AB 2907, as introduced, Committee on Banking and Finance. State government: omnibus technical changes.
(1) Existing law abolished the Department of Corporations, the Commissioner of Corporations, the Department of Financial Institutions, and the Commissioner of Financial Institutions and transferred the powers, duties, responsibilities, and functions of those entities and officers to the Department of Business Oversight and the Commissioner of Business Oversight.
This bill would make technical, nonsubstantive changes to update references from these abolished entities and officers to the successor Department of Business Oversight and the Commissioner of Business Oversight.
(2) Existing law reorganized the provisions of the Financial Code.
This bill would make technical, nonsubstantive changes to update cross-references to the prior organization of the Financial Code to its current organization.
(3) Existing law regulates telephonic sellers, as defined, and requires, among other things, a telephonic seller to, not less than 10 days prior to doing business in this state, register specific information with the Department of Justice.
This bill would modify the definition of “telephonic seller” or “seller” to remove an outdated reference.
(4) The Corporate Securities Law of 1968 authorizes the Commissioner of Business Oversight to enforce its provisions, including the power to issue an order for a violation of that law, and, under certain conditions, make claim for ancillary relief.
This bill would make a technical, nonsubstantive change to include a cross-reference to a specific type of order issued by the commissioner within a procedure for a person to request a hearing regarding that order. The bill would also make a technical, nonsubstantive change to update a reference to the commissioner seeking administrative relief to instead refer to seeking ancillary relief.
(5) Under federal law, the Office of Thrift Supervision merged with the Office of the Comptroller of the Currency.
This bill would make technical, nonsubstantive changes to update references to the Office of Thrift Supervision to instead refer to the Office of the Comptroller of the Currency.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 7574.14 of the Business and Professions
2Code is amended to read:
This chapter shall not apply to the following:
4(a) An officer or employee of the United States of America, or
5of this state or a political subdivision thereof, while the officer or
6employee is engaged in the performance of his or her official
7duties, including uniformed peace officers employed part time by
8a public agency pursuant to a written agreement between a chief
9of police or sheriff and the public agency, provided the part-time
10employment does not exceed 50 hours in a calendar month.
P3 1(b) A person engaged exclusively in the business of obtaining
2and furnishing information as to the financial rating of persons.
3(c) A charitable philanthropic society or
4under the laws of this state that is organized and duly maintained
5for the public good and not for private profit.
6(d) Patrol special police officers appointed by the police
7commission of a city, county, or city and county under the express
8terms of its charter who also under the express terms of the charter
9(1) are subject to suspension or dismissal after a hearing on charges
10duly filed with the commission after a fair and impartial trial, (2)
11must be not less than 18 years of age nor more than 40 years of
12age, (3) must possess physical qualifications prescribed by the
13commission, and (4) are designated by the police commission as
14the owners of a certain beat or territory as may be fixed from time
15to time by the police commission.
16(e) An attorney at law in performing his or her duties as an
17attorney at law.
18(f) A collection agency or an employee thereof while acting
19within the scope of his or her employment, while making an
20investigation incidental to the business of the agency, including
21an investigation of the location of a debtor or his or her property
22where the contract with an assignor creditor is for the collection
23of claims owed or due or asserted to be owed or due or the
25(g) Admitted insurers and agents and insurance brokers licensed
26by the state, performing duties in connection with insurance
27transacted by them.
28(h) A bank subject to the jurisdiction of the Commissioner of
begin delete Financial Institutions of the State of Californiaend delete
30 under Division
begin delete 1end delete (commencing with Section begin delete 99)end delete of the
31Financial Code or the Comptroller of Currency of the United
33(i) A person engaged solely in the business of securing
34information about persons or property from public records.
35(j) A peace officer of this state or a political subdivision thereof
36while the peace officer is employed by a private employer to
37engage in off-duty employment in accordance with Section 1126
38of the Government Code. However, nothing herein shall exempt
39such a peace officer who either contracts for his or her services or
40the services of others as a private patrol operator or contracts for
P4 1his or her services as or is employed as an armed private security
2officer. For purposes of this subdivision, “armed security officer”
3means an individual who carries or uses a firearm in the course
4and scope of that contract or employment.
5(k) A retired peace officer of the state or political subdivision
6thereof when the retired peace officer is employed by a private
7employer in employment approved by the chief law enforcement
8officer of the jurisdiction where the employment takes place,
9provided that the retired officer is in a uniform of a public law
10enforcement agency, has registered with the bureau on a form
11approved by the director, and has met any training requirements
12or their equivalent as established for security personnel under
13Section 7583.5. This officer may not carry an unloaded and
14exposed handgun unless he or she is exempted under the provisions
15of Article 2 (commencing with Section 26361) of Chapter 6 of
16Division 5 of Title 4 of Part 6 of the Penal Code, may not carry
17an unloaded firearm that is not a handgun unless he or she is
18exempted under the provisions of Article 2 (commencing with
19Section 26405) of Chapter 7 of Division 5 of Title 4 of Part 6 of
20the Penal Code, and may not carry a loaded or concealed firearm
21unless he or she is exempted under the provisions of Sections
2225450 to 25475, inclusive, of the Penal Code or Sections 25900
23to 25910, inclusive, of the Penal Code or has met the requirements
24set forth in subdivision (d) of Section 26030 of the Penal Code.
25However, nothing herein shall exempt the retired peace officer
26who contracts for his or her services or the services of others as a
27private patrol operator.
28(l) A licensed insurance adjuster in performing his or her duties
29within the scope of his or her license as an insurance adjuster.
30(m) A savings association subject to the jurisdiction of the
begin delete Financial Institutionsend delete
begin delete Thrift Supervision.end delete
33(n) A secured creditor engaged in the repossession of the
34creditor’s collateral and a lessor engaged in the repossession of
35leased property in which it claims an interest.
36(o) A peace officer in his or her official police uniform acting
37in accordance with subdivisions (c) and (d) of Section 70 of the
39(p) An unarmed, uniformed security person employed
40exclusively and regularly by a motion picture studio facility
P5 1employer who does not provide contract security services for other
2entities or persons in connection with the affairs of that employer
3only and where there exists an employer-employee relationship if
4that person at no time carries or uses a deadly weapon, as defined
5in subdivision (a), in the performance of his or her duties, which
6may include, but are not limited to, the following business
8(1) The screening and monitoring access of employees of the
10(2) The screening and monitoring access of prearranged and
11preauthorized invited guests.
12(3) The screening and monitoring of vendors and suppliers.
13(4) Patrolling the private property facilities for the safety and
14welfare of all who have been legitimately authorized to have access
15to the facility.
16(q) An armored contract carrier operating
17pursuant to the authority of the Department of the California
18Highway Patrol or the Public Utilities Commission, or an armored
19vehicle guard employed by an armored contract carrier.
Section 17511.1 of the Business and Professions Code
21 is amended to read:
As used in this article, “telephonic seller” or “seller”
23means a person who, on his or her own behalf or through
24salespersons or through the use of an automatic dialing-announcing
25device, as defined in Section 2871 of the Public Utilities Code,
26causes a telephone solicitation or attempted telephone solicitation
27to occur which meets the criteria specified in subdivision (a), (b),
28(c), or (d) and who is not exempted by subdivision (e), as follows:
29(a) A telephone solicitation or attempted telephone solicitation
30wherein the telephonic seller initiates telephonic contact with a
31prospective purchaser and represents or implies one or more of
33(1) That a prospective purchaser who buys one or more items
34will also receive additional or other items, whether or not of the
35same type as purchased, without further cost. For purposes of this
36subdivision, “further cost” does not include actual postage or
37common carrier delivery charges, if any.
38(2) That a prospective purchaser will receive a prize or gift, if
39the person also encourages the prospective purchaser to do either
40of the following:
P6 1(A) Purchase or rent any goods or services.
2(B) Pay any money, including, but not limited to, a delivery or
4(3) That a prospective purchaser is able to obtain any item or
5service at a price which the seller states or implies is below the
6regular price of the item or service offered. This paragraph shall
7not apply to retailers who, within the previous 12 months, have
8 sold a majority of their goods or services through in-person sales
9at retail stores.
10(4) That a prospective purchaser who buys office equipment or
11supplies will, because of some unusual event or imminent price
12increase, be able to buy these items at prices which are below those
13that are usually charged or will be charged for the items.
14(5) That the seller is a person other than the person he or she is.
15(6) That the items for sale are manufactured or supplied by a
16person other than the actual manufacturer or supplier.
17(7) That the seller is offering to sell the prospective purchaser
18any gold, silver, or other metals, including coins, diamonds, rubies,
19sapphires, or other stones, coal or other minerals, or any interest
20in oil, gas, or mineral fields, wells, or exploration sites, or any
21other investment opportunity of any type whatsoever.
22(8) That the seller is offering to make a loan, or to arrange or
23assist in arranging a loan or to assist in providing information
24which may lead to the obtaining of a loan, unless no payment of
25any kind is made until the loan proceeds are disbursed to the
27(9) That a prospective purchaser will receive a credit card, as
28defined in subdivision (a) of Section 1747.02 of the Civil Code,
29if the purchaser pays an upfront or preapplication fee for the credit
30card to the telephonic seller.
31(b) A solicitation or attempted solicitation which is made by
32telephone in response to inquiries generated by unrequested
33notifications sent by the seller to persons who have not previously
34purchased goods or services from the seller or who have not
35previously requested credit from the seller, to a prospective
36 purchaser wherein the seller represents or implies to the recipient
37of the notification that any of the following applies to the recipient:
38(1) That the recipient has in any manner been specially selected
39to receive the notification or the offer contained in the notification.
P7 1(2) That the recipient will receive a prize or gift if the recipient
2calls the seller.
3(3) That if the recipient buys one or more items from the seller,
4the recipient will also receive additional or other items, whether
5or not of the same type as purchased, without further cost or at a
6cost which the seller states or implies is less than the regular price
7of such items.
8However, this subdivision does not apply to the solicitation of
9 sales by a catalog seller who periodically issues and delivers
10catalogs to potential purchasers by mail or by other means. This
11exception only applies if the catalog includes a written description
12or illustration and the sales price of each item of merchandise
13offered for sale, includes at least 24 full pages of written material
14or illustrations, is distributed in more than one state, and has an
15annual circulation of not less than 250,000 customers.
16(c) A solicitation or attempted solicitation which is made by
17telephone in response to inquiries generated by advertisements on
18behalf of the telephonic seller wherein it is represented or implied
19that the seller is offering to sell to the prospective purchaser any
20gold, silver, or other metals, including coins, diamonds, rubies,
21sapphires, or other stones, coal or other minerals, or any interest
22in oil, gas, or mineral fields, wells, or exploration sites, or any
23other investment opportunity of any type whatsoever.
24(d) A solicitation or attempted solicitation which is made by
25telephone in response to inquiries generated by advertisements on
26behalf of the telephonic seller wherein it is represented or implied
27that the seller is offering to make a loan or to arrange or assist in
28arranging a loan or to assist in providing information which may
29lead to the obtaining of a loan, unless no payment of any kind is
30made until the loan proceeds are disbursed to the borrower.
31(e) For purposes of this article, “telephonic seller” or “seller”
32does not include any of the following:
33(1) A person offering or selling a security qualified under
34Section 25110, 25120, or 25130 of the Corporations Code or
35exempt from qualification under Chapter 1 (commencing with
36Section 25100) of Part 2 of Division 1 of Title 4 of the
37Corporations Code. The fact that a notice claiming an exemption
38under the Corporate Securities Law of 1968 is filed with the
39Department of Business Oversight does not create an exemption
40under this paragraph.
P8 1(2) A person licensed pursuant to Part 1 (commencing with
2Section 10000) of Division 4, when the solicited transaction is
3governed by that law.
4(3) A person licensed pursuant to Chapter 9 (commencing with
5Section 7000) of Division 3, when the solicited transaction is
6governed by that law.
7(4) A person licensed or certificated pursuant to Part 2
8(commencing with Section 680) of Division 1 of the Insurance
9Code, including a person licensed pursuant to Chapter 5
10(commencing with Section 1621) thereof, when the solicited
11transaction is governed by that law.
person offering or selling a franchise registered pursuant
13to Section 31110 of the Corporations Code or exempt from
14registration under Chapter 1 (commencing with Section 31100)
15of Part 2 of Division 5 of Title 4 of the Corporations Code. The
16fact that a notice claiming an exemption under the Franchise
17Investment Law is filed with the Department of Business Oversight
18does not create an exemption under this paragraph.
19(6) A person soliciting the sale of a seller assisted marketing
20plan, as defined in Title 2.7 (commencing with Section 1812.200)
21of Part 4 of Division 3 of the Civil Code, who has filed with the
22Attorney General the documents required by Section 1812.203 of
23the Civil Code.
24(7) A person primarily soliciting the sale of a newspaper of
25general circulation, as defined in Article 1 (commencing with
26Section 6000) of Chapter 1 of Division 7 of Title 1 of the
27Government Code, a magazine, or membership in a book or record
28club whose program operates in conformity with the requirements
29of Section 1584.5 of the Civil Code.
30(8) A person soliciting business from prospective purchasers
31who have previously purchased from the business enterprise for
32which the person is calling.
33(9) A person soliciting without the intent to complete and who
34does not complete the sales presentation during the telephone
35solicitation but completes the sales presentation at a later
36face-to-face meeting between the solicitor and the prospective
37purchaser. However, if a seller, directly following a telephone
38solicitation, causes an individual whose primary purpose it is to
39go to the prospective purchaser to collect the payment or deliver
40any item purchased, this exemption does not apply.
P9 1(10) Any supervised financial
institution or parent, subsidiary,
2or subsidiary of parent thereof. As used in this paragraph,
3“supervised financial institution” means any commercial bank,
4trust company, savings and loan association, credit union, industrial
5loan company, finance lender or broker, or insurer, provided that
6the institution is subject to supervision by an official or agency of
7this state or of the United States.
8(11) A person soliciting the sale of a preneed funeral
9arrangement regulated by Article 9 (commencing with Section
107735) of Chapter 12 of Division 3.
11(12) A person licensed pursuant to Chapter 19 (commencing
12with Section 9600) of Division 3 when acting pursuant to that
14(13) A person soliciting the sale of services provided by a cable
15television system licensed or franchised pursuant to Section 53066
16of the Government Code or any other authority.
17(14) A person or an affiliate of a person whose business is
18regulated by the Public Utilities Commission.
19(15) A person soliciting the sale of a commodity pursuant to
20Part 2 (commencing with Section 58601) of Division 21 of the
21Food and Agricultural Code, if the solicitation neither intends to,
22nor actually results in, a sale which costs the purchaser in excess
23of one hundred dollars ($100).
24(16) An issuer or subsidiary of an issuer that has a security listed
25on a national securities
begin delete exchange or designated as a national market
if the exchange
26system security on an interdealer quotation system by the National
27Association of Securities Dealers, Inc.,end delete
begin delete or interdealer quotation systemend delete has been certified by rule or order
29of the Commissioner of
begin delete Corporationsend delete under
30subdivision (o) of Section 25100 of the Corporations Code. A
31subsidiary of an issuer that qualifies for exemption under this
32paragraph is not itself exempt unless not less than 60 percent of
33the voting power of its shares is owned by the qualifying issuer or
35(17) A person soliciting exclusively the sale of telephone
36answering services to be provided by that person or that person’s
38(18) A person soliciting a transaction regulated by the
39 Commodity Futures Trading Commission if the person is registered
40or temporarily licensed for this activity with the Commodity
P10 1Futures Trading Commission under the Commodity Exchange Act
2(7 U.S.C. Sec. 1 et seq.), and the registration or license has not
3expired or been suspended or revoked.
4(19) A person who sells coins or bullion at a price which is not
5more than 25 percent more than the price at which the seller is
6concurrently buying the same coins or bullion, if: (A) the seller
7has had a retail location in California from which he or she has
8been selling coins or bullion to the public in person for at least
9three years; (B) the telephonic solicitations are not the person’s
10primary business and sales made telephonically make up less than
1120 percent of the person’s total retail sales; and (C) the person
12claiming an exemption pursuant to this subdivision complies with
13Section 17511.3, as applicable, and subdivision (p) of Section
15(20) A person licensed pursuant to Division 1.2 (commencing
16with Section 2000) of the Financial Code to engage in the business
17of money transmission if the license has not expired or been
18suspended or revoked.
19(21) A person licensed as a residential mortgage lender or
20servicer pursuant to Division 20 (commencing with Section 50000)
21of the Financial Code, when acting under the authority of that
23(22) A corporation that meets all of the following conditions:
24(A) It has been exempt from taxation under Section 23701e of
25the Revenue and Taxation Code for a minimum of 10 years.
26(B) It has maintained its principal purpose for a minimum of
28(C) It has been incorporated in the state for a minimum of 25
30(f) In any civil proceeding alleging a violation of this article,
31the burden of proving an exemption or an exception from a
32definition is upon the person claiming it, and in any criminal
33proceeding alleging a violation of this article, the burden of
34producing evidence to support a defense based upon an exemption
35or an exception from a definition is upon the person claiming it.
36(g) Compliance with this article does not satisfy nor substitute
37for any requirements for license, registration, or regulation
38mandated by other laws.
Section 2510 of the Corporations Code is amended to
“Social purpose corporation subject to the Banking Law”
2means any of the following:
3(a) A social purpose corporation that, with the approval of the
4Commissioner of Business Oversight, is incorporated for the
5purpose of engaging in, or that is authorized by the Commissioner
6of Business Oversight to engage in, the commercial banking
7business under the Banking Law (Division
begin delete 1end delete (commencing
begin delete 99)end delete
of the Financial Code).
9(b) Any social purpose corporation that, with the approval of
10the Commissioner of Business Oversight, is incorporated for the
11purpose of engaging in, or that is authorized by the Commissioner
12of Business Oversight to engage in, the industrial banking business
13under the Banking Law (Division
begin delete 1end delete (commencing with Section
begin delete 99)end delete of the Financial Code).
15(c) Any social purpose corporation, other than a social purpose
16corporation described in subdivision (d), that, with the approval
17of the Commissioner of Business Oversight, is incorporated for
18the purpose of engaging in, or that is authorized by the
19Commissioner of Business Oversight to engage in, the trust
20business under the Banking Law (Division
begin delete 1end delete (commencing
begin delete 99)end delete of the Financial Code).
22(d) Any social purpose corporation that is authorized by the
23Commissioner of Business Oversight and the Commissioner of
24Insurance to maintain a title insurance department to engage in
25title insurance business and a trust department to engage in trust
27(e) Any social purpose corporation that, with the approval of
28the Commissioner of Business Oversight, is incorporated for the
29purpose of engaging in, or that is authorized by the Commissioner
30of Business Oversight to engage in, business under Article 1
31(commencing with Section
begin delete 3500)end delete of Chapter begin delete 19end delete of
begin delete 1end delete of the Financial Code.
Section 25100 of the Corporations Code is amended
The following securities are exempted from Sections
3625110, 25120, and 25130:
37(a) Any security (including a revenue obligation) issued or
38guaranteed by the United States, any state, any city, county, city
39and county, public district, public authority, public corporation,
40public entity, or political subdivision of a state or any agency or
P12 1corporate or other instrumentality of any one or more of the
2foregoing; or any certificate of deposit for any of the foregoing.
3(b) Any security issued or guaranteed by Canada, any Canadian
4province, any political subdivision or municipality of that province,
5or by any other foreign government with which the United States
6currently maintains diplomatic relations, if the security is
7 recognized as a valid obligation by the issuer or guarantor; or any
8certificate of deposit for any of the foregoing.
9(c) Any security issued or guaranteed by and representing an
10interest in or a direct obligation of a national bank or a bank or
11trust company incorporated under the laws of this state, and any
12security issued by a bank to one or more other banks and
13representing an interest in an asset of the issuing bank.
14(d) Any security issued or guaranteed by a federal savings
15association or federal savings bank or federal land bank or joint
16land bank or national farm loan association or by any savings
17association, as defined in subdivision (a) of Section 5102 of the
18Financial Code, which is subject to the supervision and regulation
19of the Commissioner of Business Oversight of this state.
20(e) Any security (other
than an interest in all or portions of a
21parcel or parcels of real property which are subdivided land or a
22subdivision or in a real estate development), the issuance of which
23is subject to authorization by the Insurance Commissioner, the
24Public Utilities Commission, or the Real Estate Commissioner of
26(f) Any security consisting of any interest in all or portions of
27a parcel or parcels of real property that are subdivided lands or a
28subdivision or in a real estate development; provided that the
29exemption in this subdivision shall not be applicable to: (1) any
30investment contract sold or offered for sale with, or as part of, that
31interest, or (2) any person engaged in the business of selling,
32distributing, or supplying water for irrigation purposes or domestic
33use that is not a public utility except that the exemption is
34applicable to any security of a mutual water company (other than
35an investment contract as described in paragraph (1)) offered or
36sold in connection with subdivided lands pursuant to Chapter 2
37(commencing with Section 14310) of Part 7 of Division 3 of Title
39(g) Any mutual capital certificates or savings accounts, as
40defined in the Savings Association Law, issued by a savings
P13 1association, as defined by subdivision (a) of Section 5102 of the
2Financial Code, and holding a license or certificate of authority
3then in force from the Commissioner of Business Oversight of this
5(h) Any security issued or guaranteed by any federal credit
6union, or by any credit union organized and supervised, or
7regulated, under the Credit Union Law.
8(i) Any security issued or guaranteed by any railroad, other
9common carrier, public utility, or public utility holding company
10which is (1) subject to the jurisdiction of the Interstate Commerce
11 Commission or its successor or (2) a holding company registered
12with the Securities and Exchange Commission under the Public
13Utility Holding Company Act of 1935 or a subsidiary of that
14company within the meaning of that act or (3) regulated in respect
15of the issuance or guarantee of the security by a governmental
16authority of the United States, of any state, of Canada or of any
17Canadian province; and the security is subject to registration with
18or authorization of issuance by that authority.
19(j) Any security (except evidences of indebtedness, whether
20interest bearing or not) of an issuer (1) organized exclusively for
21educational, benevolent, fraternal, religious, charitable, social, or
22reformatory purposes and not for pecuniary profit, if no part of the
23net earnings of the issuer inures to the benefit of any private
24shareholder or individual, or (2) organized as a chamber of
25commerce or trade or professional association. The fact that
26amounts received from memberships or dues or both will or may
27be used to construct or otherwise acquire facilities for use by
28members of the nonprofit organization does not disqualify the
29organization for this exemption. This exemption does not apply
30to the securities of any nonprofit organization if any promoter
31thereof expects or intends to make a profit directly or indirectly
32from any business or activity associated with the organization or
33operation of that nonprofit organization or from remuneration
34received from that nonprofit organization.
35(k) Any agreement, commonly known as a “life income
36contract,” of an issuer (1) organized exclusively for educational,
37benevolent, fraternal, religious, charitable, social, or reformatory
38purposes and not for pecuniary profit and (2) which the
39commissioner designates by rule or order, with a donor in
40consideration of a donation of property to that issuer and providing
P14 1for the payment to the donor or persons designated by him or her
2of income or specified periodic payments from the donated
3property or other property for the life of the donor or those other
5(l) Any note, draft, bill of exchange, or banker’s acceptance
6which is freely transferable and of prime quality, arises out of a
7current transaction or the proceeds of which have been or are to
8be used for current transactions, and which evidences an obligation
9to pay cash within nine months of the date of issuance, exclusive
10of days of grace, or any renewal of that paper which is likewise
11limited, or any guarantee of that paper or of that renewal, provided
12that the paper is not offered to the public in amounts of less than
13twenty-five thousand dollars ($25,000) in the aggregate to any one
14purchaser. In addition, the commissioner may, by rule or order,
15exempt any issuer of any notes, drafts, bills of exchange or banker’s
16acceptances from qualification of those securities when the
17 commissioner finds that the qualification is not necessary or
18appropriate in the public interest or for the protection of investors.
19(m) Any security issued by any corporation organized and
20existing under the provisions of Chapter 1 (commencing with
21Section 54001) of Division 20 of the Food and Agricultural Code.
22(n) Any beneficial interest in an employees’ pension,
23profit-sharing, stock bonus, or similar benefit plan which meets
24the requirements for qualification under Section 401 of the federal
25Internal Revenue Code or any statute amendatory thereof or
26supplementary thereto. A determination letter from the Internal
27Revenue Service stating that an employees’ pension, profit-sharing,
28stock bonus, or similar benefit plan meets those requirements shall
29be conclusive evidence that the plan is an employees’ pension,
30profit-sharing, stock bonus, or similar benefit plan within the
31 meaning of the first sentence of this subdivision until the date the
32determination letter is revoked in writing by the Internal Revenue
33Service, regardless of whether or not the revocation is retroactive.
34(o) Any security listed or approved for listing upon notice of
35issuance on a national securities exchange, if the exchange has
36been certified by rule or order of the commissioner and any warrant
37or right to purchase or subscribe to the security. The exemption
38afforded by this subdivision does not apply to securities listed or
39approved for listing upon notice of issuance on a national securities
P15 1exchange, in a rollup transaction unless the rollup transaction is
2an eligible rollup transaction as defined in Section 25014.7.
3That certification of any exchange shall be made by the
4commissioner upon the written request of the exchange if the
5commissioner finds that the exchange, in acting on applications
6 for listing of common stock, substantially applies the minimum
7standards set forth in either subparagraph (A) or (B) of paragraph
8(1), and, in considering suspension or removal from listing,
9substantially applies each of the criteria set forth in paragraph (2).
10(1) Listing standards:
11(A) (i) Shareholders’ equity of at least four million dollars
13(ii) Pretax income of at least seven hundred fifty thousand
14dollars ($750,000) in the issuer’s last fiscal year or in two of its
15last three fiscal years.
16(iii) Minimum public distribution of 500,000 shares (exclusive
17of the holdings of officers, directors, controlling shareholders, and
18other concentrated or family holdings), together with a minimum
19of 800 public holders or minimum public distribution of 1,000,000
20shares together with a minimum of 400 public holders. The
21exchange may also consider the listing of a company’s securities
22if the company has a minimum of 500,000 shares publicly held, a
23minimum of 400 shareholders and daily trading volume in the
24issue has been approximately 2,000 shares or more for the six
25months preceding the date of application. In evaluating the
26suitability of an issue for listing under this trading provision, the
27exchange shall review the nature and frequency of that activity
28and any other factors as it may determine to be relevant in
29ascertaining whether the issue is suitable for trading. A security
30that trades infrequently shall not be considered for listing under
31this paragraph even though average daily volume amounts to 2,000
32shares per day or more.
33Companies whose securities are concentrated in a limited
34geographical area, or whose securities are largely held in block by
35institutional investors, normally may not be considered eligible
36for listing unless the public distribution appreciably exceeds
38(iv) Minimum price of three dollars ($3) per share for a
39reasonable period of time prior to the filing of a listing application;
40provided, however, in certain instances an exchange may favorably
P16 1consider listing an issue selling for less than three dollars ($3) per
2share after considering all pertinent factors, including market
3conditions in general, whether historically the issue has sold above
4three dollars ($3) per share, the applicant’s capitalization, and the
5number of outstanding and publicly held shares of the issue.
6(v) An aggregate market value for publicly held shares of at
7least three million dollars ($3,000,000).
8(B) (i) Shareholders’ equity of at least four million
10(ii) Minimum public distribution set forth in clause (iii) of
11subparagraph (A) of paragraph (1).
12(iii) Operating history of at least three years.
13(iv) An aggregate market value for publicly held shares of at
14least fifteen million dollars ($15,000,000).
15(2) Criteria for consideration of suspension or removal from
17(A) If a company that (A) has shareholders’ equity of less than
18one million dollars ($1,000,000) has sustained net losses in each
19of its two most recent fiscal years, or (B) has net tangible assets
20of less than three million dollars ($3,000,000) and has sustained
21net losses in three of its four most recent fiscal years.
22(B) If the number of shares publicly held (excluding the holdings
23of officers, directors, controlling shareholders, and other
24concentrated or family holdings) is less than 150,000.
25(C) If the total number of shareholders is less than 400 or if the
26number of shareholders of lots of 100 shares or more is less than
28(D) If the aggregate market value of shares publicly held is less
29than seven hundred fifty thousand dollars ($750,000).
30(E) If shares of common stock sell at a price of less than three
31dollars ($3) per share for a substantial period of time and the issuer
32shall fail to effectuate a reverse stock split of the shares within a
33reasonable period of time after being requested by the exchange
34to take that action.
35A national securities exchange, certified by rule or order of the
36commissioner under this subdivision, shall file annual reports when
37requested to do so by the commissioner. The annual reports shall
38contain, by issuer: the variances granted to an exchange’s listing
39standards, including variances from corporate governance and
40voting rights’ standards, for any security of that issuer; the reasons
P17 1for the variances; a discussion of the review procedure instituted
2by the exchange to determine the effect of the variances on
3investors and whether the variances should be continued; and any
4other information that the commissioner deems relevant. The
5purpose of these reports is to assist the commissioner in
6 determining whether the quantitative and qualitative requirements
7of this subdivision are substantially being met by the exchange in
8general or with regard to any particular security.
9The commissioner after appropriate notice and
10hearing in accordance with the provisions of the Administrative
11Procedure Act, Chapter 5 (commencing with Section 11500) of
12Part 1 of Division 3 of Title 2 of the Government Code, may, in
13his or her discretion, by rule or order, decertify any exchange
14previously certified that ceases substantially to apply the minimum
15standards or criteria as set forth in paragraphs (1) and (2).
16A rule or order of certification shall conclusively establish that
17any security listed or approved for listing upon notice of issuance
18on any exchange named in a rule or order of certification, and any
19warrant or right to purchase or subscribe to that security, is exempt
20under this subdivision until the adoption by the commissioner of
21any rule or order decertifying the exchange.
22(p) A promissory note secured by a lien on real property, which
23is neither one of a series of notes of equal priority secured by
24 interests in the same real property nor a note in which beneficial
25interests are sold to more than one person or entity.
26(q) Any unincorporated interindemnity or reciprocal or
27interinsurance contract, that qualifies under the provisions of
28Section 1280.7 of the Insurance Code, between members of a
29cooperative corporation, organized and operating under Part 2
30(commencing with Section 12200) of Division 3 of Title 1, and
31whose members consist only of physicians and surgeons licensed
32in California, which contracts indemnify solely in respect to
33medical malpractice claims against the members, and which do
34not collect in advance of loss any moneys other than contributions
35by each member to a collective reserve trust fund or for necessary
36expenses of administration.
37(1) Whenever it appears to the commissioner that any person
38has engaged or is about to engage in any act or practice constituting
39a violation of any provision of Section 1280.7 of the Insurance
40Code, the commissioner may, in the commissioner’s discretion,
P18 1bring an action in the name of the people of the State of California
2in the superior court to enjoin the acts or practices or to enforce
3compliance with Section 1280.7 of the Insurance Code. Upon a
4proper showing a permanent or preliminary injunction, a restraining
5order, or a writ of mandate shall be granted and a receiver or
6conservator may be appointed for the defendant or the defendant’s
8(2) The commissioner may, in the commissioner’s discretion,
9(A) make public or private investigations within or outside of this
10state as the commissioner deems necessary to determine whether
11any person has violated or is about to violate any provision of
12Section 1280.7 of the Insurance Code or to aid in the enforcement
13of Section 1280.7, and (B) publish information concerning the
14violation of Section 1280.7.
15(3) For the purpose of any investigation or proceeding under
16this section, the commissioner or any officer designated by the
17commissioner may administer oaths and affirmations, subpoena
18witnesses, compel their attendance, take evidence, and require the
19production of any books, papers, correspondence, memoranda,
20agreements, or other documents or records which the commissioner
21deems relevant or material to the inquiry.
22(4) In case of contumacy by, or refusal to obey a subpoena
23issued to, any person, the superior court, upon application by the
24commissioner, may issue to the person an order requiring the
25person to appear before the commissioner, or the officer designated
26by the commissioner, to produce documentary evidence, if so
27ordered, or to give evidence touching the matter under investigation
28or in question. Failure to obey the order of the court may be
29punished by the court as a contempt.
30(5) No person is excused from attending or testifying or from
31producing any document or record before the commissioner or in
32obedience to the subpoena of the commissioner or any officer
33designated by the commissioner, or in any proceeding instituted
34by the commissioner, on the ground that the testimony or evidence
35(documentary or otherwise), required of the person may tend to
36incriminate the person or subject the person to a penalty or
37forfeiture, but no individual may be prosecuted or subjected to any
38penalty or forfeiture for or on account of any transaction, matter,
39or thing concerning which the person is compelled, after validly
40claiming the privilege against self-incrimination, to testify or
P19 1produce evidence (documentary or otherwise), except that the
2individual testifying is not exempt from prosecution and
3punishment for perjury or contempt committed in testifying.
4(6) The cost of any review, examination, audit, or investigation
5made by the commissioner under Section 1280.7 of the Insurance
6Code shall be paid to the commissioner by the person subject to
7the review, examination, audit, or investigation, and the
8commissioner may maintain an action for the recovery of these
9costs in any court of competent jurisdiction. In determining the
10cost, the commissioner may use the actual amount of the salary or
11other compensation paid to the persons making the review,
12examination, audit, or investigation plus the actual amount of
13expenses including overhead reasonably incurred in the
14performance of the work.
15The recoverable cost of each review, examination, audit, or
16investigation made by the commissioner under Section 1280.7 of
17the Insurance Code shall not exceed twenty-five thousand dollars
18($25,000), except that costs exceeding twenty-five thousand dollars
19($25,000) shall be recoverable if the costs are necessary to prevent
20a violation of any provision of Section 1280.7 of the Insurance
22(r) Any shares or memberships issued by any corporation
23organized and existing pursuant to the provisions of Part 2
24(commencing with Section 12200) of Division 3 of Title 1,
25provided the aggregate investment of any shareholder or member
26in shares or memberships sold pursuant to this subdivision does
27not exceed one thousand dollars ($1,000). This exemption does
28not apply to the shares or memberships of that corporation if any
29promoter thereof expects or intends to make a profit directly or
30indirectly from any business or activity associated with the
31corporation or the operation of the corporation or from
32remuneration, other than reasonable salary, received from the
33corporation. This exemption does not apply to nonvoting shares
34or memberships of that corporation issued to any person who does
35not possess, and who will not acquire in connection with the
36issuance of nonvoting shares or memberships, voting power
37(Section 12253) in the corporation. This exemption also does not
38apply to shares or memberships issued by a nonprofit cooperative
39corporation organized to facilitate the creation of an unincorporated
40interindemnity arrangement that provides indemnification for
P20 1medical malpractice to its physician and surgeon members as set
2forth in subdivision (q).
3(s) Any security consisting of or representing an interest in a
4pool of mortgage loans that meets each of the following
6(1) The pool consists of whole mortgage loans or participation
7interests in those loans, which loans were originated or acquired
8in the ordinary course of business by a national bank or federal
9savings association or federal savings bank having its principal
10office in this state, by a bank incorporated under the laws of this
11state or by a savings association as defined in subdivision (a) of
12Section 5102 of the Financial Code and which is subject to the
13supervision and regulation of the Commissioner of
begin delete Financial and each of which at the time of
15transfer to the pool is an authorized investment for the originating
16or acquiring institution.
17(2) The pool of mortgage loans is held in trust by a trustee which
18is a financial institution specified in paragraph (1) as trustee or
20(3) The loans are serviced by a financial institution specified in
22(4) The security is not offered in amounts of less than
23twenty-five thousand dollars ($25,000) in the aggregate to any one
25(5) The security is offered pursuant to a registration under the
26Securities Act of 1933, or pursuant to an exemption under
27Regulation A under that act, or in the opinion of counsel for the
28issuer, is offered pursuant to an exemption under Section 4(2) of
30(t) (1) Any security issued or guaranteed by and representing
31an interest in or a direct obligation of an industrial loan company
32incorporated under the laws of the state and authorized by the
begin delete Financial Institutionsend delete to
34engage in industrial loan business.
35(2) Any investment certificate in or issued by any industrial
36loan company that is organized under the laws of a state of the
37United States other than this state, that is insured by the Federal
38Deposit Insurance Corporation, and that maintains a branch office
39in this state.
Section 25254 of the Corporations Code is amended
(a) If the commissioner determines it is in the public
4interest, the commissioner may include in any administrative action
5brought under this part a claim for ancillary relief, including, but
6not limited to, a claim for restitution or disgorgement or damages
7on behalf of the persons injured by the act or practice constituting
8the subject matter of the action, and the administrative law judge
9shall have jurisdiction to award additional relief.
10(b) In an administrative action brought under this part, the
11commissioner is entitled to recover costs, which in the discretion
12of the administrative law judge may include an amount representing
13reasonable attorney’s fees and investigative expenses for the
14services rendered, for deposit into the State Corporations Fund for
15the use of the Department of Business Oversight.
16(c) After the exhaustion of the review procedures provided in
17accordance with the provisions of the Administrative Procedure
18Act, Chapter 5 (commencing with Section 11500) of Part 1 of
19Division 3 of Title 2 of the Government Code, the commissioner
20may apply to the appropriate superior court for a judgment in the
21amount of the
begin delete administrative penaltyend delete and costs
22awarded in a final decision and order compelling the respondent,
23or the named or cited person, to comply with the final decision of
24the commissioner brought under this division. The application
25shall include a certified copy of the final decision of the
26commission and shall constitute a sufficient showing to warrant
27the issuance of the judgment and order from superior court.
Section 25532 of the Corporations Code is amended
(a) If, in the opinion of the commissioner, (1) the sale
31of a security is subject to qualification under this law and it is being
32or has been offered or sold without first being qualified, the
33commissioner may order the issuer or offeror of the security to
34desist and refrain from the further offer or sale of the security until
35qualification has been made under this law or (2) the sale of a
36security is subject to the requirements of Section 25100.1, 25101.1,
37or 25102.1 and the security is being or has been offered or sold
38without first meeting the requirements of those sections, the
39commissioner may order the issuer or offeror of that security to
P22 1desist and refrain from the further offer or sale of the security until
2those requirements have been met.
3(b) If, in the
opinion of the commissioner, a person has been or
4is acting as a broker-dealer or investment adviser, or has been or
5is engaging in broker-dealer or investment adviser activities, in
6violation of Section 25210, 25230, or 25230.1, the commissioner
7may order that person to desist and refrain from the activity until
8the person has been appropriately licensed or the required filing
9has been made under this law.
10(c) If, in the opinion of the commissioner, a person has violated
11or is violating Section 25401, the commissioner may order that
12person to desist and refrain from the violation.
13(d) If the commissioner determines that a person has engaged,
14is engaging, or is about to engage in an act, practice, or course of
15business constituting a violation of this division or a rule adopted
16or order issued under this division, the commissioner may issue
17an order directing the person to desist and refrain from engaging
18in the act, practice, or course of business, or take other action
19necessary or appropriate to comply with this division.
20(e) If the commissioner determines it is in the public interest,
21the commissioner may include in any administrative action brought
22under this division a claim for ancillary relief, including, but not
23limited to, a claim for restitution or disgorgement or damages on
24behalf of the persons injured by the act or practice constituting the
25subject matter of the action, and the administrative law judge shall
26have jurisdiction to award additional relief.
27(f) If, after an order has been served under subdivision (a), (b),
begin delete orend delete (c), a request for
hearing is filed in writing within 30
29days of the date of service of the order by the person to whom the
30order was directed, a hearing shall be held in accordance with
31provisions of the Administrative Procedure Act, Chapter 5
32(commencing with Section 11500) of Part 1 of Division 3 of Title
332 of the Government Code, and the commissioner shall have all
34of the powers granted under that chapter. Unless the hearing is
35commenced within 15 business days after the request is filed (or
36the person affected consents to a later date), the order is rescinded.
37If that person fails to file a written request for a hearing within
3830 days from the date of service of the order, the order shall be
39deemed a final order of the commissioner and is not subject to
40review by any court or agency, notwithstanding Section 25609.
P23 1The commissioner may file a certified copy of the final order
2with the clerk of the superior court or any court of competent
3 jurisdiction. The order so filed has the same effect as a judgment
4of the court and may be recorded, enforced, or satisfied in the same
5manner as a judgment of the court.
6If a person does not comply with an order under this section, the
7commissioner may petition the superior court or any court of
8competent jurisdiction to enforce the order. The court may not
9require the commissioner to post a bond in an action or proceeding
10under this section. If the court finds, after service and opportunity
11for hearing, that the person was not in compliance with the order,
12the court may adjudge the person in civil contempt of the order.
13The court may impose a further civil penalty against the person
14for contempt and may grant any other relief the court determines
15is just and proper in the circumstances.
Section 5100.2 of the Financial Code is amended to
For purposes of this division:
19(a) Any reference to regulations of the federal Office of
begin delete Thrift or the Federal Deposit
21Insurance Corporation shall also be deemed to include and refer
22to regulations adopted by the Federal Home Loan Bank Board or
23the Federal Savings and Loan Insurance Corporation, to the extent
24these regulations have been continued in effect and made
25enforceable by the Office of
begin delete Thrift Supervisionend delete or Federal Deposit Insurance Corporation,
27respectively, pursuant to the Financial Institutions Reform,
28Recovery, and Enforcement Act of 1989 (Public Law 101-73).
29(b) Any reference to charters issued by the Office of
begin delete Thrift shall also be deemed
31to include and refer to charters issued by the Federal Home Loan
Section 18427.9 of the Financial Code is amended to
There shall be exempted from the provisions of
36Section 18427.1 all of the following:
37(a) (1) Any offer, not involving a public offering, to an affiliate
38or to a person of the type described in subdivision (i) of Section
3925102 of the Corporations Code or in the regulations of the
P24 1Commissioner of
begin delete Corporationsend delete adopted
3(2) The execution and delivery of an agreement for the sale of
4securities to any person of the type described in paragraph (1),
5 subject to all of the following:
6(A) The agreement shall contain substantially the following
8“The sale of the securities which are the subject of this agreement
9has not been authorized by a permit issued by the Commissioner
begin delete Financial Institutions of the State of California.end delete The issuance of the securities or the payment or receipt
12of any part of the consideration therefor prior to the issuance of a
13permit is unlawful, unless the sale of securities is exempt from
14Section 18427.1 of the California Financial Code. The rights of
15all parties to this agreement are expressly conditioned upon the
16issuance of a permit, unless the sale is so exempt.”
part of the purchase price may be paid or received, and
18none of the securities may be issued, until a permit authorizing the
19sale of the securities is issued, unless the sale is exempt from
21(b) Any transaction or security which the commissioner by
22regulation or order exempts as not being comprehended within the
23purposes of this article and the regulation of which he or she finds
24is not necessary or appropriate in the public interest or for the
25protection of investors.
Section 53638 of the Government Code is amended
(a) The deposit shall not exceed the shareholder’s
29equity of any depository bank. For the purposes of this subdivision,
30shareholder’s equity shall be determined in accordance with Section
31463 of the Financial Code, but shall be deemed to include capital
32notes and debentures.
33(b) The deposit shall not exceed the total of the net worth of
34any depository savings association or federal association, except
35that deposits not exceeding a total of five hundred thousand dollars
36($500,000) may be made to a savings association or federal
37association without regard to the net worth of that depository, if
38such deposits are insured or secured as required by law.
39(c) The deposit to the share accounts of any regularly
40credit union shall not exceed the total of the unimpaired capital
P25 1and surplus of the credit union, as defined by rule of the
begin delete Financial Institutions,end delete except
3that the deposit to any credit union share account in an amount not
4exceeding five hundred thousand dollars ($500,000) may be made
5if the share accounts of that credit union are insured or guaranteed
6pursuant to Section 14858 of the Financial Code or are secured as
7required by law.
8(d) The deposit in investment certificates of a federally insured
9industrial loan company shall not exceed the total of the unimpaired
10capital and surplus of the insured industrial loan company.