Amended in Assembly August 12, 2013

Amended in Assembly May 16, 2013

Amended in Senate April 1, 2013

Senate Bill No. 537

Introduced by Committee on Banking and Financial Institutions (Senators Correa (Chair), Beall, Berryhill, Calderon, Hill, Hueso, begin delete Lara, end delete Roth, begin insert Torres, end insert and Walters)

February 22, 2013

An act to amend Sections 31101, 31107, 31109.1, 31114, and 31119 of the Corporations Code, and to amend Sections 101, 103, 129, 133, 155, 171, 185, 189, begin delete 326, end delete 329, 331, 376, 377, 379, 405, 413, 563, 589, 590, 600, 672, 1024, 1026, 1080, 1255, 1331, 1473, 1485, 1495, 1515, 1702, 1805, 1806, 1835, 1858, 4805.01, 4805.02, 4805.05, 4805.10, 4821.5, 4822, 4823, 4824, 4826.5, 4827, 4827.3, 4827.7, 4871.5, 4877.03, 4901.5, 4961.5, 4970, 4982, 4990, 4995, and 18003 of, to amend the heading of Article 4 (commencing with Section 670) of Chapter 7 of Division 1 of, to add Sections 186, 188, and 190 to, and to repeal and add Section 187 of, the Financial Code, relating to business.

LEGISLATIVE COUNSEL’S DIGEST

SB 537, as amended, Committee on Banking and Financial Institutions. Business and finance.

(1) Existing law provides for the regulation of specified financial institutions pursuant to the Financial Institutions Law.

This bill would revise and recast provisions of the Financial Institutions Law. The bill would, among other things, make changes to cross-references and definitions that apply to the Financial Institutions Law, as specified, in accordance with changes made to the law pursuant to Chapter 243 of the Statutes of 2011. The bill would make changes to provisions related to foreign (other nation) banks, as specified.

(2) The Franchise Investment Law generally provides for the regulation of the offer and sale of franchises. The law requires specific written disclosures, including, but not limited to, an offering circular, and authorizes the sale of a franchise to be exempt from specified requirements if the franchisor meets certain disclosure and notice requirements.

This bill, for that exemption to apply, would modify the requirement that certain written disclosures be made by a franchisor at least 10 business days prior to the sale or material modification of a franchise, and instead require those disclosures to be made at least 14 days prior to the sale or modification. The bill also would replace the term for a written document called an “offering circular” with the term “franchise disclosure document.”

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

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

SECTION 1.  

Section 31101 of the Corporations Code is
amended to read:

31101.  

There shall be exempted from the provisions of Chapter
2 (commencing with Section 31110) of this part the offer and sale
of a franchise if the franchisor complies with each of the following
minimum net worth, experience, disclosure, and notice filing
requirements:

(a) Net worth. The franchisor and, when necessary, a corporation
owning at least 80 percent of the franchisor (parent) meet one of
the following net worth requirements, according to financial
statements for the fiscal year just ended. The franchisor and the
parent, when necessary, may rely upon the immediately preceding
fiscal year’s audited financial statement for 15 months from that
fiscal year end date.

(1) The franchisor has a net worth on a consolidated basis of
not less than five million dollars ($5,000,000), according to its
audited financial statement.

(2) The franchisor has a net worth of not less than one million
dollars ($1,000,000) and its parent has a net worth of five million
dollars ($5,000,000), according to the audited financial statements
of the franchisor and its parent, respectively.

(3) The franchisor has a net worth of one million dollars
($1,000,000), according to its unaudited financial statement, and
the parent has a net worth on a consolidated basis of not less than
five million dollars ($5,000,000), according to its audited financial
statement, and the parent absolutely and unconditionally guarantees
to assume the duties and obligations of the franchisor under the
franchise agreement should the franchisor become unable to
perform its duties and obligations.

(b) Experience. The franchisor or a corporation owning at least
80 percent of the franchisor (parent) complies with one or more
of the following conditions throughout the five-year period
immediately preceding the offer and sale of the franchise, or
complies with one of the following conditions during part of the
period and one or more of the following conditions during the
balance of the period:

(1) The franchisor has had at least 25 franchisees conducting
business which is the subject of the franchise.

(2) The franchisor has conducted business which is the subject
of the franchise.

(3) The parent has had at least 25 franchisees conducting
business which is the subject of the franchise.

(4) The parent has conducted business which is the subject of
the franchise.

(c) Disclosure. (1) Except as provided in begin delete subparagraph end delete
begin insert paragraph end insert (2), the franchisor discloses in writing to each
prospective franchisee, at least 14 days prior to the execution by
the prospective franchisee of any binding franchise or other
agreement, or at least 14 days prior to the receipt of any
consideration, the following information:

(A) The name of the franchisor, the name under which the
franchisor is doing or intends to do business, and the name of any
parent or affiliated company that will engage in business
transactions with franchisees.

(B) The franchisor’s principal business address and the name
and address of its agent in the State of California authorized to
receive service of process.

(C) The business form of the franchisor, whether corporate,
partnership, or otherwise.

(D) The business experience of the franchisor, including the
length of time the franchisor (i) has conducted a business of the
type to be operated by the franchisees, (ii) has granted franchises
for such business, and (iii) has granted franchises in other lines of
business.

(E) A copy of the typical franchise contract or agreement
proposed for use or in use in this state.

(F) A statement of the franchise fee charged, the proposed
application of the proceeds of such fee by the franchisor, and the
formula by which the amount of the fee is determined if the fee is
not the same in all cases.

(G) A statement describing any payments or fees other than
franchise fees that the franchisee or subfranchisor is required to
pay to the franchisor, including royalties and payments or fees
which the franchisor collects in whole or in part on behalf of a
third party or parties.

(H) A statement of the conditions under which the franchise
agreement may be terminated or renewal refused, or repurchased
at the option of the franchisor.

(I) A statement as to whether, by the terms of the franchise
agreement or by other device or practice, the franchisee or
subfranchisor is required to purchase from the franchisor or his or
her designee services, supplies, products, fixtures, or other goods
relating to the establishment or operation of the franchise business,
together with a description thereof.

(J) A statement as to whether, by the terms of the franchise
agreement or other device or practice, the franchisee is limited in
the goods or services offered by him or her to his or her customers.

(K) A statement of the terms and conditions of any financing
arrangements when offered directly or indirectly by the franchisor
or his or her agent or affiliate.

(L) A statement of any past or present practice or of any intent
of the franchisor to sell, assign, or discount to a third party any
note, contract, or other obligation of the franchisee or subfranchisor
in whole or in part.

(M) If any statement of estimated or projected franchisee
earnings is used, a statement of such estimation or projection and
the data upon which it is based.

(N) A statement as to whether franchisees or subfranchisors
receive an exclusive area or territory.

(O) A copy of the financial statement or statements required by
subdivision (a).

(P) A copy of the unconditional guaranty, if applicable, required
by paragraph (3) of subdivision (a).

(2) In the case of a material modification of an existing
franchise, the franchisor discloses in writing to each franchisee
information concerning the specific sections of the franchise
agreement proposed to be modified and such additional information
as may be required by rule or order of the commissioner. Any
agreement by such franchisee to such material modifications shall
not be binding upon the franchisee if the franchisee, within 14
days after the receipt of such writing identifying the material
modification, notifies the franchisor in writing that the agreement
to such modification is rescinded. A writing identifying the material
modification is received when delivered to the franchisee. A written
notice by the franchisee rescinding an agreement to a material
modification is effective when delivered to the franchisor or when
deposited in the mail, postage prepaid, and addressed to the
franchisor in accordance with any notice provisions in the franchise
agreement, or when delivered or mailed to the person designated
in the franchise agreement for the receipt of notices on behalf of
the franchisor.

(d) Notice filing. The franchisor has filed with the commissioner
a notice of exemption and paid the fee required by subdivision (f)
of Section 31500 prior to an offer or sale of a franchise in this state
during any calendar year in which one or more franchises are sold,
excluding any material modification.

SEC. 2.  

Section 31107 of the Corporations Code is amended
to read:

31107.  

There shall be exempted from the provisions of Chapter
2 (commencing with Section 31110) of this part, any offer (but
not the sale) by a franchisor of a franchise while an application
for renewal or amendment is pending if the prospective franchisee
receives all of the following:

(a) The franchise disclosure document and its exhibits as filed
with the commissioner with the application for renewal or
amendment.

(b) A written statement from the franchisor that (1) the filing
has been made but is not effective, (2) the information in the
franchise disclosure document and exhibits has not been reviewed
by the commissioner, and (3) the franchisor will deliver to the
prospective franchisee an effective franchise disclosure document
and exhibits at least 14 days prior to execution by the prospective
franchisee of a binding agreement or payment of any consideration
to the franchisor, or any person affiliated with the franchisor,
whichever occurs first, showing all material changes from the
franchise disclosure document and exhibits received by the
prospective franchisee under subdivision (a) of this section.

(c) The franchise disclosure document and exhibits in
accordance with paragraph (3) of subdivision (b) of this section.

SEC. 3.  

Section 31109.1 of the Corporations Code is amended
to read:

31109.1.  

(a) There shall be exempted from the provisions of
Chapter 2 (commencing with Section 31110) the offer and sale of
a franchise registered under Section 31111, 31121, or 31123 on
terms different from the terms of the offer registered thereunder
if all of the following requirements are met:

(1) The initial offer is the offer registered under Section 31111,
31121, or 31123.

(2) The prospective franchisee receives all of the following in
a separate written appendix to the franchise disclosure document:

(A) A summary description of each material negotiated term
that was negotiated by the franchisor for a California franchise
during the 12-month period ending in the calendar month
immediately preceding the month in which the negotiated offer or
sale is made under this section.

(B) A statement indicating that copies of the negotiated terms
are available upon written request.

(C) The name, telephone number, and address of the
representative of the franchisor to whom requests for a copy of
the negotiated terms may be obtained.

(3) The franchisor certifies or declares in an appendix to its
application for renewal that it has complied with all of the
requirements of this section, in the event this exemption is claimed.

(4) The negotiated terms, on the whole, confer additional
benefits on the franchisee.

(b) The franchisor shall provide a copy of the negotiated terms
described in subdivision (a) to the prospective franchisee within
five business days following the request of the franchisee.

(c) The franchisor shall maintain copies of all material
negotiated terms for which this exemption is claimed for a period
of five years from the effective date of the first agreement
containing the relevant negotiated term. Upon the request of the
commissioner, the franchisor shall make the copies available to
the commissioner for review. For purposes of this section, the
commissioner may prescribe by rule or order the format and content
of the summary description of the negotiated terms required by
subparagraph (A) of paragraph (2) of subdivision (a).

(d) For purposes of this section, “material” means that a
reasonable franchisee would view the terms as important in
negotiating the franchise.

SEC. 4.  

Section 31114 of the Corporations Code is amended
to read:

31114.  

The application for registration shall be accompanied
by a proposed franchise disclosure document, which shall contain
the material information set forth in the application for registration,
as specified by rule of the commissioner, and such additional
disclosures as the commissioner may require. The franchise
disclosure document shall recite in bold type of not less than
10-point type that registration does not constitute approval,
recommendation, or endorsement by the commissioner.

SEC. 5.  

Section 31119 of the Corporations Code is amended
to read:

31119.  

(a) It is unlawful to sell any franchise in this state that
is subject to registration under this law without first providing to
the prospective franchisee, at least 14 days prior to the execution
by the prospective franchisee of any binding franchise or other
agreement, or at least 14 days prior to the receipt of any
consideration, whichever occurs first, a copy of the franchise
disclosure document, together with a copy of all proposed
agreements relating to the sale of the franchise.

(b) Nothing in this division shall be construed to prevent a
franchisor from providing copies of the franchise disclosure
documents to prospective franchisees through electronic means
pursuant to any requirements or conditions that may be imposed
by rule or order of the commissioner.

SEC. 6.  

Section 101 of the Financial Code is amended to read:

101.  

If and to the extent that any provision of the Financial
Institutions Law is preempted by federal law, the provision does
not apply and shall not be enforced.

SEC. 7.  

Section 103 of the Financial Code is amended to read:

103.  

The word “bank” as used in the Financial Institutions Law
means any incorporated banking institution that shall have been
incorporated to engage in commercial banking business, industrial
banking, or trust business.

SEC. 8.  

Section 129 of the Financial Code is amended to read:

129.  

Unless the provision or the context otherwise requires,
the definitions set forth in this chapter govern the construction of
the Financial Institutions Law.

SEC. 9.  

Section 133 of the Financial Code is amended to read:

133.  

If the articles of a bank provide for more or less than one
vote for any share on any matter, the references in Sections 139
and 141 to a majority or other proportion of shares means, as to
such matter, a majority or other proportion of the votes entitled to
be cast. Whenever, under Division 1 (commencing with Section
100), Title 1 of the Corporations Code, this division, or Division
1.1 (commencing with Section 1000), shares are disqualified from
voting on any matter, they shall not be considered outstanding for
the determination of a quorum at any meeting to act upon, or the
required vote to approve action upon, such matter under any
provision of Division 1 (commencing with Section 100), Title 1
of the Corporations Code, of this division, Division 1.1
(commencing with Section 1000), or of the articles or bylaws.

SEC. 10.  

Section 155 of the Financial Code is amended to read:

155.  

“Certificate of revocation” means a certificate executed
and filed with the Secretary of State pursuant to the second and
third sentences of subdivision (c) of Section 110 of the
Corporations Code, subject, however, to the provisions of Section
1106.

SEC. 11.  

Section 171 of the Financial Code is amended to read:

171.  

“Distribution to its shareholders” has the meaning set
forth in Section 166 of the Corporations Code. However, in
Division 1 (commencing with Section 100), Title 1 of the
Corporations Code, in this division, and in Division 1.1
(commencing with Section 1000), “distribution to its shareholders”
does not include any purchase of shares by a bank or by a
majority-owned subsidiary of a bank which is necessary to reduce
or avoid loss to such bank or to such subsidiary on an extension
of credit previously made in good faith. Also, in this division and
in Division 1.1 (commencing with Section 1000), “distribution to
its shareholders” includes any distribution made by a bank or by
a majority-owned subsidiary of a bank to the shareholders of any
corporation of which such bank is a majority-owned subsidiary.

SEC. 12.  

Section 185 of the Financial Code is amended to read:

185.  

“Licensee” has the following meanings:

(a) Any bank authorized by the commissioner pursuant to
Section 1042 to transact banking or trust business.

(b) Any industrial bank authorized by the commissioner pursuant
to Section 1042 to transact industrial banking business.

(c) Any trust company authorized by the commissioner pursuant
to Section 1042 to transact trust business.

(d) Any foreign (other nation) bank that is licensed under Article
2 (commencing with Section 1780) of Chapter 20 or under Article
3 (commencing with Section 1800) of Chapter 20.

(e) Any person licensed by the commissioner as a money
transmitter pursuant to Division 1.2 (commencing with Section
2000).

(f) Any person authorized by the commissioner to conduct the
business of a savings association pursuant to Division 2
(commencing with Section 5000).

(g) Any credit union authorized by the commissioner to conduct
business pursuant to Section 14154.

(h) Any foreign (other state) credit union licensed by the
commissioner to conduct business pursuant to Chapter 11
(commencing with Section 16000) of Division 5.

(i) Any foreign (other nation) credit union licensed by the
commissioner to conduct business pursuant to Chapter 12
(commencing with Section 16500) of Division 5.

(j) Any industrial loan company authorized by the commissioner
to conduct insurance premium finance business pursuant to
Division 7 (commencing with Section 18000).

(k) Any corporation licensed by the commissioner as a business
and industrial development corporation pursuant to Section 31154.

SEC. 13.  

Section 186 is added to the Financial Code, to read:

186.  

“Majority-owned subsidiary” has the meaning set forth
for “subsidiary” in subdivision (a) of Section 189 of the
Corporations Code.

SEC. 14.  

Section 187 of the Financial Code is repealed.

SEC. 15.  

Section 187 is added to the Financial Code, to read:

187.  

“Member of the public” means any person, except an
agent, officer, or employee of the department acting within the
scope of his or her agency, office, or employment. Member of the
public does not include a director, officer, employee, attorney,
accountant, or consultant of a licensee, provided that the
confidential information in question only pertains to the licensee
that employs or utilizes the director, officer, employee, attorney,
accountant, or consultant.

SEC. 16.  

Section 188 is added to the Financial Code, to read:

188.  

“Money transmitter” means a person authorized pursuant
to Chapter 3 (commencing with Section 2030) of Division 1.2 to
engage in the business of money transmission.

SEC. 17.  

Section 189 of the Financial Code is amended to read:

189.  

(a) “National bank” or “national banking association”
means a national banking association organized under the National
Bank Act.

(b) For purposes of the Financial Institutions Law, a national
bank is deemed to be a corporation.

SEC. 18.  

Section 190 is added to the Financial Code, to read:

190.  

“Officer” means:

(a) When used with respect to a corporation, any person
appointed or designated as an officer of the corporation by or
pursuant to applicable law or the articles of incorporation or bylaws
of the corporation or any person who performs with respect to the
corporation functions usually performed by an officer of a
corporation.

(b) When used with respect to a specified person other than a
natural person or a corporation, any person who performs with
respect to the specified person, functions usually performed by an
officer of a corporation with respect to the corporation.

begin delete

SEC. 19.  

Section 326 of the Financial Code is amended to read:

326.  

The commissioner is responsible for the performance of
all duties, the exercise of all powers and jurisdiction, and the
assumption and discharge of all responsibilities vested by law in
the department. The commissioner has and may exercise all the
powers necessary or convenient for the administration and
enforcement of, among other laws, the Financial Institutions Law.
The commissioner may issue such rules and regulations consistent
with law as he or she may deem necessary or advisable in executing
the powers, duties, and responsibilities of the department.

end delete

begin delete SEC. 20. end delete
begin insert SEC. 19. end insert   

Section 329 of the Financial Code is amended to read:

329.  

(a) For purposes of this section, the following definitions
apply:

(1) “Applicable law” means:

(A) With respect to any bank, Division 1.6 (commencing with
Section 4800), and any of the following provisions:

(i) Article 6 (commencing with Section 405) of Chapter 3.

(ii) Article 3 (commencing with Section 1130) of Chapter 5 of
Division 1.1.

(iii) Chapter 6 (commencing with Section 1200) of Division
1.1.

(iv) Chapter 10 (commencing with Section 1320) of Division
1.1.

(v) Chapter 14 (commencing with Section 1460) of Division
1.1.

(vi) Article 1 (commencing with Section 1530) of Chapter 15
of Division 1.1.

(vii) Chapter 16 (commencing with Section 1550) of Division
1.1.

(viii) Chapter 20 (commencing with Section 1750) of Division
1.1.

(ix) Section 456.

(x) Section 457.

(xi) Section 459.

(xii) Section 460.

(xiii) Section 461.

(xiv) Section 1331.

(xv) Chapter 21 (commencing with Section 1850) of Division
1.1.

(xvi) Chapter 18 (commencing with Section 1660) of Division
1.1.

(xvii) Chapter 19 (commencing with Section 1670) of Division
1.1.

(B) With respect to any savings association, any provision of
Division 1.6 (commencing with Section 4800) and Division 2
(commencing with Section 5000).

(C) With respect to any insurance premium finance agency, any
provision of Division 7 (commencing with Section 18000).

(D) With respect to any business and industrial development
corporation, any provision of Division 15 (commencing with
Section 31000).

(E) With respect to any credit union, any of the following
provisions:

(i) Section 14252.

(ii) Section 14253.

(iii) Section 14255.

(iv) Article 4 (commencing with Section 14350) of Chapter 3
of Division 5.

(v) Section 14401.

(vi) Section 14404.

(vii) Section 14408, only as that section applies to gifts to
directors, volunteers, and employees, and the related family or
business interests of the directors, volunteers, and employees.

(viii) Section 14409.

(ix) Section 14410.

(x) Article 5 (commencing with Section 14600) of Chapter 4
of Division 5.

(xi) Article 6 (commencing with Section 14650) of Chapter 4
of Division 5, excluding subdivision (a) of Section 14651.

(xii) Section 14803.

(xiii) Section 14851.

(xiv) Section 14858.

(xv) Section 14860.

(xvi) Section 14861.

(xvii) Section 14863.

(F) With respect to any money transmitter, any provision of
Division 1.2 (commencing with Section 2000).

(2) “Licensee” means any bank, savings association, credit
union, trust company, money transmitter, insurance premium
finance agency, or business and industrial development corporation
that is authorized by the commissioner to conduct business in this
state.

(b) Notwithstanding any other provision of this code that applies
to a licensee or a subsidiary of a licensee, after notice and an
opportunity to be heard, the commissioner may, by order that shall
include findings of fact which incorporates a determination made
in accordance with subdivision (e), levy civil penalties against any
licensee or any subsidiary of a licensee who has violated any
provision of applicable law, any order issued by the commissioner,
any written agreement between the commissioner and the licensee
or subsidiary of the licensee, or any condition of any approval
issued by the commissioner. Notwithstanding any other provision
of law, neither the commissioner nor any employee of the
department shall disclose or permit the disclosure of any record,
record of any action, or information contained in a record of any
action, taken by the commissioner under the provisions of this
section, unless the action was taken pursuant to paragraph (2) of
subdivision (b), to persons other than federal or state government
employees who are authorized by statute to obtain the records in
the performance of their official duties, unless the disclosure is
authorized or requested by the affected licensee or the affected
subsidiary of the licensee. The commissioner shall have the sole
authority to bring any action with respect to a violation of
applicable law subject to a penalty imposed under this section.

Except as provided in paragraphs (1) and (2), any penalty
imposed by the commissioner may not exceed one thousand dollars
($1,000) a day, provided that the aggregate penalty of all offenses
in any one action against any licensee or subsidiary of a licensee
shall not exceed fifty thousand dollars ($50,000).

(1) If the commissioner determines that any licensee or
subsidiary of the licensee has recklessly violated any applicable
law, any order issued by the commissioner, any provision of any
written agreement between the commissioner and the licensee or
subsidiary, or any condition of any approval issued by the
commissioner, the commissioner may impose a penalty not to
exceed five thousand dollars ($5,000) per day, provided that the
aggregate penalty of all offenses in an action against any licensee
or subsidiary of a licensee shall not exceed seventy-five thousand
dollars ($75,000).

(2) If the commissioner determines that any licensee or
subsidiary of the licensee has knowingly violated any applicable
law, any order issued by the commissioner, any provision of any
written agreement between the commissioner and the licensee or
subsidiary, or any condition of any approval issued by the
commissioner, the commissioner may impose a penalty not to
exceed ten thousand dollars ($10,000) per day, provided that the
aggregate penalty of all offenses in an action against any licensee
or subsidiary of a licensee shall not exceed 1 percent of the total
assets of the licensee or subsidiary of a licensee subject to the
penalty.

(c) Nothing in this section shall be construed to impair or impede
the commissioner from pursuing any other administrative action
allowed by law.

(d) Nothing in this section shall be construed to impair or impede
the commissioner from bringing an action in court to enforce any
law or order he or she has issued, including orders issued under
this section. Nothing in this section shall be construed to impair
or impede the commissioner from seeking any other damages or
injunction allowed by law.

(e) In determining the amount and the appropriateness of
initiating a civil money penalty under subdivision (b), the
commissioner shall consider all of the following:

(1) Evidence that the violation or practice or breach of duty was
intentional or was committed with a disregard of the law or with
a disregard of the consequences to the institution.

(2) The duration and frequency of the violations, practices, or
breaches of duties.

(3) The continuation of the violations, practices, or breaches of
duty after the licensee or subsidiary of the licensee was notified,
or, alternatively, its immediate cessation and correction.

(4) The failure to cooperate with the commissioner in effecting
early resolution of the problem.

(5) Evidence of concealment of the violation, practice, or breach
of duty or, alternatively, voluntary disclosure of the violation,
practice, or breach of duty.

(6) Any threat of loss, actual loss, or other harm to the
institution, including harm to the public confidence in the
institution, and the degree of that harm.

(7) Evidence that a licensee or subsidiary of a licensee received
financial gain or other benefit as a result of the violation, practice,
or breach of duty.

(8) Evidence of any restitution paid by a licensee or subsidiary
of a licensee of losses resulting from the violation, practice, or
breach of duty.

(9) History of prior violations, practices, or breaches of duty,
particularly where they are similar to the actions under
consideration.

(10) Previous criticism of the institution for similar actions.

(11) Presence or absence of a compliance program and its
effectiveness.

(12) Tendency to engage in violations of law, unsafe or unsound
financial institutions practices, or breaches of duties.

(13) The existence of agreements, commitments, orders, or
conditions imposed in writing intended to prevent the violation,
practice, or breach of duty.

(14) Whether the violation, practice, or breach of duty causes
quantifiable, economic benefit or loss to the licensee or the
subsidiary of the licensee. In those cases, removal of the benefit
or recompense of the loss usually will be insufficient, by itself, to
promote compliance with the applicable law, order, or written
agreement. The penalty amount should reflect a remedial purpose
and should provide a deterrent to future misconduct.

(15) Other factors as the commissioner may, in his or her
opinion, consider relevant to assessing the penalty or establishing
the amount of the penalty.

(f) The amounts collected under this section shall be deposited
in the appropriate fund of the department. For purposes of this
subdivision, the term “appropriate fund” means the fund to which
the annual assessments of fined licensees, or the parent licensee
of the fined subsidiary, are credited.

begin delete SEC. 21. end delete
begin insert SEC. 20. end insert   

Section 331 of the Financial Code is amended to read:

331.  

Notwithstanding any other provision of law, the
commissioner may adopt and implement any method of accepting
electronic filings of applications, reports, or other matters, which,
in the opinion of the commissioner, is secure. Any method of
electronic filing chosen by the commissioner shall include a method
to verify the identity of the person making the filing. The
verification shall be deemed to satisfy all other verifications
required by the Financial Institutions Law, and shall have the same
force and effect as the use of manual signatures.

begin delete SEC. 22. end delete
begin insert SEC. 21. end insert   

Section 376 of the Financial Code is amended to read:

376.  

At least once each month, the commissioner shall issue
and disseminate as the commissioner deems appropriate a bulletin
containing the following information:

(a) Information regarding any of the following actions taken
since issuance of the previous bulletin:

(1) The filing, approval, or denial under Chapter 1 (commencing
with Section 1000) of Division 1.1 of an application for authority
to organize a California state bank, or the issuance under Chapter
3 (commencing with Section 1040) of Division 1.1 of a certificate
of authority to a California state bank.

(2) The filing, approval, or denial under Article 1 (commencing
with Section 5400) of Chapter 2 of Division 2 of an application
for the issuance of an organizing permit for the organization of a
California savings association, or for the issuance under Article 2
(commencing with Section 5500) of Chapter 2 of Division 2 of a
certificate of authority to a California savings association.

(3) The filing, approval, or denial under Article 2 (commencing
with Section 14150) of Chapter 2 of Division 5 of an application
for a certificate to act as a credit union, or the issuance of a
certificate to engage in the business of a credit union.

(4) The filing, approval, or denial under Division 1.2
(commencing with Section 2000), Division 7 (commencing with
Section 18000), or Division 15 (commencing with Section 31000)
of an application for a license to engage in business, or the issuance
under any of those laws of a license to engage in business.

(5) The filing, approval, or denial under Chapter 20
(commencing with Section 1750) of Division 1.1 of an application
by a foreign (other nation) bank to establish its first office of any
particular class (as determined under Section 1753) in this state,
or the issuance under that chapter of a license in connection with
the establishment of such an office.

(6) The filing, approval, or denial under Division 1.6
(commencing with Section 4800) of an application for approval
of a sale, merger, or conversion.

(7) The filing, approval, or denial under Article 6 (commencing
with Section 5700) of Chapter 2 of Division 2 of an application
for approval of a conversion of a federal savings association into
a state savings association, or the filing of a federal charter of a
state savings association that has converted to a federal savings
association.

(8) The filing, approval, or denial under Article 7 (commencing
with Section 5750) of Chapter 2 of Division 2 of an application
for approval of a reorganization, merger, consolidation, or transfer
of assets of a state savings association.

(9) The filing, approval, or denial under Chapter 9 (commencing
with Section 15200) of Division 5 of an application for approval
of a merger, dissolution, or conversion of a credit union.

(10) The taking of possession of the property and business of a
California state bank, savings association, credit union, or person
licensed by the commissioner under any of the laws cited in
paragraph (4).

(b) Other information as the commissioner deems appropriate.

begin delete SEC. 23. end delete
begin insert SEC. 22. end insert   

Section 377 of the Financial Code is amended to read:

377.  

Notwithstanding any other provision of this code,
whenever any provision of the Financial Institutions Law requires
the pledge of securities to be deposited with the Treasurer, to ensure
the performance of any act or duty, the securities after first being
approved by the commissioner and upon the written order of the
commissioner, shall be deposited with the Treasurer. The Treasurer,
with the consent of the owner of the securities deposited or to be
deposited with the Treasurer, may place the securities in the
custody of a qualified trust company or bank in the same manner
and under the same conditions provided in Article 3 (commencing
with Section 16550) of Chapter 4 of Part 2 of Division 4 of Title
2 of the Government Code.

begin delete SEC. 24. end delete
begin insert SEC. 23. end insert   

Section 379 of the Financial Code is amended to read:

379.  

(a) For the purposes of this section the following
definitions shall apply:

(1) “Control” has the meaning set forth in subdivision (b) of
Section 1250. “Control” also means the ownership of a subject
person by means of sole proprietorship, partnership, or by any
other similar means.

(2) “Controlling person” means a person who, directly or
indirectly, controls a subject person.

(3) “Subject person” means any licensee.

(b) Notwithstanding any other provision of law, and subject to
subdivision (c), the commissioner may deliver, or cause to be
delivered, to local, state, or federal law enforcement agencies
fingerprints taken of any of the following:

(1) An applicant for employment with the department.

(2) A person licensed, or proposed to be licensed, as a subject
person.

(3) A director, officer, or employee of an existing or proposed
subject person.

(4) An existing or proposed controlling person of a subject
person.

(5) A director, officer, or employee of an existing or proposed
controlling person of a subject person.

(6) A director, officer, or employee of an existing or proposed
affiliate of a subject person.

(c) The authorization in subdivision (b) may only be used by
the department for the purpose of obtaining information regarding
an individual as to the existence and nature of the criminal record,
if any, of that individual relating to convictions, and to any arrest
for which the individual is released on bail or on his or her own
recognizance pending trial, for the commission or attempted
commission of a crime involving robbery, burglary, theft,
embezzlement, fraud, forgery, bookmaking, receiving stolen
property, counterfeiting, or involving checks or credit cards or
using computers.

(d) No request shall be submitted pursuant to this section without
the written consent of the person affected.

(e) Any criminal history information obtained pursuant to this
section shall be confidential and no recipient shall disclose its
contents other than for the purpose for which it was acquired.

begin delete SEC. 25. end delete
begin insert SEC. 24. end insert   

Section 405 of the Financial Code is amended to read:

405.  

(a) The commissioner shall annually collect pro rata from
the banks and trust companies under the supervision of the
department a fund in an amount sufficient in the commissioner’s
judgment to meet the expenses of the department in administering
laws relating to banks or trust companies or to the banking or trust
business that are not otherwise provided for and to provide a
reasonable reserve for contingencies.

(b) The amount of the annual assessment for the fund on any
bank or trust company shall not be less than five thousand dollars
($5,000). Above that minimum amount, except as otherwise
provided in subdivision (c), the annual assessment shall not exceed
the sum of the products of a base assessment rate, or percentage
thereof, and segregated portions of its total resources, according
to the following table:

 

Segregated Total Resources	Percentage of Base
(In Millions or Fractions Thereof)	Assessment Rate
First $2	100.0
Next $18	50.0
Next $80	12.0
Next $100	6.25
Next $800	6.0
Next $1,000	4.0
Next $4,000	3.5
Next $14,000	3.0
Next $20,000	2.5
Excess over $40,000	1.5

 

(c) (1) For purposes of determining the annual assessment on
banks and trust companies that have one or more foreign (other
state) branch offices, the resources of foreign (other state) branch
offices shall be excluded from total resources, except that the
commissioner may order the resources of foreign (other state)
branch offices to be included in total resources if and to the extent
that it is necessary in the commissioner’s judgment to meet the
expenses of the department on account of foreign (other state)
branch offices and a reasonable reserve for contingencies.

(2) If the commissioner finds that a bank or trust company
allocated any resource to a foreign (other state) branch office for
the purpose, in whole or in part, of reducing its annual assessment,
the commissioner may, for purposes of calculating the annual
assessment on the bank or trust company, reallocate the resource
to the bank’s or trust company’s head office.

(d) The base assessment rate shall be set by the commissioner
from time to time at the commissioner’s discretion, not to exceed
two dollars and twenty cents ($2.20) per one thousand dollars
($1,000) of total resources.

begin delete SEC. 26. end delete
begin insert SEC. 25. end insert   

Section 413 of the Financial Code is amended to read:

413.  

(a) In this section, “assessment statute” means any statute
that authorizes the commissioner to make or collect an assessment
(other than a fine) on financial institutions, including the following:

(1) Sections 405 to 407, inclusive.

(2) Section 2042.

(3) Article 2 (commencing with Section 8030) of Chapter 7 of
Division 2.

(4) Article 4 (commencing with Section 14350) of Chapter 3
of Division 5.

(5) Section 1533.

(b) The commissioner may charge to and collect from the
Financial Institutions Fund, the Credit Union Fund, each of the
accounts included in the Financial Institutions Fund, and each of
the programs included in the State Banking Account an amount
equal to the fund’s, account’s, or program’s pro rata share of those
expenses of the department which, in the opinion of the
commissioner, it is not feasible to attribute to any single one of
the funds, accounts, or programs. The fund’s, account’s, or
program’s pro rata share shall be determined and paid in the manner
and at the time ordered by the commissioner.

(c) The provisions of any assessment statute that authorize the
commissioner to make or collect an assessment for the purposes
specified in the assessment statute include authority for the
commissioner to make and collect an assessment for the additional
purpose of providing money in an amount that will, in the
commissioner’s judgment, be sufficient to make payments that
may be required under subdivision (b).

begin delete SEC. 27. end delete
begin insert SEC. 26. end insert   

Section 563 of the Financial Code is amended to read:

563.  

No provision of Section 560, 561, or 562 prohibits any
of the following from transacting any business or performing any
activity if it is authorized by applicable law to transact the business
or perform the activity and is not prohibited by any applicable law,
other than Section 560, 561, or 562, from transacting the business
or performing the activity:

(a) Any California state commercial bank, industrial bank, or
trust company.

(b) Any national bank.

(c) Any insured foreign (other state) state bank.

(d) Any foreign (other state) state bank that is licensed by the
commissioner under Article 3 (commencing with Section 1700)
of Chapter 19 of Division 1.1 to maintain a facility, as defined in
Section 1670, in this state.

(e) Any foreign (other nation) bank that is licensed by the
commissioner under Chapter 20 (commencing with Section 1750)
of Division 1.1 to maintain an office in this state.

(f) Any foreign (other nation) bank that maintains a federal
agency, as defined in subdivision (g) of Section 1750, or federal
branch, as defined in subdivision (h) of Section 1750, in this state.

(g) Any California state corporation that is incorporated for the
purpose of engaging in, and that is authorized by the commissioner
to engage in, business under Article 1 (commencing with Section
1850) of Chapter 21 of Division 1.1.

(h) Any corporation incorporated under Section 25A of the
Federal Reserve Act (12 U.S.C. Sec. 612 et seq.).

(i) Any foreign corporation that is licensed by the commissioner
under Article 1 (commencing with Section 1850) of Chapter 21
of Division 1.1 to maintain an office in this state and to transact
at that office business under Article 1 (commencing with Section
1850) of Chapter 21 of Division 1.1.

(j) Any industrial bank that is organized under the laws of
another state of the United States and is insured by the Federal
Deposit Insurance Corporation.

begin delete SEC. 28. end delete
begin insert SEC. 27. end insert   

Section 589 of the Financial Code is amended to read:

589.  

(a) In this section, “subject financial 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 financial institution to whom an order is issued under
Sections 585 to 587, 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 financial institution.

(2) Vote any shares or other securities having voting rights for
the election of any person as a director of a subject financial
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 financial institution having voting rights.

(4) Otherwise to participate in any manner in the affairs of any
subject financial institution.

begin delete SEC. 29. end delete
begin insert SEC. 28. end insert   

Section 590 of the Financial Code is amended to read:

590.  

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 or
unsound 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 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.

begin delete SEC. 30. end delete
begin insert SEC. 29. end insert   

Section 600 of the Financial Code is amended to read:

600.  

In this chapter, “Federal Insurance Agency” means the
Federal Deposit Insurance Corporation or the National Credit
Union Administration, as appropriate, or their respective
successors-in-interest.

begin delete SEC. 31. end delete
begin insert SEC. 30. end insert   

The heading of Article 4 (commencing with Section
670) of Chapter 7 of Division 1 of the Financial Code is amended
to read:

 

Article 4.  Conservatorship and Liquidation of a Bank and
Liquidation of an Uninsured Licensee

 

begin delete SEC. 32. end delete
begin insert SEC. 31. end insert   

Section 672 of the Financial Code is amended to read:

672.  

(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
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.

begin delete SEC. 33. end delete
begin insert SEC. 32. end insert   

Section 1024 of the Financial Code is amended to
read:

1024.  

(a) In this section, “control” has the meaning set forth
in Section 1250.

(b) For purposes of Section 1023, the commissioner may find:

(1) That a proposed officer or director of a proposed bank or
trust company does not have sufficient standing to afford
reasonable promise of successful operation if such person has been
convicted of, or has pleaded nolo contendere to, any crime
involving fraud or dishonesty.

(2) That the establishment of a proposed bank or trust company
will not promote the public convenience and advantage if any
person who is proposed to control the proposed bank or trust
company or any director or officer of such person has been
convicted of, or has pleaded nolo contendere to, any crime
involving fraud or dishonesty.

(c) Subdivision (b) shall not be deemed to be the only grounds
upon which the commissioner may find, for purposes of Section
1023, that a proposed officer or director of a proposed bank or
trust company does not have sufficient standing to afford
reasonable promise of successful operation or that the establishment
of a proposed bank or trust company will not promote the public
convenience and advantage.

begin delete SEC. 34. end delete
begin insert SEC. 33. end insert   

Section 1026 of the Financial Code is amended to
read:

1026.  

The commissioner may, in approving an application to
organize and establish a corporation to engage in the banking or
trust business pursuant to Section 1023, impose any conditions
the commissioner deems reasonable or necessary or advisable in
the public interest.

begin delete SEC. 35. end delete
begin insert SEC. 34. end insert   

Section 1080 of the Financial Code is amended to
read:

1080.  

If a bank violates any provision of this chapter or fails
to comply with any order, the commissioner may levy a penalty
against the bank pursuant to Section 329.

begin delete SEC. 36. end delete
begin insert SEC. 35. end insert   

Section 1255 of the Financial Code is amended to
read:

1255.  

(a) For purposes of Section 1254, the commissioner
may find:

(1) That the integrity of an acquiring person indicates that it
would not be in the interest of the depositors, creditors, or
shareholders of a bank or controlling person or in the interest of
the public to permit the acquiring person to control the bank or
controlling person if the acquiring person or any director or officer
of the acquiring person has been convicted of, or has pleaded nolo
contendere to, any crime involving fraud or dishonesty.

(2) That a plan to make a major change in the management of
a bank or controlling person is not fair and reasonable to the
depositors, creditors, or shareholders of the bank or controlling
person if the plan provides for a person who has been convicted
of, or has pleaded nolo contendere to, any crime involving fraud
or dishonesty to become a director or officer of the bank or
controlling person.

(b) Subdivision (a) shall not be deemed to be the only grounds
upon which the commissioner may find, for purposes of Section
1254, that the integrity of an acquiring person indicates that it
would not be in the interest of the depositors, creditors, or
shareholders of a bank or controlling person or in the interest of
the public to permit the acquiring person to control the bank or
controlling person or that a plan to make a major change in the
management of a bank or controlling person is not fair and
reasonable to the depositors, creditors, or shareholders of the bank
or controlling person.

begin delete SEC. 37. end delete
begin insert SEC. 36. end insert   

Section 1331 of the Financial Code is amended to
read:

1331.  

(a) For purposes of this section, the following terms
have the following meanings:

(1) “Carrying a security” means maintaining, reducing, or
retiring indebtedness originally incurred to acquire a security.

(2) “Controlling person” has the same meaning specified in
Section 1250.

(3) “Security” has the following meanings:

(A) When used with respect to a bank, “security” has the same
meaning set forth in subdivision (c) of Section 1200.

(B) When used with respect to any other person, “security” has
the same meaning set forth in Section 25019 of the Corporations
Code.

(b) No bank shall acquire, hold, extend credit on the security
of, or extend credit for the purpose of acquiring or carrying, any
security of the bank or of any controlling person of the bank.

(c) (1) Any bank which acquires or holds securities in violation
of this section shall be liable to the people of this state for twice
the market, book, or face value of the securities, whichever is
greatest.

(2) Any bank which extends credit in violation of this section
shall be liable to the people of this state for twice the amount of
the credit so extended.

(d) This section does not apply to any of the following
transactions:

(1) Any acquisition or extension of credit by a bank which is
necessary to reduce or prevent loss to the bank on debts previously
contracted in good faith.

(2) Any redemption by a bank of any of its redeemable securities
in accordance with applicable provisions of this division and of
Division 1 (commencing with Section 100) of Title 1 of the
Corporations Code.

(3) Any acquisition by a bank of any of its securities, other than
an acquisition of the type described in paragraph (1) or (2), if the
acquisition is approved in advance by the commissioner.

(e) The provisions of Section 329 shall not apply to this section.

begin delete SEC. 38. end delete
begin insert SEC. 37. end insert   

Section 1473 of the Financial Code is amended to
read:

1473.  

Sections 1481 and 1510 shall not apply to investments
held by a bank prior to January 1, 2009. All authorizations
regarding investments by a bank issued by the commissioner prior
to January 1, 2009, are terminated.

begin delete SEC. 39. end delete
begin insert SEC. 38. end insert   

Section 1485 of the Financial Code is amended to
read:

1485.  

The limitations of Section 1481 shall not apply to the
following and the following shall not be included among the
obligations of a person for the purpose of applying these
limitations:

(a) Loans secured by obligations of the United States or by
obligations unconditionally guaranteed both as to principal and
interest by the United States, having a market value at least 10
percent in excess of the loans secured thereby.

(b) Loans in an amount and of a type or class previously
approved in writing by the commissioner that are secured by not
less than a like amount of obligations of the United States or by
obligations unconditionally guaranteed both as to principal and
interest by the United States.

(c) Loans to the extent that they are covered by guarantees or
by commitments to take over or to purchase without recourse made
by (1) any Federal Reserve bank, (2) the United States, (3) any
department, bureau, board, commission, agency, or establishment
of the United States, including any corporation wholly owned
directly or indirectly by the United States, or (4) any small business
development corporation, urban development corporation, or rural
development corporation incorporated pursuant to Part 5
(commencing with Section 14000) of Division 3 of Title 1 of the
Corporations Code.

(d) Drafts or bills of exchange drawn in good faith against actual
existing values with negotiable bills of lading attached, whether
or not accepted by the drawee.

(e) Bankers’ acceptances of other banks which are eligible for
rediscount with a Federal Reserve bank.

(f) Obligations resulting from daily clearances through any
clearinghouse association.

(g) Obligations that are fully guaranteed or fully insured or
covered by a commitment to fully guarantee or fully insure by the
Federal Housing Administration.

(h) Obligations, including portions thereof, to the extent secured
by a segregated deposit account in the lending bank, provided a
security interest in the deposit has been perfected under applicable
law, and subject to all of the following conditions:

(1) Where the deposit is eligible for withdrawal before the
secured obligation matures, the lending bank shall establish internal
procedures to prevent release of the security without the lending
bank’s prior consent.

(2) A deposit that is denominated and payable in a currency
other than that of the obligation that it secures may be eligible for
this exception if the currency is freely convertible to United States
dollars.

(A) This exception applies only to that portion of the obligation
that is covered by the United States dollar value of the deposit.

(B) The lending bank shall establish procedures to periodically
revalue foreign currency deposits to ensure that the loan or
extension of credit remains fully secured at all times.

(i) Obligations described in Section 1510.

begin delete SEC. 40. end delete
begin insert SEC. 39. end insert   

Section 1495 of the Financial Code is amended to
read:

1495.  

(a) A commercial bank may make amortized loans upon
the security of residential real property to finance the purchase and
installation of material or equipment designed to promote energy
conservation or the efficient use of energy in the residential real
property securing the loan, if all of the following apply:

(1) The residential real property securing the loan consists of
not more than four dwelling units.

(2) The loan is made in connection with a concurrent loan
authorized under Section 1486.

(3) The loan is in an amount not to exceed 10 percent of the
loan made under the authority of Section 1486.

(b) A commercial bank may make additional advances, or
additional loans, to an existing borrower in order to finance the
purchase and installation of material and equipment designed to
promote energy conservation or the efficient use of energy in the
residential real property securing the loan, if all of the following
apply:

(1) The residential real property securing the loan consists of
not more than four dwelling units.

(2) The aggregate of the additional loan or advance and the
unpaid balance of the existing loan will not exceed that percent of
the appraised value of the residential real property securing the
loan permitted by Section 1486 immediately after the purchase
and installation of such material and equipment.

begin delete SEC. 41. end delete
begin insert SEC. 40. end insert   

Section 1515 of the Financial Code is amended to
read:

1515.  

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 1510 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 1510.

begin delete SEC. 42. end delete
begin insert SEC. 41. end insert   

Section 1702 of the Financial Code is amended to
read:

1702.  

Not less than 30 days before an insured foreign (other
state) bank establishes a facility, the bank shall file with the
commissioner a report and the appointment required pursuant to
Section 1703.

begin delete SEC. 43. end delete
begin insert SEC. 42. end insert   

Section 1805 of the Financial Code is amended to
read:

1805.  

(a) A foreign (other nation) bank that is licensed to
maintain an agency or branch office may transact commercial
banking business at the office, subject to the following:

(1) In case the office is a nondepositary agency, the bank shall
not transact the business of accepting deposits.

(2) In case the office is a depositary agency, the bank shall not
transact the business of accepting any deposits other than deposits
of (A) a foreign nation, (B) an agency or instrumentality of a
foreign nation, or (C) a person which resides, is domiciled, and
maintains its principal place of business in a foreign nation. For
purposes of this paragraph, “person” means any individual,
proprietorship, joint venture, partnership, trust, business trust,
syndicate, association, joint stock company, corporation, limited
liability company, or any other organization or any branch or
division thereof.

(3) In case the office is a limited branch office, the bank shall
not transact the business of accepting any deposits other than (A)
deposits of the kind described in paragraph (2), or (B) deposits
that a corporation organized under Section 25A of the Federal
Reserve Act (12 U.S.C. Sec. 612 et seq.) is permitted to accept.

(4) In case the office is a wholesale branch office, the bank shall
not transact the business of accepting any deposits other than (A)
deposits of the kind described in paragraph (2), (B) deposits of
two hundred fifty thousand dollars ($250,000) or more, or (C)
deposits the acceptance of which the commissioner determines by
regulation or order do not constitute engaging in domestic retail
deposit activities requiring deposit insurance protection.

(5) In case the office is an agency, limited branch office, or
wholesale branch office, the bank may, subject to any regulations
that the commissioner may prescribe, maintain credit balances.

(6) In any case, the bank shall not transact any business that it
is not authorized to transact or is prohibited from transacting under
the law of its domicile or that commercial banks organized under
the laws of this state are not authorized to transact or are prohibited
from transacting.

(b) No foreign (other nation) bank that is licensed to maintain
an agency or branch office shall transact any trust business at the
office except as permitted under Section 1555.

begin delete SEC. 44. end delete
begin insert SEC. 43. end insert   

Section 1806 of the Financial Code is amended to
read:

1806.  

(a) In addition to other provisions of this division and
Division 1 (commencing with Section 99) that are otherwise
applicable to or with respect to foreign (other nation) banks
licensed to maintain nondepositary agencies, the following
provisions of this division shall apply to or with respect to each
foreign (other nation) bank licensed to maintain a nondepositary
agency with respect to its business in this state as if the bank were
a commercial bank organized under the laws of this state:

(1) Article 6 (commencing with Section 405) of Chapter 3 of
Division 1.

(2) Chapter 6 (commencing with Section 550) of Division 1.

(3) Chapter 4.5 (commencing with Section 1090).

(4) Chapter 17 (commencing with Section 1620).

(5) Chapter 19 (commencing with Section 1670).

(b) In addition to other provisions of this division and Division
1 (commencing with Section 99) which are otherwise applicable
to or with respect to foreign (other nation) banks licensed to
maintain depositary agencies or branch offices, the following
provisions of this division and Division 1 (commencing with
Section 99) shall apply to or with respect to each foreign (other
nation) bank licensed to maintain a depositary agency or branch
office with respect to its business in this state as if the bank were
a commercial bank organized under the laws of this state:

(1) Article 6 (commencing with Section 405) of Chapter 3 of
Division 1.

(2) Chapter 6 (commencing with Section 550) of Division 1.

(3) Chapter 4.5 (commencing with Section 1090).

(4) Chapter 10 (commencing with Section 1320).

(5) Chapter 12 (commencing with Section 1400).

(6) Chapter 13 (commencing with Section 1450).

(7) Chapter 14 (commencing with Section 1460).

(8) Chapter 17 (commencing with Section 1620).

(9) Chapter 19 (commencing with Section 1670).

(10) Section 1864 and Article 2 (commencing with Section
1900), Article 3 (commencing with Section 1905), and Article 4
(commencing with Section 1910) of Chapter 21.

(c) Whenever any provision of this chapter or of any regulation
or order issued under this chapter that is applicable to or with
respect to foreign (other nation) banks licensed to transact business
in this state is inconsistent with any provision of any other chapter
of this division and Division 1 (commencing with Section 99) that
is applicable to or with respect to foreign (other nation) banks
licensed to transact business in this state, the former provision
shall apply, and the latter provision shall not apply.

(d) (1) Whenever any provision of this division (other than the
provisions of this chapter) and Division 1 (commencing with
Section 99) is applicable to or with respect to foreign (other nation)
banks licensed to transact business in this state, the provision shall
be applied with any changes in points of detail as may be necessary
or appropriate.

(2) Without limiting the provisions of paragraph (1), for
purposes of any provision of this division (other than the provisions
of this chapter) and Division 1 (commencing with Section 99) that
is applicable to or with respect to a foreign (other nation) bank
licensed to transact business in this state:

(A) “Approved by (or approval of) the board” means approved
or ratified by the board of the bank, by a committee of the board
authorized to exercise the powers of the board with respect to the
particular matter, or by an officer of the bank who is assigned to
the head office of the bank and who has authority over the bank’s
business in this state, including authority to approve or ratify the
particular matter.

(B) “Head office” means the primary office of the bank.

(C) “Shareholders’ equity” means the shareholders’ equity of
the bank or, if the bank has no shareholders’ equity, the closest
equivalent account or accounts.

(e) Whenever any provision of this division (other than the
provisions of this chapter) and Division 1 (commencing with
Section 99) that is applicable to or with respect to a foreign (other
nation) bank licensed to transact business in this state limits the
amount of any assets or liabilities of the bank (including, by way
of example, the amount of borrowings of, obligations to, or
investments of the bank), for purposes of calculating the amount
of the assets or liabilities, only the assets or liabilities of the
agencies or branch offices of the bank shall be included, and the
assets and liabilities of offices of the bank outside this state shall
be excluded.

begin delete SEC. 45. end delete
begin insert SEC. 44. end insert   

Section 1835 of the Financial Code is amended to
read:

1835.  

(a) If the commissioner finds that any of the factors set
forth in Section 1831 is true with respect to any foreign (other
nation) bank which is licensed to transact business in this state and
that it is necessary for the protection of the interests of the creditors
of such bank’s business in this state or for the protection of the
public interest that he or she take immediate possession of the
property and business of the bank, the commissioner may by order
forthwith take possession of the property and business of the bank
and retain possession until the bank resumes business in this state
or is finally liquidated. The bank may, with the consent of the
commissioner, resume business in this state upon such conditions
as the commissioner may prescribe.

(b) (1) Whenever the commissioner takes possession of the
property and business of a foreign (other nation) bank pursuant to
subdivision (a), such bank may, within 10 days, apply to the
superior court in the county in which the primary office of the
bank 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 such application
or enjoin the commissioner from further proceedings and order
him or her to surrender the property and business of the bank to
the bank or make such further order as may be just.

(2) The judgment of the court may be appealed by the
commissioner or by the bank in the manner provided by law for
appeals from the judgment of a superior court to the court of
appeal. In case the commissioner appeals the judgment of the court,
such appeal shall operate as a stay of the judgment, and the
commissioner shall not be required to post any bond.

(c) Whenever the commissioner takes possession of the property
and business of a foreign (other nation) bank pursuant to
subdivision (a), the commissioner shall conserve or liquidate the
property and business of the bank pursuant to Chapter 6
(commencing with Section 550) and Chapter 7 (commencing with
Section 600) of Division 1, and the provisions of those chapters
shall apply, except Sections 592, 593, and 690, as if the bank were
a bank organized under the laws of this state.

(d) When the commissioner has completed the liquidation of
the property and business of a foreign (other nation) bank, the
commissioner shall transfer any remaining assets to such bank in
accordance with such orders as the court may issue. However, in
case the bank has an office in another state of the United States
which is in liquidation and the assets of such office appear to be
insufficient to pay in full the creditors of the office, the court shall
order the commissioner to transfer to the liquidator of the office
such amount of any such remaining assets as appears to be
necessary to cover such insufficiency; if there are two or more
such offices and the amount of remaining assets is less than the
aggregate amount of insufficiencies with respect to the offices, the
court shall order the commissioner to distribute the remaining
assets among the liquidators of such offices in such manner as the
court finds equitable.

begin delete SEC. 46. end delete
begin insert SEC. 45. end insert   

Section 1858 of the Financial Code is amended to
read:

1858.  

Nothing contained in this article shall prevent
corporations from purchasing and holding stock in any corporation
where such purchase shall be necessary to prevent a loss upon a
debt previously contracted in good faith; and stock so purchased
or acquired in corporations shall within six months from such
purchase be sold or disposed of at public or private sale unless the
time to so dispose of same is extended by the commissioner.

begin delete SEC. 47. end delete
begin insert SEC. 46. end insert   

Section 4805.01 of the Financial Code is amended
to read:

4805.01.  

Subject to additional definitions contained in this
division that are applicable to specific provisions of this division
and unless the context otherwise requires:

(a) The definitions in this article apply throughout this division.

(b) The definitions in Chapter 1 (commencing with Section 99)
of Division 1 and in Section 1750 apply throughout this division.
For this purpose, “this division,” as used in Sections 139 and 141,
means:

(1) In the case of a California state bank, Division 1
(commencing with Section 99), Division 1.1 (commencing with
Section 1000), and this division.

(2) In the case of a California state savings association, this
division and Division 2 (commencing with Section 5000).

begin delete SEC. 48. end delete
begin insert SEC. 47. end insert   

Section 4805.02 of the Financial Code is amended
to read:

4805.02.  

(a) In this division, “bank” means a commercial bank
or trust company (other than an industrial loan company authorized
to engage in trust business). “Bank” does not include an industrial
loan company.

(b) Notwithstanding subdivision (a), “foreign (other nation)
bank” has the meaning set forth in paragraph (1) of subdivision
(b) of Section 177.

begin delete SEC. 49. end delete
begin insert SEC. 48. end insert   

Section 4805.05 of the Financial Code is amended
to read:

4805.05.  

“California state-licensed foreign (other nation) bank,”
when used with respect to a sale or merger, means a foreign (other
nation) bank that is licensed under Article 3 (commencing with
Section 1800) of Chapter 20 of Division 1.1 to maintain an agency
or branch office in this state immediately before the effective time
of the sale or merger in case it is the selling or disappearing
corporation or at the effective time of the sale or merger in case it
is the purchasing or surviving corporation.

begin delete SEC. 50. end delete
begin insert SEC. 49. end insert   

Section 4805.10 of the Financial Code is amended
to read:

4805.10.  

In this division, “industrial loan company” means an
industrial bank as defined in Section 111.

begin delete SEC. 51. end delete
begin insert SEC. 50. end insert   

Section 4821.5 of the Financial Code is amended to
read:

4821.5.  

Any certificate of authority, license, or other
authorization issued under subdivision (b) of Section 4858,
subdivision (b) of Section 4879.12, subdivision (b) of Section
4888, subdivision (b) of Section 4928, or Section 4948 or 4949 is
deemed to have been issued under the provisions of Division 1.1
(commencing with Section 1000) or Division 2 (commencing with
Section 5000) that would otherwise apply to the issuance of the
certificate of authority, license, or other authorization.

begin delete SEC. 52. end delete
begin insert SEC. 51. end insert   

Section 4822 of the Financial Code is amended to
read:

4822.  

(a) References in this division to the voting of the shares
of a California state depository corporation shall be construed in
accordance with Section 111 of the Corporations Code.

(b) If the articles of a California state depository corporation
provide for more or less than one vote for any share on any matter
that is subject to this division, the references in Sections 139 and
141 (which are made applicable to this division by Section
4805.01) to a majority or other proportion of shares mean, as to
the matter, a majority or other proportion of the votes entitled to
be cast.

(c) Whenever shares of a California state depository corporation
are disqualified under any applicable law from voting on any matter
that is subject to this division, the shares shall not be considered
outstanding for the determination of a quorum at any meeting to
act upon, or the required vote to approve action upon, the matter.

begin delete SEC. 53. end delete
begin insert SEC. 52. end insert   

Section 4823 of the Financial Code is amended to
read:

4823.  

References in this division to shareholders’ equity mean
shareholders’ equity determined in accordance with generally
accepted accounting principles, subject (a) in the case of California
state banks or California industrial loan companies, to the
provisions of Section 463, and (b) in the case of California state
savings associations, to the provisions of Division 2 (commencing
with Section 5000).

begin delete SEC. 54. end delete
begin insert SEC. 53. end insert   

Section 4824 of the Financial Code is amended to
read:

4824.  

In determining for purposes of this division whether the
shareholders’ equity of a California state depository corporation
will be adequate:

(a) In case the corporation is, or is to convert into, a California
state bank, the commissioner shall consider the factors specified
in Section 1150.

(b) In case the corporation is, or is to convert into, a California
state savings association or a California industrial loan company,
the commissioner shall consider factors equivalent to those
specified in Section 1150.

begin delete SEC. 55. end delete
begin insert SEC. 54. end insert   

Section 4826.5 of the Financial Code is amended to
read:

4826.5.  

Notwithstanding any other provision of this division:

(a) The provisions of Chapter 19 (commencing with Section
1670) of Division 1.1 apply to any transaction that is subject to
this division. Whenever any provision of Chapter 19 (commencing
with Section 1670) of Division 1.1 or of any regulation or order
issued under Chapter 19 (commencing with Section 1670) of
Division 1.1 is inconsistent with any provision of this division or
of any regulation or order issued under this division, the provision
of Chapter 19 (commencing with Section 1670) of Division 1.1
or of the regulation or order issued under Chapter 19 (commencing
with Section 1670) of Division 1.1 applies, and the provision or
this division or of the regulation or order issued under this division
does not apply.

(b) Nothing in this division authorizes any sale or merger in a
case where the purchasing or surviving depository corporation is
a foreign depository corporation if the sale or merger is prohibited
by Chapter 19 (commencing with Section 1670) of Division 1.1.

(c) Nothing in this division constitutes an election by this state
under federal law to prohibit or permit interstate sales or mergers
between banks or industrial loan companies.

begin delete SEC. 56. end delete
begin insert SEC. 55. end insert   

Section 4827 of the Financial Code is amended to
read:

4827.  

Except as expressly provided otherwise in this division:

(a) (1) No sale of a whole business unit (as defined in Section
4840) or merger in which the selling or disappearing depository
corporation is a California state savings association, in which the
purchasing or surviving depository corporation is a California state
bank, a California industrial loan company, or a California
state-licensed foreign (other nation) bank, and which may be
effected with the approval of the commissioner pursuant to this
division is prohibited or restricted by any provision of Division 2
(commencing with Section 5000) or requires any approval, consent,
or other authorization of the commissioner pursuant to Division 2
(commencing with Section 5000).

(2) No conversion in which the converting depository
corporation is a California state savings association in which the
resulting depository corporation is a California state bank or a
California industrial loan company, and which may be effected
with the approval of the commissioner pursuant to this division is
prohibited or restricted by any provision of Division 2
(commencing with Section 5000) or requires any approval, consent,
or other authorization of the commissioner pursuant to Division 2
(commencing with Section 5000).

(b) (1) No sale of a whole business unit (as defined in Section
4840) or merger in which the selling or disappearing depository
corporation is a California state bank, a California state-licensed
foreign (other nation) bank, or a California industrial loan
company, in which the purchasing or surviving depository
corporation is a California state savings association, and which
may be effected with the approval of the commissioner pursuant
to this division is prohibited or restricted by any provision of
Division 1.1 (commencing with Section 1000), except the
provisions of Chapter 19 (commencing with Section 1670) of
Division 1.1, or requires any approval, consent, or other
authorization of the commissioner pursuant to Division 1.1
(commencing with Section 1000), except as may be required under
the provisions of Chapter 19 (commencing with Section 1670) of
Division 1.1.

(2) No conversion in which the converting depository
corporation is a California state bank or a California industrial
loan company, in which the resulting depository corporation is a
California state savings association, and which may be effected
with the approval of the commissioner pursuant to this division is
prohibited or restricted by any provision of Division 1.1
(commencing with Section 1000), except the provisions of Chapter
19 (commencing with Section 1670) of Division 1.1, or requires
any approval, consent, or other authorization of the commissioner
pursuant to Division 1.1 (commencing with Section 1000), except
as may be required under the provisions of Chapter 19
(commencing with Section 1670) of Division 1.1.

begin delete SEC. 57. end delete
begin insert SEC. 56. end insert   

Section 4827.3 of the Financial Code is amended to
read:

4827.3.  

Except as otherwise provided in paragraph (2) of
subdivision (a) of Section 4827.7 in the case of a California
state-licensed foreign (other nation) bank or in federal law in the
case of a federally licensed foreign (other nation) bank, nothing
in this division except subdivision (c) of Section 4879.02 authorizes
any sale or merger in a case where the purchasing or surviving
corporation is a foreign (other nation) bank unless the foreign
(other nation) bank is at the effective time of the sale or merger
licensed under Article 3 (commencing with Section 1800) of
Chapter 20 of Division 1.1 or authorized under federal law to
transact in this state the business to be acquired in the sale or
merger.

begin delete SEC. 58. end delete
begin insert SEC. 57. end insert   

Section 4827.7 of the Financial Code is amended to
read:

4827.7.  

(a) (1) Except as otherwise provided in paragraph
(2):

(A) No California state depository corporation may, as the
selling or disappearing depository corporation, make a sale or
merger pursuant to this division in which it would transfer to a
California state-licensed or federally licensed foreign (other nation)
bank any deposit or fiduciary account that the foreign bank is not
authorized to accept.

(B) No California state-licensed foreign (other nation) bank
may, as the purchasing or surviving depository corporation, make
a sale or merger pursuant to this division in which it would acquire
any deposit or fiduciary account that it is not authorized to accept.

(2) Notwithstanding paragraph (1) and Section 1805, a
California state depository corporation may, as the selling or
disappearing depository corporation, make a sale or merger
pursuant to this division in which it transfers to a California
state-licensed or federally licensed foreign (other nation) bank
deposits or fiduciary accounts that the foreign bank is not
authorized to accept, and a California state-licensed foreign (other
nation) bank may, as the purchasing or surviving depository
corporation, make a sale or merger pursuant to this division in
which it acquires deposits or fiduciary accounts that it is not
authorized to accept, if, concurrently with the effective time of the
sale or merger, the foreign bank, pursuant to Article 5 (commencing
with Section 4879.01) of Chapter 3 or other applicable law, sells
all those deposits and fiduciary accounts to a depository corporation
that is authorized to accept them.

(b) (1) Except as otherwise provided in paragraph (2):

(A) No California state bank or industrial loan company may,
as the selling, disappearing, or converting depository corporation,
make a sale, merger, or conversion pursuant to this division in
which it would transfer to a savings association any deposit or
fiduciary account that the savings association is not authorized to
accept.

(B) No California state savings association may, as the
purchasing, surviving, or resulting depository corporation, make
a sale, merger, or conversion pursuant to this division in which it
would acquire any deposit or fiduciary account that it is not
authorized to accept.

(2) Notwithstanding paragraph (1) and Division 2 (commencing
with Section 5000), a California state bank or industrial loan
company may, as the selling, disappearing, or converting
depository corporation, make a sale, merger, or conversion pursuant
to this division in which it transfers to a savings association
deposits or fiduciary accounts that the savings association is not
authorized to accept, and a California state savings association
may, as the purchasing, surviving, or resulting depository
corporation, make a sale, merger, or conversion pursuant to this
division in which it acquires deposits or fiduciary accounts that it
is not authorized to accept, if, concurrently with the effective time
of the sale, merger, or conversion, the savings association, pursuant
to Article 5 (commencing with Section 4879.01) of Chapter 3 or
other applicable law, sells all those deposits and fiduciary accounts
to a depository corporation that is authorized to accept them.

(c) (1) Except as otherwise provided in paragraph (2):

(A) No California state bank or savings association may, as the
selling, disappearing, or converting depository corporation, make
a sale, merger, or conversion pursuant to this division in which it
would transfer to an industrial loan company any deposit or
fiduciary account that the industrial loan company is not authorized
to accept.

(B) No California industrial loan company may, as the
purchasing, surviving, or resulting depository corporation, make
a sale, merger, or conversion pursuant to this division in which it
would acquire any deposit or fiduciary account that it is not
authorized to accept.

(2) Notwithstanding paragraph (1) and Division 1.1
(commencing with Section 1000), a California state bank or savings
and loan association may, as the selling, disappearing, or converting
depository corporation, make a sale, merger, or conversion pursuant
to this division in which it transfers to an industrial loan company
deposits or fiduciary accounts that the industrial loan company is
not authorized to accept, and a California industrial loan company
may, as the purchasing, surviving, or resulting depository
corporation, make a sale, merger, or conversion pursuant to this
division in which it acquires deposits or fiduciary accounts that it
is not authorized to accept, if, concurrently with the effective time
of the sale, merger, or conversion, the industrial loan company,
pursuant to Article 5 (commencing with Section 4879.01) of
Chapter 3 or other applicable law, sells all those deposit accounts
and fiduciary accounts to a depository corporation that is authorized
to accept them.

begin delete SEC. 59. end delete
begin insert SEC. 58. end insert   

Section 4871.5 of the Financial Code is amended to
read:

4871.5.  

(a) No provision of Division 1.1 (commencing with
Section 1000), except the provisions of Chapter 19 (commencing
with Section 1670) of Division 1.1, prohibits or restricts a sale in
a case where the seller is a California state bank or a California
industrial loan company.

(b) No provision of Division 2 (commencing with Section 5000)
prohibits or restricts a sale in a case where the seller is a California
state savings and loan association.

begin delete SEC. 60. end delete
begin insert SEC. 59. end insert   

Section 4877.03 of the Financial Code is amended
to read:

4877.03.  

No provision of Division 1.1 (commencing with
Section 1000), except the provisions of Chapter 19 (commencing
with Section 1670) of Division 1.1, prohibits or restricts a sale in
a case where the seller is a California state bank or a California
industrial loan company.

begin delete SEC. 61. end delete
begin insert SEC. 60. end insert   

Section 4901.5 of the Financial Code is amended to
read:

4901.5.  

(a) No provision of Division 1.1 (commencing with
Section 1000), except the provisions of Chapter 19 (commencing
with Section 1670) of Division 1.1, prohibits or restricts the merger
of a California state bank or California industrial loan company.

(b) No provision of Division 2 (commencing with Section 5000)
prohibits or restricts the merger of a California state savings and
loan association.

begin delete SEC. 62. end delete
begin insert SEC. 61. end insert   

Section 4961.5 of the Financial Code is amended to
read:

4961.5.  

(a) No provision of Division 1.1 (commencing with
Section 1000), except the provisions of Chapter 19 (commencing
with Section 1670) of Division 1.1, prohibits or restricts the
conversion of a California state bank.

(b) No provision of Division 2 (commencing with Section 5000)
prohibits or restricts the conversion of a California state savings
and loan association.

(c) No provision of Division 7 (commencing with Section
18000), except the provisions of Chapter 10 (commencing with
Section 18660) of Division 7, prohibits or restricts the conversion
of a California industrial loan company.

begin delete SEC. 63. end delete
begin insert SEC. 62. end insert   

Section 4970 of the Financial Code is amended to
read:

4970.  

For purposes of this division:

(a) “Annual percentage rate” means the annual percentage rate
for the loan calculated according to the provisions of the federal
Truth in Lending Act and the regulations adopted thereunder by
the Federal Reserve Board.

(b) “Covered loan” means a consumer loan in which the original
principal balance of the loan does not exceed the most current
conforming loan limit for a single-family first mortgage loan
established by the Federal National Mortgage Association in the
case of a mortgage or deed of trust, and where one of the following
conditions are met:

(1) For a mortgage or deed of trust, the annual percentage rate
at consummation of the transaction will exceed by more than eight
percentage points the yield on Treasury securities having
comparable periods of maturity on the 15th day of the month
immediately preceding the month in which the application for the
extension of credit is received by the creditor.

(2) The total points and fees payable by the consumer at or
before closing for a mortgage or deed of trust will exceed 6 percent
of the total loan amount.

(c) “Points and fees” shall include the following:

(1) All items required to be disclosed as finance charges under
Sections 226.4(a) and 226.4(b) of Title 12 of the Code of Federal
Regulations, including the Official Staff Commentary, as amended
from time to time, except interest.

(2) All compensation and fees paid to mortgage brokers in
connection with the loan transaction.

(3) All items listed in Section 226.4(c)(7) of Title 12 of the Code
of Federal Regulations, only if the person originating the covered
loan receives direct compensation in connection with the charge.

(d) “Consumer loan” means a consumer credit transaction that
is secured by real property located in this state used, or intended
to be used or occupied, as the principal dwelling of the consumer
that is improved by a one-to-four residential unit. “Consumer loan”
does not include a reverse mortgage, an open line of credit as
defined in Part 226 of Title 12 of the Code of Federal Regulations
(Regulation Z), or a consumer credit transaction that is secured by
rental property or second homes. “Consumer loan” does not include
a bridge loan. For purposes of this division, a bridge loan is any
temporary loan, having a maturity of one year or less, for the
purpose of acquisition or construction of a dwelling intended to
become the consumer’s principal dwelling.

(e) “Original principal balance” means the total initial amount
the consumer is obligated to repay on the loan.

(f) “Licensing agency” shall mean the Department of Real Estate
for licensed real estate brokers, the Department of Corporations
for licensed residential mortgage lenders and licensed finance
lenders and brokers, and the Department of Financial Institutions
for commercial and industrial banks and savings associations and
credit unions organized in this state.

(g) “Licensed person” means a real estate broker licensed under
the Real Estate Law (Part 1 (commencing with Section 10000) of
Division 4 of the Business and Professions Code), a finance lender
or broker licensed under the California Finance Lenders Law
(Division 9 (commencing with Section 22000)), a residential
mortgage lender licensed under the California Residential Mortgage
Lending Act (Division 20 (commencing with Section 50000)), a
commercial or industrial bank organized under the Banking Law
(Division 1.1 (commencing with Section 1000)), a savings
association organized under the Savings Association Law (Division
2 (commencing with Section 5000)), and a credit union organized
under the California Credit Union Law (Division 5 (commencing
with Section 14000)). Nothing in this division shall be construed
to prevent any enforcement by a governmental entity against any
person who originates a loan and who is exempt or excluded from
licensure by all of the licensing agencies, based on a violation of
any provision of this division. Nothing in this division shall be
construed to prevent the Department of Real Estate from enforcing
this division against a licensed salesperson employed by a licensed
real estate broker as if that salesperson were a licensed person
under this division. A licensed person includes any person engaged
in the practice of consumer lending, as defined in this division, for
which a license is required under any other provision of law, but
whose license is invalid, suspended or revoked, or where no license
has been obtained.

(h) “Originate” means to arrange, negotiate, or make a consumer
loan.

(i) “Servicer” has the same meaning provided in Section 6 (i)(2)
of the begin insert federal end insert Real Estate Settlement Procedures Act of 1974
begin insert (Public Law 93-533) end insert .

begin delete SEC. 64. end delete
begin insert SEC. 63. end insert   

Section 4982 of the Financial Code is amended to
read:

4982.  

Any violation of this division by a bank is a violation of
Division 1.1 (commencing with Section 1000); a violation by a
savings association is a violation of Division 2 (commencing with
Section 5000); a violation by a credit union is a violation of
Division 5 (commencing with Section 14000); and a violation by
an industrial loan company is a violation of Division 7
(commencing with Section 18000).

begin delete SEC. 65. end delete
begin insert SEC. 64. end insert   

Section 4990 of the Financial Code is amended to
read:

4990.  

(a) Any person convicted of a felony violation of any
of the provisions specified in subdivision (b) shall not serve in any
capacity as a director or officer or in any other position involving
any management duties with a financial institution in this state
with accounts insured by an agency or instrumentality of the United
States or a private share insurance or guaranty arrangement. This
subdivision does not, however, apply to any director or officer of
a financial institution, or to persons serving in managerial positions
for financial institutions, whose office or employment with a
financial institution commenced, and whose felony conviction
occurred, prior to January 1, 1991.

(b) Subdivision (a) applies to felony convictions of offenses
specified in Chapter 10 (commencing with Section 1320) of
Division 1.1, Article 4 (commencing with Section 5300) of Chapter
1 of Division 2, Article 8 (commencing with Section 14750) of
Chapter 4 of Division 5, and Chapter 6 (commencing with Section
18435) of Division 7. Subdivision (a) also applies to felony
convictions of offenses specified in provisions of the laws of the
United States added or amended by the federal Financial
Institutions Reform, Recovery, and Enforcement Act of 1989
(Public Law 101-73).

(c) On and after January 1, 1991, any person who seeks
employment by, or a controlling interest in, a financial institution
specified in subdivision (a) shall, as a condition to obtaining that
employment or controlling interest, permit the financial institution,
its regulatory agency, or both to have access to that person’s state
summary criminal history information, as defined in Section 11105
of the Penal Code, for purposes of determining whether the person
has a prior conviction of a felony offense specified in subdivision
(b) or any theft offense.

(d) Any state summary criminal history information obtained
pursuant to this subdivision shall be kept confidential and no
recipient under this subdivision shall disclose the contents other
than for the purpose of determining eligibility for employment by,
or acquisition of a controlling interest in, a financial institution
specified in subdivision (a).

(e) The authority granted by this section to the commissioner
and other regulatory agencies shall be in addition to any other
authority granted by law to obtain information about the
background of any person. Nothing in this section shall be
construed to limit any authority of the commissioner or any
regulatory agency otherwise provided by law.

begin delete SEC. 66. end delete
begin insert SEC. 65. end insert   

Section 4995 of the Financial Code is amended to
read:

4995.  

The following definitions shall apply for purposes of
this division:

(a) “Higher-priced mortgage loan” has the meaning set forth in
Part 226 of Title 12 of the Code of Federal Regulations.

(b) “Licensed person” means a real estate broker licensed under
the Real Estate Law (Part 1 (commencing with Section 10000) of
Division 4 of the Business and Professions Code), a finance lender
or broker licensed under the California Finance Lenders Law
(Division 9 (commencing with Section 22000)), a residential
mortgage lender licensed under the California Residential Mortgage
Lending Act (Division 20 (commencing with Section 50000)), a
commercial or industrial bank organized under the Banking Law
(Division 1.1 (commencing with Section 1000)), a savings
association organized under the Savings Association Law (Division
2 (commencing with Section 5000)), and a credit union organized
under the California Credit Union Law (Division 5 (commencing
with Section 14000)).

(c) “Mortgage broker” means a licensed person who provides
mortgage brokerage services. For purposes of this division, a
licensed person who makes home loans is a “mortgage broker,”
and subject to the requirements of this division applicable to
mortgage brokers, only with respect to transactions in which the
licensed person provides mortgage brokerage services.

(d) “Mortgage brokerage services” means arranging or
attempting to arrange, as exclusive agent for the borrower or as
dual agent for the borrower and lender, for compensation or in
expectation of compensation, paid directly or indirectly, a
higher-priced mortgage loan made by an unaffiliated third party.

begin delete SEC. 67. end delete
begin insert SEC. 66. end insert   

Section 18003 of the Financial Code is amended to
read:

18003.  

“Industrial loan company,” “thrift and loan company,”
or “company” as used in this division means a premium finance
agency as defined in Section 18560. Notwithstanding any other
provision of this chapter, these terms and this division do not apply
to an industrial bank subject to, and governed by, Chapter 15
(commencing with Section 1530) of Division 1.1.