Amended in Senate May 23, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2907

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

March 8, 2016

An act to amend Sections 7574.14 and 17511.1 of the Business and Professions Code, to amend Sections 2510, begin insert 2601, end insert 25100, 25254, and 25532 of the Corporations Code, to amend Sections begin delete 5100.2 and end delete begin insert 5100.2, 18139, and end insert 18427.9 of the Financial Code, and to amend Section 53638 of the Government Code, relating to state government.

LEGISLATIVE COUNSEL’S DIGEST

AB 2907, as amended, 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This bill would modify the definition of “telephonic seller” or “seller” to remove an outdated reference.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.

begin insert

(6) Existing law prohibits the Secretary of State from filing articles of incorporation setting forth a name in which “bank,” “trust,” “trustee,” or related words appear, except as specified.

end insert begin insert

This bill would remove a duplicate exception that does not prohibit the Secretary of State from filing these types of articles if a certificate of approval of the Commissioner of Business Oversight is attached to the articles.

end insert

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

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

SECTION 1.  

Section 7574.14 of the Business and Professions
Code is amended to read:

7574.14.  

This chapter shall not apply to the following:

(a) An officer or employee of the United States of America, or
of this state or a political subdivision thereof, while the officer or
employee is engaged in the performance of his or her official
duties, including uniformed peace officers employed part time by
a public agency pursuant to a written agreement between a chief
of police or sheriff and the public agency, provided the part-time
employment does not exceed 50 hours in a calendar month.

(b) A person engaged exclusively in the business of obtaining
and furnishing information as to the financial rating of persons.

(c) A charitable philanthropic society or association incorporated
under the laws of this state that is organized and duly maintained
for the public good and not for private profit.

(d) Patrol special police officers appointed by the police
commission of a city, county, or city and county under the express
terms of its charter who also under the express terms of the charter
(1) are subject to suspension or dismissal after a hearing on charges
duly filed with the commission after a fair and impartial trial, (2)
must be not less than 18 years of age nor more than 40 years of
age, (3) must possess physical qualifications prescribed by the
commission, and (4) are designated by the police commission as
the owners of a certain beat or territory as may be fixed from time
to time by the police commission.

(e) An attorney at law in performing his or her duties as an
attorney at law.

(f) A collection agency or an employee thereof while acting
within the scope of his or her employment, while making an
investigation incidental to the business of the agency, including
an investigation of the location of a debtor or his or her property
where the contract with an assignor creditor is for the collection
of claims owed or due or asserted to be owed or due or the
equivalent thereof.

(g) Admitted insurers and agents and insurance brokers licensed
by the state, performing duties in connection with insurance
transacted by them.

(h) A bank subject to the jurisdiction of the Commissioner of
Business Oversight under Division 1.1 (commencing with Section
1000) of the Financial Code or the Comptroller of the Currency
of the United States.

(i) A person engaged solely in the business of securing
information about persons or property from public records.

(j) A peace officer of this state or a political subdivision thereof
while the peace officer is employed by a private employer to
engage in off-duty employment in accordance with Section 1126
of the Government Code. However, nothing herein shall exempt
such a peace officer who either contracts for his or her services or
the services of others as a private patrol operator or contracts for
his or her services as or is employed as an armed private security
officer. For purposes of this subdivision, “armed security officer”
means an individual who carries or uses a firearm in the course
and scope of that contract or employment.

(k) A retired peace officer of the state or political subdivision
thereof when the retired peace officer is employed by a private
employer in employment approved by the chief law enforcement
officer of the jurisdiction where the employment takes place,
provided that the retired officer is in a uniform of a public law
enforcement agency, has registered with the bureau on a form
approved by the director, and has met any training requirements
or their equivalent as established for security personnel under
Section 7583.5. This officer may not carry an unloaded and
exposed handgun unless he or she is exempted under the provisions
of Article 2 (commencing with Section 26361) of Chapter 6 of
Division 5 of Title 4 of Part 6 of the Penal Code, may not carry
an unloaded firearm that is not a handgun unless he or she is
exempted under the provisions of Article 2 (commencing with
Section 26405) of Chapter 7 of Division 5 of Title 4 of Part 6 of
the Penal Code, and may not carry a loaded or concealed firearm
unless he or she is exempted under the provisions of Sections
25450 to 25475, inclusive, of the Penal Code or Sections 25900
to 25910, inclusive, of the Penal Code or has met the requirements
set forth in subdivision (d) of Section 26030 of the Penal Code.
However, nothing herein shall exempt the retired peace officer
who contracts for his or her services or the services of others as a
private patrol operator.

(l) A licensed insurance adjuster in performing his or her duties
within the scope of his or her license as an insurance adjuster.

(m) A savings association subject to the jurisdiction of the
Commissioner of Business Oversight or the Office of the
Comptroller of the Currency.

(n) A secured creditor engaged in the repossession of the
creditor’s collateral and a lessor engaged in the repossession of
leased property in which it claims an interest.

(o) A peace officer in his or her official police uniform acting
in accordance with subdivisions (c) and (d) of Section 70 of the
Penal Code.

(p) An unarmed, uniformed security person employed
exclusively and regularly by a motion picture studio facility
employer who does not provide contract security services for other
entities or persons in connection with the affairs of that employer
only and where there exists an employer-employee relationship if
that person at no time carries or uses a deadly weapon, as defined
in subdivision (a), in the performance of his or her duties, which
may include, but are not limited to, the following business
purposes:

(1) The screening and monitoring access of employees of the
same employer.

(2) The screening and monitoring access of prearranged and
preauthorized invited guests.

(3) The screening and monitoring of vendors and suppliers.

(4) Patrolling the private property facilities for the safety and
welfare of all who have been legitimately authorized to have access
to the facility.

(q) An armored contract carrier operating armored vehicles
pursuant to the authority of the Department of the California
Highway Patrol or the Public Utilities Commission, or an armored
vehicle guard employed by an armored contract carrier.

SEC. 2.  

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 upfront 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, finance lender or broker, 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 if the exchange has been certified
by rule or order of the Commissioner of Business Oversight 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 Division 1.2 (commencing
with Section 2000) of the Financial Code to engage in the business
of money transmission 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. 3.  

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 1.1 (commencing with
Section 1000) 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 1.1 (commencing with Section
1000) 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 1.1 (commencing with
Section 1000) 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 1850) of Chapter 21 of Division 1.1
of the Financial Code.

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 2601 of the end insert begin insert Corporations Code end insert begin insert is amended to
read: end insert

2601.  

(a) The Secretary of State shall not file articles setting
forth a name in which “bank,” “trust,” “trustee,” or related words
appear, unless the certificate of approval of the Commissioner of
Business Oversight is attached to the articles. This subdivision
does not apply to the articles of any social purpose corporation
subject to the Banking Law on which is endorsed the approval of
the Commissioner of Business begin delete Oversight or to which a certificate
of approval of the Commissioner of Business Oversight is attached
to the articles. end delete begin insert Oversight. end insert

(b) (1) The Secretary of State shall not file articles that set forth
a name that is likely to mislead the public or that is the same as,
or resembles so closely as to tend to deceive, the name of a
domestic corporation, the name of a domestic social purpose
corporation, or the name of a foreign corporation that is authorized
to transact intrastate business or has registered its name pursuant
to Section 2101, a name that a foreign corporation has assumed
under subdivision (b) of Section 2106, a name that will become
the record name of a corporation or social purpose corporation or
a foreign corporation upon the effective date of a filed corporate
instrument where there is a delayed effective date pursuant to
subdivision (c) of Section 110 or subdivision (c) of Section 5008,
or a name that is under reservation for another corporation or social
purpose corporation pursuant to this title, except that a social
purpose corporation may adopt a name that is substantially the
same as an existing corporation or social purpose corporation,
foreign or domestic, which is authorized to transact intrastate
business or has registered its name pursuant to Section 2101, upon
proof of consent by the domestic or foreign corporation or social
purpose corporation and a finding by the Secretary of State that
under the circumstances the public is not likely to be misled. The
use by a social purpose corporation of a name in violation of this
section may be enjoined notwithstanding the filing of its articles
by the Secretary of State.

(2) A corporation formed pursuant to this division before
January 1, 2015, may elect to change its status from a flexible
purpose corporation to a social purpose corporation by amending
its articles of incorporation to change its name to replace “flexible
purpose corporation” with “social purpose corporation” and to
replace the term “flexible purpose corporation” with “social
purpose corporation” as applicable in any statements contained in
the articles. For any flexible purpose corporation formed prior to
January 1, 2015, that has not amended its articles of incorporation
to change its status to a social purpose corporation, any reference
in this division to social purpose corporation shall be deemed a
reference to “flexible purpose corporation.”

(c) Any applicant may, upon payment of the fee prescribed in
Article 3 (commencing with Section 12180) of Chapter 3 of Part
2 of Division 3 of Title 2 of the Government Code, obtain from
the Secretary of State a certificate of reservation of any name not
prohibited by subdivision (b), and upon the issuance of the
certificate the name stated in the certificate shall be reserved for
a period of 60 days. The Secretary of State shall not, however,
issue certificates reserving the same name for two or more
consecutive 60-day periods to the same applicant or for the use or
benefit of the same person. No consecutive reservations shall be
made by or for the use or benefit of the same person of names so
similar as to fall within the prohibitions of subdivision (b).

begin delete SEC. 4. end delete

begin insert SEC. 5. end insert   

Section 25100 of the Corporations Code is amended
to read:

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 Business Oversight 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 that 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 Business Oversight 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
which is (1) 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 or (3) 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:

(A) 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.

(B) 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.

(C) 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.

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

(E) 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 one thousand dollars ($1,000). 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 Business
Oversight, 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 Business Oversight 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. 5. end delete

begin insert SEC. 6. 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 ancillary relief 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. 6. end delete

begin insert SEC. 7. end insert   

Section 25532 of the Corporations Code is amended
to read:

25532.  

(a) If, in the opinion of the commissioner, (1) the sale
of a security is subject to qualification under this law and it is being
or has been offered or sold without first being qualified, the
commissioner may order the issuer or offeror of the security to
desist and refrain from the further offer or sale of the security until
qualification has been made under this law or (2) the sale of a
security is subject to the requirements of Section 25100.1, 25101.1,
or 25102.1 and the security is being or has been offered or sold
without first meeting the requirements of those sections, the
commissioner may order the issuer or offeror of that security to
desist and refrain from the further offer or sale of the security until
those requirements have been met.

(b) If, in the opinion of the commissioner, a person has been or
is acting as a broker-dealer or investment adviser, or has been or
is engaging in broker-dealer or investment adviser activities, in
violation of Section 25210, 25230, or 25230.1, the commissioner
may order that person to desist and refrain from the activity until
the person has been appropriately licensed or the required filing
has been made under this law.

(c) If, in the opinion of the commissioner, a person has violated
or is violating Section 25401, the commissioner may order that
person to desist and refrain from the violation.

(d) If the commissioner determines that a person has engaged,
is engaging, or is about to engage in an act, practice, or course of
business constituting a violation of this division or a rule adopted
or order issued under this division, the commissioner may issue
an order directing the person to desist and refrain from engaging
in the act, practice, or course of business, or take other action
necessary or appropriate to comply with this division.

(e) If the commissioner determines it is in the public interest,
the commissioner may include in any administrative action brought
under this division 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.

(f) If, after an order has been served under subdivision (a), (b),
(c), or (d), 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 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, and the commissioner shall have all of the powers granted
under that chapter. 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 is not subject to
review by any court or agency, notwithstanding Section 25609.

The commissioner may file a certified copy of the final order
with the clerk of the superior court or any court of competent
jurisdiction. The order so filed has the same effect as a judgment
of the court and may be recorded, enforced, or satisfied in the same
manner as a judgment of the court.

If a person does not comply with an order under this section, the
commissioner may petition the superior court or any court of
competent jurisdiction to enforce the order. The court may not
require the commissioner to post a bond in an action or proceeding
under this section. If the court finds, after service and opportunity
for hearing, that the person was not in compliance with the order,
the court may adjudge the person in civil contempt of the order.
The court may impose a further civil penalty against the person
for contempt and may grant any other relief the court determines
is just and proper in the circumstances.

begin delete SEC. 7. end delete

begin insert SEC. 8. end insert   

Section 5100.2 of the Financial Code is amended to
read:

5100.2.  

For purposes of this division:

(a) Any reference to regulations of the federal Office of the
Comptroller of the Currency or the Federal Deposit Insurance
Corporation shall also be deemed to include and refer to regulations
adopted by the Federal Home Loan Bank Board or the Federal
Savings and Loan Insurance Corporation, to the extent these
regulations have been continued in effect and made enforceable
by the Office of the Comptroller of the Currency or Federal Deposit
Insurance Corporation, respectively, pursuant to the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989
(Public Law 101-73).

(b) Any reference to charters issued by the Office of the
Comptroller of the Currency shall also be deemed to include and
refer to charters issued by the Federal Home Loan Bank Board.

begin insert

begin insert SEC. 9. end insert   

end insert

begin insert Section 18139 of the end insert begin insert Financial Code end insert begin insert is amended to
read: end insert

18139.  

A sale, merger, or conversion involving an industrial
loan company and another industrial loan company, a bank, or a
savings association is subject to Division begin delete 1.5 end delete begin insert 1.6 end insert (commencing
with Section 4800).

begin delete SEC. 8. end delete

begin insert SEC. 10. end insert   

Section 18427.9 of the Financial Code is amended
to read:

18427.9.  

There shall be exempted from the provisions of
Section 18427.1 all of the following:

(a) (1) Any offer, not involving a public offering, to an affiliate
or to a person of the type described in subdivision (i) of Section
25102 of the Corporations Code or in the regulations of the
Commissioner of Business Oversight adopted thereunder.

(2) The execution and delivery of an agreement for the sale of
securities to any person of the type described in paragraph (1),
subject to all of the following:

(A) The agreement shall contain substantially the following
provision:

“The sale of the securities which are the subject of this agreement
has not been authorized by a permit issued by the Commissioner
of Business Oversight. The issuance of the securities or the
payment or receipt of any part of the consideration therefor prior
to the issuance of a permit is unlawful, unless the sale of securities
is exempt from Section 18427.1 of the California Financial Code.
The rights of all parties to this agreement are expressly conditioned
upon the issuance of a permit, unless the sale is so exempt.”

(B) No part of the purchase price may be paid or received, and
none of the securities may be issued, until a permit authorizing the
sale of the securities is issued, unless the sale is exempt from
Section 18427.1.

(b) Any transaction or security which the commissioner by
regulation or order exempts as not being comprehended within the
purposes of this article and the regulation of which he or she finds
is not necessary or appropriate in the public interest or for the
protection of investors.

begin delete SEC. 9. end delete

begin insert SEC. 11. 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 Business Oversight, 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.