The Governor’s Reorganization Plan No. 2, as of July 1, 2013, abolishes the Department of Financial Institutions and transfers its responsibilities to the Department of Business Oversight and the Commissioner of Business Oversight.

Existing law, the Money Transmission Act, requires a person who engages in the business of money transmission in this state to be licensed by the department. Existing law provides that only a corporation or limited liability company may be issued a license under the Money Transmission Act. Existing law exempts certain persons or entities from the application of the act, as specified.

This bill would further exempt from the act a person that delivers payroll money on behalf of an employer to employees by check or deposit in a checking or savings account, as specified.

Existing law requires a licensee to maintain tangible shareholders’ equity, as defined, in an amount to be determined from time to time by the commissioner, but not less than $500,000.

This bill would require an applicant to possess, and a licensee to maintain at all times, a minimum net worth of $100,000 to $500,000, depending on estimated or actual transaction volume, as determined by the commissioner. The bill would authorize the commissioner to increase that net worth requirement to up to $2,000,000, if certain criteria are met.

Existing law provides that a licensee shall be deemed to own an eligible security under specified criteria. Existing law provides that no licensee shall be deemed not to own an eligible security solely on account of certain facts, provided that, but for that fact, the licensee would be deemed to own the eligible security.

This bill would provide that no licensee shall be deemed not to own an eligible security solely on account of the fact that the licensee holds the eligible security in a custodial capacity as an agent of its customers in a pooled account in the name of the licensee, as determined by the commissioner.

Existing law sets forth enforcement provisions under the Money Transmission Act. Existing law authorizes the commissioner to direct a licensee who is out of compliance with the Money Transmission Act to comply with the law or discontinue any unsafe or injurious practices.

This bill would provide that the commissioner has continuous authority to exercise the powers set forth in this act whether or not an application for a license has been filed with the commissioner, any license has been issued, or if issued, has been surrendered, suspended, or revoked. The bill would authorize the commissioner to bring an action, or request that the Attorney General bring an action, against any person who has violated or is about to violate the act, and would set forth the relief that is authorized, as specified.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 2010 of the Financial Code is amended
2to read:

3

2010.  

This division does not apply to the following:

4(a) The United States or a department, agency, or instrumentality
5thereof, including any federal reserve bank and any federal home
6loan bank.

P3    1(b) Money transmission by the United States Postal Service or
2by a contractor on behalf of the United States Postal Service.

3(c) A state, county, city, or any other governmental agency or
4governmental subdivision of a state.

5(d) A commercial bank or industrial bank, the deposits of which
6are insured by the Federal Deposit Insurance Corporation or its
7successor, or any foreign (other nation) bank that is licensed under
8Article 3 (commencing with Section 1800) of Chapter 20 or that
9is authorized under federal law to maintain a federal agency or
10federal branch office in this state; a trust company licensed pursuant
11to Section 1042 or a national association authorized under federal
12law to engage in a trust banking business; an association or federal
13association, as defined in Section 5102 the deposits of which are
14insured by the Federal Deposit Insurance Corporation or its
15successor; and any federally or state chartered credit union the
16member accounts of which are insured or guaranteed as provided
17in Section 14858.

18(e) Electronic funds transfer of governmental benefits for a
19federal, state, county, or local governmental agency by a contractor
20on behalf of the United States or a department, agency, or
21instrumentality thereof, or a state or governmental subdivision,
22agency, or instrumentality thereof.

23(f) A board of trade designated as a contract market under the
24federal Commodity Exchange Act (7 U.S.C. Secs. 1-25, incl.) or
25a person that, in the ordinary course of business, provides clearance
26and settlement services for a board of trade to the extent of its
27operation as or for such a board.

28(g) A person that provides clearance or settlement services
29pursuant to a registration as a clearing agency or an exemption
30from registration granted under the federal securities laws to the
31extent of its operation as such a provider.

32(h) An operator of a payment system to the extent that it provides
33processing, clearing, or settlement services, between or among
34persons excluded by this section, in connection with wire transfers,
35credit card transactions, debit card transactions, stored value
36transactions, automated clearing house transfers, or similar funds
37transfers, to the extent of its operation as such a provider.

38(i) A person registered as a securities broker-dealer under federal
39or state securities laws to the extent of its operation as such a
40broker-dealer.

begin insert

P4    1(j) A person that delivers payroll money on behalf of an
2employer to employees by check or deposit into a checking or
3savings account at a bank, savings bank, savings and loan
4association, savings association, or credit union, if that delivery
5is the only money transmission activity of which the person
6engages.

end insert
begin delete

7(j)

end delete

8begin insert(k)end insert A person listed under subdivision (d) is exempted from all
9the provisions of this division, except Sections 2062 and 2063.

10

SEC. 2.  

Section 2040 of the Financial Code is amended to read:

begin delete
11

2040.  

(a) A licensee under this division shall maintain tangible
12shareholders’ equity in an amount determined to be adequate by
13the commissioner from time to time, but in no event shall tangible
14shareholders’ equity be less than five hundred thousand dollars
15($500,000). “Tangible shareholders’ equity” means shareholders’
16or members’ equity minus intangible assets as determined in
17accordance with United States generally accepted accounting
18principles.

end delete
19begin insert

begin insert2040.end insert  

end insert
begin insert

(a) An applicant shall possess, and a licensee shall
20maintain at all times, a minimum net worth computed in
21accordance with generally accepted accounting principles of one
22hundred thousand dollars ($100,000) to five hundred thousand
23dollars ($500,000), depending on estimated or actual transaction
24volume, as determined by the commissioner.

end insert
begin insert

25(b) The commissioner may increase the amount of net worth
26required of an applicant or licensee, up to a maximum of two
27million dollars ($2,000,000), if the commissioner determines, with
28respect to the applicant or licensee, that a higher net worth is
29necessary to achieve the purposes of this division based on the
30following:

end insert
begin insert

31(1) The nature and volume of the projected or established
32business.

end insert
begin insert

33(2) The number of locations at or through which money
34transmission is or will be conducted.

end insert
begin insert

35(3) The amount, nature, quality, and liquidity of its assets.

end insert
begin insert

36(4) The amount and nature of its liabilities.

end insert
begin insert

37(5) The history of its operations and prospects for earning and
38retaining income.

end insert
begin insert

39(6) The quality of its operations.

end insert
begin insert

40(7) The quality of its management.

end insert
begin insert

P5    1(8) The nature and quality of its principals.

end insert
begin insert

2(9) The nature and quality of the persons in control.

end insert
begin insert

3(10) The history of its compliance with applicable state and
4federal law.

end insert
begin insert

5(11) Any other factor the commissioner considers relevant.

end insert
begin delete

6(b)

end delete

7begin insert(c)end insert The commissioner at any time may require a licensee to
8write down any asset held by it to a valuation that will represent
9its then fair market value. Any receivable or debt due to a licensee
10that is past due and unpaid for the period of one year shall be
11charged off, unless it is well secured or is in process of collection.

begin delete

12(c)

end delete

13begin insert(d)end insert The aggregate value of a licensee’s accounts receivable,
14excluding money transmission receivables, loans or extensions of
15credit to any one person, or that person’s affiliates, cannot exceed
1650 percent of the licensee’s tangible shareholders’ equity without
17the advanced written approval of the commissioner. Whenever
18such amount equals or exceeds 20 percent of the licensee’s tangible
19shareholders’ equity, the licensee shall maintain records evidencing
20such amount and any security or other source of payment for the
21amount owed, and such other records as the commissioner may
22require by order or regulation.

23

SEC. 3.  

Section 2084 of the Financial Code is amended to read:

24

2084.  

(a) A licensee shall be deemed to own an eligible
25security only if the following apply:

26(1) The licensee owns the eligible security solely and exclusively
27in its own right, both of record and beneficially.

28(2) The eligible security is not subject to any pledge, lien, or
29security interest.

30(3) The licensee can freely negotiate, assign, or otherwise
31transfer the eligible security.

32(b) Notwithstanding subdivision (a), no licensee shall be deemed
33not to own an eligible security solely on account of any of the
34following facts, provided that, but for that fact, the licensee would
35 be deemed to own the eligible security under the provisions of
36subdivision (a):

37(1) The fact that the eligible security is owned of record by a
38documented nominee of the licensee or by a securities depository.

P6    1(2) The fact that the licensee has pledged the eligible security
2with the United States or any state of the United States to secure
3payment by the licensee of transmission money.

begin insert

4(3) The fact that the licensee holds the eligible security in a
5custodial capacity as an agent of its customers in a pooled account
6titled in the name of the licensee for the benefit of its customers.

end insert
begin insert

7(c) The commissioner shall make a determination of the
8application of paragraph (3) of subdivision (b) on a case-by-case
9basis.

end insert
10

SEC. 4.  

Section 2154 is added to the Financial Code, to read:

11

2154.  

Whenever the commissioner deems it necessary for the
12general welfare of the public, he or she has continuous authority
13to exercise the powers set forth in this division whether or not an
14application for a license has been filed with the commissioner, any
15license has been issued, or if issued, has been surrendered,
16suspended, or revoked.

17

SEC. 5.  

Section 2155 is added to the Financial Code, to read:

18

2155.  

(a) Whenever the commissioner believes from evidence
19satisfactory to the commissioner that any person has violated or
20is about to violate a provision of this division, or a provision of
21any order, license, decision, demand, requirement, or any regulation
22adopted pursuant to this division, the commissioner may, in the
23commissioner’s discretion, bring an action, or the commissioner
24may request the Attorney General to bring an action in the name
25of the people of the State of California, against that person to enjoin
26that person from continuing that violation or doing any act in
27furtherance of the violation. Upon a proper showing, a permanent
28or preliminary injunction, restraining order, or writ of mandate
29shall be granted and other ancillary relief may be granted, as
30appropriate.

31(b) If the commissioner determines that it is in the public
32interest, the commissioner may include in any action authorized
33by subdivision (a), a claim for ancillary relief, including, but not
34limited to, a claim for restitution, disgorgement, or damages on
35behalf of the persons injured by the act or practice constituting the
36subject matter of the action. The court shall have jurisdiction to
37award additional relief.



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