Amended in Assembly April 8, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 1517

Introduced by Committee on Banking and Finance (Assembly Members Dababneh (Chair), Travis Allen (Vice Chair), Achadjian, Brown, Chau, Gatto, Kim, Low, Perea, begin insert Ridley-Thomas, end insert 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, begin insert 25003, 25018, 25100, end insert 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, begin delete and end delete 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 begin delete of, and to repeal Section 1341.9 of, end delete begin insert of end insert 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 amended, 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 This bill would also update cross-references and outdated contact information with respect to the Department of Business Oversight. begin delete This bill would repeal obsolete provisions relating to the Department of Corporations. end delete

(2) Existing law begin insert , the Corporate Securities Law of 1968, end insert 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.

begin insert

Existing law, the Corporate Securities Law of 1968, requires the offer and sale of securities in the state to be qualified with the Commissioner of Business Oversight, unless exempt. That law exempts specific securities or transactions from qualification, including, among others, any security issued or guaranteed by a public utility holding company, as specified.

end insert begin insert

This bill would revise this exemption to exempt any security issued or guaranteed by a public utility holding company that is regulated in respect to its rates and charges by the United States or a state, and delete obsolete cross-references.

end insert begin insert

This bill would also update and delete obsolete cross-references to federal law in the Corporate Securities Law of 1968.

end insert

(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:

SECTION 1.  

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

17511.1.  

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

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

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

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

(A) Purchase or rent any goods or services.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(1) A person offering or selling a security qualified under
Section 25110, 25120, or 25130 of the Corporations Code or
exempt from qualification under Chapter 1 (commencing with
Section 25100) of Part 2 of Division 1 of Title 4 of the
Corporations Code. The fact that a notice claiming an exemption
under the Corporate Securities Law of 1968 is filed with the
Department of Business Oversight does not create an exemption
under this paragraph.

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

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

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

(5) A person offering or selling a franchise registered pursuant
to Section 31110 of the Corporations Code or exempt from
registration under Chapter 1 (commencing with Section 31100)
of Part 2 of Division 5 of Title 4 of the Corporations Code. The
fact that a notice claiming an exemption under the Franchise
Investment Law is filed with the Department of Business Oversight
does not create an exemption under this paragraph.

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

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

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

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

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

(11) A person soliciting the sale of a preneed funeral
arrangement regulated by Article 9 (commencing with Section
7735) of Chapter 12 of Division 3.

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

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

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

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

(16) An issuer or subsidiary of an issuer that has a security listed
on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., if the exchange or
interdealer quotation system has been certified by rule or order of
the Commissioner of Corporations under subdivision (o) of Section
25100 of the Corporations Code. A subsidiary of an issuer that
qualifies for exemption under this paragraph is not itself exempt
unless not less than 60 percent of the voting power of its shares is
owned by the qualifying issuer or issuers.

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

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

(19) A person who sells coins or bullion at a price which is not
more than 25 percent more than the price at which the seller is
concurrently buying the same coins or bullion, if: (A) the seller
has had a retail location in California from which he or she has
been selling coins or bullion to the public in person for at least
three years; (B) the telephonic solicitations are not the person’s
primary business and sales made telephonically make up less than
20 percent of the person’s total retail sales; and (C) the person
claiming an exemption pursuant to this subdivision complies with
Section 17511.3, as applicable, and subdivision (p) of Section
17511.4.

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

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

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

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

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

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

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

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

SEC. 2.  

Section 1632.5 of the Civil Code is amended to read:

1632.5.  

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

(b) For purposes of this section:

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

(2) “Supervised financial organization” means a bank, savings
association, as defined in Section 5102 of the Financial Code,
credit union, or holding company, affiliate, or subsidiary thereof,
or any person subject to Division 7 (commencing with Section
18000), Division 9 (commencing with Section 22000), or Division
20 (commencing with Section 50000) of the Financial Code.

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

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

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

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

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

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

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

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

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

(4) Alphanumeric codes.

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

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

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

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

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

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

(i) The Department of Business Oversight shall create a form
to be made available in each of the languages set forth in
subdivision (a) for use by a supervised financial organization to
summarize the terms of a mortgage loan pursuant to subdivision
(a). In creating the form, the Department of Business Oversight
may use as guidance the United States Department of Housing and
Urban Development’s Good Faith Estimate disclosure form.

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

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

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

(m) This section shall become operative beginning on July 1,
2010, or 90 days following the issuance of a form by the
Department of Business Oversight pursuant to subdivision (i),
whichever occurs later.

SEC. 3.  

Section 1748.13 of the Civil Code is amended to read:

1748.13.  

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

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

(2) Either of the following:

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

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

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

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

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

“A two hundred fifty dollar ($250) balance will take two years
and eight months to pay off a total cost of three hundred
twenty-five dollars and twenty-four cents ($325.24).
A five hundred dollar ($500) balance will take four years and five
months to pay off at a total cost of seven hundred nine dollars and
ninety cents ($709.90).
A seven hundred fifty dollar ($750) balance will take five years
and five months to pay off at a total cost of one thousand
ninety-four dollars and forty-nine cents ($1,094.49).
This information is based on an annual percentage rate of 21
percent and a minimum payment of 5 percent or ten dollars ($10),
whichever is greater.”

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

(B) A written statement providing individualized information
indicating an estimate of the number of years and months and the
approximate total cost to pay off the entire balance due on an
open-end credit card account if the cardholder were to pay only
the minimum amount due on the open-ended account based upon
the terms of the credit agreement. For purposes of this
subparagraph only, if the account is subject to a variable rate, the
creditor may make disclosures based on the rate for the entire
balance as of the date of the disclosure and indicate that the rate
may vary. In addition, the cardholder shall be provided with
referrals or, in the alternative, with the “800” telephone number
of the National Foundation for Credit Counseling through which
the cardholder can be referred, to credit counseling services in, or
closest to, the cardholder’s county of residence. The credit
counseling service shall be in good standing with the National
Foundation for Credit Counseling or accredited by the Council on
Accreditation for Children and Family Services. The creditor is
required to provide, or continue to provide, the information
required by this paragraph only if the cardholder has not paid more
than the minimum payment for six consecutive months, after July
1, 2002.

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

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

(C) The Department begin delete ofBusiness end delete begin insert of Business end insert Oversight shall
establish a detailed table illustrating the approximate number of
months that it would take and the approximate total cost to repay
an outstanding balance if the consumer pays only the required
minimum monthly payments and if no other additional charges or
fees are incurred on the account, such as additional extension of
credit, voluntary credit insurance, late fees, or dishonored check
fees by assuming all of the following:

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

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

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

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

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

(b) For purposes of this section:

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

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

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

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

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

SEC. 4.  

Section 1789.12 of the Civil Code is amended to read:

1789.12.  

As used in this title:

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

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

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

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

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

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

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

(3) Any person licensed as a prorater by the Department of
Business Oversight when the person is acting within the course
and scope of that license.

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

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

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

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

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

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

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

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

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

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

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

SEC. 5.  

Section 1812.201 of the Civil Code is amended to
read:

1812.201.  

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

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

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

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

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

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

(1) A security, as defined in the Corporate Securities Law of
1968 (Division 1 (commencing with Section 25000) of Title 4 of
the Corporations Code), that has been qualified for sale by the
Department of Business Oversight, or is exempt under Chapter 1
(commencing with Section 25100) of Part 2 of Division 1 of Title
4 of the Corporations Code from the necessity to qualify.

(2) A franchise defined by the Franchise Investment Law
(Division 5 (commencing with Section 31000) of Title 4 of the
Corporations Code) that is registered with the Department of
Business Oversight or is exempt under Chapter 1 (commencing
with Section 31100) of Part 2 of Division 5 of Title 4 of the
Corporations Code from the necessity of registering.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(1) Sell or lease.

(2) Use to perform a service.

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

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

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

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

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

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

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

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

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

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

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

SEC. 6.  

Section 2923.3 of the Civil Code is amended to read:

2923.3.  

(a) With respect to residential real property containing
no more than four dwelling units, a mortgagee, trustee, beneficiary,
or authorized agent shall provide to the mortgagor or trustor a copy
of the recorded notice of default with an attached separate summary
document of the notice of default in English and the languages
described in Section 1632, as set forth in subdivision (c), and a
copy of the recorded notice of sale with an attached separate
summary document of the information required to be contained
in the notice of sale in English and the languages described in
Section 1632, as set forth in subdivision (d). These summaries are
not required to be recorded or published. This subdivision shall
become operative on April 1, 2013, or 90 days following the
issuance of the translations by the Department of Business
Oversight pursuant to subdivision (b), whichever is later.

(b) (1) The Department of Business Oversight shall provide a
standard translation of the statement in paragraph (1) of subdivision
(c), and of the summary of the notice of default, as set forth in
paragraph (2) of subdivision (c) in the languages described in
Section 1632.

(2) The Department of Business Oversight shall provide a
standard translation of the statement in paragraph (1) of subdivision
(d), and of the summary of the notice of sale, as set forth in
paragraph (2) of subdivision (d).

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

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

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

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

SUMMARY OF KEY INFORMATION

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

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

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

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

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

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

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

____________________________________

(Name of beneficiary or mortgagee)

____________________________________

(Mailing address)

____________________________________

(Telephone)

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

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

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

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

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

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

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

SUMMARY OF KEY INFORMATION

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

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

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

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

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

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

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

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

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

SEC. 7.  

Section 1101.1 of the Corporations Code is amended
to read:

1101.1.  

Subdivision (c) of Section 1113 and subdivision (b)
of Section 1101 do not apply to any transaction if the
Commissioner of Business Oversight, the Insurance Commissioner
or, the Public Utilities Commission has approved the terms and
conditions of the transaction and the fairness of those terms and
conditions pursuant to Section 25142 or Section 1209, 5750, or
5802 of the Financial Code, Section 838.5 of the Insurance Code,
or Section 822 of the Public Utilities Code.

SEC. 8.  

Section 2207 of the Corporations Code is amended to
read:

2207.  

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

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

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

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

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

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

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

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

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

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

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

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

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

(e) For purposes of this section:

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

(A) Management authority over a business entity.

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

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

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

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

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

(A) Department of Business Oversight.

(B) Department of Insurance.

(C) Department of Managed Health Care.

(D) United States Securities and Exchange Commission.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SEC. 9.  

Section 2510 of the Corporations Code is amended to
read:

2510.  

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

(a) A social purpose corporation that, with the approval of the
Commissioner of Business Oversight, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner
of Business Oversight to engage in, the commercial banking
business under the Banking Law (Division 1 (commencing with
Section 99) of the Financial Code).

(b) Any social purpose corporation that, with the approval of
the Commissioner of Business Oversight, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner
of Business Oversight to engage in, the industrial banking business
under the Banking Law (Division 1 (commencing with Section
99) of the Financial Code).

(c) Any social purpose corporation, other than a social purpose
corporation described in subdivision (d), that, with the approval
of the Commissioner of Business Oversight, is incorporated for
the purpose of engaging in, or that is authorized by the
Commissioner of Business Oversight to engage in, the trust
business under the Banking Law (Division 1 (commencing with
Section 99) of the Financial Code).

(d) Any social purpose corporation that is authorized by the
Commissioner of Business Oversight and the Commissioner of
Insurance to maintain a title insurance department to engage in
title insurance business and a trust department to engage in trust
business.

(e) Any social purpose corporation that, with the approval of
the Commissioner of Business Oversight, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner
of Business Oversight to engage in, business under Article 1
(commencing with Section 3500) of Chapter 19 of Division 1 of
the Financial Code.

SEC. 10.  

Section 3100 of the Corporations Code is amended
to read:

3100.  

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

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

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

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

(e) Subdivision (d) shall not apply to a transaction if the
Commissioner of Business Oversight, the Insurance Commissioner,
or the Public Utilities Commission has approved the terms and
conditions of the transaction and the fairness of those terms and
conditions pursuant to Section 25142, Section 1209 of the Financial
Code, Section 838.5 of the Insurance Code, or Section 822 of the
Public Utilities Code.

SEC. 11.  

Section 17713.12 of the Corporations Code is
amended to read:

17713.12.  

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

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

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

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

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

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

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

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

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

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

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

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

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

(e) For purposes of this section:

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

(A) Management authority over the limited liability company.

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

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

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

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

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

(A) Department of Business Oversight.

(B) Department of Insurance.

(C) Department of Managed Health Care.

(D) United States Securities and Exchange Commission.

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

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

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

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

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

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

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

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

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

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

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

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

(11) “Officer” means a person appointed pursuant to Section
17703.02, except an officer of a specified subsidiary limited
liability company who is not also an officer of the parent limited
liability company.

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

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

begin insert

begin insert SEC. 12. end insert   

end insert

begin insert Section 25003 of the end insert begin insert Corporations Code end insert begin insert is amended
to read: end insert

25003.  

(a) “Agent” means any individual, other than a
broker-dealer or a partner of a licensed broker-dealer, who
represents a broker-dealer or who for compensation represents an
issuer in effecting or attempting to effect purchases or sales of
securities in this state.

(b) “Agent” does not include an individual who only represents
an issuer in effecting transactions in securities exempted by
subdivision (a), (b), (e), (f), (g), (j), (k) or (l) of Section 25100 or
in effecting transactions exempted by Section 25102, and does not
include an individual who has no place of business in this state if
he or she effects transactions in this state exclusively with
broker-dealers.

(c)  “Agent” does not include an associated person of a broker
or dealer effecting transactions described in Section begin delete 15(h)(3) end delete
begin insert 15(i)(4) end insert of the Securities Exchange Act of 1934, subject to the
provisions of Section begin delete 15(h)(2) end delete begin insert 15(i)(3) end insert of that act.

(d) An officer or director of a broker-dealer or issuer, or an
individual occupying a similar status or performing similar
functions, is an agent only if he otherwise comes within this
definition and receives compensation specifically related to
purchases or sales of securities.

begin insert

begin insert SEC. 13. end insert   

end insert

begin insert Section 25018 of the end insert begin insert Corporations Code end insert begin insert is amended
to read: end insert

25018.  

“Securities Act of 1933,” “Securities Exchange Act of
1934,” begin delete “Public Utility Holding Company Act of 1935,” end delete
“Investment Advisers Act of 1940,” and “Investment Company
Act of 1940” mean the federal statutes of those names as amended
before or after the effective date of this law.

begin insert

begin insert SEC. 14. end insert   

end insert

begin insert Section 25100 of the end insert begin insert Corporations Code end insert begin insert is amended
to read: end insert

25100.  

The following securities are exempted from Sections
25110, 25120, and 25130:

(a) Any security (including a revenue obligation) issued or
guaranteed by the United States, any state, any city, county, city
and county, public district, public authority, public corporation,
public entity, or political subdivision of a state or any agency or
corporate or other instrumentality of any one or more of the
foregoing; or any certificate of deposit for any of the foregoing.

(b) Any security issued or guaranteed by Canada, any Canadian
province, any political subdivision or municipality of that province,
or by any other foreign government with which the United States
currently maintains diplomatic relations, if the security is
recognized as a valid obligation by the issuer or guarantor; or any
certificate of deposit for any of the foregoing.

(c) Any security issued or guaranteed by and representing an
interest in or a direct obligation of a national bank or a bank or
trust company incorporated under the laws of this state, and any
security issued by a bank to one or more other banks and
representing an interest in an asset of the issuing bank.

(d) Any security issued or guaranteed by a federal savings
association or federal savings bank or federal land bank or joint
land bank or national farm loan association or by any savings
association, as defined in subdivision (a) of Section 5102 of the
Financial Code, which is subject to the supervision and regulation
of the Commissioner of Financial Institutions of this state.

(e) Any security (other than an interest in all or portions of a
parcel or parcels of real property which are subdivided land or a
subdivision or in a real estate development), the issuance of which
is subject to authorization by the Insurance Commissioner, the
Public Utilities Commission, or the Real Estate Commissioner of
this state.

(f) Any security consisting of any interest in all or portions of
a parcel or parcels of real property which are subdivided lands or
a subdivision or in a real estate development; provided that the
exemption in this subdivision shall not be applicable to: (1) any
investment contract sold or offered for sale with, or as part of, that
interest, or (2) any person engaged in the business of selling,
distributing, or supplying water for irrigation purposes or domestic
use that is not a public utility except that the exemption is
applicable to any security of a mutual water company (other than
an investment contract as described in paragraph (1)) offered or
sold in connection with subdivided lands pursuant to Chapter 2
(commencing with Section 14310) of Part 7 of Division 3 of Title
1.

(g) Any mutual capital certificates or savings accounts, as
defined in the Savings Association Law, issued by a savings
association, as defined by subdivision (a) of Section 5102 of the
Financial Code, and holding a license or certificate of authority
then in force from the Commissioner of Financial Institutions of
this state.

(h) Any security issued or guaranteed by any federal credit
union, or by any credit union organized and supervised, or
regulated, under the Credit Union Law.

(i) Any security issued or guaranteed by any railroad, other
common carrier, public utility, or public utility holding company
begin delete which end delete is (1) begin delete subject to the jurisdiction of the Interstate Commerce
Commission or its successor or (2) a holding company registered
with the Securities and Exchange Commission under the Public
Utility Holding Company Act of 1935 or a subsidiary of that
company within the meaning of that act end delete begin insert subject to jurisdiction of
the Federal Energy Regulatory Commission under the Public
Utility Holding Company Act of 2005 end insert begin delete or (3) end delete begin insert regulated in respect
to its rates and charges by the United States or a state or (2) end insert
regulated in respect of the issuance or guarantee of the security by
a governmental authority of the United States, of any state, of
Canada or of any Canadian province; and the security is subject
to registration with or authorization of issuance by that authority.

(j) Any security (except evidences of indebtedness, whether
interest bearing or not) of an issuer (1) organized exclusively for
educational, benevolent, fraternal, religious, charitable, social, or
reformatory purposes and not for pecuniary profit, if no part of the
net earnings of the issuer inures to the benefit of any private
shareholder or individual, or (2) organized as a chamber of
commerce or trade or professional association. The fact that
amounts received from memberships or dues or both will or may
be used to construct or otherwise acquire facilities for use by
members of the nonprofit organization does not disqualify the
organization for this exemption. This exemption does not apply
to the securities of any nonprofit organization if any promoter
thereof expects or intends to make a profit directly or indirectly
from any business or activity associated with the organization or
operation of that nonprofit organization or from remuneration
received from that nonprofit organization.

(k) Any agreement, commonly known as a “life income
contract,” of an issuer (1) organized exclusively for educational,
benevolent, fraternal, religious, charitable, social, or reformatory
purposes and not for pecuniary profit and (2) which the
commissioner designates by rule or order, with a donor in
consideration of a donation of property to that issuer and providing
for the payment to the donor or persons designated by him or her
of income or specified periodic payments from the donated
property or other property for the life of the donor or those other
persons.

(l) Any note, draft, bill of exchange, or banker’s acceptance
which is freely transferable and of prime quality, arises out of a
current transaction or the proceeds of which have been or are to
be used for current transactions, and which evidences an obligation
to pay cash within nine months of the date of issuance, exclusive
of days of grace, or any renewal of that paper which is likewise
limited, or any guarantee of that paper or of that renewal, provided
that the paper is not offered to the public in amounts of less than
twenty-five thousand dollars ($25,000) in the aggregate to any one
purchaser. In addition, the commissioner may, by rule or order,
exempt any issuer of any notes, drafts, bills of exchange or banker’s
acceptances from qualification of those securities when the
commissioner finds that the qualification is not necessary or
appropriate in the public interest or for the protection of investors.

(m) Any security issued by any corporation organized and
existing under the provisions of Chapter 1 (commencing with
Section 54001) of Division 20 of the Food and Agricultural Code.

(n) Any beneficial interest in an employees’ pension,
profit-sharing, stock bonus or similar benefit plan which meets the
requirements for qualification under Section 401 of the federal
Internal Revenue Code or any statute amendatory thereof or
supplementary thereto. A determination letter from the Internal
Revenue Service stating that an employees’ pension, profit-sharing,
stock bonus or similar benefit plan meets those requirements shall
be conclusive evidence that the plan is an employees’ pension,
profit-sharing, stock bonus or similar benefit plan within the
meaning of the first sentence of this subdivision until the date the
determination letter is revoked in writing by the Internal Revenue
Service, regardless of whether or not the revocation is retroactive.

(o) Any security listed or approved for listing upon notice of
issuance on a national securities exchange, if the exchange has
been certified by rule or order of the commissioner and any warrant
or right to purchase or subscribe to the security. The exemption
afforded by this subdivision does not apply to securities listed or
approved for listing upon notice of issuance on a national securities
exchange, in a rollup transaction unless the rollup transaction is
an eligible rollup transaction as defined in Section 25014.7.

That certification of any exchange shall be made by the
commissioner upon the written request of the exchange if the
commissioner finds that the exchange, in acting on applications
for listing of common stock, substantially applies the minimum
standards set forth in either subparagraph (A) or (B) of paragraph
(1), and, in considering suspension or removal from listing,
substantially applies each of the criteria set forth in paragraph (2).

(1) Listing standards:

(A) (i) Shareholders’ equity of at least four million dollars
($4,000,000).

(ii) Pretax income of at least seven hundred fifty thousand
dollars ($750,000) in the issuer’s last fiscal year or in two of its
last three fiscal years.

(iii) Minimum public distribution of 500,000 shares (exclusive
of the holdings of officers, directors, controlling shareholders, and
other concentrated or family holdings), together with a minimum
of 800 public holders or minimum public distribution of 1,000,000
shares together with a minimum of 400 public holders. The
exchange may also consider the listing of a company’s securities
if the company has a minimum of 500,000 shares publicly held, a
minimum of 400 shareholders and daily trading volume in the
issue has been approximately 2,000 shares or more for the six
months preceding the date of application. In evaluating the
suitability of an issue for listing under this trading provision, the
exchange shall review the nature and frequency of that activity
and any other factors as it may determine to be relevant in
ascertaining whether the issue is suitable for trading. A security
that trades infrequently shall not be considered for listing under
this paragraph even though average daily volume amounts to 2,000
shares per day or more.

Companies whose securities are concentrated in a limited
geographical area, or whose securities are largely held in block by
institutional investors, normally may not be considered eligible
for listing unless the public distribution appreciably exceeds
500,000 shares.

(iv) Minimum price of three dollars ($3) per share for a
reasonable period of time prior to the filing of a listing application;
provided, however, in certain instances an exchange may favorably
consider listing an issue selling for less than three dollars ($3) per
share after considering all pertinent factors, including market
conditions in general, whether historically the issue has sold above
three dollars ($3) per share, the applicant’s capitalization, and the
number of outstanding and publicly held shares of the issue.

(v) An aggregate market value for publicly held shares of at
least three million dollars ($3,000,000).

(B) (i) Shareholders’ equity of at least four million dollars
($4,000,000).

(ii) Minimum public distribution set forth in clause (iii) of
subparagraph (A) of paragraph (1).

(iii) Operating history of at least three years.

(iv) An aggregate market value for publicly held shares of at
least fifteen million dollars ($15,000,000).

(2) Criteria for consideration of suspension or removal from
listing:

(i) If a company that (A) has shareholders’ equity of less than
one million dollars ($1,000,000) has sustained net losses in each
of its two most recent fiscal years, or (B) has net tangible assets
of less than three million dollars ($3,000,000) and has sustained
net losses in three of its four most recent fiscal years.

(ii) If the number of shares publicly held (excluding the holdings
of officers, directors, controlling shareholders and other
concentrated or family holdings) is less than 150,000.

(iii) If the total number of shareholders is less than 400 or if the
number of shareholders of lots of 100 shares or more is less than
300.

(iv) If the aggregate market value of shares publicly held is less
than seven hundred fifty thousand dollars ($750,000).

(v) If shares of common stock sell at a price of less than three
dollars ($3) per share for a substantial period of time and the issuer
shall fail to effectuate a reverse stock split of the shares within a
reasonable period of time after being requested by the exchange
to take that action.

A national securities exchange, certified by rule or order of the
commissioner under this subdivision, shall file annual reports when
requested to do so by the commissioner. The annual reports shall
contain, by issuer: the variances granted to an exchange’s listing
standards, including variances from corporate governance and
voting rights’ standards, for any security of that issuer; the reasons
for the variances; a discussion of the review procedure instituted
by the exchange to determine the effect of the variances on
investors and whether the variances should be continued; and any
other information that the commissioner deems relevant. The
purpose of these reports is to assist the commissioner in
determining whether the quantitative and qualitative requirements
of this subdivision are substantially being met by the exchange in
general or with regard to any particular security.

The commissioner after appropriate notice and opportunity for
hearing in accordance with the provisions of the Administrative
Procedure Act, Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of Title 2 of the Government Code, may, in
his or her discretion, by rule or order, decertify any exchange
previously certified that ceases substantially to apply the minimum
standards or criteria as set forth in paragraphs (1) and (2).

A rule or order of certification shall conclusively establish that
any security listed or approved for listing upon notice of issuance
on any exchange named in a rule or order of certification, and any
warrant or right to purchase or subscribe to that security, is exempt
under this subdivision until the adoption by the commissioner of
any rule or order decertifying the exchange.

(p) A promissory note secured by a lien on real property, which
is neither one of a series of notes of equal priority secured by
interests in the same real property nor a note in which beneficial
interests are sold to more than one person or entity.

(q) Any unincorporated interindemnity or reciprocal or
interinsurance contract, that qualifies under the provisions of
Section 1280.7 of the Insurance Code, between members of a
cooperative corporation, organized and operating under Part 2
(commencing with Section 12200) of Division 3 of Title 1, and
whose members consist only of physicians and surgeons licensed
in California, which contracts indemnify solely in respect to
medical malpractice claims against the members, and which do
not collect in advance of loss any moneys other than contributions
by each member to a collective reserve trust fund or for necessary
expenses of administration.

(1) Whenever it appears to the commissioner that any person
has engaged or is about to engage in any act or practice constituting
a violation of any provision of Section 1280.7 of the Insurance
Code, the commissioner may, in the commissioner’s discretion,
bring an action in the name of the people of the State of California
in the superior court to enjoin the acts or practices or to enforce
compliance with Section 1280.7 of the Insurance Code. Upon a
proper showing a permanent or preliminary injunction, a restraining
order, or a writ of mandate shall be granted and a receiver or
conservator may be appointed for the defendant or the defendant’s
assets.

(2) The commissioner may, in the commissioner’s discretion,
(A) make public or private investigations within or outside of this
state as the commissioner deems necessary to determine whether
any person has violated or is about to violate any provision of
Section 1280.7 of the Insurance Code or to aid in the enforcement
of Section 1280.7, and (B) publish information concerning the
violation of Section 1280.7.

(3) For the purpose of any investigation or proceeding under
this section, the commissioner or any officer designated by the
commissioner may administer oaths and affirmations, subpoena
witnesses, compel their attendance, take evidence, and require the
production of any books, papers, correspondence, memoranda,
agreements, or other documents or records which the commissioner
deems relevant or material to the inquiry.

(4) In case of contumacy by, or refusal to obey a subpoena
issued to, any person, the superior court, upon application by the
commissioner, may issue to the person an order requiring the
person to appear before the commissioner, or the officer designated
by the commissioner, to produce documentary evidence, if so
ordered, or to give evidence touching the matter under investigation
or in question. Failure to obey the order of the court may be
punished by the court as a contempt.

(5) No person is excused from attending or testifying or from
producing any document or record before the commissioner or in
obedience to the subpoena of the commissioner or any officer
designated by the commissioner, or in any proceeding instituted
by the commissioner, on the ground that the testimony or evidence
(documentary or otherwise), required of the person may tend to
incriminate the person or subject the person to a penalty or
forfeiture, but no individual may be prosecuted or subjected to any
penalty or forfeiture for or on account of any transaction, matter,
or thing concerning which the person is compelled, after validly
claiming the privilege against self-incrimination, to testify or
produce evidence (documentary or otherwise), except that the
individual testifying is not exempt from prosecution and
punishment for perjury or contempt committed in testifying.

(6) The cost of any review, examination, audit, or investigation
made by the commissioner under Section 1280.7 of the Insurance
Code shall be paid to the commissioner by the person subject to
the review, examination, audit, or investigation, and the
commissioner may maintain an action for the recovery of these
costs in any court of competent jurisdiction. In determining the
cost, the commissioner may use the actual amount of the salary or
other compensation paid to the persons making the review,
examination, audit, or investigation plus the actual amount of
expenses including overhead reasonably incurred in the
performance of the work.

The recoverable cost of each review, examination, audit, or
investigation made by the commissioner under Section 1280.7 of
the Insurance Code shall not exceed twenty-five thousand dollars
($25,000), except that costs exceeding twenty-five thousand dollars
($25,000) shall be recoverable if the costs are necessary to prevent
a violation of any provision of Section 1280.7 of the Insurance
Code.

(r) Any shares or memberships issued by any corporation
organized and existing pursuant to the provisions of Part 2
(commencing with Section 12200) of Division 3 of Title 1,
provided the aggregate investment of any shareholder or member
in shares or memberships sold pursuant to this subdivision does
not exceed three hundred dollars ($300). This exemption does not
apply to the shares or memberships of that corporation if any
promoter thereof expects or intends to make a profit directly or
indirectly from any business or activity associated with the
corporation or the operation of the corporation or from
remuneration, other than reasonable salary, received from the
corporation. This exemption does not apply to nonvoting shares
or memberships of that corporation issued to any person who does
not possess, and who will not acquire in connection with the
issuance of nonvoting shares or memberships, voting power
(Section 12253) in the corporation. This exemption also does not
apply to shares or memberships issued by a nonprofit cooperative
corporation organized to facilitate the creation of an unincorporated
interindemnity arrangement that provides indemnification for
medical malpractice to its physician and surgeon members as set
forth in subdivision (q).

(s) Any security consisting of or representing an interest in a
pool of mortgage loans that meets each of the following
requirements:

(1) The pool consists of whole mortgage loans or participation
interests in those loans, which loans were originated or acquired
in the ordinary course of business by a national bank or federal
savings association or federal savings bank having its principal
office in this state, by a bank incorporated under the laws of this
state or by a savings association as defined in subdivision (a) of
Section 5102 of the Financial Code and which is subject to the
supervision and regulation of the Commissioner of Financial
Institutions, and each of which at the time of transfer to the pool
is an authorized investment for the originating or acquiring
institution.

(2) The pool of mortgage loans is held in trust by a trustee which
is a financial institution specified in paragraph (1) as trustee or
otherwise.

(3) The loans are serviced by a financial institution specified in
paragraph (1).

(4) The security is not offered in amounts of less than
twenty-five thousand dollars ($25,000) in the aggregate to any one
purchaser.

(5) The security is offered pursuant to a registration under the
Securities Act of 1933, or pursuant to an exemption under
Regulation A under that act, or in the opinion of counsel for the
issuer, is offered pursuant to an exemption under Section 4(2) of
that act.

(t) (1) Any security issued or guaranteed by and representing
an interest in or a direct obligation of an industrial loan company
incorporated under the laws of the state and authorized by the
Commissioner of Financial Institutions to engage in industrial loan
business.

(2) Any investment certificate in or issued by any industrial
loan company that is organized under the laws of a state of the
United States other than this state, that is insured by the Federal
Deposit Insurance Corporation, and that maintains a branch office
in this state.

begin delete SEC. 12. end delete
begin insert SEC. 15. end insert   

Section 25207 of the Corporations Code is amended
to read:

25207.  

A financial institution that undertakes activities with
respect to an investment company pursuant to the provisions of
Section 1514, 6524, 14652.5, or 18022.5 of the Financial Code
shall not be subject to Section 25210 or 25230 in connection with
such activities but shall be subject to Sections 25218, 25234,
25235, and 25237 and to subdivisions (a), (b), and (d) of Section
25216, and such rules thereunder as the commissioner may specify
by rule. Nothing in this section shall affect the status of such a
financial institution as a broker-dealer or investment adviser, or
the employees of such persons, when engaged in the activities
authorized by the provisions of the Financial Code specified above.

begin delete SEC. 13. end delete
begin insert SEC. 16. end insert   

Section 25243.5 of the Corporations Code is amended
to read:

25243.5.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(2) This subdivision shall be operative only if Assembly Bill
2150 of the 2007-08 Regular Session is chaptered and becomes
effective and that bill adds Section 787.1 to the Insurance Code.

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

begin delete SEC. 14. end delete
begin insert SEC. 17. end insert   

Section 25247 of the Corporations Code is amended
to read:

25247.  

(a) Upon written or oral request, the commissioner
shall make available to any person the information specified in
Section 6254.12 of the Government Code and made available
through the Public Disclosure Program of the Financial Industry
Regulatory Authority with respect to any broker-dealer or agent
licensed or regulated under this part. The commissioner shall also
make available the current license status and the year of issuance
of the license of a broker-dealer. Any information disclosed
pursuant to this subdivision shall constitute a public record.
Notwithstanding any other provisions of law, the commissioner
may disclose either orally or in writing that information pursuant
to this subdivision. There shall be no liability on the part of and
no cause of action of any nature shall arise against the State of
California, the Department of Business Oversight, the
Commissioner of Business Oversight, or any officer, agent, or
employee of the state or of the Department of Business Oversight
for the release of any false or unauthorized information, unless the
release of that information was done with knowledge and malice.

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

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

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

(e) Upon written or oral request, the commissioner shall make
available to any person the disciplinary records maintained on the
Investment Adviser Registration Depository and made available
through the Investment Advisor Public Disclosure Web site with
respect to any investment adviser, investment adviser
representative, or associated person of an investment adviser
licensed or regulated under this part. The commissioner shall also
make available the current license status and the year of issuance
of the license of an investment adviser. Any information disclosed
pursuant to this subdivision shall constitute a public record.
Notwithstanding any other provision of law, the commissioner
may disclose that information either orally or in writing pursuant
to this subdivision. There shall be no liability on the part of and
no cause of action of any nature shall arise against the State of
California, the Department of Business Oversight, the
Commissioner of Business Oversight, or any officer, agent, or
employee of the state or of the Department of Business Oversight
for the release of any false or unauthorized information, unless the
release of that information was done with knowledge and malice.

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

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

begin delete SEC. 15. end delete
begin insert SEC. 18. end insert   

Section 25254 of the Corporations Code is amended
to read:

25254.  

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

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

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

begin delete SEC. 16. end delete
begin insert SEC. 19. end insert   

Section 25401 of the Corporations Code is amended
to read:

25401.  

It is 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.

begin delete SEC. 17. end delete
begin insert SEC. 20. end insert   

Section 25604 of the Corporations Code is amended
to read:

25604.  

The administration and enforcement of, and the
education of the public relative to, the laws and programs of the
Department of Business Oversight shall be supported from the
State Corporations Fund. Funds appropriated from the State
Corporations Fund and made available for expenditure for any law
or program of the department may come from fees collected from
the following:

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

(b) Section 25608.1.

begin delete SEC. 18. end delete
begin insert SEC. 21. end insert   

Section 25607 of the Corporations Code is amended
to read:

25607.  

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

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

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

(1) The securities held or purchased by the commissioner are
exempt from the qualification requirements of Sections 25110,
25120, and 25130 by virtue of Section 25100, provided that the
holding or purchasing of those securities is in accordance with
rules adopted for the purpose of protecting the public interest and
avoiding conflicts of interest.

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

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

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

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

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

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

begin delete SEC. 19. end delete
begin insert SEC. 22. end insert   

Section 25612.5 of the Corporations Code is amended
to read:

25612.5.  

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

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

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

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

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

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

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

(c) Notwithstanding any other provision of law, any application
for qualification, amendment to the application or related securities
qualification or registration document or notice under Sections
25100.1, 25101.1, 25102, 25102.1, 25110, 25120, 25130, and
25230.1 or record otherwise required to be signed that is filed in
this state as an electronic record pursuant to a nationwide central
depository for qualification or registration of securities, or any
electronic record filed through the Central Registration Depository
or the Investment Adviser Registration Depository, shall be deemed
to be a valid original document upon reproduction to paper form
by the Department of Business Oversight.

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

begin delete SEC. 20. end delete
begin insert SEC. 23. end insert   

Section 25614 of the Corporations Code is amended
to read:

25614.  

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

begin delete SEC. 21. end delete
begin insert SEC. 24. end insert   

Section 25702 of the Corporations Code is amended
to read:

25702.  

Whenever a person is entitled under this law to a hearing
in accordance with the provisions of the Administrative Procedure
Act, Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code, a formal hearing
before the Department of Business Oversight may be substituted
with the consent of such person and of the commissioner for such
hearing before an independent hearing officer; and in that case
after such hearing before the Department of Business Oversight
such person shall not be entitled to any further administrative
remedy.

begin delete SEC. 22. end delete
begin insert SEC. 25. end insert   

Section 29542 of the Corporations Code is amended
to read:

29542.  

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

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

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

begin delete SEC. 23. end delete
begin insert SEC. 26. end insert   

Section 31408 of the Corporations Code is amended
to read:

31408.  

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

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

begin delete SEC. 24. end delete
begin insert SEC. 27. end insert   

Section 31503 of the Corporations Code is amended
to read:

31503.  

All rules of the commissioner, other than those relating
solely to the internal administration of the Department of Business
Oversight, shall be made, amended or rescinded in accordance
with the provisions of Chapter 4.5 (commencing with Section
11371) of Part 1 of Division 3 of Title 2 of the Government Code.

begin delete SEC. 25. end delete
begin insert SEC. 28. end insert   

Section 31513 of the Corporations Code is amended
to read:

31513.  

Whenever a person is entitled under this law to a hearing
in accordance with the provisions of Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code, a formal hearing before the Department of Business
Oversight may be substituted with the consent of such person and
of the commissioner for such hearing before an independent hearing
officer; and in that case after such hearing before the Department
of Business Oversight such person shall not be entitled to any
further administrative remedy.

begin delete SEC. 26. end delete
begin insert SEC. 29. end insert   

Section 620 of the Financial Code is amended to read:

620.  

If the licensee whose property and business has been taken
pursuant to Section 592 is insured by a Federal Insurance Agency,
the commissioner may tender to the appropriate Federal Insurance
Agency an appointment as conservator, liquidator, or receiver of
the licensee. The commissioner shall determine whether the
licensee whose property and business has been taken shall be
liquidated or conserved. If the Federal Insurance Agency accepts
the appointment, the Federal Insurance Agency shall have, in
addition to any powers conferred by applicable federal law, the
powers conferred on the commissioner pursuant to this chapter.

begin delete SEC. 27. end delete
begin insert SEC. 30. end insert   

Section 622 of the Financial Code is amended to read:

622.  

If the Federal Insurance Agency accepts the appointment
in accordance with Section 620, the rights of customers and other
creditors of the insured licensee shall be determined in accordance
with the applicable provisions of the laws of this state.

begin delete SEC. 28. end delete
begin insert SEC. 31. end insert   

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

 

Article 4.  Liquidation of an Uninsured Licensee

 

begin delete SEC. 29. end delete
begin insert SEC. 32. end insert   

Section 1008 of the Financial Code is repealed.

begin delete SEC. 30. end delete
begin insert SEC. 33. end insert   

Section 1070 of the Financial Code is amended to
read:

1070.  

For purposes of this chapter, the following definitions
apply:

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

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

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

(d) “Facility,” means an office at which a bank engages in
noncore banking business but at which it does not engage in core
banking business.

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

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

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

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

begin delete SEC. 31. end delete
begin insert SEC. 34. end insert   

Section 2105 of the Financial Code is amended to
read:

2105.  

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

 

“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, 1-866-275-2677, by email at [e-mail], or by mail at the Department of Business Oversight, Consumer Services, 1515 K Street, Suite 200, Sacramento, CA 95814.”

 

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

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

begin delete SEC. 32. end delete
begin insert SEC. 35. end insert   

Section 4057 of the Financial Code is amended to
read:

4057.  

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

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

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

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

(2) The nature and seriousness of the violation.

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

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

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

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

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

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

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

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

(1) The Attorney General.

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

(A) In the case of banks, savings associations, credit unions,
commercial lending companies, and bank holding companies, by
the Department of Business Oversight, Division of Financial
Institutions or the appropriate federal authority; (B) in the case of
any person engaged in the business of insurance, by the Department
of Insurance; (C) in the case of any investment broker or dealer,
investment company, investment advisor, residential mortgage
lender or finance lender, by the Department of Business Oversight,
Division of Corporations; and (D) in the case of a financial
institution not subject to the jurisdiction of any functional regulator
listed under subparagraphs (A) to (C), inclusive, above, by the
Attorney General.

begin delete SEC. 33. end delete
begin insert SEC. 36. end insert   

Section 12104 of the Financial Code is amended to
read:

12104.  

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

(a) The nonprofit community service organization incorporates
in this state or any other state as a nonprofit corporation and
operates pursuant to either the Nonprofit Public Benefit
Corporation Law, Part 2 (commencing with Section 5110) of
Division 2 of Title 1 of the Corporations Code or the Nonprofit
Mutual Benefit Corporation Law, Part 3 (commencing with Section
7110) of Division 2 of Title 1 of the Corporations Code.

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

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

(1) Consumer credit education.

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

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

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

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

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

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

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

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

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

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

(1) Total amount received from the debtor.

(2) Total amount paid to each creditor.

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

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

(5) Any amount held in reserve.

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

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

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

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

(m) The nonprofit community service organization inserts the
following statement, in not less than 10-point type, in its debt
management plan and debt settlement plan agreements:
“Complaints related to this agreement may be directed to the
California Department of Business Oversight. This nonprofit
community service organization has adopted best practices for
debt management plans and debt settlement plans, and a copy will
be provided upon request.”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(16) Provide professional liability insurance coverage.

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

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

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

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

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

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

begin delete SEC. 34. end delete
begin insert SEC. 37. end insert   

Section 17210.2 of the Financial Code is amended
to read:

17210.2.  

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

(b) A licensed escrow agent, in referring to the corporation’s
licensure under this law in any written or printed communication
or any communication by means of recorded telephone messages
or spoken on radio, television, or similar communications media,
shall include the following statement: “This escrow company holds
California Department Business Oversight Escrow License No.
____.”

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

begin delete SEC. 35. end delete
begin insert SEC. 38. end insert   

Section 17214 of the Financial Code is amended to
read:

17214.  

(a) There is established in the Department of Business
Oversight an Escrow Law Advisory Committee consisting of 11
members. The members shall consist of the commissioner or his
or her designee; the chairman of the board and the immediate past
chairman of the board for the Escrow Agents’ Fidelity Corporation;
the current chairman of the board and the immediate past chairman
of the board for the Escrow Institute of California; a person selected
by the commissioner to represent a different type of business
ownership under this division; a person selected by the
commissioner to represent a different type of business
specialization; a person selected by the commissioner to represent
small businesses operating pursuant to this division; a person
selected by the commissioner to represent medium-sized businesses
operating pursuant to this division; an attorney at law experienced
in escrow matters selected by the commissioner; and a certified
public accountant experienced in the escrow business selected by
the commissioner.

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

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

Where the chairman of the board or the immediate past chairman
of the board of the Escrow Agents’ Fidelity Corporation is the
same person, or is unable to serve on the advisory committee, then
the begin delete commissioner end delete begin insert commissioner, end insert after consultation with the board
of directors of the Escrow Agents’ Fidelity Corporation, shall
choose a member of the board of directors to serve on the
committee. Where the president or past president of the Escrow
Institute of California is the same person, or is unable to serve on
the advisory committee, then the begin delete commissioner end delete begin insert commissioner, end insert
after consultation with the board of directors of the Escrow Institute
of California, shall choose a member of the board of directors to
serve on the committee.

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

begin delete SEC. 36. end delete
begin insert SEC. 39. end insert   

Section 17311 of the Financial Code is amended to
read:

17311.  

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

(b) The State of California, the Department of Business
Oversight, or any officer, agent, or employee of either shall not
be liable in any way for the conduct of Fidelity Corporation, its
directors, officers, agents, employees, or members.

begin delete SEC. 37. end delete
begin insert SEC. 40. end insert   

Section 17320 of the Financial Code is amended to
read:

17320.  

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

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

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

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

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

(4) Any member who does not engage in any escrow transactions
pursuant to subdivision (c) of Section 17312 may terminate its
membership in Fidelity Corporation by written notice to Fidelity
Corporation and the Department of Business Oversight, as provided
in the Fidelity Corporation’s bylaws and rules and regulations.
The membership fee, less any unpaid assessments and related
costs, shall be refunded to the member in accordance with Fidelity
Corporation’s bylaws not less than 30 months and no more than
36 months after the effective date of the member’s written request
to terminate its membership in Fidelity Corporation. Before a
licensee resumes those escrow transactions, it shall first be required
to become a member of Fidelity Corporation, as provided in this
subdivision.

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

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

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

begin delete SEC. 38. end delete
begin insert SEC. 41. end insert   

Section 17331 of the Financial Code is amended to
read:

17331.  

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

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

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

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

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

A DISPUTE AS TO WHETHER THE DENIAL OF THIS
CERTIFICATE APPLICATION OR ANY SUBSEQUENT
SUSPENSION OR REVOCATION OF THE CERTIFICATE IS
UNNECESSARY OR UNAUTHORIZED OR WAS
IMPROPERLY, NEGLIGENTLY, OR UNLAWFULLY
RENDERED, MAY BE DETERMINED BY SUBMISSION TO
ARBITRATION AS PROVIDED BY CALIFORNIA LAW, AND
NOT BY A LAWSUIT OR RESORT TO COURT PROCESS
EXCEPT AS CALIFORNIA LAW PROVIDES FOR JUDICIAL
REVIEW OF ARBITRATION PROCEEDINGS OR EXCEPT
AS PROVIDED BY SECTION 17331.3 OF THE FINANCIAL
CODE.   THE APPLICANT MAY, SUBJECT TO AGREEMENT,
SUBMIT ANY ISSUE ARISING FROM A DECISION BY
FIDELITY CORPORATION TO DENY THIS CERTIFICATE
APPLICATION OR TO SUSPEND OR REVOKE THE
CERTIFICATE TO BE DECIDED BY BINDING NEUTRAL
ARBITRATION.   UPON AN AGREEMENT TO SUBMIT TO
BINDING NEUTRAL ARBITRATION, THE APPLICANT HAS
NO RIGHT TO HAVE ANY DISPUTE CONCERNING THIS
CERTIFICATE APPLICATION LITIGATED IN A COURT OR
JURY TRIAL NOR ANY JUDICIAL RIGHTS TO DISCOVERY
AND APPEAL, EXCEPT AS SPECIFICALLY PROVIDED IN
THE ESCROW LAW.   ARBITRATION MAY BE COMPELLED
AS PROVIDED BY LAW.

(f) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Business Oversight, or any officer, agent, or
employee of the state or the Department of Business Oversight for
statements made by Fidelity Corporation in reports or
recommendations made pursuant to this division, or for reports or
recommendations made pursuant to this division to Fidelity
Corporation by its members, directors, officers, begin delete employees end delete
begin insert employee, end insert or agents, the State of California, the Department of
Business begin delete Oversight end delete begin insert Oversight, end insert or any officer, agent, or employee
of the state or the Department of Business Oversight, unless the
information provided is false and the party making the statement
or providing the false information does so with knowledge and
malice. Reports or recommendations made pursuant to this section,
or Section 17331.1, 17331.2, or 17331.3, are not public documents.

(g) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Business Oversight, or an officer, agent, or
employee of the state or the Department of Business Oversight for
the release of any information furnished to Fidelity Corporation
pursuant to this section unless the information released is false and
the party, including Fidelity Corporation, its members, directors,
officers, employees, or agents, the state, the Department of
Business Oversight, or any officer, agent, or employee of the state
or the Department of Business Oversight, who releases the false
information does so with knowledge and malice.

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

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

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

(k) Notwithstanding Section 11105 of the Penal Code, Fidelity
Corporation is entitled to receive state summary criminal history
information and subsequent arrest notification from the Department
of Justice as a result of fingerprint images and related information
submitted to the Department of Justice by the Department of
Business Oversight, pursuant to subdivision (g) of Section 17209,
Section 17212.1, and subdivision (d) of Section 17414.1, by or on
behalf of escrow agents, shareholders, officers, directors, trustees,
managers, or employees of an escrow agent, directly or indirectly
compensated by an escrow agent. The Department of Justice and
Fidelity Corporation shall enter into an agreement to implement
this subdivision. The Department of Business Oversight shall
forward to Fidelity Corporation, weekly, a list of names of
individual fingerprints submitted to the Department of Justice.

(l) (1) The fingerprint images and related information required
pursuant to subdivision (d) shall be submitted by the Department
of Business Oversight to the Department of Justice, in a manner
established by the Department of Justice, for the purposes of
obtaining information as to the existence and content of a record
of state or federal convictions, state or federal arrests, and
information as to the existence of and content of a record of state
or federal arrests for which the Department of Justice establishes
that the person is free on bail or on his or her own recognizance
pending trial or appeal.

(2) Upon receipt, the Department of Justice shall forward to the
Federal Bureau of Investigation requests for federal summary
criminal history information received pursuant to this section. The
Department of Justice shall review the information returned from
the Federal Bureau of Investigation and compile and disseminate
a response to the Department of Business Oversight and a fitness
determination to Fidelity Corporation pursuant to subdivision (p)
of Section 11105 of the Penal Code.

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

begin delete SEC. 39. end delete
begin insert SEC. 42. end insert   

Section 18405 of the Financial Code is amended to
read:

18405.  

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

(b) The reports and financial statements referred to in
subdivision (a) shall be prepared in accordance with generally
accepted accounting principles and shall be accompanied by a
report, certificate, or opinion of an independent certified public
accountant or independent public accountant, and shall contain
such relevant information as the commissioner may require. The
audits shall be conducted in accordance with generally accepted
auditing standards and the rules and regulations of the
commissioner.

(c) For good cause and upon written request, the commissioner
may extend the time for compliance with subdivision (a).

(d) If the report, begin delete certificate end delete begin insert certificate, end insert or opinion of the
independent accountant referred to in subdivision (b) hereof is in
any way qualified, the commissioner may require the company to
take such action as he deems appropriate to permit an independent
accountant to remove such qualification from the report, begin delete certificate end delete
begin insert certificate, end insert or opinion.

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

begin delete SEC. 40. end delete
begin insert SEC. 43. end insert   

Section 22105.1 of the Financial Code is amended
to read:

22105.1.  

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

(b) Section 461 of the Business and Professions Code shall not
be applicable to the Department of Business Oversight when using
a national uniform application adopted or approved for use by the
Nationwide Mortgage Licensing System and Registry in connection
with the SAFE Act.

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

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

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

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

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

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

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

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

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

begin delete SEC. 41. end delete
begin insert SEC. 44. end insert   

Section 22159.5 of the Financial Code is amended
to read:

22159.5.  

(a) The commissioner may, as he or she deems
necessary, require licensees to provide reports concerning their
residential mortgage loan servicing activities, including, but not
limited to, information similar to that collected in connection with
the Mortgage Servicers Survey, first published by the Department
of Business Oversight in December 2007. The commissioner is
additionally authorized to seek and accept information provided
on a voluntary basis by residential mortgage loan servicers not
subject to the commissioner’s jurisdiction. The commissioner shall
post only aggregated survey results on the department’s Internet
Web site, and shall note the number of loan servicers submitting
data included in the aggregated totals and the estimated percentage
of outstanding mortgage loans to Californians that are serviced by
these loan servicers, to the extent information on the number of
outstanding loans is available from a reliable source. Nothing in
this section is intended to reduce or change the commissioner’s
authority to request and demand reports under Sections 22150 and
22159.

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

begin delete SEC. 42. end delete
begin insert SEC. 45. end insert   

Section 22160 of the Financial Code is amended to
read:

22160.  

The commissioner shall make and file annually with
the Department of Business Oversight as a public record a
composite of the annual reports and any comments on the reports
that he or she deems to be in the public interest.

begin delete SEC. 43. end delete
begin insert SEC. 46. end insert   

Section 22756 of the Financial Code is amended to
read:

22756.  

Notwithstanding any other law, any application for
licensure, amendment to the application or registration document
or notice filed under any of the laws administered by the
Department of Business Oversight, or record otherwise required
to be filed in this state as an electronic record pursuant to a
nationwide central depository for information regarding licensees,
including mortgage loan originators, or any electronic record filed
through the Nationwide Mortgage Licensing System and Registry,
shall be deemed to be a valid original document upon reproduction
to paper form by the Department of Business Oversight.

begin delete SEC. 44. end delete
begin insert SEC. 47. end insert   

Section 23070 of the Financial Code is amended to
read:

23070.  

(a) The Legislature finds and declares that it is in the
public interest for the administration and enforcement of this
division to be undertaken by the Department of Business Oversight.

(b) It is therefore the intent of the Legislature to transfer the
existing responsibilities relating to administration and enforcement
of check cashers that engage in activities subject to this division
from the Department of Justice to the Department of Business
Oversight.

begin delete SEC. 45. end delete
begin insert SEC. 48. end insert   

Section 23071 of the Financial Code is amended to
read:

23071.  

The Commissioner of Business Oversight and the
Department of Business Oversight shall succeed to, and are vested
with, all duties, powers, purposes, responsibilities, and jurisdiction
of the Department of Justice as they relate to check cashers who
engage in the activities subject to this division.

begin delete SEC. 46. end delete
begin insert SEC. 49. end insert   

Section 23072 of the Financial Code is amended to
read:

23072.  

The Department of Business Oversight may use the
unexpended balance of funds available for use in connection with
the performance of duties of the Department of Justice to which
the Department of Business Oversight succeeds pursuant to Section
23071.

begin delete SEC. 47. end delete
begin insert SEC. 50. end insert   

Section 23073 of the Financial Code is amended to
read:

23073.  

All officers and employees of the Department of Justice
who, on the operative date of this division, are performing any
duty, power, purpose, responsibility, or jurisdiction to which the
Department of Business Oversight succeeds, and who are serving
in the civil service, other than as temporary employees or persons
in positions exempted from civil service, shall be transferred to
the Department of Business Oversight. The status, position, and
rights of those persons shall not be affected by the transfer and
shall be retained by those persons as officers and employees of
the Department of Business Oversight, pursuant to Part 2
(commencing with Section 18500) of Division 5 of Title 2 of the
Government Code.

begin delete SEC. 48. end delete
begin insert SEC. 51. end insert   

Section 23074 of the Financial Code is amended to
read:

23074.  

The Department of Business Oversight shall have
possession and control of all records, criminal history information,
papers, equipment, supplies, moneys, funds, appropriations,
licenses, permits, contracts, claims, judgments, land, and other
property, real or personal, connected with the administration of,
or held for the benefit or use of, the Department of Justice for the
performance of the functions transferred to the Department of
Business Oversight pursuant to Section 23071.

begin delete SEC. 49. end delete
begin insert SEC. 52. end insert   

Section 23102 of the Financial Code is amended to
read:

23102.  

The deferred deposits made pursuant to a permit issued
under Section 1789.37 of the Civil Code prior to December 31,
2004, shall be subject to and enforced to the extent valid under
Sections 1789.30 to 1789.37, inclusive, of the Civil Code, as if
those sections were not repealed. Any regulation, order, or other
action adopted, prescribed, taken, or performed by the Department
of Justice or by an officer of that department in connection with
deferred deposit transactions made prior to December 31, 2004,
shall continue to apply to those transactions. No suit, action, or
other proceeding lawfully commenced by or against the Department
of Justice or any other officer of the state in relation to deferred
deposit transactions made prior to December 31, 2004, shall abate
by reason of the transfer of authority concerning deferred deposit
transactions to the Department of Business Oversight pursuant to
Section 23071.

begin delete SEC. 50. end delete
begin insert SEC. 53. end insert   

Section 30217 of the Financial Code is amended to
read:

30217.  

The commissioner may from time to time make, amend,
and rescind such rules, forms, and orders as are necessary to carry
out the provisions of this law, including rules defining any terms,
whether or not used in this law, insofar as the definitions are not
inconsistent with the provisions of this law. For the purposes of
rules and forms, the commissioner may classify persons and matters
within his jurisdiction and may prescribe different requirements
for different classes. The commissioner may in his discretion waive
any requirement of any rule or form in situations where in his
opinion such requirement is not necessary in the public interest or
for the protection of investors. All rules of the commissioner other
than those relating solely to the internal administration of the
Department of Business Oversight shall be made, amended, or
rescinded in accordance with the provisions of Chapter 4.5
(commencing with Section 11371) of Part 1 of Division 3 of Title
2 of the Government Code.

begin delete SEC. 51. end delete
begin insert SEC. 54. end insert   

Section 50140 of the Financial Code is amended to
read:

50140.  

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

(b) Section 461 of the Business and Professions Code shall not
be applicable to the Department of Business Oversight when using
a national uniform application adopted or approved for use by the
Nationwide Mortgage Licensing System and Registry in connection
with the SAFE Act.

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

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

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

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

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

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

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

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

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

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

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

begin delete SEC. 52. end delete
begin insert SEC. 55. end insert   

Section 50303 of the Financial Code is amended to
read:

50303.  

Neither the commissioner nor any employee of the
Department of Business Oversight shall be precluded from
obtaining a residential mortgage loan from a lender licensed under
this division, subject to the rules that may be adopted hereunder
or pursuant to other proper authority.

begin delete SEC. 53. end delete
begin insert SEC. 56. end insert   

Section 50307.1 of the Financial Code is amended
to read:

50307.1.  

The commissioner may, as he or she deems necessary,
require licensees to provide reports concerning their residential
mortgage loan servicing activities, including, but not limited to,
information similar to that collected in connection with the
Mortgage Servicers Survey, first published by the Department of
Business Oversight in December 2007. The commissioner is
additionally authorized to seek and accept information provided
on a voluntary basis by residential mortgage loan servicers not
subject to the commissioner’s jurisdiction. The commissioner shall
post only aggregated survey results on the department’s Internet
Web site, and shall note the number of loan servicers submitting
data included in the aggregated totals and the estimated percentage
of outstanding mortgage loans to Californians that are serviced by
these loan servicers, to the extent information on the number of
outstanding loans is available from a reliable source. Nothing in
this section is intended to reduce or change the commissioner’s
authority to request and demand reports under Section 50307.

begin delete SEC. 54. end delete
begin insert SEC. 57. end insert   

Section 50316.5 of the Financial Code is amended
to read:

50316.5.  

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

begin delete SEC. 55. end delete
begin insert SEC. 58. end insert   

Section 5970 of the Government Code is amended
to read:

5970.  

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

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

(b) “Regulatory agency” means the Department of Business
Oversight, the securities administrators or other similar regulatory
authority in any other state, the Securities and Exchange
Commission, the National Association of Securities Dealers, the
Municipal Securities Rulemaking Board, the Commodity Futures
Trading Commission, or any other self-regulatory organization.

(c) “State or local government” means the state, any department,
agency, board, commission, or authority of the state, or any city,
city and county, county, public district, public corporation,
authority, agency, board, commission, or other public entity.

begin delete SEC. 56. end delete
begin insert SEC. 59. end insert   

Section 6254.5 of the Government Code is amended
to read:

6254.5.  

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

This section, however, shall not apply to disclosures:

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

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

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

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

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

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

(g) Of records relating to any person that is subject to the
jurisdiction of the Department of Business Oversight, if the
disclosures are made to the person that is the subject of the records
for the purpose of corrective action by that person, or if a
corporation, to an officer, director, or other key personnel of the
corporation for the purpose of corrective action, or to any other
person to the extent necessary to obtain information from that
person for the purpose of an investigation by the Department of
Business Oversight.

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

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

begin delete SEC. 57. end delete
begin insert SEC. 60. end insert   

Section 6254.12 of the Government Code is amended
to read:

6254.12.  

Any information reported to the North American
Securities Administrators Association/National Association of
Securities Dealers’ Central Registration Depository and compiled
as disciplinary records which are made available to the Department
of Business Oversight through a computer system, shall constitute
a public record. Notwithstanding any other provision of law, the
Department of Business Oversight may disclose that information
and the current license status and the year of issuance of the license
of a broker-dealer upon written or oral request pursuant to Section
25247 of the Corporations Code.

begin delete SEC. 58. end delete
begin insert SEC. 61. end insert   

Section 6254.22 of the Government Code is amended
to read:

6254.22.  

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

begin delete SEC. 59. end delete
begin insert SEC. 62. end insert   

Section 11840 of the Government Code is amended
to read:

11840.  

The Legislature finds and declares all of the following:

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

(1) The Medical Board of California.

(2) The Department of Business Oversight.

(3) The State Department of Health Services.

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

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

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

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

begin delete SEC. 60. end delete
begin insert SEC. 63. end insert   

Section 53344.1 of the Government Code is amended
to read:

53344.1.  

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

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

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

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

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

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

(i) The name of the tendering party.

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

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

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

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

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

(vii) Whether the present intentions of the tendering party are
to use the bonds for payment of special taxes or the purchase of
property at a foreclosure sale pursuant to this section or Section
53356.8. This statement of present intentions shall not be construed
to be binding on the tendering party.

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

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

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

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

(D) The tendering party shall provide a copy of the solicitation
to the Department of Business Oversight prior to five working
days after notifying the legislative body pursuant to subparagraph
(C).

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

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

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

begin delete SEC. 61. end delete
begin insert SEC. 64. end insert   

Section 53638 of the Government Code is amended
to read:

53638.  

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

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

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

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

begin delete SEC. 62. end delete
begin insert SEC. 65. end insert   

Section 54956.87 of the Government Code is amended
to read:

54956.87.  

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

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

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

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

(e) The provisions of this section shall not prevent access to any
records by the Joint Legislative Audit Committee in the exercise
of its powers pursuant to Article 1 (commencing with Section
10500) of Chapter 4 of Part 2 of Division 2 of Title 2. The
provisions of this section also shall not prevent access to any
records by the Department of Business Oversight in the exercise
of its powers pursuant to Article 1 (commencing with Section
1340) of Chapter 2.2 of Division 2 of the Health and Safety Code.

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

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

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

begin delete

SEC. 63.  

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

end delete

begin delete SEC. 64. end delete
begin insert SEC. 66. end insert   

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

1341.10.  

The department may use the unexpended balance of
funds available for use in connection with the performance of the
functions of the Department of Business Oversight to which the
department succeeds pursuant to Section 1341.9.

begin delete SEC. 65. end delete
begin insert SEC. 67. end insert   

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

1341.11.  

All officers and employees of the Department of
Business Oversight who, on the operative date of this section, are
performing any duty, power, purpose, responsibility, or jurisdiction
to which the department succeeds, who are serving in the state
civil service, other than as temporary employees, and engaged in
the performance of a function vested by the department by Section
1341.9, shall be transferred to the department. The status, positions,
and rights of those persons shall not be affected by the transfer
and shall be retained by those persons as officers and employees
of the department, pursuant to the State Civil Service Act (Part 2
(commencing with Section 18500) of Division 5 of Title 2 of the
Government Code), except as to positions exempted from civil
service.

begin delete SEC. 66. end delete
begin insert SEC. 68. end insert   

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

1341.12.  

The department shall have possession and control of
all records, papers, offices, equipment, supplies, moneys, funds,
appropriations, licenses, permits, agreements, contracts, claims,
judgments, land, and other property, real or personal, connected
with the administration of, or held for the benefit or use of, the
Department of Business Oversight for the performance of the
functions transferred to the department by Section 1341.9.

begin delete SEC. 67. end delete
begin insert SEC. 69. end insert   

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

1341.14.  

(a) Any regulation, order, or other action, adopted,
prescribed, taken, or performed by the Department of Business
Oversight or by an officer of the Department of Business Oversight
in the administration of a program or the performance of a duty,
responsibility, or authorization transferred to the department by
Section 1341.9 shall remain in effect and shall be deemed to be a
regulation, order, or action of the department.

(b) No suit, action, or other proceeding lawfully commenced
by or against the Department of Business Oversight or any other
officer of the state, in relation to the administration of any program
or the discharge of any duty, responsibility, or authorization
transferred to the department by Section 1341.9 shall abate by
reason of the transfer of the program, duty, responsibility, or
authorization.

begin delete SEC. 68. end delete
begin insert SEC. 70. end insert   

Section 1280.7 of the Insurance Code is amended to
read:

1280.7.  

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

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

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

(3) Nonowned automobile coverage.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(8) The board of trustees shall cause both of the following to
be furnished to each member participating in the interindemnity
arrangement, and to be filed with the Commissioner of Business
Oversight:

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

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

(C) In addition to the statements required to be filed pursuant
to this paragraph, the board of trustees shall annually file with the
Commissioner of Business Oversight an authorization for
disclosure to the commissioner of all financial records pertaining
to the interindemnity arrangement. For the purpose of this
subparagraph, the authorization for disclosure shall also include
the financial records of any association, partnership, or corporation
that has management or control of the funds or the operation of
the interindemnity arrangement.

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

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

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

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

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

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

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

Any person whose membership in an interindemnity arrangement
is involuntarily terminated for failure to pay assessments or who
voluntarily terminates that membership and elects to be responsible
for his or her own exposure for acts committed while a participating
member, shall not be eligible to become a member of any other
interindemnity arrangement for a period of five years after the
termination unless, on the effective date of the act which amended
this section during the 1985-86 Regular Session, the person had
on file with the Department of Business Oversight a copy of a
subscription agreement signifying the person’s agreement to
transfer membership or had paid a minimum of ten thousand dollars
($10,000) to another interindemnity arrangement that was granted
a permit to organize prior to January 1, 1985.

(G) The board of trustees shall have the right to terminate the
membership of a participating member if the board of trustees
determines that the termination is in the best interests of the
interindemnity arrangement even though that person has complied
with all of the provisions of the trust agreement. A termination
may be effected only if at least two-thirds of the members of the
board of trustees indicate in writing their decision to terminate. If
the board of trustees proposes to terminate a member, the member
shall have the right to call a special meeting of all participating
members in accordance with the rules established by the board of
trustees for the purpose of voting on whether or not the member
shall be terminated. The member shall not be terminated if at least
two-thirds of the participating members present, in person or by
proxy, indicate that the member should not be terminated. In the
event a member is terminated, the person shall elect either: (i) to
request the return of his or her initial contribution, in which case
the contribution shall be repaid and the indemnity coverage shall
thereupon terminate as to all claims then pending against the person
and in respect to all occurrences prior to the date of the termination
of membership. However, in the event the interindemnity
arrangement is then providing legal defense services to the person,
the interindemnity arrangement shall continue to provide those
services for a period of 30 days to enable the person to assume his
or her own defense; or (ii) to release all rights to the return of the
initial contribution, in which case the indemnity coverage shall
continue for the benefit of the member in respect of occurrences
during the time the person was a participating member and the
person shall have no responsibility for assessments levied following
that termination. The interindemnity arrangement may provide
that if a member is terminated and fails to make the election set
forth herein within 45 days of the date of notification of termination
of membership, the participating member shall be deemed to have
elected to release all rights to a return of his or her initial
contribution, in which case indemnity coverage shall apply for the
benefit of the member with respect to occurrences occurring prior
to the termination.

(10) Each member participating in the interindemnity
arrangement shall have the right of access to, and the inspection
of, the books and records of the interindemnity arrangement, which
rights shall be similar to the corporate shareholders pursuant to
Section 3003 of the Corporations Code, or, commencing January
1, 1977, Sections 1600 to 1605, inclusive, of the Corporations
Code.

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

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

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

(B) The date of termination of membership.

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

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

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

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

(c) Each person solicited to become a participating member in
an interindemnity arrangement shall receive in writing, at least 48
hours prior to the execution by the prospective participating
member of the trust agreement, and at least 48 hours prior to the
payment by the prospective participating member of any
consideration in connection with the interindemnity begin delete arrangements, end delete
begin insert arrangement, end insert the following information:

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

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

“THE INTERINDEMNITY ARRANGEMENT
CONTEMPLATED HEREIN PROVIDES THAT
PARTICIPATING MEMBERS HAVE UNLIMITED PERSONAL
LIABILITY FOR ASSESSMENTS THAT MAY BE LEVIED
TO PAY FOR THE PROFESSIONAL NEGLIGENCE OR
OTHER LIABILITY AUTHORIZED BY THIS SECTION. NO
ASSURANCES CAN BE GIVEN REGARDING THE AMOUNT
OR FREQUENCY OF ASSESSMENTS WHICH MAY BE
LEVIED, OR THAT ALL PARTICIPATING MEMBERS WILL
MAKE TIMELY PAYMENT OF THEIR ASSESSMENTS TO
COVER THE PROFESSIONAL NEGLIGENCE OR OTHER
LIABILITY AUTHORIZED BY THIS SECTION.”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(j) Upon request of the Commissioner of Business Oversight,
an interindemnity arrangement shall immediately forward to the
commissioner a current list of participating members, including
the names, addresses, and telephone numbers of those members.

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

begin delete SEC. 69. end delete
begin insert SEC. 71. end insert   

Section 12693.35 of the Insurance Code is amended
to read:

12693.35.  

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

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

(b) Adequate administrative management.

(c) A satisfactory grievance procedure.

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

(1) Review the quality of care covered.

(2) Review the appropriateness of care covered.

(3) Provide accessible health care services.

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

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

(f) Plans licensed by the Department of Business Oversight shall
be deemed to meet the requirements of subdivisions (a) to (d),
inclusive, of this section.

begin delete SEC. 70. end delete
begin insert SEC. 72. end insert   

Section 14053 of the Insurance Code is amended to
read:

14053.  

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

begin delete SEC. 71. end delete
begin insert SEC. 73. end insert   

Section 15036 of the Insurance Code is amended to
read:

15036.  

In lieu of the surety bond required by this chapter there
may be deposited with the State of California the sum of twenty
thousand dollars ($20,000) in cash, or evidence of deposit of the
sum of twenty thousand dollars ($20,000) in banks authorized to
do business in this state and insured by the Federal Deposit
Insurance Corporation, or investment certificates or share accounts
in the amount of twenty thousand dollars ($20,000) issued by a
savings association doing business in this state and insured by the
Federal Deposit Insurance Corporation, or evidence of a certificate
of funds or share account of the sum of twenty thousand dollars
($20,000) in a credit union as defined in Section 14000 of the
Financial Code whose share deposits are guaranteed by the
National Credit Union Administration or guaranteed by any other
agency approved by the Department of Business Oversight.

begin delete SEC. 72. end delete
begin insert SEC. 74. end insert   

Section 4600.5 of the Labor Code is amended to read:

4600.5.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(7) Complies with the following requirements:

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

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

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

(f) (1) A workers’ compensation health care provider
organization authorized by the Department of Business Oversight
on December 31, 1997, shall be eligible for certification as a health
care organization under subdivision (e).

(2) An entity that had, on December 31, 1997, submitted an
application with the Commissioner of Business Oversight under
Part 3.2 (commencing with Section 5150) shall be considered an
applicant for certification under subdivision (e) and shall be entitled
to priority in consideration of its application. The Commissioner
of Business Oversight shall provide complete files for all pending
applications to the administrative director on or before January
31, 1998.

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

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

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

(j) In consultation with interested parties, including the
Department of Business Oversight and the Department of
Insurance, the administrative director shall adopt rules necessary
to carry out this section.

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

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

(2) A health care service plan licensed by the Department of
Managed Health Care, a workers’ compensation health care
provider organization authorized by the Department of Business
Oversight, or a carrier licensed by the Department of Insurance is
not in good standing with its licensing agency.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

begin delete SEC. 73. end delete
begin insert SEC. 75. end insert   

Section 11604.5 of the Probate Code is amended to
read:

11604.5.  

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

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

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

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

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

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

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

(3) A transaction made in conformity with the California Finance
Lenders Law (Division 9 (commencing with Section 22000) of
the Financial Code) and subject to regulation by the Department
of Business Oversight.

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

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

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

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

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

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

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

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

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

(2) A description of the transferred interest.

(3) If the written agreement so provides, the amount by which
the transferee for value would have its distribution reduced if the
beneficial interest assigned is distributed prior to a specified date.

(4)  A statement of the total of all costs or fees charged to the
beneficiary resulting from the transfer for value, including, but not
limited to, transaction or processing fees, credit report costs, title
search costs, due diligence fees, filing fees, bank or electronic
transfer costs, or any other fees or costs. If all the costs and fees
are paid by the transferee for value and are included in the amount
of the transferred interest, then the statement of costs need not
itemize any costs or fees. This subdivision shall not apply to costs,
fees, or damages arising out of a material breach of the agreement
or fraud by or on the part of the beneficiary.

(f) A written agreement shall not contain any of the following
provisions and, if any such provision is included, that provision
shall be null and void:

(1) A provision holding harmless the transferee for value, other
than for liability arising out of fraud by the beneficiary.

(2) A provision granting to the transferee for value agency
powers to represent the beneficiary’s interest in the decedent’s
estate beyond the interest transferred.

(3) A provision requiring payment by the beneficiary to the
transferee for value for services not related to the written agreement
or services other than the transfer of interest under the written
agreement.

(4) A provision permitting the transferee for value to have
recourse against the beneficiary if the distribution from the estate
in satisfaction of the beneficial interest is less than the beneficial
interest assigned to the transferee for value, other than recourse
for any expense or damage arising out of the material breach of
the agreement or fraud by the beneficiary.

(g) The court on its own motion, or on the motion of the personal
representative or other interested person, may inquire into the
circumstances surrounding the execution of, and the consideration
for, the written agreement to determine that the requirements of
this section have been satisfied.

(h) The court may refuse to order distribution under the written
agreement, or may order distribution on any terms that the court
considers equitable, if the court finds that the transferee for value
did not substantially comply with the requirements of this section,
or if the court finds that any of the following conditions existed at
the time of transfer:

(1) The fees, charges, or consideration paid or agreed to be paid
by the beneficiary were grossly unreasonable.

(2) The transfer of the beneficial interest was obtained by duress,
fraud, or undue influence.

(i) In addition to any remedy specified in this section, for any
willful violation of the requirements of this section found to be
committed in bad faith, the court may require the transferee for
value to pay to the beneficiary up to twice the value paid for the
assignment.

(j) Notice of the hearing on any motion brought under this
section shall be served on the beneficiary and on the transferee for
value at least 15 days before the hearing in the manner provided
in Section 415.10 or 415.30 of the Code of Civil Procedure.

(k) If the decedent’s estate is not subject to a pending court
proceeding under the Probate Code in California, but is the subject
of a probate proceeding in another state, the transferee for value
shall not be required to submit to the court a copy of the written
agreement as required under paragraph (1) of subdivision (d). If
the written agreement is entered into in California or if the
beneficiary is domiciled in California, that written agreement shall
otherwise conform to the provisions of subdivisions (d), (e), and
(f) in order to be effective.

begin delete SEC. 74. end delete
begin insert SEC. 76. end insert   

Section 408 of the Revenue and Taxation Code is
amended to read:

408.  

(a) Except as otherwise provided in subdivisions (b), (c),
(d), (e), and (g), any information and records in the assessor’s
office that are not required by law to be kept or prepared by the
assessor, disabled veterans’ exemption claims, and homeowners’
exemption claims, are not public documents and shall not be open
to public inspection. Property receiving the homeowners’
exemption shall be clearly identified on the assessment roll. The
assessor shall maintain records which shall be open to public
inspection to identify those claimants who have been granted the
homeowners’ exemption.

(b) The assessor may provide any appraisal data in his or her
possession to the assessor of any county.

The assessor shall disclose information, furnish abstracts, or
permit access to all records in his or her office to law enforcement
agencies, the county grand jury, the board of supervisors or their
duly authorized agents, employees, or representatives when
conducting an investigation of the assessor’s office pursuant to
Section 25303 of the Government Code, the county recorder when
conducting an investigation to determine whether a documentary
transfer tax is imposed, the Controller, employees of the Controller
for property tax postponement purposes, probate referees,
employees of the Franchise Tax Board for tax administration
purposes only, staff appraisers of the Department of Financial
Institutions, the Department of Transportation, the Department of
General Services, the State Board of Equalization, the State Lands
Commission, the State Department of Social Services, the
Department of Child Support Services, the Department of Water
Resources, and other duly authorized legislative or administrative
bodies of the state pursuant to their authorization to examine the
records. Whenever the assessor discloses information, furnishes
abstracts, or permits access to records in his or her office to staff
appraisers of the Department of Business Oversight, the
Department of Transportation, the Department of General Services,
the State Lands Commission, or the Department of Water
Resources pursuant to this section, the department shall reimburse
the assessor for any costs incurred as a result thereof.

(c) Upon the request of the tax collector, the assessor shall
disclose and provide to the tax collector information used in the
preparation of that portion of the unsecured roll for which the taxes
thereon are delinquent. The tax collector shall certify to the assessor
that he or she needs the information requested for the enforcement
of the tax lien in collecting those delinquent taxes. Information
requested by the tax collector may include social security numbers,
and the assessor shall recover from the tax collector his or her
actual and reasonable costs for providing the information. The tax
collector shall add the costs described in the preceding sentence
to the assessee’s delinquent tax lien and collect those costs subject
to subdivision (e) of Section 2922.

(d) The assessor shall, upon the request of an assessee or his or
her designated representative, permit the assessee or representative
to inspect or copy any market data in the assessor’s possession.
For purposes of this subdivision, “market data” means any
information in the assessor’s possession, whether or not required
to be prepared or kept by him or her, relating to the sale of any
property comparable to the property of the assessee, if the assessor
bases his or her assessment of the assessee’s property, in whole
or in part, on that comparable sale or sales. The assessor shall
provide the names of the seller and buyer of each property on
which the comparison is based, the location of that property, the
date of the sale, and the consideration paid for the property, whether
paid in money or otherwise. However, for purposes of providing
market data, the assessor may not display any document relating
to the business affairs or property of another.

(e) (1) With respect to information, documents, and records,
other than market data as defined in subdivision (d), the assessor
shall, upon request of an assessee of property, or his or her
designated representative, permit the assessee or representative to
inspect or copy all information, documents, and records, including
auditors’ narrations and workpapers, whether or not required to
be kept or prepared by the assessor, relating to the appraisal and
the assessment of the assessee’s property, and any penalties and
interest thereon.

(2) After enrolling an assessment, the assessor shall respond to
a written request for information supporting the assessment,
including, but not limited to, any appraisal and other data requested
by the assessee.

(3) Except as provided in Section 408.1, an assessee, or his or
her designated representative, may not be permitted to inspect or
copy information and records that also relate to the property or
business affairs of another, unless that disclosure is ordered by a
competent court in a proceeding initiated by a taxpayer seeking to
challenge the legality of the assessment of his or her property.

(f) (1) Permission for the inspection or copying requested
pursuant to subdivision (d) or (e) shall be granted as soon as
reasonably possible to the assessee or his or her designated
representative.

(2) If the assessee, or his or her designated representative,
requests the assessor to make copies of any of the requested
records, the assessee shall reimburse the assessor for the reasonable
costs incurred in reproducing and providing the copies.

(3) If the assessor fails to permit the inspection or copying of
materials or information as requested pursuant to subdivision (d)
or (e) and the assessor introduces any requested materials or
information at any assessment appeals board hearing, the assessee
or his or her representative may request and shall be granted a
continuance for a reasonable period of time. The continuance shall
extend the two-year period specified in subdivision (c) of Section
1604 for a period of time equal to the period of continuance.

(g) Upon the written request of the tax collector, the assessor
shall provide to the tax collector information for the preparation
and enforcement of Part 6 (commencing with Section 3351). The
tax collector shall certify to the assessor that he or she needs the
contact information to assist with the preparation and enforcement
of Part 6 (commencing with Section 3351). The assessor shall
provide the information, which may not include social security
numbers. Any information provided to the tax collector pursuant
to this subdivision shall not become a public record and shall not
be open to public inspection. The tax collector shall reimburse the
assessor for the actual and reasonable costs incurred by the assessor
for providing the information to administer this subdivision. The
tax collector shall add the costs described in the preceding sentence
to the assessee’s delinquent taxes and include the costs incurred
subject to Sections 4112 and 4672.2. The tax collector or his or
her designated employee shall, under penalty of perjury, certify
to the assessor that he or she needs the information to assist with
the preparation and enforcement of Part 6 (commencing with
Section 3351), and that the information provided pursuant to this
subdivision that is not public record and that is not open to public
inspection shall not become public record and shall not be open
to public inspection.

begin delete SEC. 75. end delete
begin insert SEC. 77. end insert   

Section 22005.1 of the Welfare and Institutions Code
is amended to read:

22005.1.  

(a) The State Department of Health Services shall
only certify a long-term care insurance policy that substantially
meets the requirements of Chapter 2.6 (commencing with Section
10230) of Part 2 of Division 2 of the Insurance Code, except the
requirements of Sections 10232.1, 10232.2, 10232.25, 10232.8,
10232.9, and 10232.92 of the Insurance Code, and that provides
all of the items specified in subdivision (b). The State Department
of Health Services shall only certify a health care service plan
contract that has been approved by the Department of Business
Oversight pursuant to Chapter 2.2 (commencing with Section
1340) of Division 2 of the Health and Safety Code as providing
substantially equivalent coverage to that required by Chapter 2.6
(commencing with Section 10230) of Part 2 of Division 2 of the
Insurance Code, and that provides all of the items specified in
subdivision (b). Policies issued by organizations subject to the
Insurance Code and regulated by the Department of Insurance
shall also be approved by the Department of Insurance.

(b) Only policies and contracts that provide all of the following
items shall be certified by the department:

(1) Individual assessment and case management by a
coordinating entity designated and approved by the department.

(2) Levels and durations of benefits that meet minimum
standards set by the State Department of Health Services pursuant
to Section 22009.

(3) Protection against loss of benefits due to inflation.

(4) A periodic record issued to the insured including an
explanation of insurance payments or benefits paid that count
toward Medi-Cal asset protection under this division.

(5) Compliance with any other requirements imposed by
regulations adopted by the State Department of Health Services
or the State Department of Social Services and consistent with the
purposes of this division.