AB 556, as amended, Irwin. Trusts: regulation and enforcement.
Existing law requires an individual or entity who for compensation solicits funds or property for charitable purposes to disclose that the solicitation is being conducted by a commercial fundraiser for a charitable purpose and the registered name of the commercial fundraiser.
This bill would
begin delete also require an individual or entity who solicits funds or property for charitable purposes with the participation of a fundraising counsel for charitable purposes to make specified disclosures regarding the fundraising counsel. The bill would requireend delete the disclosures, if printed or if presented electronically, to be in at least 12-point type, and be clear and
Existing law, the Supervision of Trustees and Fundraisers for Charitable Purposes Act, generally regulates charitable corporations, trustees, and other legal entities holding property for charitable purposes, commercial fundraisers for charitable purposes, and fundraising counsel for charitable purposes, among others, over which the state or the Attorney General has enforcement or supervisory powers. Existing law requires the Attorney General to establish and maintain a register of charitable corporations, unincorporated associations, and trustees subject to these provisions and of the particular trust or other relationship under which they hold property for charitable purposes. Existing law authorizes the Attorney General to bring any action against trustees or against any charitable corporation or director or officer thereof, to enforce a charitable trust, to impress property with a trust for charitable purposes, or to recover property or the proceeds thereof at any time within 10 years after the cause of action accrued.
This bill would authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued. The bill would also authorize the Attorney General to bring an action for civil liability against a person who aids or abets a violation of these provisions at any time within 10 years after the cause of action accrued.
Existing law provides that one who wrongfully detains a thing is an involuntary trustee thereof for the benefit of the owner, and that one who gains a thing by fraud, or other wrongful act is an involuntary trustee of the thing gained for the benefit of the owner.
This bill would authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued.
This bill would also authorize the Attorney General to bring an action for civil liability against a person who aids or abets a violation of these provisions at any time within 10 years after the cause of action accrued.
Existing law, the Nonprofit Corporation Law, set forth standards of conduct for directors and officers of nonprofit public benefit corporations and provides that it is a crime for any director or officer of any corporation among other things, to knowingly engage in specified acts relating to fraud, to make materially false reports, to receive or acquire possession of the property of the corporation, or to falsify the books or accounts of the corporation.
This bill would authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued. The bill would also authorize the Attorney General to bring an action for civil liability against a person who aids or abets a violation of the standards of conduct for directors and officers of nonprofit public benefit corporations at any time within 10 years after the cause of action accrued.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 17510.85 of the Business and Professions
2Code is amended to read:
(a) An individual, corporation, or other legal entity
4who for compensation solicits funds or other property in this state
5for charitable purposes shall disclose prior to an oral solicitation
6or sales solicitation made by direct personal contact, radio,
7television, telephone, or over the Internet, or at the same time as
8a written solicitation or sales solicitation:
9(1) That the solicitation or sales solicitation is being conducted
10by a commercial fundraiser for charitable purposes.
11(2) The name of the commercial fundraiser for charitable
12purposes as registered with the Attorney General pursuant to
13Section 12599 of the Government Code.
14(b) An individual, corporation, or other legal entity who solicits
15funds or other property in this state for charitable purposes with
16the participation of a fundraising counsel for charitable purposes,
17as defined in Section 12599.1 of the Government Code, shall
18disclose prior to an oral solicitation or sales solicitation made by
19direct personal contact, radio, television, telephone, or via the
20Internet, or at the same time as a written solicitation or sales
22(1) That the solicitation or sales solicitation is being conducted
23with the participation of a fundraising counsel for charitable
P4 1(2) The name of the fundraising counsel for charitable purposes
2as registered with the Attorney General pursuant to Section 12599.1
3of the Government Code.
9 4(c)end delete
5 The disclosures required pursuant to this section, if printed
6or if presented electronically, shall be in at least 12-point type, and
7shall be clear and conspicuous, as defined in Section 17601.
Section 2224.5 is added to the Civil Code, to read:
An action brought by the Attorney General pursuant
10to Section 2223 or 2224 may be brought at any time within 10
11years after the cause of action accrued.
Section 12596 of the Government Code is amended
(a) A civil action brought by the Attorney General
15against trustees or other persons holding property in trust for
16charitable purposes or against any charitable corporation or any
17director or officer thereof to enforce a charitable trust or to impress
18property with a trust for charitable purposes or to recover property
19or the proceeds thereof for and on behalf of any charitable trust or
20corporation, may be brought at any time within 10 years after the
21cause of action accrued.
22(b) A civil action brought by the Attorney General for a violation
23of this article, pursuant to Section 2223 or 2224 of the Civil Code,
24or pursuant to Division 2 (commencing with Section 5000) of Title
251 of the Corporations Code, may be brought at any time within 10
26years after the cause of action accrued.
27(c) Notwithstanding Section 12581, the Attorney General may
28bring a civil action against a person who aids or abets a violation
29of this article, Section 2223 or 2224 of the Civil Code, or Article
303 (commencing with Section 5230) of Chapter 2 of Division 2 of
31Title 1 of the Corporations Code, at any time within 10 years after
32the cause of action accrued.
(a) “Commercial fundraiser for charitable purposes”
36means any individual, corporation, unincorporated association, or
37other legal entity who for compensation does any of the following:
38(1) Solicits funds, assets, or property in this state for charitable
P5 1(2) As a result of a solicitation of funds, assets, or property in
2this state for charitable purposes, receives or controls the funds,
3assets, or property solicited for charitable
begin delete purposes.end delete
11(3) Employs, procures, or engages any compensated person to
12solicit, receive, or control funds, assets, or property for charitable
35A commercial fundraiser for charitable purposes shall include
36any person, association of persons, corporation, or other entity that
37obtains a majority of its inventory for sale by the purchase, receipt,
38or control for resale to the general public, of salvageable personal
39property solicited by an organization qualified to solicit donations
40pursuant to Section 148.3 of the Welfare and Institutions Code.
P6 1A commercial fundraiser for charitable purposes shall not include
2a “trustee” as defined in Section 12582 or 12583, a “charitable
3corporation” as defined in Section 12582.1, or any employee
4thereof. A commercial fundraiser for charitable purposes shall not
5include an individual who is employed by or under the control of
6a commercial fundraiser for charitable purposes registered with
7the Attorney General. A commercial fundraiser for charitable
8purposes shall not include any federally insured financial institution
9that holds as a depository funds received as a result of a solicitation
10for charitable purposes.
used in this section, “charitable purposes” includes any
12solicitation in which the name of any organization of law
13enforcement personnel, firefighters, or other persons who protect
14the public safety is used or referred to as an inducement for
15transferring any funds, assets, or property, unless the only
16expressed or implied purpose of the solicitation is for the sole
17benefit of the actual active membership of the organization.
18(b) A commercial fundraiser for charitable purposes shall, prior
19to soliciting any funds, assets, or property, including salvageable
20personal property, in California for charitable purposes, or prior
21to receiving and controlling any funds, assets, or property,
22including salvageable personal property, as a result of a solicitation
23in this state for charitable purposes, register with the Attorney
24General’s Registry of Charitable Trusts on a registration form
25provided by the Attorney General. Renewals of registration shall
26be filed with the Registry of Charitable Trusts by January 15 of
27each calendar year in which the commercial fundraiser for
28charitable purposes does business and shall be effective for one
29year. A registration or renewal fee of two hundred dollars ($200)
30shall be required for registration of a commercial fundraiser for
31charitable purposes, and shall be payable by certified or cashier’s
32check to the Attorney General’s Registry of Charitable Trusts at
33the time of registration or renewal. The Attorney General may
34adjust the annual registration or renewal fee, or means of payment,
35as needed pursuant to this section. The Attorney General’s Registry
36of Charitable Trusts may grant extensions of time to file annual
37registration as required, pursuant to subdivision (b) of Section
3812586. No separate fee shall be charged by the Attorney General
39for electronic registration, electronic renewal, or electronic
40repayment of fees.
P7 1(c) A commercial fundraiser for
charitable purposes shall file
2with the Attorney General’s Registry of Charitable Trusts an annual
3financial report on a form provided by the Attorney General,
4accounting for all funds collected pursuant to any solicitation for
5charitable purposes during the preceding calendar year. The annual
6financial report shall be filed with the Attorney General’s Registry
7of Charitable Trusts no later than 30 days after the close of the
8preceding calendar year.
9(d) The contents of the forms for annual registration and annual
10financial reporting by commercial fundraisers for charitable
11purposes shall be established by the Attorney General in a manner
12consistent with the procedures set forth in subdivisions (a) and (b)
13of Section 12586. The annual financial report shall require a
14detailed, itemized accounting of funds, assets, or property, solicited
15for charitable purposes on behalf of each charitable organization
16exempt from taxation under Section 501(c)(3) of the Internal
17Revenue Code or for each charitable purpose during the accounting
18period, and shall include, among other data, the following
19information for funds, assets, or property, solicited by the
20commercial fundraiser for charitable purposes:
21(1) Total revenue.
22(2) The fee or commission charged by the commercial fundraiser
23for charitable purposes.
24(3) Salaries paid by the commercial fundraiser for charitable
25purposes to its officers and employees.
26(4) Fundraising expenses.
27(5) Distributions to the identified charitable organization or
29(6) The names and addresses of any director, officer, or
30employee of the commercial fundraiser for charitable purposes
31who is a director, officer, or employee of any charitable
32organization listed in the annual financial report.
33(e) A commercial fundraiser for charitable purposes that obtains
34a majority of its inventory for sale by the purchase, receipt, or
35control for resale to the general public, of salvageable personal
36property solicited by an organization qualified to solicit donations
37pursuant to Section 148.3 of the Welfare and Institutions Code
38shall file with the Attorney General’s Registry of Charitable Trusts,
39and not with the sheriff of any county, an annual financial report
40on a form provided by the Attorney General that is separate and
P8 1distinct from forms filed by other commercial fundraisers for
2charitable purposes pursuant to subdivisions (c) and (d).
3(f) It shall be unlawful for any commercial fundraiser for
4charitable purposes to solicit funds in this state for charitable
5purposes unless the commercial fundraiser for charitable purposes
6has complied with the registration or annual renewal and financial
7reporting requirements of this article. Failure to comply with these
8registration or annual renewal and financial reporting requirements
9shall be grounds for injunction against solicitation in this state for
10charitable purposes and other civil remedies provided by law.
11(g) A commercial fundraiser for charitable purposes is a
12constructive trustee for charitable purposes as to all funds collected
13pursuant to solicitation for charitable purposes and shall account
14to the Attorney General for all funds. A commercial fundraiser for
15charitable purposes is subject to the Attorney General’s supervision
16and enforcement over charitable funds and assets to the same extent
17as a trustee for charitable purposes under this article.
18(h) Not less than 10 working days prior to the commencement
19of each solicitation campaign, event, or service, or not later than
20commencement of solicitation for solicitations to aid victims of
21emergency hardship or disasters, a commercial fundraiser for
22charitable purposes shall file with the Attorney General’s Registry
23of Charitable Trusts a notice on a form prescribed by the Attorney
24General that sets forth all of the following:
25(1) The name, address, and telephone number of the commercial
26fundraiser for charitable purposes.
27(2) The name, address, and telephone number of the charitable
28organization with whom the commercial fundraiser has contracted.
29(3) The fundraising methods to be used.
30(4) The projected dates when performance under the
31will commence and terminate.
32(5) The name, address, and telephone number of the person
33responsible for directing and supervising the work of the
34commercial fundraiser under the contract.
35(i) There shall be a written contract between a commercial
36fundraiser for charitable purposes and a charitable organization
37for each solicitation campaign, event, or service, that shall be
38signed by the authorized contracting officer for the commercial
39fundraiser and by an official of the charitable organization who is
40authorized to sign by the organization’s governing body. The
P9 1contract shall be available for inspection by the Attorney General
2and shall contain all of the following provisions:
3(1) The legal name and address of the charitable organization
4as registered with the Registry of Charitable Trusts, unless the
5 charitable organization is exempt from registration.
6(2) A statement of the charitable purpose for which the
7solicitation campaign, event, or service is being conducted.
8(3) A statement of the respective obligations of the commercial
9fundraiser and the charitable organization.
10(4) If the commercial fundraiser is to be paid a fixed fee, a
11statement of the fee to be paid to the commercial fundraiser and a
12good faith estimate of what percentage the fee will constitute of
13the total contributions received. The contract shall clearly disclose
14the assumptions upon which the estimate is based, and the stated
15assumptions shall be based upon all of the relevant facts known
16to the commercial fundraiser regarding the solicitation to be
17conducted by the commercial fundraiser.
18(5) If a percentage fee is to be paid to the commercial fundraiser,
19a statement of the percentage of the total contributions received
20that will be remitted to or retained by the charitable organization,
21or, if the solicitation involves the sale of goods or services or the
22sale of admissions to a fundraising event, the percentage of the
23purchase price that will be remitted to the charitable organization.
24The stated percentage shall be calculated by subtracting from
25contributions received and sales receipts not only the commercial
26fundraiser’s fee, but also any additional amounts that the charitable
27organization is obligated to pay as fundraising costs.
28(6) The effective and termination dates of the contract and the
29date solicitation activity is to commence within the state.
30(7) A provision that requires that each contribution in the control
31or custody of the commercial fundraiser shall in its entirety and
32within five working days of its receipt comply with either of the
34(A) Be deposited in an account at a bank or other federally
35insured financial institution that is solely in the name of the
36charitable organization and over which the charitable organization
37has sole control of withdrawals.
38(B) Be delivered to the charitable organization in person, by
39United States express mail, or by another method of delivery
40providing for overnight delivery.
P10 1(8) A statement that the charitable organization exercises control
2and approval over the content and frequency of any solicitation.
3(9) If the commercial fundraiser proposes to make any payment
4in cash or in kind to any person or legal entity to secure any
5person’s attendance at, or sponsorship, approval, or endorsement
6of, a charity fundraising event, the maximum dollar amount of
7those payments shall be set forth in the contract. “Charity
8fundraising event” means any gathering of persons, including, but
9not limited to, a party, banquet, concert, or show, that is held for
10the purpose or claimed purpose of raising funds for any charitable
11purpose or organization.
12(10) A provision that includes all of the following statements:
13(A) The charitable organization has the right to cancel the
14contract without cost, penalty, or liability for a period of 10 days
15following the date on which the contract is executed.
16(B) The charitable organization may cancel the contract by
17serving a written notice of cancellation on the commercial
19(C) If mailed, service shall be by certified mail, return receipt
20requested, and cancellation shall be deemed effective upon the
21expiration of five calendar days from the date of mailing.
22(D) Any funds collected after effective notice that the contract
23has been canceled shall be deemed to be held in trust for the benefit
24of the charitable organization without deduction for costs or
25expenses of any nature.
26(E) The charitable organization shall be entitled to recover all
27funds collected after the date of cancellation.
28(11) A provision that includes all of the following statements:
29(A) Following the initial 10-day cancellation period, the
30charitable organization may terminate the contract by giving 30
31days’ written notice.
32(B) If mailed, service of the notice shall be by certified mail,
33return receipt requested, and shall be deemed effective upon the
34expiration of five calendar days from the date of mailing.
35(C) In the event of termination under this subdivision, the
36charitable organization shall be liable for services provided by the
37commercial fundraiser up to 30 days after the effective service of
39(12) A provision that, following the initial 10-day cancellation
40period, the charitable organization may terminate the contract at
P11 1any time upon written notice, without payment or compensation
2of any kind to the commercial fundraiser, if the commercial
3fundraiser or its agents, employees, or representatives do any of
5(A) Make any material misrepresentations in the course of
6solicitations or with respect to the charitable organization.
7(B) Are found by the charitable organization to have been
8convicted of a crime arising from the conduct of a solicitation for
9a charitable organization or purpose punishable as a misdemeanor
10or a felony.
11(C) Otherwise conduct fundraising activities in a manner that
12causes or could cause public disparagement of the charitable
13organization’s good name or good will.
14(13) Any other information required by the regulations of the
16(j) It shall be unlawful for a commercial fundraiser for charitable
17purposes to not disclose the percentage of total fundraising
18expenses of the fundraiser upon receiving a written or oral request
19from a person solicited for a contribution for a charitable purpose.
20“Percentage of total fundraising expenses,” as used in this section,
21means the ratio of the total expenses of the fundraiser to the total
22revenue received by the fundraiser for the charitable purpose for
23which funds are being solicited, as reported on the most recent
24financial report filed with the Attorney General’s Registry of
25Charitable Trusts. A commercial fundraiser shall disclose this
26information in writing within five working days from receipt of a
27request by mail or facsimile. A commercial fundraiser shall orally
28disclose this information immediately upon a request made in
29person or in a telephone conversation and shall follow this response
30with a written disclosure within five working days. Failure to
31comply with the requirements of this subdivision shall be grounds
32for an injunction against solicitation in this state for charitable
33purposes and other civil remedies provided by law.
34(k) If the Attorney General issues a report to the public
35containing information obtained from registration forms or
36financial report forms filed by commercial fundraisers for
37charitable purposes, there shall be a separate section concerning
38commercial fundraisers for charitable purposes that obtain a
39majority of their inventory for sale by the purchase, receipt, or
40control for resale to the general public, of salvageable personal
P12 1property solicited by an organization qualified to solicit donations
2pursuant to Section 148.3 of the Welfare and Institutions Code.
3The report shall include an explanation of the distinctions between
4these thrift store operations and other types of commercial
6(l) No person may act as a commercial fundraiser for charitable
7purposes if that person, any officer or director of that person’s
8business, any person with a controlling interest in the business, or
9any person the commercial fundraiser employs, engages, or
10procures to solicit for compensation, has been convicted by a court
11of any state or the United States of a crime arising from the conduct
12of a solicitation for a charitable organization or purpose punishable
13as a misdemeanor or felony.
14(m) A commercial fundraiser for charitable purposes shall not
15solicit in the state on behalf of a charitable organization unless that
16charitable organization is registered or is exempt from registration
17with the Attorney General’s Registry of Charitable Trusts.
18(n) If any provision of this section or the application thereof to
19any person or circumstances is held invalid, that invalidity shall
20not affect any other provision or application of this section that
21can be given effect without the invalid provision or application,
22and to this end the provisions of this section are severable.