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This bill would modify the definition of “telephonic seller” or “seller” to remove an outdated reference.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.
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:
P3 1(a) An officer or employee of the United States of America, or
2of this state or a political subdivision thereof, while the officer or
3employee is engaged in the performance of his or her official
4duties, including uniformed peace officers employed part time by
5a public agency pursuant to a written agreement between a chief
6of police or sheriff and the public agency, provided the part-time
7employment does not exceed 50 hours in a calendar month.
8(b) A person engaged exclusively in the business of obtaining
9and furnishing information as to the financial rating of persons.
10(c) A charitable philanthropic society or association incorporated
11under the laws of this state that is organized and duly maintained
12for the public good and not for private profit.
13(d) Patrol special police officers appointed by the police
14commission of a city, county, or city and county under the express
15terms of its charter who also under the express terms of the charter
16(1) are subject to suspension or dismissal after a hearing on charges
17duly filed with the commission after a fair and impartial trial, (2)
18must be not less than 18 years of age nor more than 40 years of
19age, (3) must possess physical qualifications prescribed by the
20commission, and (4) are designated by the police commission as
21the owners of a certain beat or territory as may be fixed from time
22to time by the police commission.
23(e) An attorney at law in performing his or her duties as an
24attorney at law.
25(f) A collection agency or an employee thereof while acting
26within the scope of his or her employment, while making an
27investigation incidental to the business of the agency, including
28an investigation of the location of a debtor or his or her property
29where the contract with an assignor creditor is for the collection
30of claims owed or due or asserted to be owed or due or the
32(g) Admitted insurers and agents and insurance brokers licensed
33by the state, performing duties in connection with insurance
34transacted by them.
35(h) A bank subject to the
jurisdiction of the Commissioner of
36Business Oversight under Division 1.1 (commencing with Section
371000) of the Financial Code or the Comptroller of the Currency
38of the United States.
39(i) A person engaged solely in the business of securing
40information about persons or property from public records.
P4 1(j) A peace officer of this state or a political subdivision thereof
2while the peace officer is employed by a private employer to
3engage in off-duty employment in accordance with Section 1126
4of the Government Code. However, nothing herein shall exempt
5such a peace officer who either contracts for his or her services or
6the services of others as a private patrol operator or contracts for
7his or her services as or is employed as an armed private security
8officer. For purposes of this subdivision, “armed security officer”
9means an individual who carries or uses a firearm in the course
10and scope of that contract or employment.
11(k) A retired peace officer of the state or political subdivision
12thereof when the retired peace officer is employed by a private
13employer in employment approved by the chief law enforcement
14officer of the jurisdiction where the employment takes place,
15provided that the retired officer is in a uniform of a public law
16enforcement agency, has registered with the bureau on a form
17approved by the director, and has met any training requirements
18or their equivalent as established for security personnel under
19Section 7583.5. This officer may not carry an unloaded and
20exposed handgun unless he or she is exempted under the provisions
21of Article 2 (commencing with Section 26361) of Chapter 6 of
22Division 5 of Title 4 of Part 6 of the Penal Code, may not carry
23an unloaded firearm that is not a handgun unless he or she is
24exempted under the provisions of Article 2 (commencing with
25Section 26405) of Chapter 7 of Division 5 of Title 4 of Part 6 of
26the Penal Code, and may not carry a loaded or concealed firearm
27unless he or she is exempted under the provisions of Sections
2825450 to 25475, inclusive, of the Penal Code or Sections 25900
29to 25910, inclusive, of the Penal Code or has met the requirements
30set forth in subdivision (d) of Section 26030 of the Penal Code.
31However, nothing herein shall exempt the retired peace officer
32who contracts for his or her services or the services of others as a
33private patrol operator.
34(l) A licensed insurance adjuster in performing his or her duties
35within the scope of his or her license as an insurance adjuster.
36(m) A savings association subject to the jurisdiction of the
37Commissioner of Business Oversight or the Office of the
38Comptroller of the Currency.
P5 1(n) A secured creditor engaged in the repossession of the
2creditor’s collateral and a lessor engaged in the repossession of
3leased property in which it claims an interest.
4(o) A peace officer in his or her official police uniform acting
5in accordance with subdivisions (c) and (d) of Section 70 of the
7(p) An unarmed, uniformed security person employed
8exclusively and regularly by a motion picture studio facility
9employer who does not provide contract security services for other
10entities or persons in connection with the affairs of that employer
11only and where there exists an employer-employee relationship if
12that person at no time carries or uses a deadly weapon, as defined
13in subdivision (a), in the performance of his or her duties, which
14may include, but are not limited to, the following business
16(1) The screening and monitoring access of employees of the
18(2) The screening and monitoring access of prearranged and
19preauthorized invited guests.
20(3) The screening and monitoring of vendors and suppliers.
21(4) Patrolling the private property facilities for the safety and
22welfare of all who have been legitimately authorized to have access
23to the facility.
24(q) An armored contract carrier operating armored vehicles
25pursuant to the authority of the Department of the California
26Highway Patrol or the Public Utilities Commission, or an armored
27vehicle guard employed by an armored contract carrier.
Section 17511.1 of the Business and Professions Code
29 is amended to read:
As used in this article, “telephonic seller” or “seller”
31means a person who, on his or her own behalf or through
32salespersons or through the use of an automatic dialing-announcing
33device, as defined in Section 2871 of the Public Utilities Code,
34causes a telephone solicitation or attempted telephone solicitation
35to occur which meets the criteria specified in subdivision (a), (b),
36(c), or (d) and who is not exempted by subdivision (e), as follows:
37(a) A telephone solicitation or attempted telephone solicitation
38wherein the telephonic seller initiates telephonic contact with a
39prospective purchaser and represents or implies one or more of
P6 1(1) That a prospective purchaser who buys one or more items
2will also receive additional or other items, whether or not of the
3same type as purchased, without further cost. For purposes of this
4subdivision, “further cost” does not include actual postage or
5common carrier delivery charges, if any.
6(2) That a prospective purchaser will receive a prize or gift, if
7the person also encourages the prospective purchaser to do either
8of the following:
9(A) Purchase or rent any goods or services.
10(B) Pay any money, including, but not limited to, a delivery or
12(3) That a prospective purchaser is able to obtain any item or
13service at a price which the seller states or implies is below the
14regular price of the item or service offered. This paragraph shall
15not apply to retailers who, within the previous 12 months, have
16 sold a majority of their goods or services through in-person sales
17at retail stores.
18(4) That a prospective purchaser who buys office equipment or
19supplies will, because of some unusual event or imminent price
20increase, be able to buy these items at prices which are below those
21that are usually charged or will be charged for the items.
22(5) That the seller is a person other than the person he or she is.
23(6) That the items for sale are manufactured or supplied by a
24person other than the actual manufacturer or supplier.
25(7) That the seller is offering to sell the prospective purchaser
26any gold, silver, or other metals, including coins, diamonds, rubies,
27sapphires, or other stones, coal or other minerals, or any interest
28in oil, gas, or mineral fields, wells, or exploration sites, or any
29other investment opportunity of any type whatsoever.
30(8) That the seller is offering to make a loan, or to arrange or
31assist in arranging a loan or to assist in providing information
32which may lead to the obtaining of a loan, unless no payment of
33any kind is made until the loan proceeds are disbursed to the
35(9) That a prospective purchaser will receive a credit card, as
36defined in subdivision (a) of Section 1747.02 of the Civil Code,
37if the purchaser pays an upfront or preapplication fee for the credit
38card to the telephonic seller.
39(b) A solicitation or attempted solicitation which is made
40telephone in response to inquiries generated by unrequested
P7 1notifications sent by the seller to persons who have not previously
2purchased goods or services from the seller or who have not
3previously requested credit from the seller, to a prospective
4purchaser wherein the seller represents or implies to the recipient
5of the notification that any of the following applies to the recipient:
6(1) That the recipient has in any manner been specially selected
7to receive the notification or the offer contained in the notification.
8(2) That the recipient will receive a prize or gift if the recipient
9calls the seller.
10(3) That if the recipient buys one or more items from the seller,
11the recipient will also receive additional or other items, whether
12or not of the same type as purchased, without further cost or at a
13cost which the seller states or implies is less than the regular price
14of such items.
15However, this subdivision does not apply to the solicitation of
16 sales by a catalog seller who periodically issues and delivers
17catalogs to potential purchasers by mail or by other means. This
18exception only applies if the catalog includes a written description
19or illustration and the sales price of each item of merchandise
20offered for sale, includes at least 24 full pages of written material
21or illustrations, is distributed in more than one state, and has an
22annual circulation of not less than 250,000 customers.
23(c) A solicitation or attempted solicitation which is made by
24telephone in response to inquiries generated by advertisements on
25behalf of the telephonic seller wherein it is represented or implied
26that the seller is offering to sell to the prospective purchaser any
27gold, silver, or other metals, including coins, diamonds, rubies,
28sapphires, or other stones, coal or other minerals, or any interest
29in oil, gas, or mineral fields, wells, or exploration sites, or any
30other investment opportunity of any type whatsoever.
31(d) A solicitation or attempted solicitation which is made by
32telephone in response to inquiries generated by advertisements on
33behalf of the telephonic seller wherein it is represented or implied
34that the seller is offering to make a loan or to arrange or assist in
35arranging a loan or to assist in providing information which may
36lead to the obtaining of a loan, unless no payment of any kind is
37made until the loan proceeds are disbursed to the borrower.
38(e) For purposes of this article, “telephonic seller” or “seller”
39does not include any of the following:
P8 1(1) A person offering or selling a
security qualified under
2Section 25110, 25120, or 25130 of the Corporations Code or
3exempt from qualification under Chapter 1 (commencing with
4Section 25100) of Part 2 of Division 1 of Title 4 of the
5Corporations Code. The fact that a notice claiming an exemption
6under the Corporate Securities Law of 1968 is filed with the
7Department of Business Oversight does not create an exemption
8under this paragraph.
9(2) A person licensed pursuant to Part 1 (commencing with
10Section 10000) of Division 4, when the solicited transaction is
11governed by that law.
12(3) A person licensed pursuant to Chapter 9 (commencing with
13Section 7000) of Division 3, when the solicited transaction is
14governed by that law.
15(4) A person
licensed or certificated pursuant to Part 2
16(commencing with Section 680) of Division 1 of the Insurance
17Code, including a person licensed pursuant to Chapter 5
18(commencing with Section 1621) thereof, when the solicited
19transaction is governed by that law.
20(5) A person offering or selling a franchise registered pursuant
21to Section 31110 of the Corporations Code or exempt from
22registration under Chapter 1 (commencing with Section 31100)
23of Part 2 of Division 5 of Title 4 of the Corporations Code. The
24fact that a notice claiming an exemption under the Franchise
25Investment Law is filed with the Department of Business Oversight
26does not create an exemption under this paragraph.
27(6) A person soliciting the sale of a seller assisted marketing
28plan, as defined in Title 2.7 (commencing with Section 1812.200)
29of Part 4 of Division 3 of the Civil Code, who has filed with the
30Attorney General the documents required by Section 1812.203 of
31the Civil Code.
32(7) A person primarily soliciting the sale of a newspaper of
33general circulation, as defined in Article 1 (commencing with
34Section 6000) of Chapter 1 of Division 7 of Title 1 of the
35Government Code, a magazine, or membership in a book or record
36club whose program operates in conformity with the requirements
37of Section 1584.5 of the Civil Code.
38(8) A person soliciting business from prospective purchasers
39who have previously purchased from the business enterprise for
40which the person is calling.
P9 1(9) A person soliciting without the intent to complete
2does not complete the sales presentation during the telephone
3solicitation but completes the sales presentation at a later
4face-to-face meeting between the solicitor and the prospective
5purchaser. However, if a seller, directly following a telephone
6solicitation, causes an individual whose primary purpose it is to
7go to the prospective purchaser to collect the payment or deliver
8any item purchased, this exemption does not apply.
9(10) Any supervised financial institution or parent, subsidiary,
10or subsidiary of parent thereof. As used in this paragraph,
11“supervised financial institution” means any commercial bank,
12trust company, savings and loan association, credit union, industrial
13loan company, finance lender or broker, or insurer, provided that
14the institution is subject to supervision by an official or agency of
15this state or of the United States.
16(11) A person soliciting the sale of a preneed funeral
17arrangement regulated by Article 9 (commencing with Section
187735) of Chapter 12 of Division 3.
19(12) A person licensed pursuant to Chapter 19 (commencing
20with Section 9600) of Division 3 when acting pursuant to that
22(13) A person soliciting the sale of services provided by a cable
23television system licensed or franchised pursuant to Section 53066
24of the Government Code or any other authority.
25(14) A person or an affiliate of a person whose business is
26regulated by the Public Utilities Commission.
person soliciting the sale of a commodity pursuant to
28Part 2 (commencing with Section 58601) of Division 21 of the
29Food and Agricultural Code, if the solicitation neither intends to,
30nor actually results in, a sale which costs the purchaser in excess
31of one hundred dollars ($100).
32(16) An issuer or subsidiary of an issuer that has a security listed
33on a national securities exchange if the exchange has been certified
34by rule or order of the Commissioner of Business Oversight under
35subdivision (o) of Section 25100 of the Corporations Code. A
36subsidiary of an issuer that qualifies for exemption under this
37paragraph is not itself exempt unless not less than 60 percent of
38the voting power of its shares is owned by the qualifying issuer or
P10 1(17) A person soliciting exclusively the sale of telephone
2answering services to be provided by that person or that person’s
4(18) A person soliciting a transaction regulated by the
5 Commodity Futures Trading Commission if the person is registered
6or temporarily licensed for this activity with the Commodity
7Futures Trading Commission under the Commodity Exchange Act
8(7 U.S.C. Sec. 1 et seq.), and the registration or license has not
9expired or been suspended or revoked.
10(19) A person who sells coins or bullion at a price which is not
11more than 25 percent more than the price at which the seller is
12concurrently buying the same coins or bullion, if: (A) the seller
13has had a retail location in California from which he or she has
14been selling coins or bullion to the public in person for at least
15three years; (B) the telephonic solicitations are not the person’s
16primary business and sales made telephonically make up less than
1720 percent of the person’s total retail sales; and (C) the person
18claiming an exemption pursuant to this subdivision complies with
19Section 17511.3, as applicable, and subdivision (p) of Section
21(20) A person licensed pursuant to Division 1.2 (commencing
22with Section 2000) of the Financial Code to engage in the business
23of money transmission if the license has not expired or been
24suspended or revoked.
25(21) A person licensed as a residential mortgage lender or
26servicer pursuant to Division 20 (commencing with Section 50000)
27of the Financial Code, when acting under the authority of that
29(22) A corporation that meets all of the following conditions:
30(A) It has been exempt from taxation under Section 23701e of
31the Revenue and Taxation Code for a minimum of 10 years.
32(B) It has maintained its principal purpose for a minimum of
34(C) It has been incorporated in the state for a minimum of 25
36(f) In any civil proceeding alleging a violation of this article,
37the burden of proving an exemption or an exception from a
38definition is upon the person claiming it, and in any criminal
39proceeding alleging a violation of this article, the burden of
P11 1producing evidence to support a defense based upon an exemption
2or an exception from a definition is upon the person claiming it.
3(g) Compliance with this article does not satisfy nor substitute
4for any requirements for license, registration, or regulation
5mandated by other laws.
Section 2510 of the Corporations Code is amended to
“Social purpose corporation subject to the Banking Law”
9means any of the following:
10(a) A social purpose corporation that, with the approval of the
11Commissioner of Business Oversight, is incorporated for the
12purpose of engaging in, or that is authorized by the Commissioner
13of Business Oversight to engage in, the commercial banking
14business under the Banking Law (Division 1.1 (commencing with
15Section 1000) of the Financial Code).
16(b) Any social purpose corporation that, with the approval of
17the Commissioner of Business Oversight, is incorporated for the
18purpose of engaging in, or that is authorized by the Commissioner
19of Business Oversight to engage in, the industrial banking business
20under the Banking Law (Division 1.1 (commencing with Section
211000) of the Financial Code).
22(c) Any social purpose corporation, other than a social purpose
23corporation described in subdivision (d), that, with the approval
24of the Commissioner of Business Oversight, is incorporated for
25the purpose of engaging in, or that is authorized by the
26Commissioner of Business Oversight to engage in, the trust
27business under the Banking Law (Division 1.1 (commencing with
28Section 1000) of the Financial Code).
29(d) Any social purpose corporation that is authorized by the
30Commissioner of Business Oversight and the Commissioner of
31Insurance to maintain a title insurance department to engage in
32title insurance business and a trust department to engage in trust
34(e) Any social purpose corporation that, with the approval of
35the Commissioner of Business Oversight, is incorporated for the
36purpose of engaging in, or that is authorized by the Commissioner
37of Business Oversight to engage in, business under Article 1
38(commencing with Section 1850) of Chapter 21 of Division 1.1
39of the Financial Code.
(a) The Secretary of State shall not file articles setting
4forth a name in which “bank,” “trust,” “trustee,” or related words
5appear, unless the certificate of approval of the Commissioner of
6Business Oversight is attached to the articles. This subdivision
7does not apply to the articles of any social purpose corporation
8subject to the Banking Law on which is endorsed the approval of
9the Commissioner of Business
begin delete Oversight or to which a certificate
10of approval of the Commissioner of Business Oversight is attached
11to the articles.end delete
12(b) (1) The
Secretary of State shall not file articles that set forth
13a name that is likely to mislead the public or that is the same as,
14or resembles so closely as to tend to deceive, the name of a
15domestic corporation, the name of a domestic social purpose
16corporation, or the name of a foreign corporation that is authorized
17to transact intrastate business or has registered its name pursuant
18to Section 2101, a name that a foreign corporation has assumed
19under subdivision (b) of Section 2106, a name that will become
20the record name of a corporation or social purpose corporation or
21a foreign corporation upon the effective date of a filed corporate
22instrument where there is a delayed effective date pursuant to
23subdivision (c) of Section 110 or subdivision (c) of Section 5008,
24or a name that is under reservation for another corporation or social
25purpose corporation pursuant to this title, except that a social
26purpose corporation may adopt a name that is substantially the
27same as an existing corporation or social purpose corporation,
28foreign or domestic, which is authorized to transact intrastate
29business or has registered its name pursuant to Section 2101, upon
30proof of consent by the domestic or foreign corporation or social
31purpose corporation and a finding by the Secretary of State that
32under the circumstances the public is not likely to be misled. The
33use by a social purpose corporation of a name in violation of this
34section may be enjoined notwithstanding the filing of its articles
35by the Secretary of State.
36(2) A corporation formed pursuant to this division before
37January 1, 2015, may elect to change its status from a flexible
38purpose corporation to a social purpose corporation by amending
39its articles of incorporation to change its name to replace “flexible
40purpose corporation” with “social purpose corporation” and to
P13 1replace the term “flexible purpose corporation” with “social
2purpose corporation” as applicable in any statements contained in
3the articles. For any flexible purpose corporation formed prior to
4January 1, 2015, that has not amended its articles of incorporation
5to change its status to a social purpose corporation, any reference
6in this division to social purpose corporation shall be deemed a
7reference to “flexible purpose corporation.”
8(c) Any applicant may, upon payment of the fee prescribed in
9Article 3 (commencing with Section 12180) of Chapter 3 of Part
102 of Division 3 of Title 2 of the Government Code, obtain from
11the Secretary of State a certificate of reservation of any name not
12prohibited by subdivision (b), and upon the issuance of the
13certificate the name stated in the certificate shall be reserved for
14a period of 60 days. The Secretary of State shall not, however,
15issue certificates reserving the same name for two or more
16consecutive 60-day periods to the same applicant or for the use or
17benefit of the same person. No consecutive reservations shall be
18made by or for the use or benefit of the same person of names so
19similar as to fall within the prohibitions of subdivision (b).
Section 25100 of the Corporations Code is amended
The following securities are exempted from Sections
2425110, 25120, and 25130:
25(a) Any security (including a revenue obligation) issued or
26guaranteed by the United States, any state, any city, county, city
27and county, public district, public authority, public corporation,
28public entity, or political subdivision of a state or any agency or
29corporate or other instrumentality of any one or more of the
30foregoing; or any certificate of deposit for any of the foregoing.
31(b) Any security issued or guaranteed by Canada, any Canadian
32province, any political subdivision or municipality of that province,
33or by any other foreign government with which the United States
34currently maintains diplomatic relations, if the security is
35 recognized as a valid obligation by the issuer or guarantor; or any
36certificate of deposit for any of the foregoing.
37(c) Any security issued or guaranteed by and representing an
38interest in or a direct obligation of a national bank or a bank or
39trust company incorporated under the laws of this state, and any
P14 1security issued by a bank to one or more other banks and
2representing an interest in an asset of the issuing bank.
3(d) Any security issued or guaranteed by a federal savings
4association or federal savings bank or federal land bank or joint
5land bank or national farm loan association or by any savings
6association, as defined in subdivision (a) of Section 5102 of the
7Financial Code, which is subject to the supervision and regulation
8of the Commissioner of Business Oversight of this state.
9(e) Any security (other than an interest in all or portions of a
10parcel or parcels of real property which are subdivided land or a
11subdivision or in a real estate development), the issuance of which
12is subject to authorization by the Insurance Commissioner, the
13Public Utilities Commission, or the Real Estate Commissioner of
15(f) Any security consisting of any interest in all or portions of
16a parcel or parcels of real property that are subdivided lands or a
17subdivision or in a real estate development; provided that the
18exemption in this subdivision shall not be applicable to: (1) any
19investment contract sold or offered for sale with, or as part of, that
20interest, or (2) any person engaged in the business of selling,
21distributing, or supplying water for irrigation purposes or domestic
22use that is not a public utility except that the exemption is
23applicable to any security of a mutual water company (other than
24an investment contract as described in paragraph (1)) offered or
25sold in connection with subdivided lands pursuant to Chapter 2
26(commencing with Section 14310) of Part 7 of Division 3 of Title
28(g) Any mutual capital certificates or savings accounts, as
29defined in the Savings Association Law, issued by a savings
30association, as defined by subdivision (a) of Section 5102 of the
31Financial Code, and holding a license or certificate of authority
32then in force from the Commissioner of Business Oversight of this
34(h) Any security issued or guaranteed by any federal credit
35union, or by any credit union organized and supervised, or
36regulated, under the Credit Union Law.
37(i) Any security issued or guaranteed by any railroad, other
38common carrier, public utility, or public utility holding company
39which is (1) subject to the jurisdiction of the Interstate Commerce
40 Commission or its successor or (2) a holding company registered
P15 1with the Securities and Exchange Commission under the Public
2Utility Holding Company Act of 1935 or a subsidiary of that
3company within the meaning of that act or (3) regulated in respect
4of the issuance or guarantee of the security by a governmental
5authority of the United States, of any state, of Canada or of any
6Canadian province; and the security is subject to registration with
7or authorization of issuance by that authority.
8(j) Any security (except evidences of indebtedness, whether
9interest bearing or not) of an issuer (1) organized exclusively for
10educational, benevolent, fraternal, religious, charitable, social, or
11reformatory purposes and not for pecuniary profit, if no part of the
12net earnings of the issuer inures to the benefit of any private
13shareholder or individual, or (2) organized as a chamber of
14commerce or trade or professional association. The fact that
15amounts received from memberships or dues or both will or may
16be used to construct or otherwise acquire facilities for use by
17members of the nonprofit organization does not disqualify the
18organization for this exemption. This exemption does not apply
19to the securities of any nonprofit organization if any promoter
20thereof expects or intends to make a profit directly or indirectly
21from any business or activity associated with the organization or
22operation of that nonprofit organization or from remuneration
23received from that nonprofit organization.
24(k) Any agreement, commonly known as a “life income
25contract,” of an issuer (1) organized exclusively for educational,
26benevolent, fraternal, religious, charitable, social, or reformatory
27purposes and not for pecuniary profit and (2) which the
28commissioner designates by rule or order, with a donor in
29consideration of a donation of property to that issuer and providing
30for the payment to the donor or persons designated by him or her
31of income or specified periodic payments from the donated
32property or other property for the life of the donor or those other
34(l) Any note, draft, bill of exchange, or banker’s acceptance
35which is freely transferable and of prime quality, arises out of a
36current transaction or the proceeds of which have been or are to
37be used for current transactions, and which evidences an obligation
38to pay cash within nine months of the date of issuance, exclusive
39of days of grace, or any renewal of that paper which is likewise
40limited, or any guarantee of that paper or of that renewal, provided
P16 1that the paper is not offered to the public in amounts of less than
2twenty-five thousand dollars ($25,000) in the aggregate to any one
3purchaser. In addition, the commissioner may, by rule or order,
4exempt any issuer of any notes, drafts, bills of exchange or banker’s
5acceptances from qualification of those securities when the
6 commissioner finds that the qualification is not necessary or
7appropriate in the public interest or for the protection of investors.
8(m) Any security issued by any corporation organized and
9existing under the provisions of Chapter 1 (commencing with
10Section 54001) of Division 20 of the Food and Agricultural Code.
11(n) Any beneficial interest in an employees’ pension,
12profit-sharing, stock bonus, or similar benefit plan which meets
13the requirements for qualification under Section 401 of the federal
14Internal Revenue Code or any statute amendatory thereof or
15supplementary thereto. A determination letter from the Internal
16Revenue Service stating that an employees’ pension, profit-sharing,
17stock bonus, or similar benefit plan meets those requirements shall
18be conclusive evidence that the plan is an employees’ pension,
19profit-sharing, stock bonus, or similar benefit plan within the
20 meaning of the first sentence of this subdivision until the date the
21determination letter is revoked in writing by the Internal Revenue
22Service, regardless of whether or not the revocation is retroactive.
23(o) Any security listed or approved for listing upon notice of
24issuance on a national securities exchange, if the exchange has
25been certified by rule or order of the commissioner and any warrant
26or right to purchase or subscribe to the security. The exemption
27afforded by this subdivision does not apply to securities listed or
28approved for listing upon notice of issuance on a national securities
29exchange, in a rollup transaction unless the rollup transaction is
30an eligible rollup transaction as defined in Section 25014.7.
31That certification of any exchange shall be made by the
32commissioner upon the written request of the exchange if the
33commissioner finds that the exchange, in acting on applications
34 for listing of common stock, substantially applies the minimum
35standards set forth in either subparagraph (A) or (B) of paragraph
36(1), and, in considering suspension or removal from listing,
37substantially applies each of the criteria set forth in paragraph (2).
38(1) Listing standards:
39(A) (i) Shareholders’ equity of at least four million dollars
P17 1(ii) Pretax income of at least seven hundred fifty thousand
2dollars ($750,000) in the issuer’s last fiscal year or in two of its
3last three fiscal years.
4(iii) Minimum public distribution of 500,000 shares (exclusive
5of the holdings of officers, directors, controlling shareholders, and
6other concentrated or family holdings), together with a minimum
7of 800 public holders or minimum public distribution of 1,000,000
8shares together with a minimum of 400 public holders. The
9exchange may also consider the listing of a company’s securities
10if the company has a minimum of 500,000 shares publicly held, a
11minimum of 400 shareholders and daily trading volume in the
12issue has been approximately 2,000 shares or more for the six
13months preceding the date of application. In evaluating the
14suitability of an issue for listing under this trading provision, the
15exchange shall review the nature and frequency of that activity
16and any other factors as it may determine to be relevant in
17ascertaining whether the issue is suitable for trading. A security
18that trades infrequently shall not be considered for listing under
19this paragraph even though average daily volume amounts to 2,000
20shares per day or more.
21Companies whose securities are concentrated in a limited
22geographical area, or whose securities are largely held in block by
23institutional investors, normally may not be considered eligible
24for listing unless the public distribution appreciably exceeds
26(iv) Minimum price of three dollars ($3) per share for a
27reasonable period of time prior to the filing of a listing application;
28provided, however, in certain instances an exchange may favorably
29consider listing an issue selling for less than three dollars ($3) per
30share after considering all pertinent factors, including market
31conditions in general, whether historically the issue has sold above
32three dollars ($3) per share, the applicant’s capitalization, and the
33number of outstanding and publicly held shares of the issue.
34(v) An aggregate market value for publicly held shares of at
35least three million dollars ($3,000,000).
36(B) (i) Shareholders’ equity of at least four million dollars
38(ii) Minimum public distribution set forth in clause (iii) of
39subparagraph (A) of paragraph (1).
40(iii) Operating history of at least three years.
P18 1(iv) An aggregate market value for publicly held shares of at
2least fifteen million dollars ($15,000,000).
3(2) Criteria for consideration of suspension or removal from
5(A) If a company that (A) has shareholders’ equity of less than
6one million dollars ($1,000,000) has sustained net losses in each
7of its two most recent fiscal years, or (B) has net tangible assets
8of less than three million dollars ($3,000,000) and has sustained
9net losses in three of its four most recent fiscal years.
10(B) If the number of shares publicly held (excluding the holdings
11of officers, directors, controlling shareholders, and other
12concentrated or family holdings) is less than 150,000.
13(C) If the total number of shareholders is less than 400 or if the
14number of shareholders of lots of 100 shares or more is less than
16(D) If the aggregate market
value of shares publicly held is less
17than seven hundred fifty thousand dollars ($750,000).
18(E) If shares of common stock sell at a price of less than three
19dollars ($3) per share for a substantial period of time and the issuer
20shall fail to effectuate a reverse stock split of the shares within a
21reasonable period of time after being requested by the exchange
22to take that action.
23A national securities exchange, certified by rule or order of the
24commissioner under this subdivision, shall file annual reports when
25requested to do so by the commissioner. The annual reports shall
26contain, by issuer: the variances granted to an exchange’s listing
27standards, including variances from corporate governance and
28voting rights’ standards, for any security of that issuer; the reasons
29for the variances; a discussion of the review procedure instituted
30by the exchange to determine the effect of the variances on
31investors and whether the variances should be continued; and any
32other information that the commissioner deems relevant. The
33purpose of these reports is to assist the commissioner in
34determining whether the quantitative and qualitative requirements
35of this subdivision are substantially being met by the exchange in
36general or with regard to any particular security.
37The commissioner after appropriate notice and opportunity for
38hearing in accordance with the provisions of the Administrative
39Procedure Act, Chapter 5 (commencing with Section 11500) of
40Part 1 of Division 3 of Title 2 of the Government Code, may, in
P19 1his or her discretion, by rule or order, decertify any exchange
2previously certified that ceases substantially to apply the minimum
3standards or criteria as set forth in paragraphs (1) and (2).
4A rule or order of certification shall conclusively establish that
5any security listed or approved for listing upon notice of issuance
6on any exchange named in a rule or order of certification, and any
7warrant or right to purchase or subscribe to that security, is exempt
8under this subdivision until the adoption by the commissioner of
9any rule or order decertifying the exchange.
10(p) A promissory note secured by a lien on real property, which
11is neither one of a series of notes of equal priority secured by
12 interests in the same real property nor a note in which beneficial
13interests are sold to more than one person or entity.
14(q) Any unincorporated interindemnity or reciprocal or
15interinsurance contract, that qualifies under the provisions of
16Section 1280.7 of the Insurance Code, between members of a
17cooperative corporation, organized and operating under Part 2
18(commencing with Section 12200) of Division 3 of Title 1, and
19whose members consist only of physicians and surgeons licensed
20in California, which contracts indemnify solely in respect to
21medical malpractice claims against the members, and which do
22not collect in advance of loss any moneys other than contributions
23by each member to a collective reserve trust fund or for necessary
24expenses of administration.
25(1) Whenever it appears to the commissioner that any person
26has engaged or is about to engage in any act or practice constituting
27a violation of any provision of Section 1280.7 of the Insurance
28Code, the commissioner may, in the commissioner’s discretion,
29bring an action in the name of the people of the State of California
30in the superior court to enjoin the acts or practices or to enforce
31compliance with Section 1280.7 of the Insurance Code. Upon a
32proper showing a permanent or preliminary injunction, a restraining
33order, or a writ of mandate shall be granted and a receiver or
34conservator may be appointed for the defendant or the defendant’s
36(2) The commissioner may, in the commissioner’s discretion,
37(A) make public or private investigations within or outside of this
38state as the commissioner deems necessary to determine whether
39any person has violated or is about to violate any provision of
40Section 1280.7 of the Insurance Code or to aid in the enforcement
P20 1of Section 1280.7, and (B) publish information concerning the
2violation of Section 1280.7.
3(3) For the purpose of any investigation or proceeding under
4this section, the commissioner or any officer designated by the
5commissioner may administer oaths and affirmations, subpoena
6witnesses, compel their attendance, take evidence, and require the
7production of any books, papers, correspondence, memoranda,
8agreements, or other documents or records which the commissioner
9deems relevant or material to the inquiry.
10(4) In case of contumacy by, or refusal to obey a subpoena
11issued to, any person, the superior court, upon application by the
12commissioner, may issue to the person an order requiring the
13person to appear before the commissioner, or the officer designated
14by the commissioner, to produce documentary evidence, if so
15ordered, or to give evidence touching the matter under investigation
16or in question. Failure to obey the order of the court may be
17punished by the court as a contempt.
18(5) No person is excused from attending or testifying or from
19producing any document or record before the commissioner or in
20obedience to the subpoena of the commissioner or any officer
21designated by the commissioner, or in any proceeding instituted
22by the commissioner, on the ground that the testimony or evidence
23(documentary or otherwise), required of the person may tend to
24incriminate the person or subject the person to a penalty or
25forfeiture, but no individual may be prosecuted or subjected to any
26penalty or forfeiture for or on account of any transaction, matter,
27or thing concerning which the person is compelled, after validly
28claiming the privilege against self-incrimination, to testify or
29produce evidence (documentary or otherwise), except that the
30individual testifying is not exempt from prosecution and
31punishment for perjury or contempt committed in testifying.
32(6) The cost of any review, examination, audit, or investigation
33made by the commissioner under Section 1280.7 of the Insurance
34Code shall be paid to the commissioner by the person subject to
35the review, examination, audit, or investigation, and the
36commissioner may maintain an action for the recovery of these
37costs in any court of competent jurisdiction. In determining the
38cost, the commissioner may use the actual amount of the salary or
39other compensation paid to the persons making the review,
40examination, audit, or investigation plus the actual amount of
P21 1expenses including overhead reasonably incurred in the
2performance of the work.
3The recoverable cost of each review, examination, audit, or
4investigation made by the commissioner under Section 1280.7 of
5the Insurance Code shall not exceed twenty-five thousand dollars
6($25,000), except that costs exceeding twenty-five thousand dollars
7($25,000) shall be recoverable if the costs are necessary to prevent
8a violation of any provision of Section 1280.7 of the Insurance
10(r) Any shares or memberships issued by any corporation
11organized and existing pursuant to the provisions of Part 2
12(commencing with Section 12200) of Division 3 of Title 1,
13provided the aggregate investment of any shareholder or member
14in shares or memberships sold pursuant to this subdivision does
15not exceed one thousand dollars ($1,000). This exemption does
16not apply to the shares or memberships of that corporation if any
17promoter thereof expects or intends to make a profit directly or
18indirectly from any business or activity associated with the
19corporation or the operation of the corporation or from
20remuneration, other than reasonable salary, received from the
21corporation. This exemption does not apply to nonvoting shares
22or memberships of that corporation issued to any person who does
23not possess, and who will not acquire in connection with the
24issuance of nonvoting shares or memberships, voting power
25(Section 12253) in the corporation. This exemption also does not
26apply to shares or memberships issued by a nonprofit cooperative
27corporation organized to facilitate the creation of an unincorporated
28interindemnity arrangement that provides indemnification for
29medical malpractice to its physician and surgeon members as set
30forth in subdivision (q).
31(s) Any security consisting of or representing an interest in a
32pool of mortgage loans that meets each of the following
34(1) The pool consists of whole mortgage loans or participation
35interests in those loans, which loans were originated or acquired
36in the ordinary course of business by a national bank or federal
37savings association or federal savings bank having its principal
38office in this state, by a bank incorporated under the laws of this
39state or by a savings association as defined in subdivision (a) of
40Section 5102 of the Financial Code and which is subject to the
P22 1supervision and regulation of the Commissioner of Business
2Oversight, and each of which at the time of transfer to the pool is
3an authorized investment for the originating or acquiring institution.
4(2) The pool of mortgage loans is held in trust by a trustee which
5is a financial institution specified in paragraph (1) as trustee or
7(3) The loans are serviced by a financial institution specified in
9(4) The security is not offered in amounts of less than
10twenty-five thousand dollars ($25,000) in the aggregate to any one
12(5) The security is offered pursuant to a registration under the
13Securities Act of 1933, or pursuant to an exemption under
14Regulation A under that act, or in the opinion of counsel for the
15issuer, is offered pursuant to an exemption under Section 4(2) of
17(t) (1) Any security issued or guaranteed by and representing
18an interest in or a direct obligation of an industrial loan company
19incorporated under the laws of the state and authorized by the
20Commissioner of Business Oversight to engage in industrial loan
22(2) Any investment certificate in or issued by any industrial
23loan company that is organized under the laws of a state of the
24United States other than this state, that is insured by the Federal
25Deposit Insurance Corporation, and that maintains a branch office
26in this state.
Section 25254 of the Corporations Code is amended
(a) If the commissioner determines it is in the public
31interest, the commissioner may include in any administrative action
32brought under this part a claim for ancillary relief, including, but
33not limited to, a claim for restitution or disgorgement or damages
34on behalf of the persons injured by the act or practice constituting
35the subject matter of the action, and the administrative law judge
36shall have jurisdiction to award additional relief.
37(b) In an administrative action brought under this part, the
38commissioner is entitled to recover costs, which in the discretion
39of the administrative law judge may include an amount representing
40reasonable attorney’s fees and investigative expenses for the
P23 1services rendered, for deposit into the State Corporations Fund for
2the use of the Department of Business Oversight.
3(c) After the exhaustion of the review procedures provided in
4accordance with the provisions of the Administrative Procedure
5Act, Chapter 5 (commencing with Section 11500) of Part 1 of
6Division 3 of Title 2 of the Government Code, the commissioner
7may apply to the appropriate superior court for a judgment in the
8amount of the ancillary relief and costs awarded in a final decision
9and order compelling the respondent, or the named or cited person,
10to comply with the final decision of the commissioner brought
11under this division. The application shall include a certified copy
12of the final decision of the commission and shall constitute a
13sufficient showing to warrant the issuance of the judgment and
14order from superior court.
Section 25532 of the Corporations Code is amended
(a) If, in the opinion of the commissioner, (1) the sale
19of a security is subject to qualification under this law and it is being
20or has been offered or sold without first being qualified, the
21commissioner may order the issuer or offeror of the security to
22desist and refrain from the further offer or sale of the security until
23qualification has been made under this law or (2) the sale of a
24security is subject to the requirements of Section 25100.1, 25101.1,
25or 25102.1 and the security is being or has been offered or sold
26without first meeting the requirements of those sections, the
27commissioner may order the issuer or offeror of that security to
28desist and refrain from the further offer or sale of the security until
29those requirements have been met.
30(b) If, in the opinion of the commissioner, a person has been or
31is acting as a broker-dealer or investment adviser, or has been or
32is engaging in broker-dealer or investment adviser activities, in
33violation of Section 25210, 25230, or 25230.1, the commissioner
34may order that person to desist and refrain from the activity until
35the person has been appropriately licensed or the required filing
36has been made under this law.
37(c) If, in the opinion of the commissioner, a person has violated
38or is violating Section 25401, the commissioner may order that
39person to desist and refrain from the violation.
P24 1(d) If the commissioner determines that a person has engaged,
2is engaging, or is about to engage in an act, practice, or course of
3business constituting a violation of this division or a rule adopted
4or order issued under this division, the commissioner may issue
5an order directing the person to desist and refrain from engaging
6in the act, practice, or course of business, or take other action
7necessary or appropriate to comply with this division.
8(e) If the commissioner determines it is in the public interest,
9the commissioner may include in any administrative action brought
10under this division a claim for ancillary relief, including, but not
11limited to, a claim for restitution or disgorgement or damages on
12behalf of the persons injured by the act or practice constituting the
13subject matter of the action, and the administrative law judge shall
14have jurisdiction to award additional relief.
after an order has been served under subdivision (a), (b),
16(c), or (d), a request for hearing is filed in writing within 30 days
17of the date of service of the order by the person to whom the order
18was directed, a hearing shall be held in accordance with provisions
19of the Administrative Procedure Act, Chapter 5 (commencing with
20Section 11500) of Part 1 of Division 3 of Title 2 of the Government
21Code, and the commissioner shall have all of the powers granted
22under that chapter. Unless the hearing is commenced within 15
23business days after the request is filed (or the person affected
24consents to a later date), the order is rescinded.
25If that person fails to file a written request for a hearing within
2630 days from the date of service of the order, the order shall be
27deemed a final order of the commissioner and is not subject to
28review by any court or agency, notwithstanding Section 25609.
29The commissioner may file a certified copy of the final order
30with the clerk of the superior court or any court of competent
31 jurisdiction. The order so filed has the same effect as a judgment
32of the court and may be recorded, enforced, or satisfied in the same
33manner as a judgment of the court.
34If a person does not comply with an order under this section, the
35commissioner may petition the superior court or any court of
36competent jurisdiction to enforce the order. The court may not
37require the commissioner to post a bond in an action or proceeding
38under this section. If the court finds, after service and opportunity
39for hearing, that the person was not in compliance with the order,
40the court may adjudge the person in civil contempt of the order.
P25 1The court may impose a further civil penalty against the person
2for contempt and may grant any other relief the court determines
3is just and proper in the circumstances.
Section 5100.2 of the Financial Code is amended to
For purposes of this division:
8(a) Any reference to regulations of the federal Office of the
9Comptroller of the Currency or the Federal Deposit Insurance
10Corporation shall also be deemed to include and refer to regulations
11adopted by the Federal Home Loan Bank Board or the Federal
12Savings and Loan Insurance Corporation, to the extent these
13regulations have been continued in effect and made enforceable
14by the Office of the Comptroller of the Currency or Federal Deposit
15Insurance Corporation, respectively, pursuant to the Financial
16Institutions Reform, Recovery, and Enforcement Act of 1989
17(Public Law 101-73).
18(b) Any reference to charters issued by the Office of the
19Comptroller of the Currency shall also be deemed to include and
20refer to charters issued by the Federal Home Loan Bank Board.
A sale, merger, or conversion involving an industrial
24loan company and another industrial loan company, a bank, or a
25savings association is subject to Division
begin delete 1.5end delete (commencing
26with Section 4800).
Section 18427.9 of the Financial Code is amended
There shall be exempted from the provisions of
31Section 18427.1 all of the following:
32(a) (1) Any offer, not involving a public offering, to an affiliate
33or to a person of the type described in subdivision (i) of Section
3425102 of the Corporations Code or in the regulations of the
35Commissioner of Business Oversight adopted thereunder.
36(2) The execution and delivery of an agreement for the sale of
37securities to any person of the type described in paragraph (1),
38 subject to all of the following:
39(A) The agreement shall contain substantially the following
P26 1“The sale of the securities which are the subject of this agreement
2has not been authorized by a permit issued by the Commissioner
3of Business Oversight. The issuance of the securities or the
4payment or receipt of any part of the consideration therefor prior
5to the issuance of a permit is unlawful, unless the sale of securities
6is exempt from Section 18427.1 of the California Financial Code.
7The rights of all parties to this agreement are expressly conditioned
8upon the issuance of a permit, unless the sale is so exempt.”
9(B) No part of the purchase price may be paid or received, and
10none of the securities may be issued, until a permit authorizing the
11sale of the securities is issued, unless the sale is exempt from
13(b) Any transaction or security which the commissioner by
14regulation or order exempts as not being comprehended within the
15purposes of this article and the regulation of which he or she finds
16is not necessary or appropriate in the public interest or for the
17protection of investors.
Section 53638 of the Government Code is amended
(a) The deposit shall not exceed the shareholder’s
22equity of any depository bank. For the purposes of this subdivision,
23shareholder’s equity shall be determined in accordance with Section
24463 of the Financial Code, but shall be deemed to include capital
25notes and debentures.
26(b) The deposit shall not exceed the total of the net worth of
27any depository savings association or federal association, except
28that deposits not exceeding a total of five hundred thousand dollars
29($500,000) may be made to a savings association or federal
30association without regard to the net worth of that depository, if
31such deposits are insured or secured as required by law.
32(c) The deposit to the share accounts of any regularly chartered
33credit union shall not exceed the total of the unimpaired capital
34and surplus of the credit union, as defined by rule of the
35Commissioner of Business Oversight, except that the deposit to
36any credit union share account in an amount not exceeding five
37hundred thousand dollars ($500,000) may be made if the share
38accounts of that credit union are insured or guaranteed pursuant
39to Section 14858 of the Financial Code or are secured as required
P27 1(d) The deposit in investment certificates of a federally insured
2industrial loan company shall not exceed the total of the unimpaired
3capital and surplus of the insured industrial loan company.