BILL ANALYSIS Ó
SENATE BANKING & FINANCIAL INSTITUTIONS COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
AB 2289 (Daly) Hearing Date: June 18,
2014
As Amended: June 9, 2014
Fiscal: Yes
Urgency: No
SUMMARY Would amend several laws administered by the
Department of Business Oversight (DBO) to clarify the definition
of an electronic record, and would increase, from 15 days to 30
days, the amount of time in which the Commissioner of Business
Oversight (commissioner) has to review franchise applications
and franchise renewals under the Franchise Investment Law.
DESCRIPTION
1. Would amend the Check Sellers, Bill Payers, and Proraters
Law; Escrow Law; Finance Lenders Law; Franchise Investment
Law; and California Deferred Deposit Transactions Law to
provide that, notwithstanding any other law, the
commissioner may by rule or order prescribe circumstances
under which to accept electronic records, as specified, or
electronic signatures; clarify that this authority shall not
require the commissioner to accept electronic records or
electronic signatures; and state the intent of the
Legislature that DBO is encouraged to continue to expand its
use of electronic filings to the extent feasible, as budget,
resources, and equipment are made available to accomplish
that goal.
2. Would amend all of the aforementioned laws and the
Corporate Securities Law to add a definition of "electronic
record."
3. Would amend the Franchise Investment Law to provide that,
as long as no stop order is in effect, registration of an
offer of franchises automatically becomes effective on the
30th business day after the filing of a complete application
for registration or the last preeffective amendment to that
application, and would define a complete application as one
that contains the appropriate filing fee, Uniform Franchise
AB 2289 (Daly), Page 2
Disclosure Document, and all additional exhibits, including
financial statements in conformity with regulations of the
commissioner.
EXISTING LAW
4. Provides, under the Corporate Securities Law of 1968, that
notwithstanding any other provision of law, the commissioner
may by rule or order prescribe circumstances under which to
accept electronic records or electronic signatures, and
clarifies that nothing in the aforementioned language
requires the commissioner to accept electronic records or
electronic signatures (Corporations Code Section 25620).
5. Defines an electronic record under the Corporate Securities
Law as a record created, generated, sent, communicated,
received, or stored by electronic means, and includes a
record transmitted by means of facsimile machine or other
telephone transceiving equipment (Section 25620).
6. Defines an electronic signature under the Corporate
Securities Law as an electronic sound, symbol, or process
attached to or logically associated with an electronic
record and executed or adopted by a person with the intent
to sign the electronic record (Section 25620).
7. Contains a codified statement of legislative intent within
the Corporate Securities Law of 1968 which states that DBO
has continuously implemented methods to file records
electronically, including broker-dealer and investment
adviser applications, and is encouraged to continue to
expand its use of electronic filings to the extent feasible,
as budget, resources, and equipment are made available to
accomplish that goal (Section 25620).
8. Provides, under the Franchise Investment Law, that if no
stop order is in effect, registration of an offer of
franchises automatically becomes effective on the 15th
business day after an application for registration is filed,
or after the last amendment to that application is filed, or
at such earlier time as the commissioner determines (Section
31116).
9. Provides, under the Franchise Investment Law, that a
registration may be renewed for additional periods of one
year each, unless the commissioner by rule or order
AB 2289 (Daly), Page 3
specifies a different period, by submitting a registration
renewal statement no later than 15 business days prior to
the expiration of the registration, unless such period is
waived by order of the commissioner. If no stop order or
other order is in effect, provides that the registration
automatically renews on the date the prior registration was
scheduled to expire, or at such earlier time as the
commissioner determines (Section 31121).
COMMENTS
1. Purpose: This bill is intended to authorize DBO to accept
multiple types of electronic filings under several laws it
administers and to give DBO more time in which to review
original and renewal applications for franchises under the
Franchise Investment Law.
2. Background and Discussion: This bill has two unrelated
provisions.
Electronic Submissions: DBO is currently in the middle of a
multi-year effort to increase the number and type of
licensee submissions it will accept electronically.
Virtually all of the laws under DBO's jurisdiction were
written when paper submissions were the norm, and thus fail
to reference electronic filings. This bill would authorize
the commissioner to accept electronic filings under several
of the laws under DBO's jurisdiction, and would give the
commissioner the authority to prescribe the circumstances
under which such submissions would be accepted.
Additional Time to Review Franchise Applications and Renewals :
Under existing law, initial and renewal applications for
franchise registrations automatically become effective on
the 15th day after they are filed, unless the commissioner
approves them at an earlier time. This timeframe was not
problematic in 1971, when the Franchise Investment Law was
first operative, but has become increasingly problematic for
DBO as the number of franchisors has grown. DBO receives
approximately 2,000 franchise registrations and 500
exemption notice filings each year.
Under current regulation, a franchise registration expires 110
days following the end of the applicant's fiscal year,
unless the Commissioner specifies a different period.
AB 2289 (Daly), Page 4
Because most franchisors operate under a January to December
fiscal year, most renewal applications are due by the same
date. During franchise renewal season (March - May), DBO's
eight-person legal staff must review an average of over
1,000 renewal applications, as well as any other securities
filings received during that time period. This bill will
ease DBO's burden during renewal time by giving DBO staff an
additional 15 business days in which to review franchise
applications and renewals, and by clarifying that the clock
begins ticking when a complete application is submitted.
3. Summary of Arguments in Support: None received.
4. Summary of Arguments in Opposition: None received.
5. Prior and Related Legislation:
a. SB 220 (Romero), Chapter 273, Statutes of 2003:
Added Corporations Code Section 25620, thereby amending
the Corporate Securities Law of 1968 to authorize the
Commissioner of DBO to accept electronic records and
electronic signatures
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
None received
Opposition
None received
Consultant: Eileen Newhall (916) 651-4102