BILL ANALYSIS Ó
SENATE BANKING & FINANCIAL INSTITUTIONS COMMITTEE
Senator Lou Correa, Chair
2013-2014 Regular Session
SB 537 (Comm. on Banking & Financial Institutions)Hearing Date:
April 3, 2013
As Amended: April 1, 2013
Fiscal: Yes
Urgency: No
SUMMARY Would make technical and clarifying changes to several
sections of the Financial Code administered by the Department of
Financial Institutions (DFI) and to provisions of the Franchise
Investment Law administered by the Department of Corporations
(DOC).
DESCRIPTION
1. Within the Financial Code, would correct a heading
reference, update state law to reflect changes in minimum
levels of federal deposit insurance limits, delete
references to obsolete code sections, correct incorrect code
section references, restore code section references that
were inadvertently deleted, and add clarifying language and
definitions.
2. Within the Franchise Investment Law, would standardize the
length of time in which franchisors have to deliver
disclosure documents to prospective franchisees at 14
calendar days, and would update state law references to the
document used by franchisors to provide specified
information to prospective franchisees, by referring to this
document as a "franchise disclosure document" rather than an
"offering circular."
EXISTING LAW
3. Authorizes DFI to administer provisions of the Financial
Code regulating the activities of state-chartered banks and
industrial loan companies, state-chartered credit unions,
money transmitters, trust companies, and insurance premium
finance companies (Divisions 1 through 7 of the Financial
Code).
SB
537 (Comm. on B. & F.I.), Page 2
4. Authorizes DOC to administer the Franchise Investment Law
(Division 5 of the Corporations Code).
5. Effective July 1, 2013, reorganizes DFI and DOC as
divisions within a new Department of Business Oversight
(Government Reorganization Plan Number 2).
COMMENTS
1. Purpose: This bill is intended to enact technical clean up
to various sections of law administered by DFI and DOC.
These changes remain necessary in spite of, and will not
interfere with the upcoming reorganization of these
departments into, divisions.
2. Discussion:
a. The following summarizes the purpose of the proposed
amendments to the Financial Code:
i. Correct the heading of Division 1,
Article 4, Chapter 7 to restore applicability of the
provisions in this article to banks. This article
was incorrectly titled by SB 664 (Committee on
Banking & Financial Institutions, Chapter 243,
Statutes of 2011).
ii. Reflect the increase in federal
deposit insurance from $100,000 to $250,000 (Section
1805).
iii. Amend references to incorrect code
sections and delete references to obsolete code
sections (Sections 155, 185, 329, 376, 413, 563,
1024, 1026, 1080, 1255, 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).
iv. Clarify to which law or laws a
particular section applies (Sections 101, 103, 133,
171, 189, 326, 331, 377, and 600).
v. Conform language to the Money
Transmission Act definition of a money transmitter
SB
537 (Comm. on B. & F.I.), Page 3
(Sections 185 and 329).
vi. Add clarifying language and
definitions (Sections 186, 187, 188, 190, 329, 405,
589, 590, 672, 1331, 1473, 1485, and 1495).
vii. Restore inadvertently deleted code
section references (Sections 329 and 1485).
viii. Simplify an unnecessarily complicated
definition (Section 379).
b. The following summarizes the purpose of the proposed
amendments to the Franchise Investment Law:
i. SB 998 (Cox), Chapter 101, Statutes of
2007 required disclosure documents to be delivered
by franchisors to prospective franchisees 14
calendar days, rather than 10 business days, before
that prospective franchisee signs any franchise
agreement. However, that legislation failed to
revise all of the sections that required revision,
in order to effect its change. SB 537 would make
the changes inadvertently omitted from SB 998.
ii. The Federal Trade Commission, North
American Securities Administrators Association, and
California regulations refer to the disclosure
document required to be provided by franchisors to
prospective franchisees as a franchise disclosure
document. However, some provisions of California's
Franchise Investment Law continue to refer to this
document by its old name ("offering circular"). SB
537 standardizes the references to this document in
California law by deleting references to "offering
circular" and replacing them with references to
"franchise disclosure document."
3. Summary of Arguments in Support: The International
Franchise Association (IFA) supports the provisions of this
bill that modify the Franchise Investment Law. Changing the
written disclosure period for franchisors from at least 10
business days to at least 14 calendar days will make
California consistent with federal law. IFA also supports
replacing the obsolete term "Uniform Franchise Offering
Circular" with the more commonly used term "Franchise
SB
537 (Comm. on B. & F.I.), Page 4
Disclosure Document."
4. Summary of Arguments in Opposition: None received.
5. Prior and Related Legislation:
a. SB 664 (Committee on Banking & Financial
Institutions), Chapter 243, Statutes of 2011: Completed
a multi-year reorganization of the provisions of the
Financial Code administered by DFI.
b. SB 998 (Cox), Chapter 101, Statutes of 2007:
Enacted a number of technical changes to the laws
administered by DOC, including the change, referenced
above, which requires disclosure documents to be provided
by franchisors to prospective franchisees 14 days, rather
than 10 business days, prior to the franchisee signing a
franchise agreement.
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
International Franchise Association
Opposition
None received
Consultant: Eileen Newhall (916) 651-4102