California Legislature—2015–16 Regular Session

Assembly BillNo. 1517


Introduced by Committee on Banking and Finance (Assembly Members Dababneh (Chair), Travis Allen (Vice Chair), Achadjian, Brown, Chau, Gatto, Kim, Low, Perea, and Mark Stone)

March 10, 2015


An act to amend Section 17511.1 of the Business and Professions Code, to amend Sections 1632.5, 1748.13, 1789.12, 1812.201, and 2923.3 of the Civil Code, to amend Sections 1101.1, 2207, 2510, 3100, 17713.12, 25207, 25243.5, 25247, 25254, 25401, 25604, 25607, 25612.5, 25614, 25702, 29542, 31408, 31503, and 31513 of the Corporations Code, to amend Sections 620, 622, 1070, 2105, 4057, 12104, 17210.2, 17214, 17311, 17320, 17331, 18405, 22105.1, 22159.5, 22160, 22756, 23070, 23071, 23072, 23073, 23074, 23102, 30217, 50140, 50303, 50307.1, and 50316.5 of, and to amend the heading of Article 4 (commencing with Section 670) of Chapter 7 of Division 1 of, and to repeal Section 1008 of, the Financial Code, to amend Sections 5970, 6254.5, 6254.12, 6254.22, 11840, 53344.1, 53638, and 54956.87 of the Government Code, to amend Sections 1341.10, 1341.11, 1341.12, and 1341.14 of, and to repeal Section 1341.9 of, the Health and Safety Code, to amend Sections 1280.7, 12693.35, 14053, and 15036 of the Insurance Code, to amend Section 4600.5 of the Labor Code, to amend Section 11604.5 of the Probate Code, to amend Section 408 of the Revenue and Taxation Code, and to amend Section 22005.1 of the Welfare and Institutions Code, relating to business.

LEGISLATIVE COUNSEL’S DIGEST

AB 1517, as introduced, Committee on Banking and Finance. Business.

(1) Existing law abolished the Department of Corporations and the Department of Financial Institutions and transferred their responsibilities to the Department of Business Oversight, which is headed by a Commissioner of Business Oversight.

This bill would transfer additional duties from the abolished Department of Corporations and the abolished Department of Financial Institutions to the Department of Business Oversight and the Commissioner of Business Oversight, as specified. This bill would also update cross-references and outdated contact information with respect to the Department of Business Oversight. This bill would repeal obsolete provisions relating to the Department of Corporations.

(2) Existing law makes it unlawful for a person, in connection with the offer, sale, or purchase of a security, directly or indirectly, to employ a device, scheme, or artifice to defraud, make an untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, or engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.

This bill would instead make it unlawful for any person to offer or sell a security in this state, or to buy or offer to buy a security in this state, by means of any written or oral communication that includes an untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in the light of the circumstances under which the statements were made, not misleading.

(3) Existing law limits the amount of funds of a bank or trust company that are deposited in any other financial institution, as specified, unless the financial institution has been designated as a depositary for the funds of the depositing bank or trust company by a vote of the majority of the directors of the depositing bank or trust company and the financial institution has been approved by the commissioner as a depositary for the purposes of these provisions.

This bill would repeal these provisions.

(4) Existing law, the Banking Law, prescribes the conditions pursuant to which a state-chartered bank may engage in the practice of banking. Existing law requires a bank to have authorization to open an office. Existing law defines core and noncore banking business and defines a facility, in this context, as an office in this state at which a bank engages in noncore banking business but not core banking business.

This bill would delete the phrase “in this state” from the definition of a facility, as described above.

(5) Existing law requires an industrial loan company to annually file with the Commissioner of Business Oversight an audit report containing audited financial statements and other relevant information the commissioner may require relating to the company. Existing law further requires an industrial loan company whose certificate has been surrendered or revoked to submit to the commissioner a closing audit report containing audited financial statements, as specified.

This bill would repeal the requirement for the closing audit report.

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

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

P3    1

SECTION 1.  

Section 17511.1 of the Business and Professions
2Code
is amended to read:

3

17511.1.  

As used in this article, “telephonic seller” or “seller”
4means a person who, on his or her own behalf or through
5salespersons or through the use of an automatic dialing-announcing
6device, as defined in Section 2871 of the Public Utilities Code,
7causes a telephone solicitation or attempted telephone solicitation
8to occur which meets the criteria specified in subdivision (a), (b),
9(c), or (d) and who is not exempted by subdivision (e), as follows:

10(a) A telephone solicitation or attempted telephone solicitation
11wherein the telephonic seller initiates telephonic contact with a
12prospective purchaser and represents or implies one or more of
13the following:

14(1) That a prospective purchaser who buys one or more items
15will also receive additional or other items, whether or not of the
16same type as purchased, without further cost. For purposes of this
17subdivision, “further cost” does not include actual postage or
18common carrier delivery charges, if any.

19(2) That a prospective purchaser will receive a prize or gift, if
20the person also encourages the prospective purchaser to do either
21of the following:

22(A) Purchase or rent any goods or services.

P4    1(B) Pay any money, including, but not limited to, a delivery or
2handling charge.

3(3) That a prospective purchaser is able to obtain any item or
4service at a price which the seller states or implies is below the
5regular price of the item or service offered. This paragraph shall
6not apply to retailers who, within the previous 12 months, have
7sold a majority of their goods or services through in-person sales
8at retail stores.

9(4) That a prospective purchaser who buys office equipment or
10supplies will, because of some unusual event or imminent price
11increase, be able to buy these items at prices which are below those
12that are usually charged or will be charged for the items.

13(5) That the seller is a person other than the person he or she is.

14(6) That the items for sale are manufactured or supplied by a
15person other than the actual manufacturer or supplier.

16(7) That the seller is offering to sell the prospective purchaser
17any gold, silver, or other metals, including coins, diamonds, rubies,
18sapphires, or other stones, coal or other minerals, or any interest
19in oil, gas, or mineral fields, wells, or exploration sites, or any
20other investment opportunity of any type whatsoever.

21(8) That the seller is offering to make a loan, or to arrange or
22assist in arranging a loan or to assist in providing information
23which may lead to the obtaining of a loan, unless no payment of
24any kind is made until the loan proceeds are disbursed to the
25borrower.

26(9) That a prospective purchaser will receive a credit card, as
27defined in subdivision (a) of Section 1747.02 of the Civil Code,
28if the purchaser pays an up front or preapplication fee for the credit
29card to the telephonic seller.

30(b) A solicitation or attempted solicitation which is made by
31telephone in response to inquiries generated by unrequested
32notifications sent by the seller to persons who have not previously
33 purchased goods or services from the seller or who have not
34previously requested credit from the seller, to a prospective
35purchaser wherein the seller represents or implies to the recipient
36of the notification that any of the following applies to the recipient:

37(1) That the recipient has in any manner been specially selected
38to receive the notification or the offer contained in the notification.

39(2) That the recipient will receive a prize or gift if the recipient
40calls the seller.

P5    1(3) That if the recipient buys one or more items from the seller,
2the recipient will also receive additional or other items, whether
3or not of the same type as purchased, without further cost or at a
4cost which the seller states or implies is less than the regular price
5of such items.

6However, this subdivision does not apply to the solicitation of
7sales by a catalog seller who periodically issues and delivers
8catalogs to potential purchasers by mail or by other means. This
9exception only applies if the catalog includes a written description
10or illustration and the sales price of each item of merchandise
11offered for sale, includes at least 24 full pages of written material
12or illustrations, is distributed in more than one state, and has an
13annual circulation of not less than 250,000 customers.

14(c) A solicitation or attempted solicitation which is made by
15telephone in response to inquiries generated by advertisements on
16behalf of the telephonic seller wherein it is represented or implied
17that the seller is offering to sell to the prospective purchaser any
18gold, silver, or other metals, including coins, diamonds, rubies,
19sapphires, or other stones, coal or other minerals, or any interest
20in oil, gas, or mineral fields, wells, or exploration sites, or any
21other investment opportunity of any type whatsoever.

22(d) A solicitation or attempted solicitation which is made by
23telephone in response to inquiries generated by advertisements on
24behalf of the telephonic seller wherein it is represented or implied
25that the seller is offering to make a loan or to arrange or assist in
26arranging a loan or to assist in providing information which may
27lead to the obtaining of a loan, unless no payment of any kind is
28made until the loan proceeds are disbursed to the borrower.

29(e) For purposes of this article, “telephonic seller” or “seller”
30does not include any of the following:

31(1) A person offering or selling a security qualified under
32Section 25110, 25120, or 25130 of the Corporations Code or
33exempt from qualification under Chapter 1 (commencing with
34Section 25100) of Part 2 of Division 1 of Title 4 of the
35Corporations Code. The fact that a notice claiming an exemption
36under the Corporate Securities Law of 1968 is filed with the
37Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert does not create
38an exemption under this paragraph.

P6    1(2) A person licensed pursuant to Part 1 (commencing with
2Section 10000) of Division 4, when the solicited transaction is
3governed by that law.

4(3) A person licensed pursuant to Chapter 9 (commencing with
5Section 7000) of Division 3, when the solicited transaction is
6governed by that law.

7(4) A person licensed or certificated pursuant to Part 2
8(commencing with Section 680) of Division 1 of the Insurance
9Code, including a person licensed pursuant to Chapter 5
10(commencing with Section 1621) thereof, when the solicited
11transaction is governed by that law.

12(5) A person offering or selling a franchise registered pursuant
13to Section 31110 of the Corporations Code or exempt from
14registration under Chapter 1 (commencing with Section 31100)
15of Part 2 of Division 5 of Title 4 of the Corporations Code. The
16fact that a notice claiming an exemption under the Franchise
17Investment Law is filed with the Department ofbegin delete Corporationsend delete
18begin insert Business Oversightend insert does not create an exemption under this
19paragraph.

20(6) A person soliciting the sale of a seller assisted marketing
21plan, as defined in Title 2.7 (commencing with Section 1812.200)
22of Part 4 of Division 3 of the Civil Code, who has filed with the
23Attorney General the documents required by Section 1812.203 of
24the Civil Code.

25(7) A person primarily soliciting the sale of a newspaper of
26general circulation, as defined in Article 1 (commencing with
27Section 6000) of Chapter 1 of Division 7 of Title 1 of the
28Government Code, a magazine, or membership in a book or record
29club whose program operates in conformity with the requirements
30of Section 1584.5 of the Civil Code.

31(8) A person soliciting business from prospective purchasers
32who have previously purchased from the business enterprise for
33which the person is calling.

34(9) A person soliciting without the intent to complete and who
35does not complete the sales presentation during the telephone
36 solicitation but completes the sales presentation at a later
37face-to-face meeting between the solicitor and the prospective
38purchaser. However, if a seller, directly following a telephone
39solicitation, causes an individual whose primary purpose it is to
P7    1go to the prospective purchaser to collect the payment or deliver
2any item purchased, this exemption does not apply.

3(10) Any supervised financial institution or parent, subsidiary,
4or subsidiary of parent thereof. As used in this paragraph,
5“supervised financial institution” means any commercial bank,
6trust company, savings and loan association, credit union, industrial
7loan company, personal property broker, consumer finance lender,
8commercial finance lender, or insurer, provided that the institution
9is subject to supervision by an official or agency of this state or of
10the United States.

11(11) A person soliciting the sale of a preneed funeral
12arrangement regulated by Article 9 (commencing with Section
137735) of Chapter 12 of Division 3.

14(12) A person licensed pursuant to Chapter 19 (commencing
15with Section 9600) of Division 3 when acting pursuant to that
16licensure.

17(13) A person soliciting the sale of services provided by a cable
18television system licensed or franchised pursuant to Section 53066
19of the Government Code or any other authority.

20(14) A person or an affiliate of a person whose business is
21regulated by the Public Utilities Commission.

22(15) A person soliciting the sale of a commodity pursuant to
23Part 2 (commencing with Section 58601) of Division 21 of the
24Food and Agricultural Code, if the solicitation neither intends to,
25nor actually results in, a sale which costs the purchaser in excess
26of one hundred dollars ($100).

27(16) An issuer or subsidiary of an issuer that has a security listed
28on a national securities exchange or designated as a national market
29system security on an interdealer quotation system by the National
30Association of Securities Dealers, Inc., if the exchange or
31interdealer quotation system has been certified by rule or order of
32the Commissioner of Corporations under subdivision (o) of Section
3325100 of the Corporations Code. A subsidiary of an issuer that
34qualifies for exemption under this paragraph is not itself exempt
35unless not less than 60 percent of the voting power of its shares is
36owned by the qualifying issuer or issuers.

37(17) A person soliciting exclusively the sale of telephone
38answering services to be provided by that person or that person’s
39employer.

P8    1(18) A person soliciting a transaction regulated by the
2Commodity Futures Trading Commission if the person is registered
3or temporarily licensed for this activity with the Commodity
4Futures Trading Commission under the Commodity Exchange Act
5(7 U.S.C. Sec. 1 et seq.), and the registration or license has not
6expired or been suspended or revoked.

7(19) A person who sells coins or bullion at a price which is not
8more than 25 percent more than the price at which the seller is
9concurrently buying the same coins or bullion, if: (A) the seller
10has had a retail location in California from which he or she has
11been selling coins or bullion to the public in person for at least
12three years; (B) the telephonic solicitations are not the person’s
13primary business and sales made telephonically make up less than
1420 percent of the person’s total retail sales; and (C) the person
15claiming an exemption pursuant to this subdivision complies with
16Section 17511.3, as applicable, and subdivision (p) of Section
1717511.4.

18(20) A person licensed pursuant to Chapter 14 (commencing
19with Section 1800) of Division 1 of the Financial Code to receive
20money for transmittal to foreign countries if the license has not
21expired or been suspended or revoked.

22(21) A person licensed as a residential mortgage lender or
23servicer pursuant to Division 20 (commencing with Section 50000)
24of the Financial Code, when acting under the authority of that
25license.

26(22) A corporation that meets all of the following conditions:

27(A) It has been exempt from taxation under Section 23701e of
28the Revenue and Taxation Code for a minimum of 10 years.

29(B) It has maintained its principal purpose for a minimum of
3010 years.

31(C) It has been incorporated in the state for a minimum of 25
32years.

33(f) In any civil proceeding alleging a violation of this article,
34the burden of proving an exemption or an exception from a
35definition is upon the person claiming it, and in any criminal
36proceeding alleging a violation of this article, the burden of
37producing evidence to support a defense based upon an exemption
38or an exception from a definition is upon the person claiming it.

P9    1(g) Compliance with this article does not satisfy nor substitute
2for any requirements for license, registration, or regulation
3mandated by other laws.

4

SEC. 2.  

Section 1632.5 of the Civil Code is amended to read:

5

1632.5.  

(a) A supervised financial organization that negotiates
6primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean,
7whether orally or in writing, in the course of entering into a contract
8or agreement for a loan or extension of credit secured by residential
9real property, shall deliver to the other party to that contract or
10agreement prior to the execution of the contract or agreement the
11form described in subdivision (i) for that language.

12(b) For purposes of this section:

13(1) “Contract” or “agreement” shall have the same meaning as
14defined in subdivision (g) of Section 1632.

15(2) “Supervised financial organization” means a bank, savings
16association, as defined in Section 5102 of the Financial Code,
17credit union, or holding company, affiliate, or subsidiary thereof,
18or any person subject to Division 7 (commencing with Section
1918000), Division 9 (commencing with Section 22000), or Division
2020 (commencing with Section 50000) of the Financial Code.

21(c) (1) With respect to a contract or agreement for a loan or
22extension of credit secured by residential real property as described
23in subdivision (a), a supervised financial organization that complies
24with this section shall be deemed in compliance with Section 1632.

25(2) A supervised financial organization that complies with
26Section 1632, with respect to a contract or agreement for a loan
27or extension of credit secured by residential real property as
28described in subdivision (a), shall be deemed in compliance with
29this section.

30(d) The supervised financial organization shall provide the form
31described in subdivision (i) to the borrower no later than three
32business days after receipt of the written application, and if any
33of the loan terms summarized materially change after provision
34of the translated form but prior to consummation of the loan, the
35supervised financial organization shall provide an updated version
36of the translated form prior to consummation of the loan.

37(e) (1) This section does not apply to a supervised financial
38organization that negotiates primarily in a language other than
39English, as described by subdivision (a), if the party with whom
P10   1the supervised financial organization is negotiating, negotiates the
2terms of the contract through his or her own interpreter.

3(2) For purposes of this subdivision, “his or her own interpreter”
4means a person, not a minor, able to speak fluently and read with
5full understanding both the English language and one of the
6languages specified in subdivision (a) that is the language in which
7the contract was negotiated, who is not employed by, and whose
8services are not made available through, the person engaged in the
9trade or business.

10(f) Notwithstanding subdivision (a), a translated form may retain
11any of the following elements of the executed English language
12contract or agreement without translation:

13(1) Names and titles of individuals and other persons.

14(2) Addresses, brand names, trade names, trademarks, or
15registered service marks.

16(3) Full or abbreviated designations of the make and model of
17goods or services.

18(4) Alphanumeric codes.

19(5) Individual words or expressions having no generally accepted
20non-English translation.

21(g) The terms of the contract or agreement which is executed
22in the English language shall determine the rights and obligations
23of the parties. However, the translation of the form described in
24subdivision (i) and required by subdivision (a) shall be admissible
25in evidence only to show that no contract or agreement was entered
26into because of a substantial difference in the material terms and
27conditions of the contract or agreement and the prior translated
28form provided to the borrower.

29(h) (1) A licensing agency may, by order, after appropriate
30notice and opportunity for hearing, levy administrative penalties
31 against a supervised financial organization that violates any
32provision of this section, and the supervised financial organization
33may be liable for administrative penalties, up to the amounts of
34two thousand five hundred dollars ($2,500) for the first violation,
35five thousand dollars ($5,000) for the second violation, and ten
36thousand dollars ($10,000) for each subsequent violation. Except
37for licensing agencies exempt from the provisions of the
38Administrative Procedure Act, any hearing shall be held in
39accordance with the Administrative Procedure Act (Chapter 5
40(commencing with Section 11500) of Part 1 of Division 3 of Title
P11   12 of the Government Code), and the licensing agency shall have
2all the powers granted under that act.

3(2) A licensing agency may exercise any and all authority and
4powers available to it under any other provisions of law to
5administer and enforce this section, including, but not limited to,
6investigating and examining the licensed person’s books and
7records, and charging and collecting the reasonable costs for these
8activities. The licensing agency shall not charge a licensed person
9twice for the same service. Any civil, criminal, and administrative
10authority and remedies available to the licensing agency pursuant
11to its licensing law may be sought and employed in any
12combination deemed advisable by the licensing agency to enforce
13the provisions of this section.

14(3) Any supervised financial organization that violates any
15provision of this section shall be deemed to have violated its
16licensing law.

17(4) Nothing in this section shall be construed to impair or impede
18the Attorney General from bringing an action to enforce this
19division.

20(i) The Department ofbegin delete Corporations and the Department of
21Financial Institutionsend delete
begin insert Business Oversightend insert shall create a form to be
22made available in each of the languages set forth in subdivision
23(a) for use by a supervised financial organization to summarize
24the terms of a mortgage loan pursuant to subdivision (a). In creating
25the form, the Department ofbegin delete Corporations and the Department of
26Financial Institutionsend delete
begin insert end insertbegin insertBusiness Oversightend insert may use as guidance the
27United States Department of Housing and Urban Development’s
28Good Faith Estimate disclosure form.

29(j) This section shall not apply to federally chartered banks,
30credit unions, savings banks, or thrifts.

31(k) Except as otherwise provided in subdivision (h), this section
32shall not be construed to create or enhance any claim, right of
33action, or civil liability that did not previously exist under state
34law, or limit any claim, right of action, or civil liability that
35otherwise exists under state law.

36(l) An action against a supervised financial organization for a
37violation of this section may only be brought by a licensing agency
38or by the Attorney General.

39(m) This section shall become operative beginning on July 1,
402010, or 90 days following the issuance of a form bybegin delete bothend delete the
P12   1Department ofbegin delete Corporations and the Department of Financial
2Institutionsend delete
begin insert end insertbegin insertBusiness Oversightend insert pursuant to subdivision (i),
3whichever occurs later.

4

SEC. 3.  

Section 1748.13 of the Civil Code is amended to read:

5

1748.13.  

(a) A credit card issuer shall, with each billing
6statement provided to a cardholder in this state, provide the
7following on the front of the first page of the billing statement in
8type no smaller than that required for any other required disclosure,
9but in no case in less than 8-point capitalized type:

10(1) A written statement in the following form: “Minimum
11Payment Warning: Making only the minimum payment will
12increase the interest you pay and the time it takes to repay your
13balance.”

14(2) Either of the following:

15(A) A written statement in the form of and containing the
16information described in clause (i) or (ii), as applicable, as follows:

17(i) A written three-line statement, as follows:

18“A one thousand dollar ($1,000) balance will take 17 years and
19three months to pay off at a total cost of two thousand five hundred
20ninety dollars and thirty-five cents ($2,590.35).
21A two thousand five hundred dollar ($2,500) balance will take 30
22years and three months to pay off at a total cost of seven thousand
23seven hundred thirty-three dollars and forty-nine cents ($7,733.49).
24A five thousand dollar ($5,000) balance will take 40 years and two
25months to pay off at a total cost of sixteen thousand three hundred
26five dollars and thirty-four cents ($16,305.34).
27This information is based on an annual percentage rate of 17
28percent and a minimum payment of 2 percent or ten dollars ($10),
29whichever is greater.”

30In the alternative, a credit card issuer may provide this
31information for the three specified amounts at the annual percentage
32rate and required minimum payment which are applicable to the
33cardholder’s account. The statement provided shall be immediately
34preceded by the statement required by paragraph (1).

35(ii) Instead of the information required by clause (i), retail credit
36card issuers shall provide a written three-line statement to read, as
37follows:

38“A two hundred fifty dollar ($250) balance will take two years
39and eight months to pay off a total cost of three hundred
40twenty-five dollars and twenty-four cents ($325.24).

P13   1A five hundred dollar ($500) balance will take four years and five
2months to pay off at a total cost of seven hundred nine dollars and
3ninety cents ($709.90).
4A seven hundred fifty dollar ($750) balance will take five years
5and five months to pay off at a total cost of one thousand
6ninety-four dollars and forty-nine cents ($1,094.49).
7This information is based on an annual percentage rate of 21
8percent and a minimum payment of 5 percent or ten dollars ($10),
9whichever is greater.”

10In the alternative, a retail credit card issuer may provide this
11information for the three specified amounts at the annual percentage
12rate and required minimum payment which are applicable to the
13cardholder’s account. The statement provided shall be immediately
14preceded by the statement required by paragraph (1). A retail credit
15card issuer is not required to provide this statement if the
16cardholder has a balance of less than five hundred dollars ($500).

17(B) A written statement providing individualized information
18indicating an estimate of the number of years and months and the
19approximate total cost to pay off the entire balance due on an
20open-end credit card account if the cardholder were to pay only
21the minimum amount due on the open-ended account based upon
22the terms of the credit agreement. For purposes of this
23subparagraph only, if the account is subject to a variable rate, the
24creditor may make disclosures based on the rate for the entire
25balance as of the date of the disclosure and indicate that the rate
26may vary. In addition, the cardholder shall be provided with
27referrals or, in the alternative, with the “800” telephone number
28of the National Foundation for Credit Counseling through which
29the cardholder can be referred, to credit counseling services in, or
30closest to, the cardholder’s county of residence. The credit
31counseling service shall be in good standing with the National
32Foundation for Credit Counseling or accredited by the Council on
33Accreditation for Children and Family Services. The creditor is
34required to provide, or continue to provide, the information
35required by this paragraph only if the cardholder has not paid more
36than the minimum payment for six consecutive months, after July
371, 2002.

38(3) (A) A written statement in the following form: “For an
39estimate of the time it would take to repay your balance, making
40only minimum payments, and the total amount of those payments,
P14   1call this toll-free telephone number: (Insert toll-free telephone
2number).” This statement shall be provided immediately following
3the statement required by subparagraph (A) of paragraph (2). A
4credit card issuer is not required to provide this statement if the
5disclosure required by subparagraph (B) of paragraph (2) has been
6provided.

7(B) The toll-free telephone number shall be available between
8the hours of 8 a.m. and 9 p.m., Pacific standard time, seven days
9a week, and shall provide consumers with the opportunity to speak
10with a person, rather than a recording, from whom the information
11described in subparagraph (A) may be obtained.

12(C) The Department ofbegin delete Financial Institutionsend deletebegin insertBusiness Oversightend insert
13 shall establish a detailed table illustrating the approximate number
14of months that it would take and the approximate total cost to repay
15an outstanding balance if the consumer pays only the required
16minimum monthly payments and if no other additional charges or
17fees are incurred on the account, such as additional extension of
18credit, voluntary credit insurance, late fees, or dishonored check
19fees by assuming all of the following:

20(i) A significant number of different annual percentage rates.

21(ii) A significant number of different account balances, with
22the difference between sequential examples of balances being no
23greater than one hundred dollars ($100).

24(iii) A significant number of different minimum payment
25amounts.

26(iv) That only minimum monthly payments are made and no
27additional charges or fees are incurred on the account, such as
28additional extensions of credit, voluntary credit insurance, late
29fees, or dishonored check fees.

30(D) A creditor that receives a request for information described
31in subparagraph (A) from a cardholder through the toll-free
32telephone number disclosed under subparagraph (A), or who is
33required to provide the information required by subparagraph (B)
34of paragraph (2), may satisfy its obligation to disclose an estimate
35of the time it would take and the approximate total cost to repay
36the cardholder’s balance by disclosing only the information set
37forth in the table described in subparagraph (C). Including the full
38chart along with a billing statement does not satisfy the obligation
39under this section.

40(b) For purposes of this section:

P15   1(1) “Credit card” has the same meaning as in paragraph (2) of
2subdivision (a) of Section 1748.12.

3(2) “Open-end credit card account” means an account in which
4consumer credit is granted by a creditor under a plan in which the
5creditor reasonably contemplates repeated transactions, the creditor
6may impose a finance charge from time to time on an unpaid
7balance, and the amount of credit that may be extended to the
8consumer during the term of the plan is generally made available
9to the extent that any outstanding balance is repaid and up to any
10limit set by the creditor.

11(3) “Retail credit card” means a credit card is issued by or on
12behalf of a retailer, or a private label credit card that is limited to
13customers of a specific retailer.

14(c) (1) This section shall not apply in any billing cycle in which
15the account agreement requires a minimum payment of at least 10
16percent of the outstanding balance.

17(2) This section shall not apply in any billing cycle in which
18finance charges are not imposed.

19

SEC. 4.  

Section 1789.12 of the Civil Code is amended to read:

20

1789.12.  

As used in this title:

21(a) “Credit services organization” means a person who, with
22respect to the extension of credit by others, sells, provides, or
23performs, or represents that he or she can or will sell, provide or
24perform, any of the following services, in return for the payment
25of money or other valuable consideration:

26(1) Improving a buyer’s credit record, history, or rating.

27(2) Obtaining a loan or other extension of credit for a buyer.

28(3) Providing advice or assistance to a buyer with regard to
29either paragraph (1) or (2).

30(b) “Credit services organization” does not include any of the
31following:

32(1) Any person holding a license to make loans or extensions
33of credit pursuant to the laws of this state or the United States who
34is subject to regulation and supervision with respect to the making
35of those loans or extensions of credit by an official or agency of
36this state or the United States and whose business is the making
37of those loans or extensions of credit.

38(2) Any bank, as defined in Section 102 of the Financial Code,
39or any savings institution, as specified in subdivision (a) or (b) of
40Section 5102 of the Financial Code, whose deposits or accounts
P16   1are eligible for insurance by the Federal Deposit Insurance
2Corporation.

3(3) Any person licensed as a prorater by the Department of
4begin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert when the person is acting within
5the course and scope of that license.

6(4) Any person licensed as a real estate broker performing an
7act for which a real estate license is required under the Real Estate
8Law (Pt. 1 (commencing with Sec. 10000), Div. 4, B. & P.C.) and
9who is acting within the course and scope of that license.

10(5) Any attorney licensed to practice law in this state, where
11the attorney renders services within the course and scope of the
12practice of law, unless the attorney is an employee of, or otherwise
13directly affiliated with, a credit services organization.

14(6) Any broker-dealer registered with the Securities and
15Exchange Commission or the Commodity Futures Trading
16Commission where the broker-dealer is acting within the course
17and scope of the regulation.

18(7) Any nonprofit organization described in Section 501(c)(3)
19of the Internal Revenue Code that, according to a final ruling or
20determination by the Internal Revenue Service, is both of the
21following:

22(A) Exempt from taxation under Section 501(a) of the Internal
23Revenue Code.

24(B) Not a private foundation as defined in Section 509 of the
25Internal Revenue Code.

26An advance ruling or determination of tax-exempt or foundation
27status by the Internal Revenue Service does not meet the
28requirements of this paragraph.

29(c) “Buyer” means any natural person who is solicited to
30purchase or who purchases the services of a credit services
31organization.

32(d) “Extension of credit” means the right to defer payment of
33debt or to incur debt and defer its payment, offered or granted
34primarily for personal, family, or household purposes.

35(e) “Consumer credit reporting agency” means a consumer credit
36reporting agency subject to the Consumer Credit Reporting
37Agencies Act, Title 1.6 (commencing with Section 1785.1).

38(f) “Person” includes an individual, corporation, partnership,
39joint venture, or any business entity.

P17   1

SEC. 5.  

Section 1812.201 of the Civil Code is amended to
2read:

3

1812.201.  

For the purposes of this title, the following
4definitions shall apply:

5(a) “Seller assisted marketing plan” means any sale or lease or
6offer to sell or lease any product, equipment, supplies, or services
7that requires a total initial payment exceeding five hundred dollars
8($500), but requires an initial cash payment of less than fifty
9thousand dollars ($50,000), that will aid a purchaser or will be
10used by or on behalf of the purchaser in connection with or
11incidental to beginning, maintaining, or operating a business when
12the seller assisted marketing plan seller has advertised or in any
13other manner solicited the purchase or lease of the seller assisted
14marketing plan and done any of the following acts:

15(1) Represented that the purchaser will earn, is likely to earn,
16or can earn an amount in excess of the initial payment paid by the
17purchaser for participation in the seller assisted marketing plan.

18(2) Represented that there is a market for the product, equipment,
19supplies, or services, or any product marketed by the user of the
20product, equipment, supplies, or services sold or leased or offered
21for sale or lease to the purchaser by the seller, or anything, be it
22tangible or intangible, made, produced, fabricated, grown, bred,
23modified, or developed by the purchaser using, in whole or in part,
24the product, supplies, equipment, or services that were sold or
25leased or offered for sale or lease to the purchaser by the seller
26assisted marketing plan seller.

27(3) Represented that the seller will buy back or is likely to buy
28 back any product made, produced, fabricated, grown, or bred by
29the purchaser using, in whole or in part, the product, supplies,
30equipment, or services that were initially sold or leased or offered
31for sale or lease to the purchaser by the seller assisted marketing
32plan seller.

33(b) A “seller assisted marketing plan” shall not include:

34(1) A security, as defined in the Corporate Securities Law of
351968 (Division 1 (commencing with Section 25000) of Title 4 of
36the Corporations Code), that has been qualified for sale by the
37Department ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert or is exempt
38under Chapter 1 (commencing with Section 25100) of Part 2 of
39Division 1 of Title 4 of the Corporations Code from the necessity
40to qualify.

P18   1(2) A franchise defined by the Franchise Investment Law
2(Division 5 (commencing with Section 31000) of Title 4 of the
3Corporations Code) that is registered with the Department of
4begin delete Corporationsend deletebegin insert Business Oversightend insert or is exempt under Chapter 1
5(commencing with Section 31100) of Part 2 of Division 5 of Title
64 of the Corporations Code from the necessity of registering.

7(3) Any transaction in which either the seller or purchaser or
8the lessor or lessee is licensed pursuant to and the transaction is
9governed by the Real Estate Law, Division 4 (commencing with
10Section 10000) of the Business and Professions Code.

11(4) A license granted by a general merchandise retailer that
12allows the licensee to sell goods, equipment, supplies, products,
13or services to the general public under the retailer’s trademark,
14trade name, or service mark if all of the following criteria are
15satisfied:

16(A) The general merchandise retailer has been doing business
17in this state continually for five years prior to the granting of the
18license.

19(B) The general merchandise retailer sells diverse kinds of
20goods, equipment, supplies, products, or services.

21(C) The general merchandise retailer also sells the same goods,
22equipment, supplies, products, or services directly to the general
23public.

24(D) During the previous 12 months the general merchandise
25retailer’s direct sales of the same goods, equipment, supplies,
26products, or services to the public account for at least 50 percent
27of its yearly sales of these goods, equipment, supplies, products,
28or services made under the retailer’s trademark, trade name, or
29service mark.

30(5) A newspaper distribution system distributing newspapers
31as defined in Section 6362 of the Revenue and Taxation Code.

32(6) A sale or lease to an existing or beginning business enterprise
33that also sells or leases equipment, products, supplies, or performs
34services that are not supplied by the seller and that the purchaser
35does not utilize with the equipment, products, supplies, or services
36of the seller, if the equipment, products, supplies, or services not
37supplied by the seller account for more than 25 percent of the
38purchaser’s gross sales.

39(7) The sale in the entirety of an “ongoing business.” For
40purposes of this paragraph, an “ongoing business” means a business
P19   1that for at least six months previous to the sale has been operated
2from a particular specific location, has been open for business to
3the general public, and has had all equipment and supplies
4necessary for operating the business located at that location. The
5sale shall be of the entire “ongoing business” and not merely a
6portion of the ongoing business.

7(8) A sale or lease or offer to sell or lease to a purchaser (A)
8who has for a period of at least six months previously bought
9products, supplies, services, or equipment that were sold under the
10same trademark or trade name or that were produced by the seller
11and, (B) who has received on resale of the product, supplies,
12services, or equipment an amount that is at least equal to the
13amount of the initial payment.

14(9) The renewal or extension of an existing seller assisted
15marketing plan contract.

16(10) A product distributorship that meets each of the following
17requirements:

18(A) The seller sells products to the purchaser for resale by the
19purchaser, and it is reasonably contemplated that substantially all
20of the purchaser’s sales of the product will be at wholesale.

21(B) The agreement between the parties does not require that the
22purchaser pay the seller, or any person associated with the seller,
23a fee or any other payment for the right to enter into the agreement,
24and does not require the purchaser to buy a minimum or specified
25quantity of the products, or to buy products for a minimum or
26specified period of time. For purposes of this paragraph, a “person
27associated with the seller” means a person, including an individual
28or a business entity, controlling, controlled by, or under the same
29control as the seller.

30(C) The seller is a corporation, partnership, limited liability
31company, joint venture, or any other business entity.

32(D) The seller has a net worth of at least ten million dollars
33($10,000,000) according to audited financial statements of the
34seller done during the 18 months preceding the date of the initial
35sale of products to the purchaser. Net worth may be determined
36on a consolidated basis if the seller is a subsidiary of another
37business entity that is permitted by generally accepted accounting
38standards to prepare financial statements on a consolidated basis
39and that business entity absolutely and irrevocably agrees in writing
40to guarantee the seller’s obligations to the purchaser. The seller’s
P20   1net worth shall be verified by a certification to the Attorney General
2from an independent certified public accountant that the audited
3financial statement reflects a net worth of at least ten million dollars
4($10,000,000). This certification shall be provided within 30 days
5following receipt of a written request from the Attorney General.

6(E) The seller grants the purchaser a license to use a trademark
7that is registered under federal law.

8(F) It is not an agreement or arrangement encouraging a
9distributor to recruit others to participate in the program and
10compensating the distributor for recruiting others into the program
11or for sales made by others recruited into the program.

12(c) “Person” includes an individual, corporation, partnership,
13limited liability company, joint venture, or any business entity.

14(d) “Seller” means a person who sells or leases or offers to sell
15or lease a seller assisted marketing plan and who meets either of
16the following conditions:

17(1) Has sold or leased or represents or implies that the seller
18has sold or leased, whether in California or elsewhere, at least five
19seller assisted marketing plans within 24 months prior to a
20solicitation.

21(2) Intends or represents or implies that the seller intends to sell
22or lease, whether in California or elsewhere, at least five seller
23assisted marketing plans within 12 months following a solicitation.

24For purposes of this title, the seller is the person to whom the
25purchaser becomes contractually obligated. A “seller” does not
26include a licensed real estate broker or salesman who engages in
27the sale or lease of a “business opportunity” as that term is used
28in Sections 10000 to 10030, inclusive, of the Business and
29Professions Code, or elsewhere in Chapter 1 (commencing with
30Section 10000), Chapter 2 (commencing with Section 10050), or
31Chapter 6 (commencing with Section 10450) of Part 1 of Division
324 of the Business and Professions Code.

33(e) “Purchaser” means a person who is solicited to become
34obligated or does become obligated on a seller assisted marketing
35plan contract.

36(f) “Equipment” includes machines, all electrical devices, video
37or audio devices, molds, display racks, vending machines, coin
38operated game machines, machines that dispense products, and
39display units of all kinds.

P21   1(g) “Supplies” includes any and all materials used to produce,
2grow, breed, fabricate, modify, develop, or make any product or
3item.

4(h) “Product” includes any tangible chattel, including food or
5living animals, that the purchaser intends to:

6(1) Sell or lease.

7(2) Use to perform a service.

8(3) Resell or attempt to resell to the seller assisted marketing
9plan seller.

10(4) Provide or attempt to provide to the seller assisted marketing
11plan seller or to any other person whom the seller suggests the
12purchaser contact so that the seller assisted marketing plan seller
13or that other person may assist, either directly or indirectly, the
14purchaser in distributing, selling, leasing, or otherwise disposing
15of the product.

16(i) “Services” includes any assistance, guidance, direction, work,
17labor, or services provided by the seller to initiate or maintain or
18assist in the initiation or maintenance of a business.

19(j) “Seller assisted marketing plan contract” or “contract” means
20any contract or agreement that obligates a purchaser to a seller.

21(k) “Initial payment” means the total amount a purchaser is
22obligated to pay to the seller under the terms of the seller assisted
23marketing plan contract prior to or at the time of delivery of the
24equipment, supplies, products, or services or within six months of
25the purchaser commencing operation of the seller assisted
26marketing plan. If the contract sets forth a specific total sale price
27for purchase of the seller assisted marketing plan which total price
28is to be paid partially as a downpayment and then in specific
29monthly payments, the “initial payment” means the entire total
30sale price.

31(l) “Initial cash payment” or “downpayment” means that portion
32 of the initial payment that the purchaser is obligated to pay to the
33seller prior to or at the time of delivery of equipment, supplies,
34products, or services. It does not include any amount financed by
35or for which financing is to be obtained by the seller, or financing
36that the seller assists in obtaining.

37(m) “Buy-back” or “secured investment” means any
38representation that implies in any manner that the purchaser’s
39initial payment is protected from loss. These terms include a
40representation or implication of any of the following:

P22   1(1) That the seller may repurchase either all or part of what it
2sold to the purchaser.

3(2) That the seller may at some future time pay the purchaser
4the difference between what has been earned and the initial
5payment.

6(3) That the seller may in the ordinary course buy from the
7purchaser items made, produced, fabricated, grown, bred, modified,
8or developed by the purchaser using, in whole or in part, the
9product, supplies, equipment, or services that were initially sold
10or leased to the purchaser by the seller.

11(4) That the seller or a person to whom the seller will refer the
12purchaser may in the ordinary course sell, lease, or distribute the
13items the purchaser has for sale or lease.

14

SEC. 6.  

Section 2923.3 of the Civil Code is amended to read:

15

2923.3.  

(a) With respect to residential real property containing
16no more than four dwelling units, a mortgagee, trustee, beneficiary,
17or authorized agent shall provide to the mortgagor or trustor a copy
18of the recorded notice of default with an attached separate summary
19document of the notice of default in English and the languages
20described in Section 1632, as set forth in subdivision (c), and a
21copy of the recorded notice of sale with an attached separate
22summary document of the information required to be contained
23in the notice of sale in English and the languages described in
24Section 1632, as set forth in subdivision (d). These summaries are
25not required to be recorded or published. This subdivision shall
26become operative on April 1, 2013, or 90 days following the
27issuance of the translations by the Department ofbegin delete Corporations,end delete
28begin insert Business Oversightend insert pursuant to subdivision (b), whichever is later.

29(b) (1) The Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
30 shall provide a standard translation of the statement in paragraph
31(1) of subdivision (c), and of the summary of the notice of default,
32as set forth in paragraph (2) of subdivision (c) in the languages
33described in Section 1632.

34(2) The Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert shall
35provide a standard translation of the statement in paragraph (1) of
36subdivision (d), and of the summary of the notice of sale, as set
37forth in paragraph (2) of subdivision (d).

38(3) The department shall make the translations described in
39paragraphs (1) and (2) available without charge on its Internet Web
40site. Any mortgagee, trustee, beneficiary, or authorized agent who
P23   1provides the department’s translations in the manner prescribed
2by this section shall be in compliance with this section.

3(c) (1) The following statement shall appear in the languages
4described in Section 1632 at the beginning of the notice of default:


6NOTE: THERE IS A SUMMARY OF THE INFORMATION
7IN THIS DOCUMENT ATTACHED.


9(2) The following summary of key information shall be attached
10to the copy of the notice of default provided to the mortgagor or
11trustor:


13SUMMARY OF KEY INFORMATION

14The attached notice of default was sent to [name of the trustor],
15in relation to [description of the property that secures the mortgage
16or deed of trust in default]. This property may be sold to satisfy
17your obligation and any other obligation secured by the deed of
18trust or mortgage that is in default. [Trustor] has, as described in
19the notice of default, breached the mortgage or deed of trust on
20the property described above.

21IMPORTANT NOTICE: IF YOUR PROPERTY IS IN
22FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR
23PAYMENTS, IT MAY BE SOLD WITHOUT ANY COURT
24ACTION, and you may have the legal right to bring your account
25in good standing by paying all of your past due payments plus
26permitted costs and expenses within the time permitted by law for
27reinstatement of your account, which is normally five business
28days prior to the date set for the sale of your property. No sale date
29may be set until approximately 90 days from the date the attached
30notice of default may be recorded (which date of recordation
31appears on the notice).

32This amount is ____________ as of ___(date)____________and
33will increase until your account becomes current.

34While your property is in foreclosure, you still must pay other
35obligations (such as insurance and taxes) required by your note
36and deed of trust or mortgage. If you fail to make future payments
37on the loan, pay taxes on the property, provide insurance on the
38property, or pay other obligations as required in the note and deed
39of trust or mortgage, the beneficiary or mortgagee may insist that
40you do so in order to reinstate your account in good standing. In
P24   1addition, the beneficiary or mortgagee may require as a condition
2to reinstatement that you provide reliable written evidence that
3you paid all senior liens, property taxes, and hazard insurance
4premiums.

5Upon your written request, the beneficiary or mortgagee will
6give you a written itemization of the entire amount you must pay.
7You may not have to pay the entire unpaid portion of your account,
8even though full payment was demanded, but you must pay all
9amounts in default at the time payment is made. However, you
10and your beneficiary or mortgagee may mutually agree in writing
11prior to the time the notice of sale is posted (which may not be
12earlier than three months after this notice of default is recorded)
13to, among other things, (1) provide additional time in which to
14cure the default by transfer of the property or otherwise; or (2)
15establish a schedule of payments in order to cure your default; or
16both (1) and (2).

17Following the expiration of the time period referred to in the
18first paragraph of this notice, unless the obligation being foreclosed
19upon or a separate written agreement between you and your creditor
20permits a longer period, you have only the legal right to stop the
21sale of your property by paying the entire amount demanded by
22your creditor.

23To find out the amount you must pay, or to arrange for payment
24to stop the foreclosure, or if your property is in foreclosure for any
25other reason, contact:

26____________________________________

27(Name of beneficiary or mortgagee)

28____________________________________

29(Mailing address)

30____________________________________

31(Telephone)

32If you have any questions, you should contact a lawyer or the
33governmental agency which may have insured your loan.

34Notwithstanding the fact that your property is in foreclosure,
35you may offer your property for sale, provided the sale is concluded
36prior to the conclusion of the foreclosure.

37Remember, YOU MAY LOSE LEGAL RIGHTS IF YOU DO
38NOT TAKE PROMPT ACTION.

39If you would like additional copies of this summary, you may
40obtain them by calling [insert telephone number].

P25   1(d) (1) The following statement shall appear in the languages
2described in Section 1632 at the beginning of the notice of sale:


4NOTE: THERE IS A SUMMARY OF THE INFORMATION
5IN THIS DOCUMENT ATTACHED.


7(2) The following summary of key information shall be attached
8to the copy of the notice of sale provided to the mortgagor or
9trustor:


11SUMMARY OF KEY INFORMATION

12The attached notice of sale was sent to [trustor], in relation to
13[description of the property that secures the mortgage or deed of
14trust in default].

15YOU ARE IN DEFAULT UNDER A (Deed of trust or
16mortgage) DATED ____. UNLESS YOU TAKE ACTION TO
17PROTECT YOUR PROPERTY, IT MAY BE SOLD AT A
18PUBLIC SALE.

19IF YOU NEED AN EXPLANATION OF THE NATURE OF
20THE PROCEEDING AGAINST YOU, YOU SHOULD
21CONTACT A LAWYER.

22The total amount due in the notice of sale is ____.

23Your property is scheduled to be sold on [insert date and time
24of sale] at [insert location of sale].

25However, the sale date shown on the attached notice of sale may
26be postponed one or more times by the mortgagee, beneficiary,
27trustee, or a court, pursuant to Section 2924g of the California
28Civil Code. The law requires that information about trustee sale
29postponements be made available to you and to the public, as a
30courtesy to those not present at the sale. If you wish to learn
31whether your sale date has been postponed, and, if applicable, the
32rescheduled time and date for the sale of this property, you may
33call [telephone number for information regarding the trustee’s sale]
34 or visit this Internet Web site [Internet Web site address for
35information regarding the sale of this property], using the file
36 number assigned to this case [case file number]. Information about
37postponements that are very short in duration or that occur close
38in time to the scheduled sale may not immediately be reflected in
39the telephone information or on the Internet Web site. The best
P26   1way to verify postponement information is to attend the scheduled
2sale.

3If you would like additional copies of this summary, you may
4obtain them by calling [insert telephone number].

5(e) Failure to provide these summaries to the mortgagor or
6trustor shall have the same effect as if the notice of default or notice
7of sale were incomplete or not provided.

8(f) This section sets forth a requirement for translation in
9languages other than English, and a document complying with the
10provisions of this section may be recorded pursuant to subdivision
11(b) of Section 27293 of the Government Code. A document that
12complies with this section shall not be rejected for recordation on
13the ground that some part of the document is in a language other
14than English.


16

SEC. 7.  

Section 1101.1 of the Corporations Code is amended
17to read:

18

1101.1.  

Subdivision (c) of Section 1113 andbegin delete the last two
19sentencesend delete
begin insert subdivision (b)end insert of Section 1101 do not apply to any
20transaction if the Commissioner ofbegin delete Corporations, the Commissioner
21of Financial Institutions,end delete
begin insert Business Oversight,end insert the Insurance
22Commissioner or, the Public Utilities Commission has approved
23the terms and conditions of the transaction and the fairness of those
24terms and conditions pursuant to Section 25142 or Sectionbegin delete 696.5end delete
25begin insert 1209end insert, 5750, or 5802 of the Financial Code, Section 838.5 of the
26Insurance Code, or Section 822 of the Public Utilities Code.

27

SEC. 8.  

Section 2207 of the Corporations Code is amended to
28read:

29

2207.  

(a) A corporation is liable for a civil penalty in an
30amount not exceeding one million dollars ($1,000,000) if the
31corporation does both of the following:

32(1) Has actual knowledge that an officer, director, manager, or
33agent of the corporation does any of the following:

34(A) Makes, publishes, or posts, or has made, published, or
35posted, either generally or privately to the shareholders or other
36persons, either of the following:

37(i) An oral, written, or electronically transmitted report, exhibit,
38notice, or statement of its affairs or pecuniary condition that
39contains a material statement or omission that is false and intended
P27   1to give the shares of stock in the corporation a materially greater
2or a materially less apparent market value than they really possess.

3(ii) An oral, written, or electronically transmitted report,
4prospectus, account, or statement of operations, values, business,
5profits, or expenditures, that includes a material false statement or
6omission intended to give the shares of stock in the corporation a
7materially greater or a materially less apparent market value than
8they really possess.

9(B) Refuses or has refused to make any book entry or post any
10notice required by law in the manner required by law.

11(C) Misstates or conceals or has misstated or concealed from a
12regulatory body a material fact in order to deceive a regulatory
13body to avoid a statutory or regulatory duty, or to avoid a statutory
14or regulatory limit or prohibition.

15(2) Within 30 days after actual knowledge is acquired of the
16actions described in paragraph (1), the corporation knowingly fails
17to do both of the following:

18(A) Notify the Attorney General or appropriate government
19agency in writing, unless the corporation has actual knowledge
20that the Attorney General or appropriate government agency has
21been notified.

22(B) Notify its shareholders in writing, unless the corporation
23has actual knowledge that the shareholders have been notified.

24(b) The requirement for notification under this section is not
25applicable if the action taken or about to be taken by the
26corporation, or by an officer, director, manager, or agent of the
27corporation under paragraph (1) of subdivision (a), is abated within
28the time prescribed for reporting, unless the appropriate
29government agency requires disclosure by regulation.

30(c) If the action reported to the Attorney General pursuant to
31this section implicates the government authority of an agency other
32than the Attorney General, the Attorney General shall promptly
33forward the written notice to that agency.

34(d) If the Attorney General was not notified pursuant to
35subparagraph (A) of paragraph (2) of subdivision (a), but the
36corporation reasonably and in good faith believed that it had
37complied with the notification requirements of this section by
38notifying a government agency listed in paragraph (5) of
39subdivision (e), no penalties shall apply.

40(e) For purposes of this section:

P28   1(1) “Manager” means a person having both of the following:

2(A) Management authority over a business entity.

3(B) Significant responsibility for an aspect of a business that
4includes actual authority for the financial operations or financial
5transactions of the business.

6(2) “Agent” means a person or entity authorized by the
7corporation to make representations to the public about the
8corporation’s financial condition and who is acting within the
9scope of the agency when the representations are made.

10(3) “Shareholder” means a person or entity that is a shareholder
11of the corporation at the time the disclosure is required pursuant
12to subparagraph (B) of paragraph (2) of subdivision (a).

13(4) “Notify its shareholders” means to give sufficient description
14of an action taken or about to be taken that would constitute acts
15or omissions as described in paragraph (1) of subdivision (a). A
16notice or report filed by a corporation with the United States
17Securities and Exchange Commission that relates to the facts and
18circumstances giving rise to an obligation under paragraph (1) of
19subdivision (a) shall satisfy all notice requirements arising under
20paragraph (2) of subdivision (a), but shall not be the exclusive
21means of satisfying the notice requirements, provided that the
22Attorney General or appropriate agency is informed in writing that
23the filing has been made together with a copy of the filing or an
24electronic link where it is available online without charge.

25(5) “Appropriate government agency” means an agency on the
26following list that has regulatory authority with respect to the
27financial operations of a corporation:

28(A) Department ofbegin delete Corporations.end deletebegin insert Business Oversight.end insert

29(B) Department of Insurance.

begin delete

30(C) Department of Financial Institutions.

end delete
begin delete

31(D)

end delete

32begin insert(C)end insert Department of Managed Health Care.

begin delete

33(E)

end delete

34begin insert(D)end insert United States Securities and Exchange Commission.

35(6) “Actual knowledge of the corporation” means the knowledge
36an officer or director of a corporation actually possesses or does
37not consciously avoid possessing, based on an evaluation of
38information provided pursuant to the corporation’s disclosure
39controls and procedures.

P29   1(7) “Refuse to make a book entry” means the intentional decision
2not to record an accounting transaction when all of the following
3conditions are satisfied:

4(A) The independent auditors required recordation of an
5accounting transaction during the course of an audit.

6(B) The audit committee of the corporation has not approved
7the independent auditor’s recommendation.

8(C) The decision is made for the primary purpose of rendering
9the financial statements materially false or misleading.

10(8) “Refuse to post any notice required by law” means an
11intentional decision not to post a notice required by law when all
12of the following conditions exist:

13(A) The decision not to post the notice has not been approved
14by the corporation’s audit committee.

15(B) The decision is intended to give the shares of stock in the
16corporation a materially greater or a materially less apparent market
17value than they really possess.

18(9) “Misstate or conceal material facts from a regulatory body”
19means an intentional decision not to disclose material facts when
20all of the following conditions exist:

21(A) The decision not to disclose material facts has not been
22approved by the corporation’s audit committee.

23(B) The decision is intended to give the shares of stock in the
24corporation a materially greater or a materially less apparent market
25value than they really possess.

26(10) “Material false statement or omission” means an untrue
27statement of material fact or an omission to state a material fact
28necessary in order to make the statements made under the
29circumstances under which they were made not misleading.

30(11) “Officer” means any person as set forth in Rule 16A-1
31promulgated under the Securities Exchange Act of 1934 or any
32 successor regulation thereto, except an officer of a subsidiary
33corporation who is not also an officer of the parent corporation.

34(f) This section only applies to corporations that are issuers, as
35defined in Section 2 of the Sarbanes-Oxley Act of 2002 (15 U.S.C.
36Sec. 7201 and following).

37(g) An action to enforce this section may only be brought by
38the Attorney General or a district attorney or city attorney in the
39name of the people of the State of California.

P30   1

SEC. 9.  

Section 2510 of the Corporations Code is amended to
2read:

3

2510.  

“Social purpose corporation subject to the Banking Law”
4means any of the following:

5(a) A social purpose corporation that, with the approval of the
6Commissioner ofbegin delete Financial Institutions,end deletebegin insert Business Oversight,end insert is
7incorporated for the purpose of engaging in, or that is authorized
8by the Commissioner ofbegin delete Financial Institutionsend deletebegin insert Business Oversightend insert
9 to engage in, the commercial banking business under the Banking
10Law (Division 1 (commencing with Section 99) of the Financial
11Code).

12(b) Any social purpose corporation that, with the approval of
13the Commissioner ofbegin delete Financial Institutions,end deletebegin insert Business Oversight,end insert
14 is incorporated for the purpose of engaging in, or that is authorized
15by the Commissioner ofbegin delete Financial Institutionsend deletebegin insert Business Oversightend insert
16 to engage in, the industrial banking business under the Banking
17Law (Division 1 (commencing with Section 99) of the Financial
18Code).

19(c) Any social purpose corporation, other than a social purpose
20corporation described in subdivision (d), that, with the approval
21of the Commissioner ofbegin delete Financial Institutions,end deletebegin insert Business Oversight,end insert
22 is incorporated for the purpose of engaging in, or that is authorized
23by the Commissioner ofbegin delete Financial Institutionsend deletebegin insert Business Oversightend insert
24 to engage in, the trust business under the Banking Law (Division
251 (commencing with Section 99) of the Financial Code).

26(d) Any social purpose corporation that is authorized by the
27Commissioner ofbegin delete Financial Institutionsend deletebegin insert Business Oversightend insert and
28the Commissioner of Insurance to maintain a title insurance
29department to engage in title insurance business and a trust
30department to engage in trust business.

31(e) Any social purpose corporation that, with the approval of
32the Commissioner ofbegin delete Financial Institutions,end deletebegin insert Business Oversight,end insert
33 is incorporated for the purpose of engaging in, or that is authorized
34by the Commissioner ofbegin delete Financial Institutionsend deletebegin insert Business Oversightend insert
35 to engage in, business under Article 1 (commencing with Section
363500) of Chapter 19 of Division 1 of the Financial Code.

37

SEC. 10.  

Section 3100 of the Corporations Code is amended
38to read:

39

3100.  

(a) A social purpose corporation may sell, lease, convey,
40exchange, transfer, or otherwise dispose of all or substantially all
P31   1of its assets when the principal terms of the transaction are
2approved by the board and are approved by an affirmative vote of
3at least two-thirds of the outstanding shares of each class, or a
4greater vote if required in the articles, regardless of whether that
5class is entitled to vote thereon by the provisions of the articles,
6either before or after approval by the board and before the
7transaction. A transaction constituting a reorganization shall be
8subject to Chapter 12 (commencing with Section 1200) of Division
91 and Chapter 10 (commencing with Section 3400) of this division
10and shall not be subject to this section, other than subdivision (d).
11A transaction constituting a conversion shall be subject to Chapter
1211.5 (commencing with Section 1150) of Division 1 and Chapter
139 (commencing with Section 3300) of this division and shall not
14be subject to this section.

15(b) Notwithstanding approval of two-thirds of the outstanding
16shares, the board may abandon the proposed transaction without
17further action by the shareholders, subject to the contractual rights,
18if any, of third parties.

19(c) The sale, lease, conveyance, exchange, transfer, or other
20disposition may be made upon those terms and conditions and for
21that consideration as the board may deem in the best interests of
22the social purpose corporation. The consideration may be money,
23securities, or other property.

24(d) If the acquiring party in a transaction pursuant to subdivision
25(a) or subdivision (g) of Section 2001 is in control of or under
26common control with the disposing social purpose corporation,
27the principal terms of the sale shall be approved by at least 90
28percent of the voting power of the disposing social purpose
29corporation unless the disposition is to a domestic or foreign other
30business entity or social purpose corporation, the articles of
31incorporation of which specify materially the same purposes, in
32consideration of the nonredeemable common shares or
33nonredeemable equity securities of the acquiring party or its parent.

34(e) Subdivision (d) shall not apply to a transaction if the
35Commissioner ofbegin delete Corporations, the Commissioner of Financial
36Institutions,end delete
begin insert Business Oversight,end insert the Insurance Commissioner, or
37the Public Utilities Commission has approved the terms and
38conditions of the transaction and the fairness of those terms and
39conditions pursuant to Section 25142, Sectionbegin delete 696.5end deletebegin insert 1209end insert of the
P32   1Financial Code, Section 838.5 of the Insurance Code, or Section
2822 of the Public Utilities Code.

3

SEC. 11.  

Section 17713.12 of the Corporations Code is
4amended to read:

5

17713.12.  

(a) A limited liability company is liable for a civil
6penalty in an amount not exceeding one million dollars
7($1,000,000) if the limited liability company does both of the
8following:

9(1) Has actual knowledge that a member, officer, manager, or
10agent of the limited liability company does any of the following:

11(A) Makes, publishes, or posts, or has made, published, or
12posted, either generally or privately to the shareholders or other
13persons, either of the following:

14(i) An oral, written, or electronically transmitted report, exhibit,
15notice, or statement of its affairs or pecuniary condition that
16contains a material statement or omission that is false and intended
17to give membership shares in the limited liability company a
18materially greater or a materially less apparent market value than
19they really possess.

20(ii) An oral, written, or electronically transmitted report,
21prospectus, account, or statement of operations, values, business,
22profits, or expenditures that includes a material false statement or
23omission intended to give membership shares in the limited liability
24company a materially greater or a materially less apparent market
25value than they really possess.

26(B) Refuses or has refused to make any book entry or post any
27notice required by law in the manner required by law.

28(C) Misstates or conceals or has misstated or concealed from a
29regulatory body a material fact in order to deceive a regulatory
30body to avoid a statutory or regulatory duty, or to avoid a statutory
31or regulatory limit or prohibition.

32(2) Within 30 days after actual knowledge is acquired of the
33actions described in paragraph (1), the limited liability company
34knowingly fails to do both of the following:

35(A) Notify the Attorney General or appropriate government
36agency in writing, unless the limited liability company has actual
37knowledge that the Attorney General or appropriate government
38agency has been notified.

P33   1(B) Notify its members and investors in writing, unless the
2limited liability company has actual knowledge that the members
3and investors have been notified.

4(b) The requirement for notification under this section is not
5applicable if the action taken or about to be taken by the limited
6liability company, or by a member, officer, manager, or agent of
7the limited liability company under paragraph (1) of subdivision
8(a), is abated within the time prescribed for reporting, unless the
9appropriate government agency requires disclosure by regulation.

10(c) If the action reported to the Attorney General pursuant to
11this section implicates the government authority of an agency other
12than the Attorney General, the Attorney General shall promptly
13forward the written notice to that agency.

14(d) If the Attorney General was not notified pursuant to
15subparagraph (A) of paragraph (2) of subdivision (a), but the
16limited liability company reasonably and in good faith believed
17that it had complied with the notification requirements of this
18section by notifying a government agency listed in paragraph (5)
19of subdivision (e), no penalties shall apply.

20(e) For purposes of this section:

21(1) “Manager” means a person defined by subdivision (m) of
22Section 17701.01 having both of the following:

23(A) Management authority over the limited liability company.

24(B) Significant responsibility for an aspect of the limited liability
25company that includes actual authority for the financial operations
26or financial transactions of the limited liability company.

27(2) “Agent” means a person or entity authorized by the limited
28liability company to make representations to the public about the
29limited liability company’s financial condition and who is acting
30within the scope of the agency when the representations are made.

31(3) “Member” means a person as defined by subdivision (o) of
32Section 17701.01 that is a member of the limited liability company
33at the time the disclosure is required pursuant to subparagraph (B)
34of paragraph (2) of subdivision (a).

35(4) “Notify its members” means to give sufficient description
36of an action taken or about to be taken that would constitute acts
37or omissions as described in paragraph (1) of subdivision (a). A
38notice or report filed by a limited liability company with the United
39States Securities and Exchange Commission that relates to the
40facts and circumstances giving rise to an obligation under
P34   1paragraph (1) of subdivision (a) shall satisfy all notice requirements
2arising under paragraph (2) of subdivision (a) but shall not be the
3exclusive means of satisfying the notice requirements, provided
4that the Attorney General or appropriate agency is informed in
5writing that the filing has been made together with a copy of the
6filing or an electronic link where it is available online without
7charge.

8(5) “Appropriate government agency” means an agency on the
9following list that has regulatory authority with respect to the
10financial operations of a limited liability company:

11(A) Department ofbegin delete Corporations.end deletebegin insert Business Oversight.end insert

12(B) Department of Insurance.

begin delete

13(C) Department of Financial Institutions.

end delete
begin delete

14(D)

end delete

15begin insert(C)end insert Department of Managed Health Care.

begin delete

16(E)

end delete

17begin insert(D)end insert United States Securities and Exchange Commission.

18(6) “Actual knowledge of the limited liability company” means
19the knowledge a member, officer, or manager of a limited liability
20company actually possesses or does not consciously avoid
21possessing, based on an evaluation of information provided
22pursuant to the limited liability company’s disclosure controls and
23procedures.

24(7) “Refuse to make a book entry” means the intentional decision
25not to record an accounting transaction when all of the following
26conditions are satisfied:

27(A) The independent auditors required recordation of an
28accounting transaction during the course of an audit.

29(B) The audit committee of the limited liability company has
30not approved the independent auditor’s recommendation.

31(C) The decision is made for the primary purpose of rendering
32the financial statements materially false or misleading.

33(8) “Refuse to post any notice required by law” means an
34intentional decision not to post a notice required by law when all
35of the following conditions exist:

36(A) The decision not to post the notice has not been approved
37by the limited liability company’s audit committee.

38(B) The decision is intended to give the membership shares in
39the limited liability company a materially greater or a materially
40less apparent market value than they really possess.

P35   1(9) “Misstate or conceal material facts from a regulatory body”
2means an intentional decision not to disclose material facts when
3all of the following conditions exist:

4(A) The decision not to disclose material facts has not been
5approved by the limited liability company’s audit committee.

6(B) The decision is intended to give the membership shares in
7the limited liability company a materially greater or a materially
8less apparent market value than they really possess.

9(10) “Material false statement or omission” means an untrue
10statement of material fact or an omission to state a material fact
11necessary in order to make the statements made under the
12circumstances under which they were made not misleading.

13(11) “Officer” means a person appointed pursuant to Section
1417703.02, except an officer of a specified subsidiary limited
15liability company who is not also an officer of the parent limited
16liability company.

17(f) This section only applies to limited liability companies that
18are issuers, as defined in Section 2 of the federal Sarbanes-Oxley
19Act of 2002 (15 U.S.C. Sec. 7201 et seq.).

20(g) An action to enforce this section may only be brought by
21the Attorney General or a district attorney or city attorney in the
22name of the people of the State of California.

23

SEC. 12.  

Section 25207 of the Corporations Code is amended
24to read:

25

25207.  

A financial institution that undertakes activities with
26respect to an investment company pursuant to the provisions of
27Sectionbegin delete 1338,end deletebegin insert 1514,end insert 6524, 14652.5, or 18022.5 of the Financial
28Code shall not be subject to Section 25210 or 25230 in connection
29with such activities but shall be subject to Sections 25218, 25234,
3025235, and 25237 and to subdivisions (a), (b), and (d) of Section
3125216, and such rules thereunder as the commissioner may specify
32by rule. Nothing in this section shall affect the status of such a
33financial institution as a broker-dealer or investment adviser, or
34the employees of such persons, when engaged in the activities
35authorized by the provisions of the Financial Code specified above.

36

SEC. 13.  

Section 25243.5 of the Corporations Code is amended
37to read:

38

25243.5.  

(a) A broker-dealer or investment adviser, or an agent
39or representative thereof, shall not use a senior-specific
40certification, credential, or professional designation in connection
P36   1with the offer, sale, or purchase of securities, or the provision of
2advice as to the value of or the advisability of investing in,
3purchasing, or selling securities, either directly or indirectly or
4through publications or writings or by issuing or promulgating
5analyses or reports relating to securities, that indicates or implies
6that the broker-dealer, investment adviser, or an agent or
7representative thereof, has special certification or training in
8advising or servicing senior citizens or retirees, in such a way as
9to mislead any person.

10(b) The prohibited use of these certifications, credentials, or
11professional designations includes, but is not limited to, the
12following:

13(1) The use of a certification, credential, or professional
14designation by a person who has not actually earned or is otherwise
15ineligible to use the certification, credential, or designation.

16(2) The use of a nonexistent or self-conferred certification,
17credential, or professional designation.

18(3) The use of a certification, credential, or professional
19designation that indicates or implies a level of occupational
20qualifications obtained through education, training, or experience
21that the person using the certification, credential, or professional
22designation does not have.

23(4) The use of a certification, credential, or professional
24designation that was obtained from a designating, credentialing,
25or certifying organization where any of the following apply:

26(A) The organization is primarily engaged in the business of
27instruction in sales marketing.

28(B) The organization does not have reasonable standards or
29procedures for assuring the competency of individuals to whom
30it grants a certification, credential, or professional designation.

31(C) The organization does not have reasonable standards or
32procedures for monitoring and disciplining individuals with a
33certification, credential, or professional designation for improper
34or unethical conduct.

35(D) The organization does not have reasonable continuing
36education requirements for individuals with a certification,
37credential, or professional designation in order to maintain the
38certificate, credential, or professional designation.

39(c) There is a rebuttable presumption that a designating,
40credentialing, or certifying organization is not disqualified solely
P37   1for the purposes of paragraph (4) of subdivision (b) when the
2organization has been accredited by the American National
3Standards Institute, the National Commission for Certifying
4Agencies, or an organization that is on the United States
5Department of Education’s list entitled “Accrediting Agencies
6Recognized for Title IV Purposes” and the certification, credential,
7or professional designation issued therefrom does not primarily
8apply to sales and/or marketing.

9(d) In determining whether a combination of words, or an
10acronym standing for a combination of words, constitutes a
11certification, credential, or professional designation indicating or
12implying that a person has special certification or training in
13advising or serving senior citizens or retirees, factors to be
14considered shall include both of the following:

15(1) Use of one or more word such as “senior,” “retirement,”
16“elder,” or like words combined with one or more words such as
17“certified,” “registered,” “chartered,” “adviser,” “specialist,”
18“consultant,” “planner,” or like words, in the name of the
19certification, credential, or professional designation or credential.

20(2) The manner in which those words are combined.

21(e) This section shall not apply to the use of a job title by a
22person within an organization that is licensed or registered by the
23Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert or a federal
24financial services regulatory agency, when that job title indicates
25seniority or standing within the organization, or specifies a person’s
26area of specialization within the organization. For the purposes of
27this subdivision, federal financial services regulatory agency
28includes, but is not limited to, an agency that regulates brokers or
29dealers, investment advisers, or investment companies as described
30under the Investment Company Act of 1940 (15 U.S.C. Sec. 809-1
31et seq.).

32(f) (1) This section shall not apply to a broker or agent who is
33licensed by the Department of Insurance and is in compliance with
34the requirements of Section 787.1 of the Insurance Code.

35(2) This subdivision shall be operative only if Assembly Bill
362150 of the 2007-08 Regular Session is chaptered and becomes
37effective and that bill adds Section 787.1 to the Insurance Code.

38(g) This section shall become operative on July 1, 2009.

39

SEC. 14.  

Section 25247 of the Corporations Code is amended
40to read:

P38   1

25247.  

(a) Upon written or oral request, the commissioner
2shall make available to any person the information specified in
3Section 6254.12 of the Government Code and made available
4through the Public Disclosure Program of the Financial Industry
5Regulatory Authority with respect to any broker-dealer or agent
6licensed or regulated under this part. The commissioner shall also
7make available the current license status and the year of issuance
8of the license of a broker-dealer. Any information disclosed
9pursuant to this subdivision shall constitute a public record.
10Notwithstanding any other provisions of law, the commissioner
11may disclose either orally or in writing that information pursuant
12to this subdivision. There shall be no liability on the part of and
13no cause of action of any nature shall arise against the State of
14California, the Department ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert
15 the Commissioner ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert or any
16officer, agent, or employee of the state or of the Department of
17begin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert for the release of any false or
18unauthorized information, unless the release of that information
19was done with knowledge and malice.

20(b) Any broker-dealer or agent licensed or regulated under this
21part shall upon request deliver a written notice to any client when
22a new account is opened stating that information about the license
23status or disciplinary record of a broker-dealer or an agent may be
24obtained from the Department of Corporations, or from any other
25source that provides substantially similar information.

26(c) The notice provided under subdivision (b) shall contain the
27office location or telephone number where the information may
28be obtained.

29(d) A broker-dealer or agent shall be exempt from providing
30the notice required under subdivision (b) if a person who does not
31have a financial relationship with the broker-dealer or agent,
32requests only general operational information such as the nature
33of the broker-dealer’s or agent’s business, office location, hours
34of operation, basic services, and fees, but does not solicit advice
35regarding investments or other services offered.

36(e) Upon written or oral request, the commissioner shall make
37available to any person the disciplinary records maintained on the
38Investment Adviser Registration Depository and made available
39through the Investment Advisor Public Disclosure Web site with
40respect to any investment adviser, investment adviser
P39   1representative, or associated person of an investment adviser
2licensed or regulated under this part. The commissioner shall also
3make available the current license status and the year of issuance
4of the license of an investment adviser. Any information disclosed
5pursuant to this subdivision shall constitute a public record.
6Notwithstanding any other provision of law, the commissioner
7may disclose that information either orally or in writing pursuant
8to this subdivision. There shall be no liability on the part of and
9no cause of action of any nature shall arise against the State of
10California, the Department ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert
11 the Commissioner ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert or any
12officer, agent, or employee of the state or of the Department of
13begin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert for the release of any false or
14unauthorized information, unless the release of that information
15was done with knowledge and malice.

16(f) Section 461 of the Business and Professions Code shall not
17be applicable to the Department of Corporations when using a
18national, uniform application adopted or approved for use by the
19Securities and Exchange Commission, the North American
20Securities Administrators Association, or the Financial Industry
21Regulatory Authority that is required for participation in the Central
22Registration Depository or the Investment Adviser Registration
23Depository.

24(g) This section shall not require the disclosure of criminal
25history record information maintained by the Federal Bureau of
26Investigation pursuant to Section 534 of Title 28 of the United
27States Code, and the rules thereunder, or information not otherwise
28subject to disclosure under the Information Practices Act of 1977.

29

SEC. 15.  

Section 25254 of the Corporations Code is amended
30to read:

31

25254.  

(a) If the commissioner determines it is in the public
32interest, the commissioner may include in any administrative action
33brought under this part a claim for ancillary relief, including, but
34not limited to, a claim for restitution or disgorgement or damages
35on behalf of the persons injured by the act or practice constituting
36the subject matter of the action, and the administrative law judge
37shall have jurisdiction to award additional relief.

38(b) In an administrative action brought under this part, the
39commissioner is entitled to recover costs, which in the discretion
40of the administrative law judge may include an amount representing
P40   1reasonable attorney’s fees and investigative expenses for the
2services rendered, for deposit into the State Corporations Fund for
3the use of the Department ofbegin delete Corporations.end deletebegin insert Business Oversight.end insert

4(c) After the exhaustion of the review procedures provided in
5accordance with the provisions of the Administrative Procedure
6Act, Chapter 5 (commencing with Section 11500) of Part 1 of
7Division 3 of Title 2 of the Government Code, the commissioner
8may apply to the appropriate superior court for a judgment in the
9amount of the administrative penalty and costs awarded in a final
10decision and order compelling the respondent, or the named or
11cited person, to comply with the final decision of the commissioner
12brought under this division. The application shall include a certified
13copy of the final decision of the commission and shall constitute
14a sufficient showing to warrant the issuance of the judgment and
15order from superior court.

16

SEC. 16.  

Section 25401 of the Corporations Code is amended
17to read:

18

25401.  

It is unlawful for begin deleteany person, in connection with the
19offer, sale, or purchase of a security, directly or indirectly, to do
20any of the following:end delete

begin delete

21(a) Employ a device, scheme, or artifice to defraud.

end delete
begin delete

22(b)  Make an untrue statement of material fact or omit to state
23a material fact necessary to make the statements made, in light of
24the circumstances under which they were made, not misleading.

end delete

25begin delete(c)end deletebegin deleteend deletebegin deleteEngage in an act, practice, or course of business that operates
26or would operate as a fraud or deceit upon another person.end delete
begin insert any
27person to offer or sell a security in this state, or to buy or offer to
28buy a security in this state, by means of any written or oral
29communication that includes an untrue statement of a material
30fact or omits to state a material fact necessary to make the
31statements made, in the light of the circumstances under which
32the statements were made, not misleading.end insert

33

SEC. 17.  

Section 25604 of the Corporations Code is amended
34to read:

35

25604.  

The administration and enforcement of, and the
36education of the public relative to, the laws and programs of the
37Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert shall be supported
38from the State Corporations Fund. Funds appropriated from the
39State Corporations Fund and made available for expenditure for
P41   1any law or program of the department may come from fees
2collected from the following:

3(a) Section 25608, except for fees collected pursuant to
4subdivisions (o) to (r), inclusive, of Section 25608.

5(b) Section 25608.1.

6

SEC. 18.  

Section 25607 of the Corporations Code is amended
7to read:

8

25607.  

(a) Neither the commissioner nor any of the
9commissioner’s assistants, clerks, or deputies shall be interested
10as a director, officer, shareholder, member (other than a member
11of an organization formed for religious purposes), partner, agent,
12or employee of any person who, during the period of the official’s
13or employee’s association with the Department ofbegin delete Corporations,end delete
14begin insert Business Oversight,end insert (1) was licensed or applied for license as a
15broker-dealer or investment adviser under this division, or (2)
16applied for or secured the qualification of the sale of securities
17under this division.

18(b) Nothing contained in subdivision (a) shall prohibit the
19holding or purchasing of any securities by any assistant, clerk, or
20deputy in accordance with rules as the commissioner shall adopt
21for the purpose of protecting the public interest and avoiding
22conflicts of interest.

23(c) Nothing contained in subdivision (a) shall prohibit the
24holding or purchasing of any securities by the commissioner if any
25of the following criteria is met:

26(1) The securities held or purchased by the commissioner are
27exempt from the qualification requirements of Sections 25110,
2825120, and 25130 by virtue of Section 25100, provided that the
29holding or purchasing of those securities is in accordance with
30rules adopted for the purpose of protecting the public interest and
31avoiding conflicts of interest.

32(2) The securities held or purchased by the commissioner are
33not subject to Sections 25110, 25120, and 25130 by virtue of
34Section 25100.1, provided that the holding or purchasing of those
35securities is in accordance with rules adopted for the purpose of
36protecting the public interest and avoiding conflicts of interest.

37(3) The holding or purchasing of any securities by the
38commissioner meets each of the following requirements:

39(A) The securities are held or purchased through a management
40account or trust administered by a bank or trust company authorized
P42   1to do business in this state, and the bank or trust company has sole
2investment discretion regarding the holding, purchase, and sale of
3securities.

4(B) The commissioner did not, directly or indirectly, advise,
5counsel, command, or suggest the holding, purchase, or sale of
6any security or furnish any information relating to the security to
7the bank or trust company.

8(C) The account or trust does not at any time have more than
910 percent of its total assets invested in the securities of any one
10issuer or hold more than 5 percent of the outstanding shares or
11units of any class of securities of any one issuer.

12(D) The commissioner shall report to the Attorney General not
13less often than quarterly all holdings, purchases, and sales of
14securities by him or her as authorized in paragraph (3), which
15reports shall be retained by the Attorney General as public
16documents.

17

SEC. 19.  

Section 25612.5 of the Corporations Code is amended
18to read:

19

25612.5.  

(a) To encourage uniform interpretation and
20administration of this law and the Franchise Investment Law
21(Division 5 (commencing with Section 31000)) and effective
22securities and franchise regulation and enforcement, the
23commissioner may cooperate with the securities agencies or
24administrators of one or more states, Canadian provinces or
25territories, or other countries, the Securities and Exchange
26Commission, the Commodity Futures Trading Commission, the
27Securities Investor Protection Corporation, any self-regulatory
28organization, any national or international organization or securities
29officials or agencies, and any governmental law enforcement or
30regulatory agency.

31(b) The cooperation authorized by subdivision (a) includes, but
32is not limited to, the following actions:

33(1) Prescribing rules and forms with a view to achieving
34maximum uniformity in the form and content of registration
35statements, applications, and reports wherever practicable.

36(2) Participating in a nationwide central depository for
37qualification or registration of securities under this law and for
38documents or records required or allowed to be maintained under
39this law.

P43   1(3) Participating in the Central Registration Depository, or any
2successor or alternative nationwide or regional depository, for the
3registering, certifying, or licensing of broker-dealers or agents, or
4both.

5(4) Participating in the Investment Adviser Registration
6Depository, or any successor or alternative nationwide or regional
7 depository, for the registering, certifying, or licensing of investment
8advisers or investment adviser representatives, or both.

9(5) Cooperating in any regulatory activity necessary in the
10administration of the Uniting and Strengthening America by
11Providing Appropriate Tools Required to Intercept and Obstruct
12Terrorism Act of 2001 (Public Law 107-56; USA Patriot Act),
13consistent with state law.

14(c) Notwithstanding any other provision of law, any application
15for qualification, amendment to the application or related securities
16qualification or registration document or notice under Sections
1725100.1, 25101.1, 25102, 25102.1, 25110, 25120, 25130, and
1825230.1 or record otherwise required to be signed that is filed in
19this state as an electronic record pursuant to a nationwide central
20depository for qualification or registration of securities, or any
21electronic record filed through the Central Registration Depository
22or the Investment Adviser Registration Depository, shall be deemed
23to be a valid original document upon reproduction to paper form
24by the Department ofbegin delete Corporations.end deletebegin insert Business Oversight.end insert

25(d) For purposes of this section, “electronic record” has the
26same meaning as in subdivision (g) of Section 1633.2 of the Civil
27Code.

28

SEC. 20.  

Section 25614 of the Corporations Code is amended
29to read:

30

25614.  

All rules of the commissioner (other than those relating
31solely to the internal administration of the Department of
32begin delete Corporations)end deletebegin insert Business Oversight)end insert shall be made, amended or
33rescinded in accordance with the provisions of the Administrative
34Procedure Act, Chapter 4 (commencing with Section 11370) of
35Part 1 of Division 3 of Title 2 of the Government Code. Rules may
36be adopted prior to the effective date of this law to become
37effective upon its effective date.

38

SEC. 21.  

Section 25702 of the Corporations Code is amended
39to read:

P44   1

25702.  

Whenever a person is entitled under this law to a hearing
2in accordance with the provisions of the Administrative Procedure
3Act, Chapter 5 (commencing with Section 11500) of Part 1 of
4Division 3 of Title 2 of the Government Code, a formal hearing
5before the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert may
6be substituted with the consent of such person and of the
7commissioner for such hearing before an independent hearing
8officer; and in that case after such hearing before the Department
9ofbegin delete Corporationsend deletebegin insert Business Oversightend insert such person shall not be
10entitled to any further administrative remedy.

11

SEC. 22.  

Section 29542 of the Corporations Code is amended
12to read:

13

29542.  

(a) If, in the opinion of the commissioner, any person
14is engaging in any activity in violation of any provision of this
15law, or rule or order under this law, the commissioner may order
16the person to desist and refrain from the activity unless and until
17the activity will not be in violation of any provision of this law or
18any rule or order under this law.

19(b) If after an order has been made under subdivision (a), a
20request for hearing is filed in writing withinbegin delete one yearend deletebegin insert 30 daysend insert of
21the date of service of the order by the person to whom the order
22was directed, a hearing shall be held in accordance with the
23Administrative Procedure Act (Chapter 5, (commencing with
24Section 11500) of Part 1 of Division 3 of Title 2 of the Government
25Code), and the commissioner shall have all of the powers granted
26under the Administrative Procedure Act. Unless the hearing is
27commenced within 15 business days after the request is filed (or
28the person affected consents to a later date), the order is rescinded.

29If that person fails to file a written request for a hearing within
3030 days from the date of service of the order, the order shall be
31deemed a final order of the commissioner and shall not be subject
32to review by any court or agency, notwithstanding Section 29563.

33

SEC. 23.  

Section 31408 of the Corporations Code is amended
34to read:

35

31408.  

(a) If the commissioner determines it is in the public
36interest, the commissioner may include in any administrative action
37brought under this division, including a stop order, a claim for
38ancillary relief, including, but not limited to, a claim for rescission,
39restitution or disgorgement or damages on behalf of the persons
40injured by the act or practice constituting the subject matter of the
P45   1action, and the administrative law judge shall have jurisdiction to
2award additional relief. The person affected may be required to
3attend remedial education, as directed by the commissioner.

4(b) In an administrative action brought under this part the
5commissioner is entitled to recover costs, which in the discretion
6of the administrative law judge may include any amount
7representing reasonable attorney’s fees and investigative expenses
8for the services rendered, for deposit into the State Corporations
9Fund for the use of the Department ofbegin delete Corporations.end deletebegin insert Business
10Oversight.end insert

11

SEC. 24.  

Section 31503 of the Corporations Code is amended
12to read:

13

31503.  

All rules of the commissioner, other than those relating
14solely to the internal administration of the Department of
15begin delete Corporations,end deletebegin insert Business Oversight,end insert shall be made, amended or
16rescinded in accordance with the provisions of Chapter 4.5
17(commencing with Section 11371) of Part 1 of Division 3 of Title
182 of the Government Code.

19

SEC. 25.  

Section 31513 of the Corporations Code is amended
20to read:

21

31513.  

Whenever a person is entitled under this law to a hearing
22in accordance with the provisions of Chapter 5 (commencing with
23Section 11500) of Part 1 of Division 3 of Title 2 of the Government
24Code, a formal hearing before the Department ofbegin delete Corporationsend deletebegin insert end insert
25begin insertBusiness Oversightend insert may be substituted with the consent of such
26person and of the commissioner for such hearing before an
27independent hearing officer; and in that case after such hearing
28before the Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert such
29person shall not be entitled to any further administrative remedy.

30

SEC. 26.  

Section 620 of the Financial Code is amended to read:

31

620.  

If the licensee whose property and business has been taken
32pursuant to Section 592 is insured by a Federal Insurance Agency,
33the commissioner may tender to the appropriate Federal Insurance
34Agency an appointment as conservator, liquidator, or receiver of
35the licensee. The commissioner shall determine whether the
36licensee whose property and business has been taken shall be
37liquidated or conserved. If the Federal Insurance Agency accepts
38the appointment, the Federal Insurance Agency shall have, in
39addition to any powers conferred by applicable federal law, the
P46   1powers conferred on the commissioner pursuant to thisbegin delete article.end delete
2begin insert chapter.end insert

3

SEC. 27.  

Section 622 of the Financial Code is amended to read:

4

622.  

If the Federal Insurance Agency accepts the appointment
5in accordance with Sectionbegin delete 621,end deletebegin insert 620,end insert the rights of customers and
6other creditors of the insured licensee shall be determined in
7accordance with the applicable provisions of the laws of this state.

8

SEC. 28.  

The heading of Article 4 (commencing with Section
9670) of Chapter 7 of Division 1 of the Financial Code is amended
10to read:

11 

12Article 4.  begin deleteConservatorship and Liquidation of a Bank and end delete
13Liquidation of an Uninsured Licensee
14

 

15

SEC. 29.  

Section 1008 of the Financial Code is repealed.

begin delete
16

1008.  

The amount of funds of a bank or trust company that are
17deposited in any other financial institution (other than a Federal
18Reserve bank) shall not at any time exceed 10 percent of the sum
19of shareholders’ equity, allowance for loan and lease losses, capital
20notes, and debentures of the depositing bank or trust company
21unless the financial institution has been designated as a depositary
22for the funds of the depositing bank or trust company by a vote of
23the majority of the directors of the depositing bank or trust
24company, and unless the financial institution has been approved
25by the commissioner as a depositary for the purposes of this
26section. The commissioner may, in his or her discretion, revoke
27his or her approval of any such depositary and may, in his or her
28discretion, limit the amount of funds that may be deposited by any
29bank or trust company with any other financial institution. A
30deposit by one bank or trust company with another financial
31institution shall not be regarded as a loan.

end delete
32

SEC. 30.  

Section 1070 of the Financial Code is amended to
33read:

34

1070.  

For purposes of this chapter, the following definitions
35apply:

36(a) “Automated teller machine” means any electronic
37information processing device used by a financial institution and
38its customers for the primary purpose of executing transactions
39solely between the financial institution and its customers, if the
P47   1transactions are not incidental to sales between the customer and
2a business entity other than a financial institution.

3(b) “Branch office” means any office at which core banking
4business is conducted other than an automated teller machine, a
5 device used to facilitate check guarantee or check authorization,
6or a remote service facility as defined in subsection (d) of Section
7345.12 of Title 12 of the Code of Federal Regulations.

8(c) “Core banking business” means the business of receiving
9deposits, paying checks, making loans, and other activities that
10the commissioner may specify by order or regulation. “Core
11banking business,” when used to describe the trust business,
12includes receiving fiduciary assets and administering fiduciary
13accounts.

14(d) “Facility,” means an officebegin delete in this stateend delete at which a bank
15engages in noncore banking business but at which it does not
16engage in core banking business.

17(e) “Head office” means the office designated by the bank as
18its headquarters.

19(f) “Noncore banking business” means all activities permissible
20for banks, except core banking business, and except those activities
21prohibited by law or determined by the commissioner by regulation
22or order not to be noncore banking business.

23(g) “Office” means the head office, any branch office, and any
24facility office of a bank.

25(h) “Redesignate offices” means (1) the relocation by a bank of
26its head office to the site of a branch or facility office in this state
27and the concurrent establishment by the bank of an office at the
28former site of the head office, or (2) the relocation by a bank of a
29branch office to the site of a facility office and the concurrent
30establishment by the bank of a branch or facility office at the
31former site of the branch office.

32

SEC. 31.  

Section 2105 of the Financial Code is amended to
33read:

34

2105.  

(a) Each licensee or agent shall prominently post on the
35premises of each branch office that conducts money transmission
36a notice stating that:
37

 

“If you have complaints with respect to any aspect of the money transmission activities conducted at this location, you may contact the California Department of Business Oversight at its toll-free telephone number, begin delete1-800-622-0620,end deletebegin insert 1-866-275-2677,end insert by email at consumer.services@dbo.ca.gov, or by mail at the Department of Business Oversight, Consumer Services, 1515 K Street, Suite 200, Sacramento, CA 95814.”

P48   5

 

6(b) The commissioner may by order or regulation modify the
7content of the notice required by this section. This notice shall be
8printed in English and in the same language principally used by
9the licensee or any agent of the licensee to advertise, solicit, or
10negotiate either orally or in writing, with respect to money
11transmission at that branch office. The information required in this
12notice shall be clear, legible, and in letters not less than one-half
13inch in height. The notice shall be posted in a conspicuous location
14in the unobstructed view of the public within the premises. The
15licensee shall provide to each of its agents the notice required by
16this section. In those locations operated by an agent, the agent, and
17not the licensee, shall be responsible for the failure to properly
18post the required notice.

19(c) In the event that a licensee or agent conducts money
20transmission activity via an Internet Web site or a mobile
21application that is not in a branch office, the commissioner may
22authorize an alternative form of the notice required in subdivision
23(a).

24

SEC. 32.  

Section 4057 of the Financial Code is amended to
25read:

26

4057.  

(a) An entity that negligently discloses or shares
27nonpublic personal information in violation of this division shall
28be liable, irrespective of the amount of damages suffered by the
29consumer as a result of that violation, for a civil penalty not to
30exceed two thousand five hundred dollars ($2,500) per violation.
31However, if the disclosure or sharing results in the release of
32nonpublic personal information of more than one individual, the
33total civil penalty awarded pursuant to this subdivision shall not
34exceed five hundred thousand dollars ($500,000).

35(b) An entity that knowingly and willfully obtains, discloses,
36shares, or uses nonpublic personal information in violation of this
37division shall be liable for a civil penalty not to exceed two
38thousand five hundred dollars ($2,500) per individual violation,
39irrespective of the amount of damages suffered by the consumer
40as a result of that violation.

P49   1(c) In determining the penalty to be assessed pursuant to a
2violation of this division, the court shall take into account the
3following factors:

4(1) The total assets and net worth of the violating entity.

5(2) The nature and seriousness of the violation.

6(3) The persistence of the violation, including any attempts to
7correct the situation leading to the violation.

8(4) The length of time over which the violation occurred.

9(5) The number of times the entity has violated this division.

10(6) The harm caused to consumers by the violation.

11(7) The level of proceeds derived from the violation.

12(8) The impact of possible penalties on the overall fiscal
13solvency of the violating entity.

14(d) In the event a violation of this division results in the identity
15theft of a consumer, as defined by Section 530.5 of the Penal Code,
16the civil penalties set forth in this section shall be doubled.

17(e) The civil penalties provided for in this section shall be
18exclusively assessed and recovered in a civil action brought in the
19name of the people of the State of California in any court of
20competent jurisdiction by any of the following:

21(1) The Attorney General.

22(2) The functional regulator with jurisdiction over regulation
23of the financial institution as follows:

24(A) In the case of banks, savings associations, credit unions,
25commercial lending companies, and bank holding companies, by
26the Department ofbegin delete Financial Institutionsend deletebegin insert Business Oversight,
27Division of Financial Institutionsend insert
or the appropriate federal
28authority; (B) in the case of any person engaged in the business
29of insurance, by the Department of Insurance; (C) in the case of
30any investment broker or dealer, investment company, investment
31advisor, residential mortgage lender or finance lender, by the
32Department ofbegin delete Corporations;end deletebegin insert Business Oversight, Division of
33Corporations;end insert
and (D) in the case of a financial institution not
34subject to the jurisdiction of any functional regulator listed under
35subparagraphs (A) to (C), inclusive, above, by the Attorney
36General.

37

SEC. 33.  

Section 12104 of the Financial Code is amended to
38read:

P50   1

12104.  

A nonprofit community service organization that meets
2all of the following criteria shall be exempt from any requirements
3imposed on proraters pursuant to this division:

4(a) The nonprofit community service organization incorporates
5in this state or any other state as a nonprofit corporation and
6operates pursuant to either the Nonprofit Public Benefit
7Corporation Law, Part 2 (commencing with Section 5110) of
8Division 2 of Title 1 of the Corporations Code or the Nonprofit
9Mutual Benefit Corporation Law, Part 3 (commencing with Section
107110) of Division 2 of Title 1 of the Corporations Code.

11(b) The nonprofit community service organization limits its
12membership to retailers, lenders in the consumer credit field,
13educators, attorneys, social service organizations, employer and
14employee organizations, and related groups that serve educational,
15benevolent, fraternal, religious, charitable, social, or reformatory
16purposes.

17(c) The nonprofit community service organization has as its
18principal functions the following:

19(1) Consumer credit education.

20(2) Counseling on consumer credit problems and family budgets.

21(3) Arranging or administering debt management plans. “Debt
22management plan” means a method of paying debtor’s obligations
23in installments on a monthly basis.

24(4) Arranging or administering debt settlement plans. “Debt
25settlement plans” means a method of paying debtor’s obligations
26in a negotiated amount to each creditor on a one-time basis.

27(d) The nonprofit community service organization receives from
28a debtor no more than the following maximum amounts to offset
29the organization’s actual and necessary expenses for the services
30described in subdivision (c): a one-time sum not to exceed fifty
31dollars ($50) for education and counseling combined in connection
32with debt management or debt settlement services; and for debt
33management plans, a sum not to exceed 8 percent of the money
34disbursed monthly, or thirty-five dollars ($35) per month,
35whichever is less, and for debt settlement plans a sum not to exceed
3615 percent of the amount of the debt forgiven for negotiated debt
37settlement plans. Nonprofit community service organizations shall
38not require any upfront payments or deposits on debt settlement
39plans and may only require payment of fees once the debt has been
40successfully settled. For purposes of this subdivision, a household
P51   1shall be considered one debtor. The fees allowed pursuant to this
2subdivision shall be the only fees that may be charged by a
3nonprofit community service organization for any services related
4to a debt management plan or a debt settlement plan.

5(e) The nonprofit community service organization maintains
6and keeps current and accurate books, records, and accounts
7relating to its business in accordance with generally accepted
8accounting principles, and stores them in a readily accessible place
9for a period of no less than five years from the end of the fiscal
10year in which any transactions occurred.

11(f) The nonprofit community service organization deposits any
12money received from a debtor for the services described in
13subdivision (c) in a noninterest-bearing trust account in a federally
14insured state or federal bank, savings bank, savings and loan
15 association, or credit union, which account is maintained
16specifically for purposes of administering a debt management plan
17or debt settlement plan. The nonprofit community service
18organization shall provide the commissioner the following prior
19to engaging in business in this state and claiming this exemption:

20(1) A written notice with the name, address, and telephone
21number of the bank, savings bank, savings and loan association,
22or credit union where the trust account is maintained, and the name
23of the account and the account number. The account information
24required in this paragraph shall be kept confidential pursuant to
25the laws governing disclosure of public records, including the
26California Public Records Act, Chapter 3.5 (commencing with
27Section 6250) of Division 7 of Title 1 of the Government Code,
28and the rules adopted thereunder.

29(2) An irrevocable written consent providing that upon the
30commissioner taking possession of the property and business of
31the nonprofit community service organization, all books, records,
32property and business, including trust accounts and any other
33accounts holding debtors’ funds, shall be immediately turned over
34to the commissioner or receiver appointed pursuant to this division.
35The consent shall be signed by the nonprofit community service
36organization and the bank, savings bank, savings and loan
37association, or credit union where the trust account is maintained.
38The consent shall be binding upon the nonprofit community service
39organization and the bank, savings bank, savings and loan
40association, or credit union, and any objection to it must be raised
P52   1pursuant to the laws of the State of California and only in the forum
2in which the proceeding to take possession or appointment of the
3receiver has been filed. The nonprofit community service
4organization and the bank, savings bank, savings and loan
5association, or credit union shall further consent to the jurisdiction
6of the commissioner for the purpose of any investigation or
7proceeding under Sections 12105 and 12106 or any other provision
8of this division. The consent required by this paragraph shall
9include the name, title, and signature of an official of the bank,
10savings bank, savings and loan association, or credit union holding
11the authority to consent on behalf of that institution, and the name,
12title, and signature of the chief executive officer or president of
13the nonprofit community service organization.

14(g) The nonprofit community service organization maintains at
15all times a surety bond in the amount of twenty-five thousand
16dollars ($25,000), issued by an insurer licensed in this state. The
17bond shall be conditioned upon the obligor faithfully conforming
18to and abiding by the provisions of Section 12104 of the Financial
19Code, honestly and faithfully applying all funds received, honestly
20and faithfully performing all obligations and undertakings required
21under this section, and paying to the state and to any person all
22money that becomes due and owing to the state or to any person
23owed by the obligor of the bond.

24(h) The nonprofit community service organization reports all
25of the following to the debtor at least once every three months, or
26upon the debtor’s request, for any debt management plan or debt
27settlement plan:

28(1) Total amount received from the debtor.

29(2) Total amount paid to each creditor.

30(3) Total amount any creditor has agreed to accept as payment
31in full on any debt owed by the debtor.

32(4) Any amount paid to the organization by the debtor.

33(5) Any amount held in reserve.

34(i) The nonprofit community service organization submits to
35the commissioner, at the organization’s expense, an audit report
36containing audited financial statements covering the calendar year
37or, if the organization has an established fiscal year, then for that
38fiscal year, within 120 days after the close of the calendar or fiscal
39year.

P53   1(j) The nonprofit community service organization submits with
2the annual financial statements required under subdivision (i) a
3declaration that conforms to Section 2015.5 of the Code of Civil
4Procedure, is executed by an official authorized by the board of
5the organization, and that states that the organization complies
6with this section. The annual financial statements shall also include
7a separate written statement that identifies the name, address,
8 contact person, and telephone number of the organization.

9(k) The nonprofit community service organization maintains
10accreditation by an independent accrediting organization, including
11either the Council on Accreditation or the International Standards
12Organization, with sector certification.

13(l) The nonprofit community service organization does not
14engage in any act or practice in violation of Section 17200 or 17500
15of the Business and Professions Code.

16(m) The nonprofit community service organization inserts the
17following statement, in not less than 10-point type, in its debt
18management plan and debt settlement plan agreements:
19“Complaints related to this agreement may be directed to the
20California Department ofbegin delete Corporations.end deletebegin insert Business Oversight.end insert This
21nonprofit community service organization has adopted best
22practices for debt management plans and debt settlement plans,
23and a copy will be provided upon request.”

24(n) The nonprofit community service organization adopts and
25implements on a continuous basis policies or procedures of best
26practices that are designed to prevent improper debt management
27or debt settlement practices and prevent theft and misappropriation
28of funds. Failure to do the following shall constitute improper debt
29management or debt settlement practices, as applicable:

30(1) Obtain counselor certification conducted by a nationally
31recognized third-party certification program that certifies that all
32of the agency’s counselors receive proper training and are qualified
33to provide financial assistance prior to performing counseling
34services in this state.

35(2) Disburse funds no later than 15 days after receipt of valid
36funds, or by a scheduled disbursement date, whichever is the
37greater amount of time.

38(3) Transmit funds utilizing electronic payment processing when
39available.

P54   1(4) Implement an inception date policy, which shall include an
2agreement that a consumer’s first disbursement pursuant to a debt
3management plan shall be received within 90 days of agreeing to
4the debt management plan service. The debt management plan
5shall include all items described in subdivision (h) and shall be
6provided to the consumer at the inception date of the plan. A
7description of best practices of the agency and of the consumer
8complaint resources shall be issued no later than the first payment
9date.

10(5) Respond to and research any complaint initiated by a
11consumer within five business days of receipt of the complaint.

12(6) Prohibit a policy requiring debt management plan consumers
13from being required to utilize additional ancillary services.

14(7) Provide consumer access to debt management plan services
15regardless of the consumer’s ability to pay fees related to the debt
16management plan, lack of creditor participation, or the amount of
17the consumer’s outstanding debt.

18(8) Implement policies that specifically prohibit credit
19counselors from receiving financial incentives or additional
20compensation based on the outcome of the counseling process.

21(9) Prohibit the practice of paying referral fees to consumers or
22other third parties who refer new clients to the agency.

23(10) Disclose in all written contracts with consumers the portion
24of funding for the agency that is provided by creditors.

25(11) Disclose in all written contracts for debt management plans
26or debt settlement plans that these plans are not suitable for all
27consumers and that consumers may request information on other
28options, including, but not limited to, bankruptcy.

29(12) Fully disclose all services to be provided by the agency
30and any initial and ongoing fees to be charged by the agency for
31services, including, but not limited to, contributions to the agency.

32(13) Prohibit the agency or any affiliate of the agency from
33purchasing debt from a consumer.

34(14) Prohibit the agency from offering loans to consumers
35involving the charging of interest.

36(15) Prominently disclose in written contracts with consumers
37of any financial arrangement between the agency and any lender
38or any provider of financial services if the agency receives any
39form of compensation for referring consumers to that lender or
40provider of financial services.

P55   1(16) Provide professional liability insurance coverage.

2(17) Provide the debtor a written individualized evaluation of
3his or her financial status and an initial debt management plan for
4the debtor’s debts with specific recommendations regarding actions
5the debtor should take.

6(18) Provide the debtor enrolling in a debt management plan a
7written reliable estimate of the length of time it will take to
8complete the plan and identifies the total debt owed to each creditor
9included in the plan, the proposed payment to each creditor, and
10any fees that would be charged for administering the plan. The
11estimate shall be provided prior to receipt of the debtor’s first
12deposit.

13(o) The nonprofit community service organization provides a
14copy of the best practices described in subdivision (n) to its debtor,
15upon request.

16(p) The nonprofit community service organization resolves in
17a prompt and reasonable manner complaints from debtors relating
18to the organization’s debt management plans or debt settlement
19plans.

20(q) The nonprofit community service organization provides
21written notice to the commissioner within 30 days of dissolution
22or termination of engaging in the activities of a prorater, as defined
23in Section 12002.1.

24(r) This section shall become inoperative upon the enactment
25of a statute requiring the licensure and regulation of nonprofit
26community service organizations providing consumer credit
27counseling.

28

SEC. 34.  

Section 17210.2 of the Financial Code is amended
29to read:

30

17210.2.  

(a) No escrow agent shall disseminate, or cause or
31permit to be disseminated, in any manner whatsoever, any
32statement or representation which is false, misleading, or deceptive,
33or which omits to state material information, or which refers to
34the supervision of that agent by the State of California or any
35department or official thereof.

36(b) A licensed escrow agent, in referring to the corporation’s
37licensure under this law in any written or printed communication
38or any communication by means of recorded telephone messages
39or spoken on radio, television, or similar communications media,
40shall include the following statement: “This escrow company holds
P56   1California Departmentbegin delete of Corporationsend deletebegin insert Business Oversightend insert Escrow
2License No. ____.”

3(c) The commissioner may order any person to desist from any
4conduct which the commissioner finds to be a violation of this
5section.

6

SEC. 35.  

Section 17214 of the Financial Code is amended to
7read:

8

17214.  

(a) There is established in the Department of
9begin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert an Escrow Law Advisory
10Committee consisting of 11 members. The members shall consist
11of the commissioner or his or her designee; the chairman of the
12board and the immediate past chairman of the board for the Escrow
13Agents’ Fidelity Corporation; the current chairman of the board
14and the immediate past chairman of the board for the Escrow
15Institute of California; a person selected by the commissioner to
16represent a different type of business ownership under this division;
17a person selected by the commissioner to represent a different type
18of business specialization; a person selected by the commissioner
19to represent small businesses operating pursuant to this division;
20a person selected by the commissioner to represent medium-sized
21businesses operating pursuant to this division; an attorney at law
22experienced in escrow matters selected by the commissioner; and
23a certified public accountant experienced in the escrow business
24selected by the commissioner.

25Except for the members from the Escrow Agents’ Fidelity
26Corporation and the Escrow Institute of California, members
27appointed by the commissioner shall serve for a term of two years.

28The committee shall meet at least quarterly. The commissioner
29or his or her designee shall chair the committee. All members shall
30serve without compensation or reimbursement for expenses.

31Where the chairman of the board or the immediate past chairman
32of the board of the Escrow Agents’ Fidelity Corporation is the
33same person, or is unable to serve on the advisory committee, then
34the commissioner after consultation with the board of directors of
35the Escrow Agents’ Fidelity Corporation, shall choose a member
36of the board of directors to serve on the committee. Where the
37president or past president of the Escrow Institute of California is
38the same person, or is unable to serve on the advisory committee,
39then the commissioner after consultation with the board of directors
P57   1of the Escrow Institute of California, shall choose a member of
2the board of directors to serve on the committee.

3(b) The purpose of the committee is to assist the commissioner
4in the implementation of the commissioner’s duties under this
5chapter.

6

SEC. 36.  

Section 17311 of the Financial Code is amended to
7read:

8

17311.  

(a) Persons licensed pursuant to this division shall
9maintain a corporation under the Nonprofit Mutual Benefit
10Corporation Law (Part 3 (commencing with Section 7110) of
11Division 2 of Title 1 of the Corporations Code) operating under
12the name Escrow Agents’ Fidelity Corporation.

13(b) The State of California, the Department ofbegin delete Corporations,end delete
14begin insert Business Oversight,end insert or any officer, agent, or employee of either
15shall not be liable in any way for the conduct of Fidelity
16Corporation, its directors, officers, agents, employees, or members.

17

SEC. 37.  

Section 17320 of the Financial Code is amended to
18read:

19

17320.  

Fidelity Corporation shall establish and maintain the
20following funds for payment of claims and for payment of costs
21of administration: the membership fund, the operations fund, and
22the fidelity fund.

23(a) An applicant or a licensee shall, at the time an application
24is filed for a license, pay to Fidelity Corporation a membership
25fee of three thousand dollars ($3,000) for each location for which
26a license is applied. If the application is denied, withdrawn, or
27abandoned, Fidelity Corporation may retain two hundred dollars
28($200) from the membership fee to cover costs of administration.

29(1) The membership fund shall be reserved for payment of
30claims which exceed the fidelity fund balance and for payment of
31extraordinary operational costs.

32(2) Any member who, on the effective date of this section, has
33an account balance which exceeds the three thousand dollars
34($3,000) membership fee times the number of its licensed locations
35shall be credited in a special reserve account for the excess amount.
36This balance shall be credited against future assessments made
37pursuant to subdivision (b) of Section 17321 in an amount not
38exceeding four hundred dollars ($400) per licensed location per
39year. Any member whose account balance is less than three
40thousand dollars ($3,000) times the number of its licensed locations
P58   1shall, on or before December 1, 1988, pay to Fidelity Corporation
2an amount sufficient to allow the member’s account to be
3maintained at three thousand dollars ($3,000) times the number
4of licensed locations. Fidelity Corporation shall provide each
5member with an accounting of the amounts being reserved for the
6members’ membership account and amounts being held as a special
7reserve.

8(3) The membership fee, less any unpaid assessments and related
9costs, shall be refunded to the member in accordance with Fidelity
10Corporation’s bylaws not less than 30 months and no more than
1136 months after the effective date of surrender of a license.

12(4) Any member who does not engage in any escrow transactions
13pursuant to subdivision (c) of Section 17312 may terminate its
14membership in Fidelity Corporation by written notice to Fidelity
15Corporation and the Department ofbegin delete Corporations,end deletebegin insert Business
16Oversight,end insert
as provided in the Fidelity Corporation’s bylaws and
17rules and regulations. The membership fee, less any unpaid
18assessments and related costs, shall be refunded to the member in
19accordance with Fidelity Corporation’s bylaws not less than 30
20months and no more than 36 months after the effective date of the
21member’s written request to terminate its membership in Fidelity
22Corporation. Before a licensee resumes those escrow transactions,
23it shall first be required to become a member of Fidelity
24Corporation, as provided in this subdivision.

25(b) Fidelity Corporation shall prepare, prior to its fiscal year
26end, an estimated annual operational budget projecting the costs
27of operations and administration for the succeeding fiscal year,
28excluding the amount paid for claims and premiums paid for excess
29coverage bonding. The amount of the assessment shall be 150
30percent of the budgetary projection. In succeeding years, the
31assessment shall be adjusted by adding the prior year’s deficit or
32deducting unused surplus from the prior year.

33(c) Fidelity Corporation shall establish a fidelity fund for the
34payment of claims and for the payment of the premium for the
35fidelity bond or insurance policy, if any. All claims shall be paid
36from the fidelity fund, provided that, to the extent that the fidelity
37fund balance is not sufficient to pay claims, the claim shall be paid
38from the membership fund by charging each member’s membership
39account a pro rata share of the excess.

P59   1(d) All interest earned on the membership fund and the
2operations fund shall be credited to the fidelity fund.

3

SEC. 38.  

Section 17331 of the Financial Code is amended to
4read:

5

17331.  

(a) An applicant applying for licensure as an escrow
6agent under this division is required to apply for a Fidelity
7Corporation Certificate, prepared and issued by Fidelity
8Corporation, for each proposed shareholder, officer, director,
9trustee, manager, or employee who is to be directly or indirectly
10compensated by the escrow agent, prior to licensure of the escrow
11agent by the commissioner.

12(b) A shareholder, officer, director, trustee, manager, or
13employee of an escrow agent, directly or indirectly compensated
14by an escrow agent within this state, is required to complete and
15execute a Fidelity Corporation Certificate application, prepared
16and issued by Fidelity Corporation, as a condition of his or her
17employment or entitlement to compensation, before the person
18may continue the regular discharge of his or her duties, or have
19access to moneys or negotiable securities belonging to or in the
20possession of the escrow agent, or draw checks upon the escrow
21agent or the trust funds of the escrow agent.

22(c) Fidelity Corporation Certificates may also be known as
23Escrow Agent’s Fidelity Corporation Certificates or EAFC
24Certificates. The certificate at all times remains the property of
25Fidelity Corporation, and is not transferable by either a member
26or employee. The certificate is not a warranty or guarantee by
27Fidelity Corporation of the integrity, veracity, or competence of
28the person.

29(d) An application for a Fidelity Corporation Certificate shall
30be in writing and in the form prescribed by Fidelity Corporation.
31The application may include (1) a fee not to exceed fifty dollars
32($50), (2) two passport-size photographs, and (3) a set of fingerprint
33images and related information using the process established by
34the Department of Justice for requesting state summary criminal
35history information, plus the fee charged by the Department of
36Justice for processing noncriminal applicant fingerprint images
37and related information, in a manner established by the Department
38of Justice pursuant to subdivision (l). The Department of Justice
39shall honor the Fidelity Corporation report request form and issue
40a report to Fidelity Corporation, notwithstanding any other
P60   1provision of law or regulation to the contrary. Fidelity Corporation
2is also entitled to submit a set of fingerprint images and related
3information in the Department of Justice specified noncriminal
4applicant fingerprint format for the purpose of requesting and
5obtaining a report from the Department of Justice, for the officers
6and employees of Fidelity Corporation. A member shall cause the
7filing of applications for all existing employees as required by this
8section within 30 days of written notice by Fidelity Corporation
9to the member.

10(e) The application form shall include a provision for binding
11arbitration to allow for arbitration of any appeal or dispute as to a
12decision by Fidelity Corporation concerning the certificate, as
13follows:

14A DISPUTE AS TO WHETHER THE DENIAL OF THIS
15CERTIFICATE APPLICATION OR ANY SUBSEQUENT
16SUSPENSION OR REVOCATION OF THE CERTIFICATE IS
17UNNECESSARY OR UNAUTHORIZED OR WAS
18IMPROPERLY, NEGLIGENTLY, OR UNLAWFULLY
19RENDERED, MAY BE DETERMINED BY SUBMISSION TO
20ARBITRATION AS PROVIDED BY CALIFORNIA LAW, AND
21NOT BY A LAWSUIT OR RESORT TO COURT PROCESS
22EXCEPT AS CALIFORNIA LAW PROVIDES FOR JUDICIAL
23REVIEW OF ARBITRATION PROCEEDINGS OR EXCEPT
24AS PROVIDED BY SECTION 17331.3 OF THE FINANCIAL
25CODE.   THE APPLICANT MAY, SUBJECT TO AGREEMENT,
26SUBMIT ANY ISSUE ARISING FROM A DECISION BY
27FIDELITY CORPORATION TO DENY THIS CERTIFICATE
28APPLICATION OR TO SUSPEND OR REVOKE THE
29CERTIFICATE TO BE DECIDED BY BINDING NEUTRAL
30ARBITRATION.   UPON AN AGREEMENT TO SUBMIT TO
31BINDING NEUTRAL ARBITRATION, THE APPLICANT HAS
32NO RIGHT TO HAVE ANY DISPUTE CONCERNING THIS
33CERTIFICATE APPLICATION LITIGATED IN A COURT OR
34JURY TRIAL NOR ANY JUDICIAL RIGHTS TO DISCOVERY
35AND APPEAL, EXCEPT AS SPECIFICALLY PROVIDED IN
36THE ESCROW LAW.   ARBITRATION MAY BE COMPELLED
37AS PROVIDED BY LAW.

38(f) There is no liability on the part of and no cause of action of
39any nature may arise against Fidelity Corporation or its members,
40directors, officers, employees, or agents, the State of California,
P61   1the Department ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert or any officer,
2agent, or employee of the state or the Department ofbegin delete Corporationsend deletebegin insert end insert
3begin insertBusiness Oversightend insert for statements made by Fidelity Corporation
4in reports or recommendations made pursuant to this division, or
5for reports or recommendations made pursuant to this division to
6Fidelity Corporation by its members, directors, officers, employees
7or agents, the State of California, the Department ofbegin delete Corporations,end deletebegin insert end insert
8begin insertBusiness Oversightend insert or any officer, agent, or employee of the state
9or the Department ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert unless the
10information provided is false and the party making the statement
11or providing the false information does so with knowledge and
12malice. Reports or recommendations made pursuant to this section,
13or Section 17331.1, 17331.2, or 17331.3, are not public documents.

14(g) There is no liability on the part of and no cause of action of
15any nature may arise against Fidelity Corporation or its members,
16directors, officers, employees, or agents, the State of California,
17the Department ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert or an officer,
18agent, or employee of the state or the Department ofbegin delete Corporationsend deletebegin insert end insert
19begin insertBusiness Oversightend insert for the release of any information furnished
20to Fidelity Corporation pursuant to this section unless the
21information released is false and the party, including Fidelity
22Corporation, its members, directors, officers, employees, or agents,
23the state, the Department ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert or
24any officer, agent, or employee of the state or the Department of
25begin delete Corporations,end deletebegin insert Business Oversight,end insert who releases the false
26information does so with knowledge and malice.

27(h) There is no liability on the part of and no cause of action of
28any nature may arise against Fidelity Corporation or its directors,
29officers, employees, or agents, for any decision to deny an
30application for a certificate or to suspend or revoke the certificate
31of any person or for the timing of any decision or the timing of
32any notice to persons or members thereof, or for any failure to
33deny an application under subdivision (a) of Section 17331.2. This
34subdivision does not apply to acts performed in bad faith or with
35malice.

36(i) Fidelity Corporation, any member of Fidelity Corporation,
37an agent of Fidelity Corporation or of its members, or any person
38who uses any information obtained under this section for any
39purpose not authorized by this chapter is guilty of a misdemeanor.

P62   1(j) Section 17331, 17331.1, or 17331.2 does not constitute a
2restriction or limitation upon the obligation of Fidelity Corporation
3to indemnify members against loss, as provided in Sections 17310
4and 17314. The failure to obtain a certificate, the denial of an
5application for a certificate, or the suspension, cancellation, or
6revocation of a certificate does not limit the obligation of Fidelity
7Corporation to indemnify a member against loss.

8(k) Notwithstanding Section 11105 of the Penal Code, Fidelity
9Corporation is entitled to receive state summary criminal history
10information and subsequent arrest notification from the Department
11of Justice as a result of fingerprint images and related information
12submitted to the Department of Justice by the Department of
13begin delete Corporations,end deletebegin insert Business Oversight,end insert pursuant to subdivision (g) of
14Section 17209, Section 17212.1, and subdivision (d) of Section
1517414.1, by or on behalf of escrow agents, shareholders, officers,
16directors, trustees, managers, or employees of an escrow agent,
17directly or indirectly compensated by an escrow agent. The
18Department of Justice and Fidelity Corporation shall enter into an
19agreement to implement this subdivision. The Department of
20begin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert shall forward to Fidelity
21Corporation, weekly, a list of names of individual fingerprints
22submitted to the Department of Justice.

23(l) (1) The fingerprint images and related information required
24pursuant to subdivision (d) shall be submitted by the Department
25ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert to the Department of Justice,
26in a manner established by the Department of Justice, for the
27purposes of obtaining information as to the existence and content
28of a record of state or federal convictions, state or federal arrests,
29and information as to the existence of and content of a record of
30state or federal arrests for which the Department of Justice
31establishes that the person is free on bail or on his or her own
32recognizance pending trial or appeal.

33(2) Upon receipt, the Department of Justice shall forward to the
34Federal Bureau of Investigation requests for federal summary
35criminal history information received pursuant to this section. The
36Department of Justice shall review the information returned from
37the Federal Bureau of Investigation and compile and disseminate
38a response to the Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert
39 and a fitness determination to Fidelity Corporation pursuant to
40subdivision (p) of Section 11105 of the Penal Code.

P63   1(3) The Department of Justice shall charge a fee sufficient to
2cover the costs of processing the requests pursuant to this
3subdivision.

4

SEC. 39.  

Section 18405 of the Financial Code is amended to
5read:

6

18405.  

(a) On or before the 15th day of March of every year,
7each industrial loan company shall file with the commissioner an
8audit report containing audited financial statements together with
9such other relevant information as the commissioner may require
10relating to the company and to each place of business of the
11company. The audited financial statements shall include a balance
12sheet of the company prepared as of the last day of the preceding
13calendar year and statements of income and of surplus for such
14calendar year.

begin delete

15(b) An industrial loan company whose certificate has been
16surrendered or revoked shall, on or before 105 days after the
17effective date of such surrender or revocation, submit to the
18commissioner a closing audit report containing audited financial
19statements as of such effective date for the 12 months ending with
20such effective date, or for such other period as the commissioner
21may specify. Such report shall include the information required
22by subdivision (a) of this section and other relevant information
23specified by the commissioner. A company which has complied
24with this subdivision is exempted from the provisions of
25subdivision (a).

26(c)

end delete

27begin insert(b)end insert The reports and financial statements referred to in
28begin delete subdivisions (a) and (b)end deletebegin insert subdivision (a)end insert shall be prepared in
29accordance with generally accepted accounting principles and shall
30be accompanied by a report, certificate, or opinion of an
31independent certified public accountant or independent public
32accountant, and shall contain such relevant information as the
33commissioner may require. The audits shall be conducted in
34accordance with generally accepted auditing standards and the
35rules and regulations of the commissioner.

begin delete

36(d)

end delete

37begin insert(c)end insert For good cause and upon written request, the commissioner
38may extend the time for compliance withbegin delete subdivisions (a) and (b).end delete
39begin insert subdivision (a).end insert

begin delete

40(e)

end delete

P64   1begin insert(end insertbegin insertd)end insert If the report, certificate or opinion of the independent
2accountant referred to in subdivisionbegin delete (c)end deletebegin insert (b)end insert hereof is in any way
3qualified, the commissioner may require the company to take such
4action as he deems appropriate to permit an independent accountant
5to remove such qualification from the report, certificate or opinion.

begin delete

6(f)

end delete

7begin insert(e)end insert The commissioner may reject any financial statement, report,
8certificate or opinion filed pursuant to this section by notifying the
9company required to make such filing of its rejection and the cause
10thereof. Within 30 days after the receipt of such notice, the
11company shall correct such deficiency, and the failure so to do
12shall be deemed a violation of this division. The commissioner
13shall retain a copy of all filings so rejected.

14

SEC. 40.  

Section 22105.1 of the Financial Code is amended
15to read:

16

22105.1.  

(a) An applicant for a mortgage loan originator
17license shall apply by submitting the uniform form prescribed for
18such purpose by the Nationwide Mortgage Licensing System and
19Registry. The commissioner may require the submission of
20additional information or supporting documentation to the
21department.

22(b) Section 461 of the Business and Professions Code shall not
23be applicable to the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
24 when using a national uniform application adopted or approved
25for use by the Nationwide Mortgage Licensing System and Registry
26in connection with the SAFE Act.

27(c) In connection with an application for a license as a mortgage
28loan originator, the applicant shall, at a minimum, furnish to the
29Nationwide Mortgage Licensing System and Registry information
30concerning the applicant’s identity, including the following:

31(1) Fingerprint images and related information, for purposes of
32performing a federal, or both a state and federal, criminal history
33background check.

34(2) Personal history and experience in a form prescribed by the
35Nationwide Mortgage Licensing System and Registry, including
36the submission of authorization for the Nationwide Mortgage
37Licensing System and Registry and the commissioner to obtain
38both of the following:

39(A) An independent credit report obtained from a consumer
40reporting agency.

P65   1(B) Information related to any administrative, civil, or criminal
2findings by any governmental jurisdiction.

3(d) The commissioner may ask the Nationwide Mortgage
4Licensing System and Registry to obtain state criminal history
5background check information on applicants described in
6subdivision (a) using the procedures set forth in subdivisions (e)
7and (f).

8(e) If the Nationwide Mortgage Licensing System and Registry
9electronically submits fingerprint images and related information,
10as required by the Department of Justice, for an applicant for a
11mortgage loan originator license, for the purposes of obtaining
12information as to the existence and content of a record of state
13convictions and state arrests and to the existence and content of a
14record of state arrests for which the Department of Justice
15establishes that the person is free on bail or on his or her
16recognizance pending trial or appeal, the Department of Justice
17shall provide an electronic response to the Nationwide Mortgage
18Licensing System and Registry pursuant to paragraph (1) of
19subdivision (p) of Section 11105 of the Penal Code, and shall
20provide the same electronic response to the commissioner.

21(f) The Nationwide Mortgage Licensing System and Registry
22may request from the Department of Justice subsequent arrest
23notification service, as provided pursuant to Section 11105.2 of
24the Penal Code, for persons described in subdivision (a). The
25Department of Justice shall provide the same electronic response
26to the commissioner.

27(g) The Department of Justice shall charge a fee sufficient to
28cover the cost of processing the requests described in this section.

29

SEC. 41.  

Section 22159.5 of the Financial Code is amended
30to read:

31

22159.5.  

(a) The commissioner may, as he or she deems
32necessary, require licensees to provide reports concerning their
33residential mortgage loan servicing activities, including, but not
34limited to, information similar to that collected in connection with
35the Mortgage Servicers Survey, first published by the Department
36ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert in December 2007. The
37commissioner is additionally authorized to seek and accept
38information provided on a voluntary basis by residential mortgage
39loan servicers not subject to the commissioner’s jurisdiction. The
40commissioner shall post only aggregated survey results on the
P66   1department’s Internet Web site, and shall note the number of loan
2servicers submitting data included in the aggregated totals and the
3estimated percentage of outstanding mortgage loans to Californians
4that are serviced by these loan servicers, to the extent information
5on the number of outstanding loans is available from a reliable
6source. Nothing in this section is intended to reduce or change the
7commissioner’s authority to request and demand reports under
8Sections 22150 and 22159.

9(b) For purposes of this section, “mortgage loan servicing
10activity” means receiving more than three installment payments
11of principal, interest, or other amounts placed in escrow, pursuant
12to the terms of a mortgage loan, and performing services relating
13to that receipt or the enforcement of its receipt, on behalf of the
14holder of the note evidencing that loan.

15

SEC. 42.  

Section 22160 of the Financial Code is amended to
16read:

17

22160.  

The commissioner shall make and file annually with
18the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert as a public
19record a composite of the annual reports and any comments on the
20reports that he or she deems to be in the public interest.

21

SEC. 43.  

Section 22756 of the Financial Code is amended to
22read:

23

22756.  

Notwithstanding any other law, any application for
24licensure, amendment to the application or registration document
25or notice filed under any of the laws administered by the
26Department ofbegin delete Corporations,end deletebegin insert Business Oversight,end insert or record
27otherwise required to be filed in this state as an electronic record
28pursuant to a nationwide central depository for information
29regarding licensees, including mortgage loan originators, or any
30electronic record filed through the Nationwide Mortgage Licensing
31System and Registry, shall be deemed to be a valid original
32document upon reproduction to paper form by the Department of
33begin delete Corporations.end deletebegin insert Business Oversight.end insert

34

SEC. 44.  

Section 23070 of the Financial Code is amended to
35read:

36

23070.  

(a) The Legislature finds and declares that it is in the
37public interest for the administration and enforcement of this
38division to be undertaken by the Department ofbegin delete Corporations.end delete
39begin insert Business Oversight.end insert

P67   1(b) It is therefore the intent of the Legislature to transfer the
2existing responsibilities relating to administration and enforcement
3of check cashers that engage in activities subject to this division
4from the Department of Justice to the Department ofbegin delete Corporations.end delete
5begin insert Business Oversight.end insert

6

SEC. 45.  

Section 23071 of the Financial Code is amended to
7read:

8

23071.  

The Commissioner ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
9 and the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert shall
10succeed to, and are vested with, all duties, powers, purposes,
11responsibilities, and jurisdiction of the Department of Justice as
12they relate to check cashers who engage in the activities subject
13to this division.

14

SEC. 46.  

Section 23072 of the Financial Code is amended to
15read:

16

23072.  

The Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
17 may use the unexpended balance of funds available for use in
18connection with the performance of duties of the Department of
19Justice to which the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness
20Oversightend insert
succeeds pursuant to Section 23071.

21

SEC. 47.  

Section 23073 of the Financial Code is amended to
22read:

23

23073.  

All officers and employees of the Department of Justice
24who, on the operative date of this division, are performing any
25duty, power, purpose, responsibility, or jurisdiction to which the
26Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert succeeds, and
27who are serving in the civil service, other than as temporary
28employees or persons in positions exempted from civil service,
29shall be transferred to the Department ofbegin delete Corporations.end deletebegin insert Business
30Oversight.end insert
The status, position, and rights of those persons shall
31not be affected by the transfer and shall be retained by those
32persons as officers and employees of the Department of
33begin delete Corporations,end deletebegin insert Business Oversight,end insert pursuant to Part 2 (commencing
34with Section 18500) of Division 5 of Title 2 of the Government
35Code.

36

SEC. 48.  

Section 23074 of the Financial Code is amended to
37read:

38

23074.  

The Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
39 shall have possession and control of all records, criminal history
40information, papers, equipment, supplies, moneys, funds,
P68   1appropriations, licenses, permits, contracts, claims, judgments,
2land, and other property, real or personal, connected with the
3administration of, or held for the benefit or use of, the Department
4of Justice for the performance of the functions transferred to the
5Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert pursuant to Section
623071.

7

SEC. 49.  

Section 23102 of the Financial Code is amended to
8read:

9

23102.  

The deferred deposits made pursuant to a permit issued
10under Section 1789.37 of the Civil Code prior to December 31,
112004, shall be subject to and enforced to the extent valid under
12Sections 1789.30 to 1789.37, inclusive, of the Civil Code, as if
13those sections were not repealed. Any regulation, order, or other
14action adopted, prescribed, taken, or performed by the Department
15of Justice or by an officer of that department in connection with
16deferred deposit transactions made prior to December 31, 2004,
17shall continue to apply to those transactions. No suit, action, or
18other proceeding lawfully commenced by or against the Department
19of Justice or any other officer of the state in relation to deferred
20deposit transactions made prior to December 31, 2004, shall abate
21by reason of the transfer of authority concerning deferred deposit
22transactions to the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
23 pursuant to Section 23071.

24

SEC. 50.  

Section 30217 of the Financial Code is amended to
25read:

26

30217.  

The commissioner may from time to time make, amend,
27and rescind such rules, forms, and orders as are necessary to carry
28out the provisions of this law, including rules defining any terms,
29whether or not used in this law, insofar as the definitions are not
30inconsistent with the provisions of this law. For the purposes of
31rules and forms, the commissioner may classify persons and matters
32within his jurisdiction and may prescribe different requirements
33for different classes. The commissioner may in his discretion waive
34any requirement of any rule or form in situations where in his
35opinion such requirement is not necessary in the public interest or
36for the protection of investors. All rules of the commissioner other
37than those relating solely to the internal administration of the
38Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert shall be made,
39amended, or rescinded in accordance with the provisions of Chapter
P69   14.5 (commencing with Section 11371) of Part 1 of Division 3 of
2Title 2 of the Government Code.

3

SEC. 51.  

Section 50140 of the Financial Code is amended to
4read:

5

50140.  

(a) An applicant for a license as a mortgage loan
6originator shall apply by submitting the uniform form prescribed
7for that purpose by the Nationwide Mortgage Licensing System
8and Registry. The commissioner may require the submission of
9additional information or supporting documentation to the
10department.

11(b) Section 461 of the Business and Professions Code shall not
12be applicable to the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
13 when using a national uniform application adopted or approved
14for use by the Nationwide Mortgage Licensing System and Registry
15in connection with the SAFE Act.

16(c) The commissioner shall, by rule, establish the timelines,
17fees, and assessments applicable to applicants for original mortgage
18loan originator licenses, license renewals, and license changes
19under this division.

20(d) The commissioner may, by rule, require mortgage loan
21originator licensees to pay assessments through the Nationwide
22Mortgage Licensing System and Registry.

23(e) In connection with an application for a license as a mortgage
24loan originator, the applicant shall, at a minimum, furnish to the
25Nationwide Mortgage Licensing System and Registry information
26concerning the applicant’s identity, including the following:

27(1) Fingerprint images and related information, for purposes of
28performing a federal, or both a state and federal, criminal history
29background check.

30(2) Personal history and experience in a form prescribed by the
31Nationwide Mortgage Licensing System and Registry, including
32the submission of authorization for the Nationwide Mortgage
33Licensing System and Registry and the commissioner to obtain
34both of the following:

35(A) An independent credit report obtained from a consumer
36reporting agency.

37(B) Information related to any administrative, civil, or criminal
38findings by any governmental jurisdiction.

39(f) The commissioner may ask the Nationwide Mortgage
40Licensing System and Registry to obtain state criminal history
P70   1background check information on applicants described in
2subdivision (a) using the procedures set forth in subdivisions (g)
3and (h).

4(g) If the Nationwide Mortgage Licensing System and Registry
5electronically submits fingerprint images and related information,
6as required by the Department of Justice, for an applicant for a
7mortgage loan originator license, for the purposes of obtaining
8information as to the existence and content of a record of state
9convictions and state arrests and to the existence and content of a
10record of state arrests for which the Department of Justice
11establishes that the person is free on bail or on his or her
12recognizance pending trial or appeal, the Department of Justice
13shall provide an electronic response to the Nationwide Mortgage
14Licensing System and Registry pursuant to paragraph (1) of
15subdivision (p) of Section 11105 of the Penal Code, and shall
16provide the same electronic response to the commissioner.

17(h) The Nationwide Mortgage Licensing System and Registry
18may request from the Department of Justice subsequent arrest
19notification service, as provided pursuant to Section 11105.2 of
20the Penal Code, for persons described in subdivision (a). The
21Department of Justice shall provide the same electronic response
22to the commissioner.

23(i) The Department of Justice shall charge a fee sufficient to
24cover the cost of processing the requests described in this section.

25

SEC. 52.  

Section 50303 of the Financial Code is amended to
26read:

27

50303.  

Neither the commissioner nor any employee of the
28Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert shall be precluded
29from obtaining a residential mortgage loan from a lender licensed
30under this division, subject to the rules that may be adopted
31hereunder or pursuant to other proper authority.

32

SEC. 53.  

Section 50307.1 of the Financial Code is amended
33to read:

34

50307.1.  

The commissioner may, as he or she deems necessary,
35require licensees to provide reports concerning their residential
36mortgage loan servicing activities, including, but not limited to,
37information similar to that collected in connection with the
38Mortgage Servicers Survey, first published by the Department of
39begin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert in December 2007. The
40commissioner is additionally authorized to seek and accept
P71   1information provided on a voluntary basis by residential mortgage
2loan servicers not subject to the commissioner’s jurisdiction. The
3commissioner shall post only aggregated survey results on the
4department’s Internet Web site, and shall note the number of loan
5servicers submitting data included in the aggregated totals and the
6estimated percentage of outstanding mortgage loans to Californians
7that are serviced by these loan servicers, to the extent information
8on the number of outstanding loans is available from a reliable
9source. Nothing in this section is intended to reduce or change the
10commissioner’s authority to request and demand reports under
11Section 50307.

12

SEC. 54.  

Section 50316.5 of the Financial Code is amended
13to read:

14

50316.5.  

Notwithstanding any other law, any application for
15licensure, amendment to the application or registration document
16or notice filed under any of the laws administered by the
17Department ofbegin delete Corporations,end deletebegin insert Business Oversight.end insert or record
18otherwise required to be filed in this state as an electronic record
19pursuant to a nationwide central depository for information
20regarding licensees, including mortgage loan originators, or any
21electronic record filed through the Nationwide Mortgage Licensing
22System and Registry, shall be deemed to be a valid original
23document upon reproduction to paper form by the Department of
24begin delete Corporations.end deletebegin insert Business Oversight.end insert

25

SEC. 55.  

Section 5970 of the Government Code is amended
26to read:

27

5970.  

As used in this chapter, the following phrases have the
28following meanings:

29(a) “Person” means any broker, dealer, municipal securities
30dealer, investment advisor, or investment firm.

31(b) “Regulatory agency” means the Department ofbegin delete Corporations,end delete
32begin insert Business Oversight,end insert the securities administrators or other similar
33regulatory authority in any other state, the Securities and Exchange
34Commission, the National Association of Securities Dealers, the
35Municipal Securities Rulemaking Board, the Commodity Futures
36Trading Commission, or any other self-regulatory organization.

begin delete

37(c) “State

end delete

38begin insert(c)end insertbegin insertend insertbegin insert“Stateend insert or local government” means the state, any department,
39agency, board, commission, or authority of the state, or any city,
P72   1city and county, county, public district, public corporation,
2authority, agency, board, commission, or other public entity.

3

SEC. 56.  

Section 6254.5 of the Government Code is amended
4to read:

5

6254.5.  

Notwithstanding any other provisions of law, whenever
6a state or local agency discloses a public record which is otherwise
7exempt from this chapter, to any member of the public, this
8disclosure shall constitute a waiver of the exemptions specified in
9Sections 6254, 6254.7, or other similar provisions of law. For
10purposes of this section, “agency” includes a member, agent,
11officer, or employee of the agency acting within the scope of his
12or her membership, agency, office, or employment.

13This section, however, shall not apply to disclosures:

14(a) Made pursuant to the Information Practices Act (commencing
15with Section 1798 of the Civil Code) or discovery proceedings.

16(b) Made through other legal proceedings or as otherwise
17required by law.

18(c) Within the scope of disclosure of a statute which limits
19disclosure of specified writings to certain purposes.

20(d) Not required by law, and prohibited by formal action of an
21elected legislative body of the local agency which retains the
22writings.

23(e) Made to any governmental agency which agrees to treat the
24disclosed material as confidential. Only persons authorized in
25writing by the person in charge of the agency shall be permitted
26to obtain the information. Any information obtained by the agency
27shall only be used for purposes which are consistent with existing
28law.

29(f) Of records relating to a financial institution or an affiliate
30thereof, if the disclosures are made to the financial institution or
31affiliate by a state agency responsible for the regulation or
32supervision of the financial institution or affiliate.

33(g) Of records relating to any person that is subject to the
34jurisdiction of the Department of Business Oversight, if the
35disclosures are made to the person that is the subject of the records
36for the purpose of corrective action by that person, or if a
37corporation, to an officer, director, or other key personnel of the
38corporation for the purpose of corrective action, or to any other
39person to the extent necessary to obtain information from that
P73   1person for the purpose of an investigation by the Department of
2begin delete Corporations.end deletebegin insert Business Oversight.end insert

3(h) Made by the Commissioner of Business Oversight under
4Section 450, 452, 8009, or 18396 of the Financial Code.

5(i) Of records relating to any person that is subject to the
6jurisdiction of the Department of Managed Health Care, if the
7disclosures are made to the person that is the subject of the records
8for the purpose of corrective action by that person, or if a
9corporation, to an officer, director, or other key personnel of the
10corporation for the purpose of corrective action, or to any other
11person to the extent necessary to obtain information from that
12person for the purpose of an investigation by the Department of
13Managed Health Care.

14

SEC. 57.  

Section 6254.12 of the Government Code is amended
15to read:

16

6254.12.  

Any information reported to the North American
17Securities Administrators Association/National Association of
18Securities Dealers’ Central Registration Depository and compiled
19as disciplinary records which are made available to the Department
20ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert through a computer system,
21shall constitute a public record. Notwithstanding any other
22provision of law, the Department ofbegin delete Corporationsend deletebegin insert Business
23Oversightend insert
may disclose that information and the current license
24status and the year of issuance of the license of a broker-dealer
25upon written or oral request pursuant to Section 25247 of the
26Corporations Code.

27

SEC. 58.  

Section 6254.22 of the Government Code is amended
28to read:

29

6254.22.  

Nothing in this chapter or any other provision of law
30shall require the disclosure of records of a health plan that is
31licensed pursuant to the Knox-Keene Health Care Service Plan
32Act of 1975 (Chapter 2.2 (commencing with Section 1340) of
33Division 2 of the Health and Safety Code) and that is governed by
34a county board of supervisors, whether paper records, records
35maintained in the management information system, or records in
36any other form, that relate to provider rate or payment
37determinations, allocation or distribution methodologies for
38provider payments, formulae or calculations for these payments,
39and contract negotiations with providers of health care for
40alternative rates for a period of three years after the contract is
P74   1fully executed. The transmission of the records, or the information
2contained therein in an alternative form, to the board of supervisors
3shall not constitute a waiver of exemption from disclosure, and
4the records and information once transmitted to the board of
5supervisors shall be subject to this same exemption. The provisions
6of this section shall not prevent access to any records by the Joint
7Legislative Audit Committee in the exercise of its powers pursuant
8to Article 1 (commencing with Section 10500) of Chapter 4 of
9Part 2 of Division 2 of Title 2. The provisions of this section also
10shall not prevent access to any records by the Department of
11begin delete Corporationsend deletebegin insert Business Oversightend insert in the exercise of its powers
12pursuant to Article 1 (commencing with Section 1340) of Chapter
132.2 of Division 2 of the Health and Safety Code.

14

SEC. 59.  

Section 11840 of the Government Code is amended
15to read:

16

11840.  

The Legislature finds and declares all of the following:

17(a) The current regulatory responsibility for medical services
18is spread among many governmental entities including all of the
19following:

20(1) The Medical Board of California.

21(2) The Department ofbegin delete Corporations.end deletebegin insert Business Oversight.end insert

22(3) The State Department of Health Services.

23(b) This overlapping jurisdiction has resulted in multiple and
24duplicative audits of many physician offices, additional expense
25and hiring of additional staff to respond to duplicate requests for
26medical records, and the review of confidential medical records
27by a growing number of governmental entities.

28(c) In the interest of reducing the number of separate times
29various public and private agencies review confidential medical
30records, streamlining the regulatory process, and reducing the
31redundant reviews of the offices of physicians, it is the intent of
32the Legislature to coordinate, to the extent feasible, as many of
33these regulatory functions as possible.

34(d) In addition to government audits of physician offices,
35numerous private entities also conduct reviews of physician offices.

36(e) It is in the public interest to achieve ultimately a uniform
37system of private and public auditing of physician offices and,
38thus, streamline the process as much as possible.

39

SEC. 60.  

Section 53344.1 of the Government Code is amended
40to read:

P75   1

53344.1.  

(a) The legislative body may provide in the resolution
2of intention or the resolution of consideration, and in documents
3setting forth the rights of the debtholders that it shall reserve to
4itself, the right and authority to allow any interested owner of
5property within the district, subject to the provisions of this section
6and to those conditions as it may impose, and any applicable
7prepayment penalties as prescribed in the bond indenture or
8comparable instrument or document, to tender to the district
9treasurer in full payment or part payment of any installment of the
10special taxes or the interest or penalties thereon which may be due
11or delinquent, but for which a bill has been received, any bond or
12other obligation secured thereby, the bond or other obligation to
13be taken at par and credit to be given for the accrued interest shown
14thereby computed to the date of tender. The district treasurer shall
15thereupon cancel the bond debt and shall cause proper credit
16therefor to be entered on the records of the district and in the office
17of the auditor and tax collector. If the legislative body agrees to
18allow bond tenders pursuant to this section or to Section 53356.8,
19the legislative body may, at its discretion, agree to distribute or
20direct its trustee or other agent to distribute by any means an offer
21to purchase bonds or other related inquiry to the holders of the
22bonds of the district, at the expense of the person requesting the
23mailing. Neither the legislative body, nor any of its officers, agents,
24or trustees shall be liable in any way for that distribution.

25(b) The provisions of this subdivision apply to any tender of
26bonds pursuant to this section by an owner of property within the
27district who is delinquent in paying special taxes levied by this
28district when due. Bonds may be tendered pursuant to this
29subdivision only after all of the following conditions have been
30satisfied:

31(1) The delinquent lot or parcel has been offered for sale as a
32result of a foreclosure judgment and the minimum price required
33to be paid for the lot or parcel was not received.

34(2) The bonds to be tendered to the district were obtained by
35the property owner only after their prior owner was presented with
36a tender offer or solicitation as defined in this subdivision.

37(A) For purposes of this subdivision, a “tender offer” or
38“solicitation” is a solicitation by any person or that person’s agent
39by offering circular, memoranda, tender, or solicitation, or any
40other document or written, oral, or electronic communication for
P76   1the purchase of the bonds from their then current owner. A person
2includes a natural person, corporation, company, partnership,
3limited liability company, limited liability partnership, association,
4or any other entity and a “tendering party” includes any person
5making a tender offer for bonds.

6(B) Any tender offer or solicitation shall include all material
7information as required under federal and state securities laws and
8shall also include the following information, to the extent
9applicable:

10(i) The name of the tendering party.

11(ii) An individual who can be contacted to provide further
12information with respect to the tender.

13(iii) The current holdings of bonds of the district by the tendering
14party and its affiliates.

15(iv) The total face amount of the bonds being solicited.

16(v) The price or method of determining the price per one
17thousand dollars ($1,000) in bonds being offered by the tendering
18party.

19(vi) Whether the tendering party or any person affiliated with
20or related to the tendering party, or any employee, agent, or
21representative of the tendering party, is a property owner within
22the district that issued the bonds.

23(vii) Whether the present intentions of the tendering party are
24to use the bonds for payment of special taxes or the purchase of
25property at a foreclosure sale pursuant to this section or Section
2653356.8. This statement of present intentions shall not be construed
27to be binding on the tendering party.

28(viii) The status of the bond redemption fund, construction fund,
29reserve fund, and any other funds of the district, and the special
30tax delinquency rate of the district, all of which data shall be the
31most recent available from the district and, in any event, shall
32apply to the state of the funds after the most recent payment of
33principal and interest on the bonds. The district shall provide the
34necessary data to the property owner within 10 days of receiving
35a written request and may charge a reasonable fee not to exceed
36its actual costs of providing the data. The district shall
37simultaneously release the same information to the general public.
38The property shall also provide the percentage of the delinquency
39attributable to the tendering party or any person affiliated with or
40related to the tendering party, or any employee, agent, or
P77   1representative of the tendering party, for each of the three most
2recent fiscal years.

3(ix) If the tendering party owns or leases property in the district
4that issued the bonds, the development plans for that property and
5an update on the current status of development of that property
6and of any zoning, planning, or other permits or approvals needed
7for development of the property to proceed.

8(x) Any other material information available to the tendering
9party and not generally available to the public that would
10significantly affect the market value of the bonds of the district.

11(C) The tendering party shall notify the legislative body of his
12or her intent to make a tender offer or solicitation at least
13simultaneously with making any offer or solicitation.

14(D) The tendering party shall provide a copy of the solicitation
15to the Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert prior to five
16working days after notifying the legislative body pursuant to
17subparagraph (C).

18(3) The tendering property owner provides the legislative body
19with a negative assurance from counsel representing the property
20owner that no misleading or other information has come to the
21opining party’s attention after reasonable investigation, that would
22lead the party providing the negative assurance to believe that the
23tender was in violation of federal or state securities laws.

24(4) The tendering property owner delivers to the legislative body
25of the district that issued the bonds subject to the tender, a
26certificate to the effect that the tender information is accurate in
27all material respects and does not omit to state a material fact
28necessary in order to make the statements included in the tender
29information not misleading, except that the certificate need not
30provide any assurances as to the accuracy of the information as to
31the bond fund balances and tax payment information provided by
32the district.

33(c) The provisions of this subdivision apply to any tender of
34bonds pursuant to this section by any owner of property within the
35district who is not delinquent in paying special taxes on any
36property within the district. A person subject to this subdivision
37shall be deemed to be a person whose relationship to the issuer
38may give him or her access, directly or indirectly, to material
39information about the issuer not generally available to the public,
40and the provisions of Section 25402 of the Corporations Code
P78   1apply to any purchase or sale of securities by that person in
2connection with the tender transaction. For purposes of this
3subdivision, the “issuer” includes the district, the local agency that
4created the district, and any owner of property within the district.
5At any time prior to tendering bonds to the district pursuant to this
6section, any person subject to this subdivision shall deliver to the
7legislative body of the district a certificate that he or she has
8complied with this subdivision and applicable federal and state
9securities laws.

10

SEC. 61.  

Section 53638 of the Government Code is amended
11to read:

12

53638.  

(a) The deposit shall not exceed the shareholder’s
13equity of any depository bank. For the purposes of this subdivision,
14shareholder’s equity shall be determined in accordance with Section
15begin delete 118end deletebegin insert 463end insert of the Financial Code, but shall be deemed to include
16capital notes and debentures.

17(b) The deposit shall not exceed the total of the net worth of
18any depository savings association or federal association, except
19that deposits not exceeding a total of five hundred thousand dollars
20($500,000) may be made to a savings association or federal
21 association without regard to the net worth of that depository, if
22such deposits are insured or secured as required by law.

23(c) The deposit to the share accounts of any regularly chartered
24credit union shall not exceed the total of the unimpaired capital
25and surplus of the credit union, as defined by rule of the
26Commissioner of Financial Institutions, except that the deposit to
27any credit union share account in an amount not exceeding five
28hundred thousand dollars ($500,000) may be made if the share
29accounts of that credit union are insured or guaranteed pursuant
30to Section 14858 of the Financial Code or are secured as required
31by law.

32(d) The deposit in investment certificates of a federally insured
33industrial loan company shall not exceed the total of the unimpaired
34capital and surplus of the insured industrial loan company.

35

SEC. 62.  

Section 54956.87 of the Government Code is amended
36to read:

37

54956.87.  

(a) Notwithstanding any other provision of this
38chapter, the records of a health plan that is licensed pursuant to
39the Knox-Keene Health Care Service Plan Act of 1975 (Chapter
402.2 (commencing with Section 1340) of Division 2 of the Health
P79   1and Safety Code) and that is governed by a county board of
2supervisors, whether paper records, records maintained in the
3management information system, or records in any other form,
4that relate to provider rate or payment determinations, allocation
5or distribution methodologies for provider payments, formulas or
6calculations for these payments, and contract negotiations with
7providers of health care for alternative rates are exempt from
8disclosure for a period of three years after the contract is fully
9executed. The transmission of the records, or the information
10contained therein in an alternative form, to the board of supervisors
11shall not constitute a waiver of exemption from disclosure, and
12the records and information once transmitted to the board of
13supervisors shall be subject to this same exemption.

14(b) Notwithstanding any other provision of law, the governing
15board of a health plan that is licensed pursuant to the Knox-Keene
16Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing
17with Section 1340) of Division 2 of the Health and Safety Code)
18and that is governed by a county board of supervisors may order
19that a meeting held solely for the purpose of discussion or taking
20action on health plan trade secrets, as defined in subdivision (f),
21shall be held in closed session. The requirements of making a
22public report of action taken in closed session, and the vote or
23abstention of every member present, may be limited to a brief
24general description without the information constituting the trade
25secret.

26(c) Notwithstanding any other provision of law, the governing
27board of a health plan may meet in closed session to consider and
28take action on matters pertaining to contracts and contract
29negotiations by the health plan with providers of health care
30services concerning all matters related to rates of payment. The
31governing board may delete the portion or portions containing
32trade secrets from any documents that were finally approved in
33the closed session held pursuant to subdivision (b) that are provided
34to persons who have made the timely or standing request.

35(d) Nothing in this section shall be construed as preventing the
36governing board from meeting in closed session as otherwise
37provided by law.

38(e) The provisions of this section shall not prevent access to any
39records by the Joint Legislative Audit Committee in the exercise
40of its powers pursuant to Article 1 (commencing with Section
P80   110500) of Chapter 4 of Part 2 of Division 2 of Title 2. The
2provisions of this section also shall not prevent access to any
3records by the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert in
4the exercise of its powers pursuant to Article 1 (commencing with
5Section 1340) of Chapter 2.2 of Division 2 of the Health and Safety
6Code.

7(f) For purposes of this section, “health plan trade secret” means
8a trade secret, as defined in subdivision (d) of Section 3426.1 of
9the Civil Code, that also meets both of the following criteria:

10(1) The secrecy of the information is necessary for the health
11plan to initiate a new service, program, marketing strategy, business
12plan, or technology, or to add a benefit or product.

13(2) Premature disclosure of the trade secret would create a
14substantial probability of depriving the health plan of a substantial
15economic benefit or opportunity.

16

SEC. 63.  

Section 1341.9 of the Health and Safety Code, as
17added by Section 31 of Chapter 525 of the Statutes of 1999, is
18repealed.

begin delete
19

1341.9.  

The director and department succeed to, and are vested
20with, all duties, powers, purposes, responsibilities, and jurisdiction
21of the Commissioner of Corporations and the Department of
22Corporations as they relate to the Department of Corporations’
23Health Plan Program, health care service plans, and the health care
24service plan business, including those powers and duties specified
25in this chapter. Nothing in this section abrogates, limits, diminishes,
26or otherwise restricts the duties, powers, purposes, responsibilities,
27and jurisdictions of the Commissioner of Corporations and the
28Department of Corporations under the Investment Program, the
29Financial Services Program, and the other laws in which
30jurisdiction is vested in the Commissioner of Corporations and the
31Department of Corporations.

end delete
32

SEC. 64.  

Section 1341.10 of the Health and Safety Code is
33amended to read:

34

1341.10.  

The department may use the unexpended balance of
35funds available for use in connection with the performance of the
36functions of the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
37 to which the department succeeds pursuant to Section 1341.9.

38

SEC. 65.  

Section 1341.11 of the Health and Safety Code is
39amended to read:

P81   1

1341.11.  

All officers and employees of the Department of
2begin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert who, on the operative date of
3this section, are performing any duty, power, purpose,
4responsibility, or jurisdiction to which the department succeeds,
5who are serving in the state civil service, other than as temporary
6employees, and engaged in the performance of a function vested
7by the department by Section 1341.9, shall be transferred to the
8department. The status, positions, and rights of those persons shall
9not be affected by the transfer and shall be retained by those
10persons as officers and employees of the department, pursuant to
11the State Civil Service Act (Part 2 (commencing with Section
1218500) of Division 5 of Title 2 of the Government Code), except
13as to positions exempted from civil service.

14

SEC. 66.  

Section 1341.12 of the Health and Safety Code is
15amended to read:

16

1341.12.  

The department shall have possession and control of
17all records, papers, offices, equipment, supplies, moneys, funds,
18appropriations, licenses, permits, agreements, contracts, claims,
19judgments, land, and other property, real or personal, connected
20with the administration of, or held for the benefit or use of, the
21Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert for the
22performance of the functions transferred to the department by
23Section 1341.9.

24

SEC. 67.  

Section 1341.14 of the Health and Safety Code is
25amended to read:

26

1341.14.  

(a) Any regulation, order, or other action, adopted,
27prescribed, taken, or performed by the Department ofbegin delete Corporationsend deletebegin insert end insert
28begin insertBusiness Oversightend insert or by an officer of the Department of
29begin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert in the administration of a program
30or the performance of a duty, responsibility, or authorization
31transferred to the department by Section 1341.9 shall remain in
32effect and shall be deemed to be a regulation, order, or action of
33the department.

34(b) No suit, action, or other proceeding lawfully commenced
35by or against the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
36 or any other officer of the state, in relation to the administration
37of any program or the discharge of any duty, responsibility, or
38authorization transferred to the department by Section 1341.9 shall
39abate by reason of the transfer of the program, duty, responsibility,
40or authorization.

P82   1

SEC. 68.  

Section 1280.7 of the Insurance Code is amended to
2read:

3

1280.7.  

This chapter and the other provisions of this code,
4except as set forth in this paragraph, shall not apply to or affect
5unincorporated interindemnity or reciprocal or interinsurance
6contracts between members of a cooperative corporation, organized
7and operating under Part 2 (commencing with Section 12200) of
8Division 3 of Title 1 of the Corporations Code, whose members
9consist solely of physicians and surgeons licensed in California,
10which contracts indemnify solely in respect to medical malpractice
11claims against those members, and which do not collect in advance
12of loss any moneys other than contributions by each member to a
13collective reserve trust fund or for necessary expenses of
14administration. However, interindemnity, reciprocal, or
15interinsurance contracts with respect to the following types of
16claims, in addition to medical malpractice claims, may be entered
17into in conjunction with contracts with respect to medical
18malpractice claims if the reserve trust fund is at least twenty million
19dollars ($20,000,000):

20(1) Bodily injury or property damage arising out of the conduct
21and of the operations of the member’s professional practice
22occurring on the member’s premises.

23(2) Officers’, directors’, and administrators’ liability, to the
24extent that the member’s professional practice is operated as a
25professional corporation or group.

26(3) Nonowned automobile coverage.

27The provisions of Chapter 3 (commencing with Section 330) of
28Part 1 of Division 1 shall apply to unincorporated interindemnity
29or reciprocal or interinsurance contracts. Those unincorporated
30interindemnity or reciprocal or interinsurance contracts shall
31comply with all of the following requirements:

32(a) Each participating member shall enter into and, concurrently
33therewith, receive an executed copy of a trust agreement, which
34shall govern the collection and disposition of all funds of the
35interindemnity arrangement.

36The trust agreement shall, at a minimum, contain provision for
37all the following matters:

38(1) An initial trust corpus of not less than ten million dollars
39($10,000,000), which corpus shall be a trust fund to secure
40enforcement of the interindemnity arrangement. The average
P83   1contribution to the initial trust corpus shall be not less than twenty
2thousand dollars ($20,000) per member participating in the
3interindemnity arrangement. The average contribution to the trust
4fund shall continue at all times to be not less than twenty thousand
5dollars ($20,000) per participating member unless the
6interindemnity arrangement is qualified to admit members under
7the terms of subdivision (k). No such interindemnity arrangement
8shall become operative until the requisite minimum reserve trust
9fund has been established by contributions from not fewer than
10500 participating members.

11(2) The reserve trust fund created by the trust agreement shall
12be administered by a board of trustees of three or more members,
13all of whom shall be physicians and surgeons licensed in California,
14participating members in the interindemnity arrangement, and
15elected biennially or more frequently by at least a majority of all
16members participating in the interindemnity arrangement.

17(3) The members of the board of trustees are fiduciaries and the
18board shall be the custodian of all funds of the interindemnity
19arrangement, and all those funds shall be deposited in the bank or
20banks and savings and loan associations in California as the board
21may designate. Each account shall require two or more signatories
22for withdrawal of funds in excess of ten thousand dollars ($10,000).
23The authorized signatories shall be appointed by the board and, as
24to any withdrawal in excess of one hundred thousand dollars
25($100,000), at least one of the two or more authorized signatories
26shall be a physician and surgeon licensed in California and a
27participating member in the interindemnity arrangement. Each
28signatory on those accounts shall maintain, at all times while
29empowered to draw on those funds, for the benefit of the
30interindemnity arrangement, a bond against loss suffered through
31embezzlement, mysterious disappearance, holdup or burglary, or
32other loss issued by a bonding company licensed to do business
33in California in a penal sum of not less than one hundred thousand
34dollars ($100,000).

35(4) All funds held in trust that are in excess of current financial
36needs shall be invested and reinvested from time to time, under
37the direction of the board of trustees, in eligible securities, as
38defined in Section 16430 of the Government Code, in portfolios
39of eligible securities, in exchange traded financial futures contracts
40or exchange traded options contracts to hedge investment in those
P84   1eligible securities, or in certificates of deposits or time deposits
2issued by banks and savings and loan associations in California
3duly insured by instrumentalities of the United States government.

4Pursuant to the authority contained in Section 1 of Article XV
5of the California Constitution, the restrictions upon rates of interest
6contained in Section 1 of Article XV of the California Constitution
7shall not apply to any obligations of, loans made by, or
8forbearances of, any trust established by a cooperative corporation
9providing indemnity pursuant to this section.

10(5) The income earned on the corpus of the trust fund shall be
11the source for the payment of the claims, costs, judgments,
12settlements, and costs of administration contemplated by the
13interindemnity arrangement, and to the extent the income is
14insufficient for those purposes, the board of trustees shall have the
15power and authority to assess participating members for all
16amounts necessary to meet the obligations of the interindemnity
17arrangement in accordance with the terms thereof. If necessary in
18the best interests of the interindemnity arrangement, the board of
19trustees may make assessments to increase the corpus of the trust
20fund in accordance with the terms of the interindemnity
21arrangement. Any assessment levied against a member shall be
22the personal obligation of the member. Any person who obtains a
23final judgment of recovery for medical malpractice or other liability
24authorized by this section against a member of the interindemnity
25 arrangement shall have, in addition to any other remedy, the right
26to assert directly all rights to indemnification that the judgment
27debtor has under the interindemnity arrangement. The final
28judgment shall be a lien on the reserve trust fund to secure payment
29of the judgment, limited to the extent of the judgment debtor’s
30rights to indemnification.

31Any change in the assessment agreement between the
32interindemnity arrangement and its membership shall be submitted
33to the entire membership for ratification. If the ratification process
34is to be performed by a mail ballot, a ballot shall be sent to each
35member by first-class mail, postage prepaid. Within 45 days after
36the posted date on the mail ballot, each member who decides to
37vote on the assessment change shall return his or her ballot to the
38interindemnity arrangement for the tallying of the ballots. An
39affirmative vote of 75 percent of those voting shall be required to
40effectuate any change in the assessment agreement.

P85   1If a change in the assessment agreement is to be submitted to
2members at a properly called meeting, the membership shall be
3notified of the meeting and the proposed assessment change by
4first-class mail, postage prepaid, posted at least 45 days prior to
5the meeting. Seventy-five percent of those present in person or by
6proxy at the meeting shall be required to effectuate any change in
7the assessment agreement.

8(6) Each participating member shall be covered by the
9interindemnity arrangement for not less than one million dollars
10($1,000,000) for each occurrence of professional negligence or
11other liability authorized by this section, with the terms and
12conditions of the coverage to be specified in the trust agreement,
13except that the interindemnity arrangement may provide
14participating members with an aggregate limit for all payments on
15behalf of the member and may provide participating members with
16less than one million dollars ($1,000,000) of coverage for each
17occurrence of professional negligence or other liability authorized
18by this section if the interindemnity arrangement obtains for the
19benefit of the members reinsurance of excess limits coverage in
20an amount that when added to the coverage provided by the
21interindemnity arrangement would equal not less than one million
22dollars ($1,000,000) for each occurrence of professional negligence
23or other liability authorized by this section.

24Any change in the coverage provided by the trust agreement
25between the interindemnity arrangement and its membership shall
26be submitted to the entire membership for ratification. If the
27ratification process is to be performed by a mail ballot, a ballot
28shall be sent to each member by first-class mail, postage prepaid.
29Within 45 days after the posted date on the mail ballot, each
30member who decides to vote on the coverage change shall return
31his or her ballot to the interindemnity arrangement for the tallying
32of the ballot. An affirmative vote of 75 percent of those voting
33shall be required to effectuate any change in the coverage provided
34by the trust agreement, except that at least 50 percent of the entire
35membership must agree to any change.

36If any change is to be submitted to members at a properly called
37meeting, the membership shall be notified of the meeting and the
38proposed coverage change by first-class mail, postage prepaid,
39posted at least 45 days prior to the meeting. An affirmative vote
40of 75 percent of the membership present at the meeting, in person
P86   1or by proxy, shall be required to effectuate any change, except that
2at least 50 percent of the entire membership must agree to any
3change.

4(7) Withdrawal of all, or any portion of, the corpus of the reserve
5trust fund shall be upon the written authorization signed by at least
6two-thirds of the members of the board of trustees.

7(8) The board of trustees shall cause both of the following to
8be furnished to each member participating in the interindemnity
9arrangement, and to be filed with the Commissioner of
10begin delete Corporations:end deletebegin insert Business Oversight:end insert

11(A) Within 90 days after the end of each fiscal year, a statement
12of the assets and liabilities of the interindemnity arrangement as
13of the end of that year, a statement of the revenue and expenditures
14of the interindemnity arrangement, and a statement of the changes
15in corpus of the reserve trust for that year, in each case
16accompanied by a certificate signed by a firm of independent
17certified public accountants selected by the board of trustees
18 indicating that the firm has conducted an audit of those statements
19in accordance with generally accepted auditing standards and
20indicating the results of the audit.

21(B) Within 45 days after the end of each of the first three
22quarterly periods of each fiscal year, a statement of the assets and
23liabilities of the interindemnity arrangement as of the end of the
24quarterly period, a statement of the revenue and expenditures of
25the interindemnity arrangement, and a statement of the changes in
26corpus of the reserve trust for the period, in each case accompanied
27by a certificate signed by a majority of the members of the board
28of trustees to the effect that the statements were prepared from the
29official books and records of the interindemnity arrangement.

30(C) In addition to the statements required to be filed pursuant
31to this paragraph, the board of trustees shall annually file with the
32 Commissioner ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert an authorization
33for disclosure to the commissioner of all financial records
34pertaining to the interindemnity arrangement. For the purpose of
35this subparagraph, the authorization for disclosure shall also include
36the financial records of any association, partnership, or corporation
37that has management or control of the funds or the operation of
38the interindemnity arrangement.

39(9) The trust agreement shall also provide for all the following:

P87   1(A) In the event a participating member who is in full
2compliance with the trust agreement, including the payment of all
3outstanding dues and assessments, dies, the initial contribution
4made by the decedent shall be returned to the member’s estate or
5designated beneficiary; the indemnity coverage shall continue for
6the benefit of the decedent’s estate in respect of occurrences during
7the time the decedent was a participating member; and neither the
8person receiving the repayment of the initial contribution nor the
9decedent’s estate shall be responsible for any assessments levied
10following the death of the member.

11(B) A participating member who is then in full compliance with
12the trust agreement and who has reached the age of 65 and who
13has retired completely from the practice of medicine may elect to
14retire from the interindemnity arrangement, in which case the
15member shall not be responsible for assessments levied following
16the date notice of retirement is given to the trust. Following that
17retirement, the indemnity coverage shall continue for the benefit
18of the member in respect of occurrences prior to the time the
19member retired from the interindemnity arrangement. That retired
20member’s initial contribution shall be repaid 10 years from the
21date the notice of retirement is received by the trust, or an earlier
22date as specified in the trust agreement. The board of trustees may
23reduce the age for retirement to not less than 55 years subject to
24all other requirements in this paragraph and any additional
25requirements deemed necessary by the board.

26(C) During any period in which a participating member, who
27is then in full compliance with the trust agreement, has, in the
28judgment of the board of trustees, become unable to perform any
29and every duty of his or her regular professional occupation, the
30participating member may request disability status in accordance
31with the terms of the interindemnity arrangement. During any
32period of disability status, the member shall not be responsible for
33assessments levied during the period and, if so provided in the
34interindemnity arrangement, all indemnity coverage, both as to
35defense and payment of claims, shall terminate as to occurrences
36arising out of the actions of the participating member during the
37period of disability status.

38(D) In the event a participating member fails to pay any
39assessment when due, the board of trustees may terminate that
40person’s membership status if the failure to pay is not cured within
P88   130 days from the date the assessment was due. Upon that
2termination the former participating member shall not be entitled
3to the return of all or any part of his or her initial contribution, and
4the indemnity coverage shall thereupon terminate as to all claims
5then pending against that person and in respect to all occurrences
6prior to the date of that termination of membership. However, in
7the event the interindemnity arrangement is then providing legal
8defense services to that person, the interindemnity arrangement
9shall continue to provide those services for a period of 10 days
10following that termination.

11(E) In the event a participating member fails to comply with
12any provision of the trust agreement (other than a failure to pay
13assessments when due), the board of trustees may terminate that
14person’s membership status if the failure to comply is not cured
15within 60 days from the date the person is notified of the failure,
16provided that before that membership status may be terminated
17the person shall be given the right to call for a hearing before the
18board of trustees (to be held before the expiration of the 60-day
19period), at which hearing the person shall be given the opportunity
20to demonstrate to the board of trustees that no failure to comply
21has occurred or, if it has occurred, that it has been cured. Upon
22that termination, the former participating member shall not be
23entitled to the return of all or any part of his or her initial
24contribution, and the indemnity coverage shall thereupon terminate
25as to all claims then pending against the person and in respect to
26all occurrences prior to the date of the termination of membership.
27However, in the event the interindemnity arrangement is then
28providing legal defense services to that person, the interindemnity
29arrangement shall continue to provide those services for a period
30of 10 days following the termination.

31(F) A participating member who is then in full compliance with
32the trust agreement may elect voluntarily to terminate his or her
33membership in the interindemnity arrangement. Upon that
34voluntary termination, that person may further elect to cease being
35responsible for future assessments, or to continue to pay those
36assessments until the time as the person’s initial contribution is
37repaid. In the event the person elects to cease being responsible
38for future assessments, the indemnity coverage shall thereupon
39terminate and the person shall either be responsible for his or her
40own exposure for acts committed while a participating member in
P89   1the interindemnity arrangement, or he or she may request the
2interindemnity arrangement to purchase or provide, at the cost of
3the person, coverage for that exposure. The initial contribution of
4the person shall be repaid on the 10th anniversary of the date the
5contribution was made. In the event the person elects to continue
6to be responsible for assessments, the indemnity coverage shall
7continue in respect of occurrences prior to the date of the voluntary
8termination, and the initial contribution of the person shall be
9repaid at the time as the board of trustees is satisfied that (i) there
10are no claims pending against the person in respect of occurrences
11during the time the person was a participating member, and (ii)
12the statute of limitations has run on all claims that might be asserted
13against that person in respect of occurrences during that time. In
14no event shall that repayment be made earlier than the 10th
15anniversary of the date the contribution was made.

16Any person whose membership in an interindemnity arrangement
17is involuntarily terminated for failure to pay assessments or who
18voluntarily terminates that membership and elects to be responsible
19for his or her own exposure for acts committed while a participating
20member, shall not be eligible to become a member of any other
21interindemnity arrangement for a period of five years after the
22termination unless, on the effective date of the act which amended
23this section during the 1985-86 Regular Session, the person had
24on file with the Department ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness Oversightend insert
25 a copy of a subscription agreement signifying the person’s
26agreement to transfer membership or had paid a minimum of ten
27thousand dollars ($10,000) to another interindemnity arrangement
28that was granted a permit to organize prior to January 1, 1985.

29(G) The board of trustees shall have the right to terminate the
30membership of a participating member if the board of trustees
31determines that the termination is in the best interests of the
32interindemnity arrangement even though that person has complied
33with all of the provisions of the trust agreement. A termination
34may be effected only if at least two-thirds of the members of the
35board of trustees indicate in writing their decision to terminate. If
36the board of trustees proposes to terminate a member, the member
37shall have the right to call a special meeting of all participating
38members in accordance with the rules established by the board of
39trustees for the purpose of voting on whether or not the member
40shall be terminated. The member shall not be terminated if at least
P90   1two-thirds of the participating members present, in person or by
2proxy, indicate that the member should not be terminated. In the
3event a member is terminated, the person shall elect either: (i) to
4request the return of his or her initial contribution, in which case
5the contribution shall be repaid and the indemnity coverage shall
6thereupon terminate as to all claims then pending against the person
7and in respect to all occurrences prior to the date of the termination
8of membership. However, in the event the interindemnity
9arrangement is then providing legal defense services to the person,
10the interindemnity arrangement shall continue to provide those
11services for a period of 30 days to enable the person to assume his
12or her own defense; or (ii) to release all rights to the return of the
13initial contribution, in which case the indemnity coverage shall
14continue for the benefit of the member in respect of occurrences
15during the time the person was a participating member and the
16person shall have no responsibility for assessments levied following
17that termination. The interindemnity arrangement may provide
18that if a member is terminated and fails to make the election set
19forth herein within 45 days of the date of notification of termination
20of membership, the participating member shall be deemed to have
21elected to release all rights to a return of his or her initial
22contribution, in which case indemnity coverage shall apply for the
23benefit of the member with respect to occurrences occurring prior
24to the termination.

25(10) Each member participating in the interindemnity
26arrangement shall have the right of access to, and the inspection
27of, the books and records of the interindemnity arrangement, which
28rights shall be similar to the corporate shareholders pursuant to
29Section 3003 of the Corporations Code, or, commencing January
301, 1977, Sections 1600 to 1605, inclusive, of the Corporations
31Code.

32(11) There shall be a meeting of all members participating in
33the interindemnity arrangement, at least annually, after not less
34than 10 days’ written notice has been given, at a location
35reasonably convenient to the participating members and on a date
36that is within a reasonable period of time following the distribution
37of the annual financial statements.

38(12) Notwithstanding Sections 12453 and 12703 of the
39Corporations Code, on any matter to be voted upon by the
40membership at either a regular or special meeting, a member shall
P91   1have the right to vote in person or by written proxy filed with the
2corporate secretary prior to the meeting. No proxy shall be made
3irrevocable, nor be valid beyond the earliest of the following dates:

4(A) The date of expiration set forth in the proxy.

5(B) The date of termination of membership.

6(C) Eleven months from the date of execution of the proxy.

7(D) Such time as may be specified in the bylaws, not to exceed
811 months.

9(13) The interindemnity arrangement, and the reserve trust fund
10incident thereto, shall be subject to termination at any time by the
11vote or written consent of not less than three-fourths of the
12participating members.

13(b) The board of trustees shall cause to be recorded with the
14office of the county recorder of the county of the principal place
15of business of the interindemnity arrangement within 90 days
16following the end of each fiscal year, a written statement, executed
17by a majority of the board of trustees under penalty of perjury,
18reciting that each member participating in the interindemnity
19arrangement was mailed a copy of the annual financial statement
20and quarterly audit certificates by first-class mail, postage prepaid,
21required pursuant to paragraph (8) of subdivision (a).

22(c) Each person solicited to become a participating member in
23an interindemnity arrangement shall receive in writing, at least 48
24hours prior to the execution by the prospective participating
25member of the trust agreement, and at least 48 hours prior to the
26payment by the prospective participating member of any
27consideration in connection with the interindemnity arrangements,
28the following information:

29(1) A copy of the articles of incorporation and bylaws of the
30cooperative corporation and a copy of the form of trust agreement
31to be executed by the prospective participating member.

32(2) A disclosure statement regarding the interindemnity
33arrangement. The disclosure statement shall contain on the first
34or cover page a legend in boldface type reading substantially as
35follows:

36“THE INTERINDEMNITY ARRANGEMENT
37CONTEMPLATED HEREIN PROVIDES THAT
38PARTICIPATING MEMBERS HAVE UNLIMITED PERSONAL
39LIABILITY FOR ASSESSMENTS THAT MAY BE LEVIED
40TO PAY FOR THE PROFESSIONAL NEGLIGENCE OR
P92   1OTHER LIABILITY AUTHORIZED BY THIS SECTION. NO
2ASSURANCES CAN BE GIVEN REGARDING THE AMOUNT
3OR FREQUENCY OF ASSESSMENTS WHICH MAY BE
4LEVIED, OR THAT ALL PARTICIPATING MEMBERS WILL
5MAKE TIMELY PAYMENT OF THEIR ASSESSMENTS TO
6COVER THE PROFESSIONAL NEGLIGENCE OR OTHER
7LIABILITY AUTHORIZED BY THIS SECTION.”

8(3) The disclosure statement shall further contain all of the
9following information:

10(A) The amount, nature, and terms and conditions of the
11professional negligence or other liability relating to a member’s
12professional practice coverage available under the interindemnity
13arrangement.

14(B) The amount of the initial contribution required of each
15participating member and a statement of the minimum number of
16members and aggregate contributions required for the
17interindemnity arrangement to commence.

18(C) The names, addresses, and professional experience of each
19member of the board of trustees.

20(D) The requirements for admission as a participating member.

21(E) A statement of the services to be provided under the
22interindemnity arrangement to each participating member.

23(F) A statement regarding the obligation of each member to pay
24assessments and the consequences for failure to do so.

25(G) A statement of the rights and obligations of a participating
26member in the event the member dies, retires, becomes disabled,
27or terminates participation for any reason, or the interindemnity
28arrangement terminates for any reason.

29(H) A statement regarding the services to be provided, indicating
30whether these services will be delegated to others pursuant to a
31contractual arrangement. For those services delegated to others
32pursuant to a contractual arrangement, a statement fully disclosing
33and itemizing all consideration received directly or indirectly under
34the arrangement, and indicating what the consideration is for, and
35how, when, and to whom the consideration will be paid.

36(I) A statement of the voting rights of the members and the
37circumstances under which participation of a member may be
38terminated and under which the interindemnity arrangement may
39be terminated.

P93   1(J) If any statement of estimated or projected financial
2information for the interindemnity arrangement is used, a statement
3of the estimation or projection and a summary of the data and
4assumptions upon which it is based.

5(4) A list with the names and addresses of current participating
6members of the interindemnity arrangement.

7(d) No officer, director, trustee, employee, or member of the
8interindemnity arrangement or the cooperative corporation shall
9receive, or be entitled to receive, any payment, bonus, salary,
10income, compensation, or other benefit whatsoever, either from
11the reserve trust fund or the income therefrom or from any other
12funds of the interindemnity arrangement or the members thereof
13based on the number of participating members, or the amount of
14the reserve trust fund or other funds of the interindemnity
15arrangement.

16(e) A peer review committee or committees shall be established
17by the trust agreement to review the qualifications of any physician
18and surgeon to participate or continue to participate in the
19interindemnity arrangement, and to review the quality of medical
20services rendered by any participating member, as well as the
21validity of medical malpractice claims made against participating
22members. Any physician and surgeon, prior to becoming a
23participating member of the interindemnity arrangement, shall be
24reviewed and approved by a majority of the members of the peer
25review committee. No peer review committee, or any of its
26members, shall be liable for any action taken by the committee in
27reviewing the qualifications of a physician and surgeon to
28participate or continue to participate, or the quality of medical
29services rendered, or the validity of a medical malpractice claim,
30unless it is alleged and proved that the action was taken with actual
31malice.

32(f) The following are hereby defined as unfair methods of
33competition and deceptive acts or practices with respect to
34cooperative corporations or interindemnity arrangements provided
35for in this section:

36(1) Making any false or misleading statement as to, or issuing,
37circulating, or causing to be made, issued, or circulated, any
38estimate, illustration, circular, or statement misrepresenting the
39terms of any interindemnity arrangement or the benefits or
40advantages promised thereby, or making any misleading
P94   1representation or any misrepresentation as to the financial condition
2of the interindemnity arrangement, or making any
3misrepresentation to any participating member for the purpose of
4inducing or tending to induce the member to lapse, forfeit, or
5surrender his or her rights to indemnification under the
6interindemnity arrangement. It shall be a false or misleading
7statement to state or represent that a cooperative corporation or
8interindemnity arrangement is or constitutes “insurance” or an
9“insurance company” or an “insurance policy.”

10(2) Making or disseminating or causing to be made or
11disseminated before the public in this state, in any newspaper or
12other publication, or any advertising device, or by public outcry
13or proclamation, or in any other manner or means whatsoever, any
14statement containing any assertion, representation, or statement
15with respect to those cooperative corporations or interindemnity
16arrangements, or with respect to any person in the conduct of those
17cooperative corporations or interindemnity arrangements, which
18is untrue, deceptive, or misleading, and which is known, or which
19by the exercise of reasonable care should be known, to be untrue,
20deceptive, or misleading. It shall be a false or misleading statement
21to state or represent that a cooperative corporation or
22interindemnity arrangement is or constitutes “insurance” or an
23“insurance company” or an “insurance policy.”

24(3) Entering into any agreement to commit, or by any concerted
25action committing, any act of boycott, coercion, or intimidation
26resulting in or tending to result in an unreasonable restraint of, or
27monopoly in, those cooperative corporations or interindemnity
28arrangements.

29(4) Filing with any supervisory or other public official, or
30making, publishing, disseminating, circulating, or delivering to
31any person, or placing before the public, or causing directly or
32indirectly, to be made, published, disseminated, circulated, or
33delivered to any person, or placed before the public any false
34 statement of financial condition of a cooperative corporation or
35interindemnity arrangement with intent to deceive.

36(5) Making any false entry in any book, report, or statement of
37a cooperative corporation or interindemnity arrangement with
38intent to deceive any agent or examiner lawfully appointed to
39examine into its condition or into any of its affairs, or any public
40official to whom a cooperative corporation or interindemnity
P95   1arrangement is required by law to report, or who has authority by
2law to examine into its condition or into any of its affairs, or, with
3like intent, willfully omitting to make a true entry of any material
4fact pertaining to a cooperative corporation or interindemnity
5arrangement in any book, report, or statement of a cooperative
6corporation or interindemnity arrangement.

7(6) Making or disseminating, or causing to be made or
8disseminated, before the public in this state, in any newspaper or
9other publication, or any other advertising device, or by public
10outcry or proclamation, or in any other manner or means whatever,
11whether directly or by implication, any statement that a cooperative
12corporation or interindemnity arrangement is a member of the
13California Insurance Guarantee Association, or insured against
14insolvency as defined in Section 119.5. This paragraph shall not
15be interpreted to prohibit any activity of the California Insurance
16Guarantee Association or of the commissioner authorized, directly
17or by implication, by Article 14.2 (commencing with Section 1063)
18of Chapter 1.

19(7) Knowingly committing or performing with a frequency as
20to indicate a general business practice any of the following unfair
21claims settlement practices:

22(A) Misrepresenting to claimants pertinent facts or provisions
23relating to any coverage at issue.

24(B) Failing to acknowledge and act promptly upon
25communications with respect to claims arising under those
26interindemnity arrangements.

27(C) Failing to adopt and implement reasonable standards for
28the prompt investigation and processing of claims arising under
29those interindemnity arrangements.

30(D) Failing to affirm or deny coverage of claims within a
31reasonable time after proof of claim requirements have been
32completed and submitted by the participating member.

33(E) Not attempting in good faith to effectuate prompt, fair, and
34equitable settlements of claims in which liability has become
35reasonably clear.

36(F) Compelling participating members to institute litigation to
37recover amounts due under an interindemnity arrangement by
38offering substantially less than the amounts ultimately recovered
39in actions brought by those participating members when those
40participating members have made claims under those
P96   1interindemnity arrangements for amounts reasonably similar to
2the amounts ultimately recovered.

3(G) Attempting to settle a claim by a participating member for
4less than the amount to which a reasonable person would have
5believed he or she was entitled by reference to written or printed
6advertising material accompanying or made part of an application
7for membership in an interindemnity arrangement.

8(H) Attempting to settle claims on the basis of an interindemnity
9arrangement that was altered without notice to the participating
10member.

11(I) Failing, after payment of a claim, to inform participating
12 members, upon request by them, of the coverage under which
13payment has been made.

14(J) Making known to claimants a practice of the cooperative
15corporation or interindemnity arrangement of appealing from
16arbitration awards in favor of claimants for the purpose of
17compelling them to accept settlements or compromises less than
18the amount awarded in arbitration.

19(K) Delaying the investigation or payment of claims by requiring
20a claimant, or his or her physician, to submit a preliminary claim
21report, and then requiring the subsequent submission of formal
22proof of loss forms, both of which submissions contain
23substantially the same information.

24(L) Failing to settle claims promptly, where liability has become
25apparent, under one portion of an interindemnity arrangement in
26order to influence settlements under other portions of the
27interindemnity arrangement.

28(M) Failing to provide promptly a reasonable explanation of
29the basis relied on in the interindemnity arrangement, in relation
30to the facts of applicable law, for the denial of a claim or for the
31offer of a compromise settlement.

32(N) Directly advising a claimant not to obtain the services of
33an attorney.

34(O) Misleading a claimant as to the applicable statute of
35limitations.

36(g) Notwithstanding any contrary provisions of Part 2
37(commencing with Section 12200) of Division 3 of Title 1 of the
38Corporations Code, it shall not be necessary to hold a meeting of
39members of the cooperative corporation for the purpose of electing
40directors if the bylaws provide the election may be held by
P97   1first-class mail balloting. First-class mail balloting may also be
2used in conjunction with a meeting at which directors are to be
3elected and all mail ballots shall count toward establishing a
4quorum for the meeting for the limited purpose of the issues set
5forth in the mail ballot. Directors shall be elected as follows:

6(1) The candidates receiving the highest number of votes, up to
7the number of directors to be elected, by a specified date at least
845 days but not later than 60 days after the ballots are first mailed,
9postage prepaid, to the members (or the date of a meeting of
10members held in conjunction therewith) shall be elected.

11(2) In the event that no candidate receives a majority of the
12votes cast for a vacant office, a runoff election shall be held
13between the two candidates receiving the highest number of votes
14cast. The runoff election shall be held at least 45 days but not more
15than 60 days after the ballots for the election are mailed, postage
16prepaid. In the event that there is more than one office for which
17no candidate receives a majority of the votes cast, the candidates
18for the runoff shall be twice the number of vacant offices, and shall
19be those persons who received the highest number of votes therefor.

20Those first-class mail ballots shall be kept on file for a period
21of three months after all vacant board positions have been filled,
22and shall be subject to inspection at any reasonable time by any
23members of the cooperative corporation.

24(h) No officer, director, trustee, or member of the interindemnity
25arrangement or the cooperative corporation, or any entity in which
26that person has a material financial interest, shall enter into or
27renew any transaction or contract with the trust unless the material
28facts as to the transaction or contract and as to the interest of the
29person are fully disclosed to the participating members, and the
30transaction or contract is approved by an affirmative vote of at
31least 75 percent of the membership present at a meeting, in person
32or by proxy. If any transaction or contract is to be submitted to
33members at a properly called meeting, the membership shall be
34notified of the meeting and of the transaction or contract by
35first-class mail, postage prepaid, at least 45 days prior to the
36meeting.

37(i) Services provided to the trust pursuant to a delegated
38contractual arrangement shall be embodied in a written contract.
39Each written contract shall provide for reasonable consideration
40to the parties. In addition, each written contract shall be disclosed
P98   1annually to participating members in a disclosure report containing
2the information described in subparagraph (H) of paragraph (3) of
3subdivision (c). The disclosure report shall be sent to participating
4members by first-class mail, postage prepaid, and shall be mailed
5separately from any statements, records, or other documents. The
6disclosure requirements of this subdivision shall apply to all
7existing and future written contracts.

8(j) Upon request of the Commissioner ofbegin delete Corporations,end deletebegin insert Business
9Oversight,end insert
an interindemnity arrangement shall immediately
10forward to the commissioner a current list of participating
11members, including the names, addresses, and telephone numbers
12of those members.

13(k) Notwithstanding any provision to the contrary, whenever
14the membership of a cooperative organization, organized pursuant
15to Part 2 (commencing with Section 12200) of Division 3 of Title
161 of the Corporations Code and consisting solely of physicians
17 and surgeons licensed in this state amounts to 2,000 or more
18members and the trust fund is at least forty million dollars
19($40,000,000), which is available to the public for malpractice
20claims or other claims authorized by this section, the cooperative
21is authorized to admit members without a contribution to that trust
22fund if assessments are charged to each of those members within
23the first 50 months in an amount equal to the amount of the
24contribution to the reserve fund that would otherwise be required.

25

SEC. 69.  

Section 12693.35 of the Insurance Code is amended
26to read:

27

12693.35.  

Participating health, dental, and vision plans shall
28have, but need not be limited to, all of the following operating
29characteristics satisfactory to the board in consultation with the
30plan’s licensing or regulatory oversight agency:

31(a) Strong financial condition, including the ability to assume
32the risk of providing and paying for covered services. A
33participating plan may utilize reinsurance, provider risk sharing,
34and other appropriate mechanisms to share a portion of the risk.

35(b) Adequate administrative management.

36(c) A satisfactory grievance procedure.

37(d) Participating plans that contract with or employ health care
38providers shall have mechanisms to accomplish all of the following,
39in a manner satisfactory to the board:

40(1) Review the quality of care covered.

P99   1(2) Review the appropriateness of care covered.

2(3) Provide accessible health care services.

3(e) (1) Before the effective date of the contract, the participating
4health plan shall have devised a system for identifying in a simple
5and clear fashion both in its own records and in the medical records
6of subscribers the fact that the services provided are provided under
7the program.

8(2) Throughout the duration of the contract, the plan shall use
9the system described in paragraph (1).

10(f) Plans licensed by the Department ofbegin delete Corporationsend deletebegin insert Business
11Oversightend insert
shall be deemed to meet the requirements of subdivisions
12(a) to (d), inclusive, of this section.

13

SEC. 70.  

Section 14053 of the Insurance Code is amended to
14read:

15

14053.  

In lieu of the surety bond required by this article there
16may be deposited with the State of California the sum of two
17thousand dollars ($2,000) in cash, or evidence of deposit of the
18sum of two thousand dollars ($2,000) in banks authorized to do
19business in this state and insured by the Federal Deposit Insurance
20Corporation, or investment certificates or share accounts in the
21amount of two thousand dollars ($2,000) issued by a savings
22association doing business in this state and insured by the Federal
23Deposit Insurance Corporation, or evidence of a certificate of funds
24or share account of the sum of two thousand dollars ($2,000) in a
25credit union, as defined in Section 14000 of the Financial Code,
26whose share deposits are guaranteed by the National Credit Union
27Administration or guaranteed by any other agency approved by
28the Department ofbegin delete Financial Institutions.end deletebegin insert Business Oversight.end insert

29

SEC. 71.  

Section 15036 of the Insurance Code is amended to
30read:

31

15036.  

In lieu of the surety bond required by this chapter there
32may be deposited with the State of California the sum of twenty
33thousand dollars ($20,000) in cash, or evidence of deposit of the
34sum of twenty thousand dollars ($20,000) in banks authorized to
35do business in this state and insured by the Federal Deposit
36Insurance Corporation, or investment certificates or share accounts
37in the amount of twenty thousand dollars ($20,000) issued by a
38savings association doing business in this state and insured by the
39Federal Deposit Insurance Corporation, or evidence of a certificate
40of funds or share account of the sum of twenty thousand dollars
P100  1($20,000) in a credit union as defined in Section 14000 of the
2Financial Code whose share deposits are guaranteed by the
3National Credit Union Administration or guaranteed by any other
4agency approved by the Department ofbegin delete Financial Institutions.end delete
5begin insert Business Oversight.end insert

6

SEC. 72.  

Section 4600.5 of the Labor Code is amended to read:

7

4600.5.  

(a) Any health care service plan licensed pursuant to
8the Knox-Keene Health Care Service Plan Act, a disability insurer
9licensed by the Department of Insurance, or any entity, including,
10but not limited to, workers’ compensation insurers and third-party
11administrators authorized by the administrative director under
12subdivision (e), may make written application to the administrative
13director to become certified as a health care organization to provide
14health care to injured employees for injuries and diseases
15compensable under this article.

16(b) Each application for certification shall be accompanied by
17a reasonable fee prescribed by the administrative director, sufficient
18to cover the actual cost of processing the application. A certificate
19is valid for the period that the director may prescribe unless sooner
20revoked or suspended.

21(c) If the health care organization is a health care service plan
22licensed pursuant to the Knox-Keene Health Care Service Plan
23Act, and has provided the Managed Care Unit of the Division of
24Workers’ Compensation with the necessary documentation to
25comply with this subdivision, that organization shall be deemed
26to be a health care organization able to provide health care pursuant
27to Section 4600.3, without further application duplicating the
28documentation already filed with the Department of Managed
29Health Care. These plans shall be required to remain in good
30standing with the Department of Managed Health Care, and shall
31meet the following additional requirements:

32(1) Proposes to provide all medical and health care services that
33may be required by this article.

34(2) Provides a program involving cooperative efforts by the
35employees, the employer, and the health plan to promote workplace
36health and safety, consultative and other services, and early return
37to work for injured employees.

38(3) Proposes a timely and accurate method to meet the
39requirements set forth by the administrative director for all carriers
40of workers’ compensation coverage to report necessary information
P101  1regarding medical and health care service cost and utilization, rates
2of return to work, average time in medical treatment, and other
3measures as determined by the administrative director to enable
4the director to determine the effectiveness of the plan.

5(4) Agrees to provide the administrative director with
6information, reports, and records prepared and submitted to the
7Department of Managed Health Care in compliance with the
8Knox-Keene Health Care Service Plan Act, relating to financial
9solvency, provider accessibility, peer review, utilization review,
10and quality assurance, upon request, if the administrative director
11determines the information is necessary to verify that the plan is
12providing medical treatment to injured employees in compliance
13with the requirements of this code.

14Disclosure of peer review proceedings and records to the
15administrative director shall not alter the status of the proceedings
16or records as privileged and confidential communications pursuant
17to Sections 1370 and 1370.1 of the Health and Safety Code.

18(5) Demonstrates the capability to provide occupational
19medicine and related disciplines.

20(6) Complies with any other requirement the administrative
21director determines is necessary to provide medical services to
22 injured employees consistent with the intent of this article,
23including, but not limited to, a written patient grievance policy.

24(d) If the health care organization is a disability insurer licensed
25by the Department of Insurance, and is in compliance with
26subdivision (d) of Sections 10133 and 10133.5 of the Insurance
27Code, the administrative director shall certify the organization to
28provide health care pursuant to Section 4600.3 if the director finds
29that the plan is in good standing with the Department of Insurance
30and meets the following additional requirements:

31(1) Proposes to provide all medical and health care services that
32may be required by this article.

33(2) Provides a program involving cooperative efforts by the
34employees, the employer, and the health plan to promote workplace
35health and safety, consultative and other services, and early return
36to work for injured employees.

37(3) Proposes a timely and accurate method to meet the
38requirements set forth by the administrative director for all carriers
39of workers’ compensation coverage to report necessary information
40regarding medical and health care service cost and utilization, rates
P102  1of return to work, average time in medical treatment, and other
2measures as determined by the administrative director to enable
3the director to determine the effectiveness of the plan.

4(4) Agrees to provide the administrative director with
5information, reports, and records prepared and submitted to the
6Department of Insurance in compliance with the Insurance Code
7relating to financial solvency, provider accessibility, peer review,
8utilization review, and quality assurance, upon request, if the
9administrative director determines the information is necessary to
10verify that the plan is providing medical treatment to injured
11employees consistent with the intent of this article.

12Disclosure of peer review proceedings and records to the
13administrative director shall not alter the status of the proceedings
14or records as privileged and confidential communications pursuant
15to subdivision (d) of Section 10133 of the Insurance Code.

16(5) Demonstrates the capability to provide occupational
17medicine and related disciplines.

18(6) Complies with any other requirement the administrative
19director determines is necessary to provide medical services to
20injured employees consistent with the intent of this article,
21including, but not limited to, a written patient grievance policy.

22(e) If the health care organization is a workers’ compensation
23insurer, third-party administrator, or any other entity that the
24administrative director determines meets the requirements of
25Section 4600.6, the administrative director shall certify the
26organization to provide health care pursuant to Section 4600.3 if
27the director finds that it meets the following additional
28requirements:

29(1) Proposes to provide all medical and health care services that
30may be required by this article.

31(2) Provides a program involving cooperative efforts by the
32employees, the employer, and the health plan to promote workplace
33health and safety, consultative and other services, and early return
34to work for injured employees.

35(3) Proposes a timely and accurate method to meet the
36requirements set forth by the administrative director for all carriers
37of workers’ compensation coverage to report necessary information
38regarding medical and health care service cost and utilization, rates
39of return to work, average time in medical treatment, and other
P103  1measures as determined by the administrative director to enable
2the director to determine the effectiveness of the plan.

3(4) Agrees to provide the administrative director with
4information, reports, and records relating to provider accessibility,
5peer review, utilization review, quality assurance, advertising,
6disclosure, medical and financial audits, and grievance systems,
7upon request, if the administrative director determines the
8information is necessary to verify that the plan is providing medical
9treatment to injured employees consistent with the intent of this
10article.

11Disclosure of peer review proceedings and records to the
12administrative director shall not alter the status of the proceedings
13or records as privileged and confidential communications pursuant
14to subdivision (d) of Section 10133 of the Insurance Code.

15(5) Demonstrates the capability to provide occupational
16medicine and related disciplines.

17(6) Complies with any other requirement the administrative
18director determines is necessary to provide medical services to
19injured employees consistent with the intent of this article,
20including, but not limited to, a written patient grievance policy.

21(7) Complies with the following requirements:

22(A) An organization certified by the administrative director
23under this subdivision may not provide or undertake to arrange
24for the provision of health care to employees, or to pay for or to
25reimburse any part of the cost of that health care in return for a
26prepaid or periodic charge paid by or on behalf of those employees.

27(B) Every organization certified under this subdivision shall
28operate on a fee-for-service basis. As used in this section, fee for
29service refers to the situation where the amount of reimbursement
30paid by the employer to the organization or providers of health
31care is determined by the amount and type of health care rendered
32by the organization or provider of health care.

33(C) An organization certified under this subdivision is prohibited
34from assuming risk.

35(f) (1) A workers’ compensation health care provider
36organization authorized by the Department ofbegin delete Corporationsend deletebegin insert end insert
37begin insertBusiness Oversightend insert on December 31, 1997, shall be eligible for
38certification as a health care organization under subdivision (e).

39(2) An entity that had, on December 31, 1997, submitted an
40application with the Commissioner ofbegin delete Corporationsend deletebegin insert end insertbegin insertBusiness
P104  1Oversightend insert
under Part 3.2 (commencing with Section 5150) shall
2be considered an applicant for certification under subdivision (e)
3and shall be entitled to priority in consideration of its application.
4The Commissioner ofbegin delete Corporationsend deletebegin insert Business Oversightend insert shall
5provide complete files for all pending applications to the
6administrative director on or before January 31, 1998.

7(g) The provisions of this section shall not affect the
8confidentiality or admission in evidence of a claimant’s medical
9treatment records.

10(h) Charges for services arranged for or provided by health care
11service plans certified by this section and that are paid on a
12per-enrollee-periodic-charge basis shall not be subject to the
13schedules adopted by the administrative director pursuant to
14Section 5307.1.

15(i) Nothing in this section shall be construed to expand or
16constrict any requirements imposed by law on a health care service
17plan or insurer when operating as other than a health care
18organization pursuant to this section.

19(j) In consultation with interested parties, including the
20Department ofbegin delete Corporationsend deletebegin insert Business Oversightend insert and the
21Department of Insurance, the administrative director shall adopt
22rules necessary to carry out this section.

23(k) The administrative director shall refuse to certify or may
24revoke or suspend the certification of any health care organization
25under this section if the director finds that:

26(1) The plan for providing medical treatment fails to meet the
27requirements of this section.

28(2) A health care service plan licensed by the Department of
29Managed Health Care, a workers’ compensation health care
30provider organization authorized by the Department of
31begin delete Corporations,end deletebegin insert Business Oversight,end insert or a carrier licensed by the
32Department of Insurance is not in good standing with its licensing
33agency.

34(3) Services under the plan are not being provided in accordance
35with the terms of a certified plan.

36(l) (1) When an injured employee requests chiropractic
37treatment for work-related injuries, the health care organization
38shall provide the injured worker with access to the services of a
39chiropractor pursuant to guidelines for chiropractic care established
40by paragraph (2). Within five working days of the employee’s
P105  1request to see a chiropractor, the health care organization and any
2person or entity who directs the kind or manner of health care
3services for the plan shall refer an injured employee to an affiliated
4chiropractor for work-related injuries that are within the guidelines
5for chiropractic care established by paragraph (2). Chiropractic
6care rendered in accordance with guidelines for chiropractic care
7established pursuant to paragraph (2) shall be provided by duly
8licensed chiropractors affiliated with the plan.

9(2) The health care organization shall establish guidelines for
10chiropractic care in consultation with affiliated chiropractors who
11are participants in the health care organization’s utilization review
12process for chiropractic care, which may include qualified medical
13evaluators knowledgeable in the treatment of chiropractic
14conditions. The guidelines for chiropractic care shall, at a
15minimum, explicitly require the referral of any injured employee
16who so requests to an affiliated chiropractor for the evaluation or
17treatment, or both, of neuromusculoskeletal conditions.

18(3) Whenever a dispute concerning the appropriateness or
19necessity of chiropractic care for work-related injuries arises, the
20dispute shall be resolved by the health care organization’s
21utilization review process for chiropractic care in accordance with
22the health care organization’s guidelines for chiropractic care
23established by paragraph (2).

24Chiropractic utilization review for work-related injuries shall be
25conducted in accordance with the health care organization’s
26approved quality assurance standards and utilization review process
27for chiropractic care. Chiropractors affiliated with the plan shall
28have access to the health care organization’s provider appeals
29process and, in the case of chiropractic care for work-related
30injuries, the review shall include review by a chiropractor affiliated
31with the health care organization, as determined by the health care
32organization.

33(4) The health care organization shall inform employees of the
34procedures for processing and resolving grievances, including
35those related to chiropractic care, including the location and
36telephone number where grievances may be submitted.

37(5) All guidelines for chiropractic care and utilization review
38shall be consistent with the standards of this code that require care
39to cure or relieve the effects of the industrial injury.

P106  1(m) Individually identifiable medical information on patients
2submitted to the division shall not be subject to the California
3Public Records Act (Chapter 3.5 (commencing with Section 6250)
4of Division 7 of Title 1 of the Government Code).

5(n) (1) When an injured employee requests acupuncture
6treatment for work-related injuries, the health care organization
7shall provide the injured worker with access to the services of an
8acupuncturist pursuant to guidelines for acupuncture care
9established by paragraph (2). Within five working days of the
10employee’s request to see an acupuncturist, the health care
11organization and any person or entity who directs the kind or
12manner of health care services for the plan shall refer an injured
13employee to an affiliated acupuncturist for work-related injuries
14that are within the guidelines for acupuncture care established by
15paragraph (2). Acupuncture care rendered in accordance with
16guidelines for acupuncture care established pursuant to paragraph
17(2) shall be provided by duly licensed acupuncturists affiliated
18with the plan.

19(2) The health care organization shall establish guidelines for
20acupuncture care in consultation with affiliated acupuncturists who
21are participants in the health care organization’s utilization review
22process for acupuncture care, which may include qualified medical
23evaluators. The guidelines for acupuncture care shall, at a
24minimum, explicitly require the referral of any injured employee
25who so requests to an affiliated acupuncturist for the evaluation
26or treatment, or both, of neuromusculoskeletal conditions.

27(3) Whenever a dispute concerning the appropriateness or
28necessity of acupuncture care for work-related injuries arises, the
29dispute shall be resolved by the health care organization’s
30utilization review process for acupuncture care in accordance with
31the health care organization’s guidelines for acupuncture care
32established by paragraph (2).

33Acupuncture utilization review for work-related injuries shall
34be conducted in accordance with the health care organization’s
35approved quality assurance standards and utilization review process
36for acupuncture care. Acupuncturists affiliated with the plan shall
37have access to the health care organization’s provider appeals
38process and, in the case of acupuncture care for work-related
39injuries, the review shall include review by an acupuncturist
P107  1affiliated with the health care organization, as determined by the
2health care organization.

3(4) The health care organization shall inform employees of the
4procedures for processing and resolving grievances, including
5those related to acupuncture care, including the location and
6telephone number where grievances may be submitted.

7(5) All guidelines for acupuncture care and utilization review
8shall be consistent with the standards of this code that require care
9to cure or relieve the effects of the industrial injury.

10

SEC. 73.  

Section 11604.5 of the Probate Code is amended to
11read:

12

11604.5.  

(a) This section applies when distribution from a
13decedent’s estate is made to a transferee for value who acquires
14any interest of a beneficiary in exchange for cash or other
15consideration.

16(b) For purposes of this section, a transferee for value is a person
17who satisfies both of the following criteria:

18(1) He or she purchases the interest from a beneficiary for
19consideration pursuant to a written agreement.

20(2) He or she, directly or indirectly, regularly engages in the
21purchase of beneficial interests in estates for consideration.

22(c) This section does not apply to any of the following:

23(1) A transferee who is a beneficiary of the estate or a person
24who has a claim to distribution from the estate under another
25instrument or by intestate succession.

26(2) A transferee who is either the registered domestic partner
27of the beneficiary, or is related by blood, marriage, or adoption to
28the beneficiary or the decedent.

29(3) A transaction made in conformity with the California Finance
30Lenders Law (Division 9 (commencing with Section 22000) of
31the Financial Code) and subject to regulation by the Department
32ofbegin delete Corporations.end deletebegin insert Business Oversight.end insert

33(4) A transferee who is engaged in the business of locating
34missing or unknown heirs and who acquires an interest from a
35beneficiary solely in exchange for providing information or services
36associated with locating the heir or beneficiary.

37(d) A written agreement is effective only if all of the following
38conditions are met:

39(1) The executed written agreement is filed with the court not
40later than 30 days following the date of its execution or, if
P108  1administration of the decedent’s estate has not commenced, then
2within 30 days of issuance of the letters of administration or letters
3testamentary, but in no event later than 15 days prior to the hearing
4on the petition for final distribution. Prior to filing or serving that
5written agreement, the transferee for value shall redact any
6personally identifying information about the beneficiary, other
7than the name and address of the beneficiary, and any financial
8information provided by the beneficiary to the transferee for value
9on the application for cash or other consideration, from the
10agreement.

11(2) If the negotiation or discussion between the beneficiary and
12the transferee for value leading to the execution of the written
13agreement by the beneficiary was conducted in a language other
14than English, the beneficiary shall receive the written agreement
15in English, together with a copy of the agreement translated into
16the language in which it was negotiated or discussed. The written
17agreement and the translated copy, if any, shall be provided to the
18beneficiary.

19(3) The documents signed by, or provided to, the beneficiary
20are printed in at least 10-point type.

21(4) The transferee for value executes a declaration or affidavit
22attesting that the requirements of this section have been satisfied,
23and the declaration or affidavit is filed with the court within 30
24days of execution of the written agreement or, if administration of
25the decedent’s estate has not commenced, then within 30 days of
26issuance of the letters of administration or letters testamentary,
27but in no event later than 15 days prior to the hearing on the petition
28for final distribution.

29(5) Notice of the assignment is served on the personal
30representative or the attorney of record for the personal
31representative within 30 days of execution of the written agreement
32or, if general or special letters of administration or letters
33testamentary have not been issued, then within 30 days of issuance
34of the letters of administration or letters testamentary, but in no
35event later than 15 days prior to the hearing on the petition for
36final distribution.

37(e) The written agreement shall include the following terms, in
38addition to any other terms:

39(1) The amount of consideration paid to the beneficiary.

40(2) A description of the transferred interest.

P109  1(3) If the written agreement so provides, the amount by which
2the transferee for value would have its distribution reduced if the
3beneficial interest assigned is distributed prior to a specified date.

4(4)  A statement of the total of all costs or fees charged to the
5beneficiary resulting from the transfer for value, including, but not
6limited to, transaction or processing fees, credit report costs, title
7search costs, due diligence fees, filing fees, bank or electronic
8transfer costs, or any other fees or costs. If all the costs and fees
9are paid by the transferee for value and are included in the amount
10of the transferred interest, then the statement of costs need not
11itemize any costs or fees. This subdivision shall not apply to costs,
12fees, or damages arising out of a material breach of the agreement
13or fraud by or on the part of the beneficiary.

14(f) A written agreement shall not contain any of the following
15provisions and, if any such provision is included, that provision
16shall be null and void:

17(1) A provision holding harmless the transferee for value, other
18than for liability arising out of fraud by the beneficiary.

19(2) A provision granting to the transferee for value agency
20powers to represent the beneficiary’s interest in the decedent’s
21estate beyond the interest transferred.

22(3) A provision requiring payment by the beneficiary to the
23transferee for value for services not related to the written agreement
24or services other than the transfer of interest under the written
25agreement.

26(4) A provision permitting the transferee for value to have
27recourse against the beneficiary if the distribution from the estate
28in satisfaction of the beneficial interest is less than the beneficial
29interest assigned to the transferee for value, other than recourse
30for any expense or damage arising out of the material breach of
31the agreement or fraud by the beneficiary.

32(g) The court on its own motion, or on the motion of the personal
33representative or other interested person, may inquire into the
34circumstances surrounding the execution of, and the consideration
35for, the written agreement to determine that the requirements of
36this section have been satisfied.

37(h) The court may refuse to order distribution under the written
38agreement, or may order distribution on any terms that the court
39considers equitable, if the court finds that the transferee for value
40did not substantially comply with the requirements of this section,
P110  1or if the court finds that any of the following conditions existed at
2the time of transfer:

3(1) The fees, charges, or consideration paid or agreed to be paid
4by the beneficiary were grossly unreasonable.

5(2) The transfer of the beneficial interest was obtained by duress,
6fraud, or undue influence.

7(i) In addition to any remedy specified in this section, for any
8willful violation of the requirements of this section found to be
9committed in bad faith, the court may require the transferee for
10value to pay to the beneficiary up to twice the value paid for the
11assignment.

12(j) Notice of the hearing on any motion brought under this
13section shall be served on the beneficiary and on the transferee for
14value at least 15 days before the hearing in the manner provided
15in Section 415.10 or 415.30 of the Code of Civil Procedure.

16(k) If the decedent’s estate is not subject to a pending court
17proceeding under the Probate Code in California, but is the subject
18of a probate proceeding in another state, the transferee for value
19shall not be required to submit to the court a copy of the written
20agreement as required under paragraph (1) of subdivision (d). If
21the written agreement is entered into in California or if the
22beneficiary is domiciled in California, that written agreement shall
23otherwise conform to the provisions of subdivisions (d), (e), and
24(f) in order to be effective.

25

SEC. 74.  

Section 408 of the Revenue and Taxation Code is
26amended to read:

27

408.  

(a) Except as otherwise provided in subdivisions (b), (c),
28(d), (e), and (g), any information and records in the assessor’s
29office that are not required by law to be kept or prepared by the
30assessor, disabled veterans’ exemption claims, and homeowners’
31exemption claims, are not public documents and shall not be open
32to public inspection. Property receiving the homeowners’
33exemption shall be clearly identified on the assessment roll. The
34assessor shall maintain records which shall be open to public
35inspection to identify those claimants who have been granted the
36homeowners’ exemption.

37(b) The assessor may provide any appraisal data in his or her
38possession to the assessor of any county.

39The assessor shall disclose information, furnish abstracts, or
40permit access to all records in his or her office to law enforcement
P111  1agencies, the county grand jury, the board of supervisors or their
2duly authorized agents, employees, or representatives when
3conducting an investigation of the assessor’s office pursuant to
4Section 25303 of the Government Code, the county recorder when
5conducting an investigation to determine whether a documentary
6transfer tax is imposed, the Controller, employees of the Controller
7for property tax postponement purposes, probate referees,
8employees of the Franchise Tax Board for tax administration
9purposes only, staff appraisers of the Department of Financial
10Institutions, the Department of Transportation, the Department of
11General Services, the State Board of Equalization, the State Lands
12Commission, the State Department of Social Services, the
13Department of Child Support Services, the Department of Water
14Resources, and other duly authorized legislative or administrative
15bodies of the state pursuant to their authorization to examine the
16records. Whenever the assessor discloses information, furnishes
17abstracts, or permits access to records in his or her office to staff
18appraisers of the Department ofbegin delete Financial Institutions,end deletebegin insert Business
19Oversight,end insert
the Department of Transportation, the Department of
20General Services, the State Lands Commission, or the Department
21of Water Resources pursuant to this section, the department shall
22reimburse the assessor for any costs incurred as a result thereof.

23(c) Upon the request of the tax collector, the assessor shall
24disclose and provide to the tax collector information used in the
25preparation of that portion of the unsecured roll for which the taxes
26thereon are delinquent. The tax collector shall certify to the assessor
27that he or she needs the information requested for the enforcement
28of the tax lien in collecting those delinquent taxes. Information
29requested by the tax collector may include social security numbers,
30and the assessor shall recover from the tax collector his or her
31actual and reasonable costs for providing the information. The tax
32collector shall add the costs described in the preceding sentence
33to the assessee’s delinquent tax lien and collect those costs subject
34to subdivision (e) of Section 2922.

35(d) The assessor shall, upon the request of an assessee or his or
36her designated representative, permit the assessee or representative
37to inspect or copy any market data in the assessor’s possession.
38For purposes of this subdivision, “market data” means any
39information in the assessor’s possession, whether or not required
40to be prepared or kept by him or her, relating to the sale of any
P112  1property comparable to the property of the assessee, if the assessor
2 bases his or her assessment of the assessee’s property, in whole
3or in part, on that comparable sale or sales. The assessor shall
4provide the names of the seller and buyer of each property on
5which the comparison is based, the location of that property, the
6date of the sale, and the consideration paid for the property, whether
7paid in money or otherwise. However, for purposes of providing
8market data, the assessor may not display any document relating
9to the business affairs or property of another.

10(e) (1) With respect to information, documents, and records,
11other than market data as defined in subdivision (d), the assessor
12shall, upon request of an assessee of property, or his or her
13designated representative, permit the assessee or representative to
14inspect or copy all information, documents, and records, including
15auditors’ narrations and workpapers, whether or not required to
16be kept or prepared by the assessor, relating to the appraisal and
17the assessment of the assessee’s property, and any penalties and
18interest thereon.

19(2) After enrolling an assessment, the assessor shall respond to
20a written request for information supporting the assessment,
21including, but not limited to, any appraisal and other data requested
22by the assessee.

23(3) Except as provided in Section 408.1, an assessee, or his or
24her designated representative, may not be permitted to inspect or
25copy information and records that also relate to the property or
26business affairs of another, unless that disclosure is ordered by a
27competent court in a proceeding initiated by a taxpayer seeking to
28challenge the legality of the assessment of his or her property.

29(f) (1) Permission for the inspection or copying requested
30pursuant to subdivision (d) or (e) shall be granted as soon as
31reasonably possible to the assessee or his or her designated
32representative.

33(2) If the assessee, or his or her designated representative,
34requests the assessor to make copies of any of the requested
35records, the assessee shall reimburse the assessor for the reasonable
36costs incurred in reproducing and providing the copies.

37(3) If the assessor fails to permit the inspection or copying of
38materials or information as requested pursuant to subdivision (d)
39or (e) and the assessor introduces any requested materials or
40information at any assessment appeals board hearing, the assessee
P113  1or his or her representative may request and shall be granted a
2continuance for a reasonable period of time. The continuance shall
3extend the two-year period specified in subdivision (c) of Section
41604 for a period of time equal to the period of continuance.

5(g) Upon the written request of the tax collector, the assessor
6shall provide to the tax collector information for the preparation
7and enforcement of Part 6 (commencing with Section 3351). The
8tax collector shall certify to the assessor that he or she needs the
9contact information to assist with the preparation and enforcement
10of Part 6 (commencing with Section 3351). The assessor shall
11provide the information, which may not include social security
12numbers. Any information provided to the tax collector pursuant
13to this subdivision shall not become a public record and shall not
14be open to public inspection. The tax collector shall reimburse the
15assessor for the actual and reasonable costs incurred by the assessor
16for providing the information to administer this subdivision. The
17tax collector shall add the costs described in the preceding sentence
18to the assessee’s delinquent taxes and include the costs incurred
19subject to Sections 4112 and 4672.2. The tax collector or his or
20her designated employee shall, under penalty of perjury, certify
21to the assessor that he or she needs the information to assist with
22the preparation and enforcement of Part 6 (commencing with
23Section 3351), and that the information provided pursuant to this
24subdivision that is not public record and that is not open to public
25inspection shall not become public record and shall not be open
26to public inspection.

27

SEC. 75.  

Section 22005.1 of the Welfare and Institutions Code
28 is amended to read:

29

22005.1.  

(a) The State Department of Health Services shall
30only certify a long-term care insurance policy that substantially
31meets the requirements of Chapter 2.6 (commencing with Section
3210230) of Part 2 of Division 2 of the Insurance Code, except the
33requirements of Sections 10232.1, 10232.2, 10232.25, 10232.8,
3410232.9, and 10232.92 of the Insurance Code, and that provides
35all of the items specified in subdivision (b). The State Department
36of Health Services shall only certify a health care service plan
37contract that has been approved by the Department ofbegin delete Corporationsend deletebegin insert end insert
38begin insertBusiness Oversightend insert pursuant to Chapter 2.2 (commencing with
39Section 1340) of Division 2 of the Health and Safety Code as
40providing substantially equivalent coverage to that required by
P114  1Chapter 2.6 (commencing with Section 10230) of Part 2 of Division
22 of the Insurance Code, and that provides all of the items specified
3in subdivision (b). Policies issued by organizations subject to the
4Insurance Code and regulated by the Department of Insurance
5shall also be approved by the Department of Insurance.

6(b) Only policies and contracts that provide all of the following
7items shall be certified by the department:

8(1) Individual assessment and case management by a
9coordinating entity designated and approved by the department.

10(2) Levels and durations of benefits that meet minimum
11standards set by the State Department of Health Services pursuant
12to Section 22009.

13(3) Protection against loss of benefits due to inflation.

14(4) A periodic record issued to the insured including an
15explanation of insurance payments or benefits paid that count
16toward Medi-Cal asset protection under this division.

17(5) Compliance with any other requirements imposed by
18regulations adopted by the State Department of Health Services
19or the State Department of Social Services and consistent with the
20purposes of this division.



O

    99