BILL ANALYSIS Ó
AB 2751
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Date of Hearing: May 11, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2751 (Brown) - As Amended April 25, 2016
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill authorizes two securities permitting exemptions under
California's Corporate Securities Law of 1968. In summary, this
bill:
AB 2751
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1)Exempts certain agricultural entities from securities
permitting requirements if certain conditions are met,
including:
a) The amount of securities in total, as well as the amount
invested by individual investors, are within an established
cap;
b) The amount raised by the issuer is allocated for certain
agricultural purposes;
c) The issuer meets the requirements for a qualified
agricultural entity (such as a farm enterprise or an
agricultural land trust); and,
d) The issuer submits the required documentation to the
Department of Business Oversight (DBO).
2)Exempts certain renewable energy projects from securities
permitting requirements if certain conditions are met,
including:
a) The amount of securities in total, as well as the amount
invested by individual investors, are within an established
cap;
b) The amount raised is allocated for the purposes of
purchasing solar panels or wind turbines or the equipment
necessary for storage and transmission of renewable energy;
AB 2751
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c) The issuer meets the requirements for a qualified
agricultural entity (such as a nonprofits, cooperatives, or
groups of tenants); and,
d) The issuer submits the required documentation to the
Department of Business Oversight (DBO).
3)Expands an existing exemption for nonprofit organizations to
include debt securities in addition to equity securities.
FISCAL EFFECT:
Ongoing costs for DBO in the range of $500,000 annually for
program administration, including the hiring of additional
enforcement staff (Special Fund).
COMMENTS:
1)Purpose. According to the sponsor, the Sustainable Economies
Law Center, this bill will help investors put money into their
local, community-based enterprises. California's securities
law makes it very expensive and time-consuming for a small
enterprise to obtain the funding it needs, and this bill will
create modest exemptions for small-scale farms and
community-owned renewable energy enterprises.
2)Background. Under existing law, one way to qualify a
securities offering is through permitting, a process in which
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applicants apply to DBO for a permit that is good for one
year. Critics say this process is costly and time-consuming,
though DBO currently offers exemptions to the permitting
requirement. The most widely-used exemptions are issuances of
securities to friends and family or employees and consultants
3)Related Legislation. AB 2178 (Chiu) creates a new
qualification by permit under California's Corporate
Securities Law of 1968 to allow equity-crowdfunding. The bill
is currently pending in this committee.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081