BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1608|
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THIRD READING
Bill No: AB 1608
Author: Olsen (R), et al.
Amended: 8/13/14 in Senate
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 8-0, 6/16/14
AYES: Lieu, Wyland, Berryhill, Block, Corbett, Galgiani, Hill,
Torres
NO VOTE RECORDED: Hernandez
SENATE JUDICIARY COMMITTEE : 5-2, 6/24/14
AYES: Anderson, Corbett, Lara, Leno, Vidak
NOES: Jackson, Monning
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 78-0, 5/15/14 (Consent) - See last page for
vote
SUBJECT : Private investigators: limited liability companies
SOURCE : California Association of Licensed Investigators
DIGEST : This bill authorizes a licensed private investigator
to organize as a limited liability company (LLC) until January
1, 2018; requires a private investigator that is an LLC to
maintain liability insurance, as specified; and makes technical,
updating and conforming changes.
Senate Floor Amendments of 8/13/14 clarify the process for
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suspension of an LLC private investigator license for failure to
maintain sufficient liability insurance as required by this
bill; provide for the assignment of a private investigator
license under specified conditions; establish a fee, not to
exceed $125, for the assignment of a license; and make technical
corrections and conforming changes.
ANALYSIS :
Existing law:
1.Licenses and regulates private investigators by the Bureau of
Security and Investigative Services (BSIS) within the
Department of Consumer Affairs (DCA) under the Private
Investigator Act and makes a violation of that Act a crime.
2.Authorizes BSIS to license and regulate security guards,
proprietary private security employers, proprietary private
security officers, alarm companies, locksmiths, private patrol
operators, and repossession companies and their employees.
3.Defines "licensee" as a person licensed under the Private
Investigator Act, and "person" as any individual, firm,
company, association, organization, partnership, and
corporation.
4.Authorizes a private investigator to provide services to
protect a person, but not property, incidental to an
investigation which the investigator has previously been hired
to perform, and requires, if the investigator provides those
services, that he/she comply with specified requirements,
including maintaining an insurance policy of at least $500,000
for any one loss due to bodily injury or death, and any one
loss due to injury or destruction of property.
5.Establishes specific requirements for an application for a
private investigator license, including:
A. The application must be verified and include, among
other things, the full name and business address of the
applicant, the name under which the applicant intends to do
business, a statement as to the general nature of the
business in which the applicant intends to engage, and a
verified statement of his/her experience qualifications.
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B. Requires an individual, qualified manager, partner or
corporate officer to submit fingerprint images with the
application for the purpose of conducting criminal
background checks.
C. Requires, if the applicant is a corporation, the
application to state the true names, and complete residence
addresses of the chief executive officer, secretary, chief
financial officer, and any other corporate officer who will
be active in the business, and the designated person to be
actively in charge of the business, and requires the
application to be signed under penalty of perjury.
1.Authorizes, under the Collateral Recovery Act, BSIS to issue a
repossessor license to an individual, partnership, LLC or
corporation.
2.The Alarm Company Act authorizes, until January 1, 2016, BSIS
to issue an alarm company license to an individual,
partnership, LLC or corporation.
3.Establishes the California Revised Uniform Limited Liability
Company Act (LLC Act) to govern the formation and operation of
LLCs.
4.Provides that an LLC may engage in any lawful activity except
banking, insurance, or trust company operations or the
offering of professional services, and authorizes an LLC to
render services that may be lawfully rendered only pursuant to
a license, certificate, or registration authorized by the
Business and Professions Code (BPC) if the applicable
provisions of the BPC authorize an LLC to hold that license,
certificate, or registration.
5.Provides that nothing under the LLC Act shall be construed to
permit a domestic or foreign LLC to render professional
services, as specified.
6.Defines professional services as "any type of professional
services that may be lawfully rendered only pursuant to a
license, certification, or registration authorized by BPC, the
Chiropractic Act, or the Osteopathic Act."
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This bill:
1.Authorizes, until January 1, 2018, a private investigator to
be licensed as an LLC.
2.Requires, as a condition of the issuance, reinstatement,
reactivation, or continued valid use of a private investigator
license, an LLC to maintain a liability insurance for damages
due to acts, errors, or omissions arising out of the private
investigator services it provides in the following amounts:
A. Requires $1 million in liability insurance for a
licensee that has up to five managing members.
B. Requires an additional $100,000 in coverage for each
additional managing member up to $5 million in total
insurance.
1.Requires an LLC applicant to submit information and
documentation to BSIS which demonstrates compliance with
financial security requirements, and to submit a Certificate
of Liability Insurance to BSIS, as specified.
2.Provides that an LLC licensed as a private investigator which
fails to maintain, or provide BSIS proof of sufficient
liability insurance is subject to suspension and shall be
automatically suspended. Requires BSIS to give the licensee a
30-day written notification, prior to any automatic
suspension.
3.Requires an LLC applicant to state the true name and complete
residence address of each managing member and any other
officer or member who will be active in the business, and the
designated person actively in charge of the business.
4.Requires a copy of the most recent articles of organization,
filed with the Secretary of State, to be supplied to BSIS upon
request.
5.Requires the LLC application to be signed under penalty of
perjury.
6.Authorizes, until January 1, 2018, the assignment of a private
investigator license to another business entity if the direct
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and indirect owners of the assignor acquire the assets of the
assignee contemporaneous with the assignment of the license.
7.Specifies, that after January 1, 2018, a license issued under
the Private Investigator Act is not assignable.
8.Establishes, until January 1, 2018, a fee not to exceed $125,
for the assignment of a license.
9.Makes technical, updating and conforming changes.
Background
Private investigators in California . There are approximately
9,000 private investigators licensed by BSIS. License
requirements include 6,000 hours of compensated experience in
investigative work over three years, a law degree or completion
of a four-year course in police science plus two years (i.e.
4,000 hours) of experience or an associate degree in police
science, criminal law, or justice and 2 1/2 years (i.e. 5,000
hours) of experience. Licensing requirements also include
passing a criminal offender background check by the Department
of Justice and the Federal Bureau of Investigation and payment
of the $125 licensing fee.
There are many types of investigations carried out by private
investigators such as identifying witnesses, locating missing
children and adults, confirming the occurrence of workers'
compensation fraud, and performing background checks regarding
job applicants. While the majority of licensed private
investigator businesses are organized as sole proprietorships,
others are organized as corporations or partnerships.
LLC: A New Business Organization . An LLC is a relatively new
form of business organization in this state. An LLC is a hybrid
entity formed under the Corporations Code and consists of at
least two members who own membership interests. The company has
a legal existence distinct from its members and provides members
with limited legal liability to the same extent enjoyed by
shareholders of a traditional corporation, but allows the
members to actively participate in the management and control of
the company. Some benefits of organizing as an LLC include
pass-through taxation (which means that money the companies
earned is taxed only once at the individual member's personal
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income tax rate), and protection from individual liability for
liability incurred by or judgments against the LLC.
NOTE: For detailed background relating to LLCs, refer to the
Senate Business, Professions and Economic Development
Committee analysis of 6/16/14.
Comments
According to the author, "Licensed private investigators would
like to organize their business entities as Limited Liability
Companies (LLCs) but the Private Investigator Act (Business and
Professions Code Section 7512 et seq.) does not provide
authorization. This legislation would enable licensed private
investigator businesses to be organized as [LLCs]."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/14/14)
California Association of Licensed Investigators (source)
ARGUMENTS IN SUPPORT : In sponsoring this bill, the California
Association of Licensed Investigators (CALI) states that this
bill amends the Private Investigator Act in BPC to authorize
LLCs to be licensed as private investigators by BSIS, with a
sunset on January 1, 2020. This bill requires the submission of
pertinent information to the BSIS within DCA and requires
liability insurance. This bill is modeled after
recently-enacted measures that authorize LLCs for cemeteries,
contractors and alarm companies, according to CALI.
ASSEMBLY FLOOR : 78-0, 5/15/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,
Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V.
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Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Mansoor, Vacancy
MW:e 8/14/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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