Amended in Senate June 22, 2016

Amended in Senate June 13, 2016

Amended in Senate May 23, 2016

California Legislature—2015–16 Regular Session

Assembly BillNo. 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 Section 4406 of the Commercial Code, to amend Sections 2510, 2601, 25100, 25254, and 25532 of the Corporations Code, to amend Sections 5100.2, 18139, and 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. Financial institutions and services: regulation.

(1) The Uniform Commercial Code-Bank Deposits and Collections, among other things, limits the time in which a customer, who receives a sufficient statement of account, as specified, from a bank regarding the payments of items for the customer’s account, is able to assert a claim against the bank based on an unauthorized signature or alteration against the account.

This bill would specify that a statement of account provides sufficient information if the item is described by item number, amount, and date of payment.

(2) 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.

(3) 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.

(4) 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.

(5) 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.

(6) 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.

(7) 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.

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.

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

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

P3    1

SECTION 1.  

Section 7574.14 of the Business and Professions
2Code
is amended to read:

3

7574.14.  

This chapter shall not apply to the following:

4(a) An officer or employee of the United States of America, or
5of this state or a political subdivision thereof, while the officer or
6employee is engaged in the performance of his or her official
7duties, including uniformed peace officers employed part time by
8a public agency pursuant to a written agreement between a chief
9of police or sheriff and the public agency, provided the part-time
10employment does not exceed 50 hours in a calendar month.

11(b) A person engaged exclusively in the business of obtaining
12and furnishing information as to the financial rating of persons.

13(c) A charitable philanthropic society or association incorporated
14under the laws of this state that is organized and duly maintained
15for the public good and not for private profit.

16(d) Patrol special police officers appointed by the police
17commission of a city, county, or city and county under the express
18terms of its charter who also under the express terms of the charter
19(1) are subject to suspension or dismissal after a hearing on charges
20duly filed with the commission after a fair and impartial trial, (2)
21must be not less than 18 years of age nor more than 40 years of
22age, (3) must possess physical qualifications prescribed by the
23commission, and (4) are designated by the police commission as
24the owners of a certain beat or territory as may be fixed from time
25to time by the police commission.

26(e) An attorney at law in performing his or her duties as an
27attorney at law.

P4    1(f) A collection agency or an employee thereof while acting
2within the scope of his or her employment, while making an
3investigation incidental to the business of the agency, including
4an investigation of the location of a debtor or his or her property
5where the contract with an assignor creditor is for the collection
6of claims owed or due or asserted to be owed or due or the
7equivalent thereof.

8(g) Admitted insurers and agents and insurance brokers licensed
9by the state, performing duties in connection with insurance
10transacted by them.

11(h) A bank subject to the jurisdiction of the Commissioner of
12Business Oversight under Division 1.1 (commencing with Section
131000) of the Financial Code or the Comptroller of the Currency
14of the United States.

15(i) A person engaged solely in the business of securing
16information about persons or property from public records.

17(j) A peace officer of this state or a political subdivision thereof
18while the peace officer is employed by a private employer to
19engage in off-duty employment in accordance with Section 1126
20of the Government Code. However, nothing herein shall exempt
21such a peace officer who either contracts for his or her services or
22the services of others as a private patrol operator or contracts for
23his or her services as or is employed as an armed private security
24officer. For purposes of this subdivision, “armed security officer”
25means an individual who carries or uses a firearm in the course
26and scope of that contract or employment.

27(k) A retired peace officer of the state or political subdivision
28thereof when the retired peace officer is employed by a private
29employer in employment approved by the chief law enforcement
30officer of the jurisdiction where the employment takes place,
31provided that the retired officer is in a uniform of a public law
32enforcement agency, has registered with the bureau on a form
33approved by the director, and has met any training requirements
34or their equivalent as established for security personnel under
35Section 7583.5. This officer may not carry an unloaded and
36exposed handgun unless he or she is exempted under the provisions
37of Article 2 (commencing with Section 26361) of Chapter 6 of
38Division 5 of Title 4 of Part 6 of the Penal Code, may not carry
39an unloaded firearm that is not a handgun unless he or she is
40exempted under the provisions of Article 2 (commencing with
P5    1Section 26405) of Chapter 7 of Division 5 of Title 4 of Part 6 of
2the Penal Code, and may not carry a loaded or concealed firearm
3unless he or she is exempted under the provisions of Sections
425450 to 25475, inclusive, of the Penal Code or Sections 25900
5to 25910, inclusive, of the Penal Code or has met the requirements
6set forth in subdivision (d) of Section 26030 of the Penal Code.
7However, nothing herein shall exempt the retired peace officer
8who contracts for his or her services or the services of others as a
9private patrol operator.

10(l) A licensed insurance adjuster in performing his or her duties
11within the scope of his or her license as an insurance adjuster.

12(m) A savings association subject to the jurisdiction of the
13Commissioner of Business Oversight or the Office of the
14Comptroller of the Currency.

15(n) A secured creditor engaged in the repossession of the
16creditor’s collateral and a lessor engaged in the repossession of
17leased property in which it claims an interest.

18(o) A peace officer in his or her official police uniform acting
19in accordance with subdivisions (c) and (d) of Section 70 of the
20Penal Code.

21(p) An unarmed, uniformed security person employed
22exclusively and regularly by a motion picture studio facility
23employer who does not provide contract security services for other
24entities or persons in connection with the affairs of that employer
25only and where there exists an employer-employee relationship if
26that person at no time carries or uses a deadly weapon, as defined
27in subdivision (a), in the performance of his or her duties, which
28may include, but are not limited to, the following business
29purposes:

30(1) The screening and monitoring access of employees of the
31same employer.

32(2) The screening and monitoring access of prearranged and
33preauthorized invited guests.

34(3) The screening and monitoring of vendors and suppliers.

35(4) Patrolling the private property facilities for the safety and
36welfare of all who have been legitimately authorized to have access
37to the facility.

38(q) An armored contract carrier operating armored vehicles
39pursuant to the authority of the Department of the California
P6    1Highway Patrol or the Public Utilities Commission, or an armored
2vehicle guard employed by an armored contract carrier.

3

SEC. 2.  

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

5

17511.1.  

As used in this article, “telephonic seller” or “seller”
6means a person who, on his or her own behalf or through
7salespersons or through the use of an automatic dialing-announcing
8device, as defined in Section 2871 of the Public Utilities Code,
9causes a telephone solicitation or attempted telephone solicitation
10to occur which meets the criteria specified in subdivision (a), (b),
11(c), or (d) and who is not exempted by subdivision (e), as follows:

12(a) A telephone solicitation or attempted telephone solicitation
13wherein the telephonic seller initiates telephonic contact with a
14prospective purchaser and represents or implies one or more of
15the following:

16(1) That a prospective purchaser who buys one or more items
17will also receive additional or other items, whether or not of the
18same type as purchased, without further cost. For purposes of this
19subdivision, “further cost” does not include actual postage or
20common carrier delivery charges, if any.

21(2) That a prospective purchaser will receive a prize or gift, if
22the person also encourages the prospective purchaser to do either
23of the following:

24(A) Purchase or rent any goods or services.

25(B) Pay any money, including, but not limited to, a delivery or
26handling charge.

27(3) That a prospective purchaser is able to obtain any item or
28service at a price which the seller states or implies is below the
29regular price of the item or service offered. This paragraph shall
30not apply to retailers who, within the previous 12 months, have
31 sold a majority of their goods or services through in-person sales
32at retail stores.

33(4) That a prospective purchaser who buys office equipment or
34supplies will, because of some unusual event or imminent price
35increase, be able to buy these items at prices which are below those
36that are usually charged or will be charged for the items.

37(5) That the seller is a person other than the person he or she is.

38(6) That the items for sale are manufactured or supplied by a
39person other than the actual manufacturer or supplier.

P7    1(7) That the seller is offering to sell the prospective purchaser
2any gold, silver, or other metals, including coins, diamonds, rubies,
3sapphires, or other stones, coal or other minerals, or any interest
4in oil, gas, or mineral fields, wells, or exploration sites, or any
5other investment opportunity of any type whatsoever.

6(8) That the seller is offering to make a loan, or to arrange or
7assist in arranging a loan or to assist in providing information
8which may lead to the obtaining of a loan, unless no payment of
9any kind is made until the loan proceeds are disbursed to the
10borrower.

11(9) That a prospective purchaser will receive a credit card, as
12defined in subdivision (a) of Section 1747.02 of the Civil Code,
13if the purchaser pays an upfront or preapplication fee for the credit
14card to the telephonic seller.

15(b) A solicitation or attempted solicitation which is made by
16telephone in response to inquiries generated by unrequested
17notifications sent by the seller to persons who have not previously
18purchased goods or services from the seller or who have not
19previously requested credit from the seller, to a prospective
20purchaser wherein the seller represents or implies to the recipient
21of the notification that any of the following applies to the recipient:

22(1) That the recipient has in any manner been specially selected
23to receive the notification or the offer contained in the notification.

24(2) That the recipient will receive a prize or gift if the recipient
25calls the seller.

26(3) That if the recipient buys one or more items from the seller,
27the recipient will also receive additional or other items, whether
28or not of the same type as purchased, without further cost or at a
29cost which the seller states or implies is less than the regular price
30of such items.

31However, this subdivision does not apply to the solicitation of
32 sales by a catalog seller who periodically issues and delivers
33catalogs to potential purchasers by mail or by other means. This
34exception only applies if the catalog includes a written description
35or illustration and the sales price of each item of merchandise
36offered for sale, includes at least 24 full pages of written material
37or illustrations, is distributed in more than one state, and has an
38annual circulation of not less than 250,000 customers.

39(c) A solicitation or attempted solicitation which is made by
40telephone in response to inquiries generated by advertisements on
P8    1behalf of the telephonic seller wherein it is represented or implied
2that the seller is offering to sell to the prospective purchaser any
3gold, silver, or other metals, including coins, diamonds, rubies,
4sapphires, or other stones, coal or other minerals, or any interest
5in oil, gas, or mineral fields, wells, or exploration sites, or any
6other investment opportunity of any type whatsoever.

7(d) A solicitation or attempted solicitation which is made by
8telephone in response to inquiries generated by advertisements on
9behalf of the telephonic seller wherein it is represented or implied
10that the seller is offering to make a loan or to arrange or assist in
11arranging a loan or to assist in providing information which may
12lead to the obtaining of a loan, unless no payment of any kind is
13made until the loan proceeds are disbursed to the borrower.

14(e) For purposes of this article, “telephonic seller” or “seller”
15does not include any of the following:

16(1) A person offering or selling a security qualified under
17Section 25110, 25120, or 25130 of the Corporations Code or
18exempt from qualification under Chapter 1 (commencing with
19Section 25100) of Part 2 of Division 1 of Title 4 of the
20Corporations Code. The fact that a notice claiming an exemption
21under the Corporate Securities Law of 1968 is filed with the
22Department of Business Oversight does not create an exemption
23under this paragraph.

24(2) A person licensed pursuant to Part 1 (commencing with
25Section 10000) of Division 4, when the solicited transaction is
26governed by that law.

27(3) A person licensed pursuant to Chapter 9 (commencing with
28Section 7000) of Division 3, when the solicited transaction is
29governed by that law.

30(4) A person licensed or certificated pursuant to Part 2
31(commencing with Section 680) of Division 1 of the Insurance
32Code, including a person licensed pursuant to Chapter 5
33(commencing with Section 1621) thereof, when the solicited
34transaction is governed by that law.

35(5) A person offering or selling a franchise registered pursuant
36to Section 31110 of the Corporations Code or exempt from
37registration under Chapter 1 (commencing with Section 31100)
38of Part 2 of Division 5 of Title 4 of the Corporations Code. The
39fact that a notice claiming an exemption under the Franchise
P9    1Investment Law is filed with the Department of Business Oversight
2does not create an exemption under this paragraph.

3(6) A person soliciting the sale of a seller assisted marketing
4plan, as defined in Title 2.7 (commencing with Section 1812.200)
5of Part 4 of Division 3 of the Civil Code, who has filed with the
6Attorney General the documents required by Section 1812.203 of
7the Civil Code.

8(7) A person primarily soliciting the sale of a newspaper of
9general circulation, as defined in Article 1 (commencing with
10Section 6000) of Chapter 1 of Division 7 of Title 1 of the
11Government Code, a magazine, or membership in a book or record
12club whose program operates in conformity with the requirements
13of Section 1584.5 of the Civil Code.

14(8) A person soliciting business from prospective purchasers
15who have previously purchased from the business enterprise for
16which the person is calling.

17(9) A person soliciting without the intent to complete and who
18does not complete the sales presentation during the telephone
19solicitation but completes the sales presentation at a later
20face-to-face meeting between the solicitor and the prospective
21purchaser. However, if a seller, directly following a telephone
22solicitation, causes an individual whose primary purpose it is to
23go to the prospective purchaser to collect the payment or deliver
24any item purchased, this exemption does not apply.

25(10) Any supervised financial institution or parent, subsidiary,
26or subsidiary of parent thereof. As used in this paragraph,
27“supervised financial institution” means any commercial bank,
28trust company, savings and loan association, credit union, industrial
29loan company, finance lender or broker, or insurer, provided that
30the institution is subject to supervision by an official or agency of
31this state or of the United States.

32(11) A person soliciting the sale of a preneed funeral
33arrangement regulated by Article 9 (commencing with Section
347735) of Chapter 12 of Division 3.

35(12) A person licensed pursuant to Chapter 19 (commencing
36with Section 9600) of Division 3 when acting pursuant to that
37licensure.

38(13) A person soliciting the sale of services provided by a cable
39television system licensed or franchised pursuant to Section 53066
40of the Government Code or any other authority.

P10   1(14) A person or an affiliate of a person whose business is
2regulated by the Public Utilities Commission.

3(15) A person soliciting the sale of a commodity pursuant to
4Part 2 (commencing with Section 58601) of Division 21 of the
5Food and Agricultural Code, if the solicitation neither intends to,
6nor actually results in, a sale which costs the purchaser in excess
7of one hundred dollars ($100).

8(16) An issuer or subsidiary of an issuer that has a security listed
9on a national securities exchange if the exchange has been certified
10by rule or order of the Commissioner of Business Oversight under
11subdivision (o) of Section 25100 of the Corporations Code. A
12subsidiary of an issuer that qualifies for exemption under this
13paragraph is not itself exempt unless not less than 60 percent of
14the voting power of its shares is owned by the qualifying issuer or
15issuers.

16(17) A person soliciting exclusively the sale of telephone
17answering services to be provided by that person or that person’s
18employer.

19(18) A person soliciting a transaction regulated by the
20 Commodity Futures Trading Commission if the person is registered
21or temporarily licensed for this activity with the Commodity
22Futures Trading Commission under the Commodity Exchange Act
23(7 U.S.C. Sec. 1 et seq.), and the registration or license has not
24expired or been suspended or revoked.

25(19) A person who sells coins or bullion at a price which is not
26more than 25 percent more than the price at which the seller is
27concurrently buying the same coins or bullion, if: (A) the seller
28has had a retail location in California from which he or she has
29been selling coins or bullion to the public in person for at least
30three years; (B) the telephonic solicitations are not the person’s
31primary business and sales made telephonically make up less than
3220 percent of the person’s total retail sales; and (C) the person
33claiming an exemption pursuant to this subdivision complies with
34Section 17511.3, as applicable, and subdivision (p) of Section
3517511.4.

36(20) A person licensed pursuant to Division 1.2 (commencing
37with Section 2000) of the Financial Code to engage in the business
38of money transmission if the license has not expired or been
39suspended or revoked.

P11   1(21) A person licensed as a residential mortgage lender or
2servicer pursuant to Division 20 (commencing with Section 50000)
3of the Financial Code, when acting under the authority of that
4license.

5(22) A corporation that meets all of the following conditions:

6(A) It has been exempt from taxation under Section 23701e of
7the Revenue and Taxation Code for a minimum of 10 years.

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

10(C) It has been incorporated in the state for a minimum of 25
11years.

12(f) In any civil proceeding alleging a violation of this article,
13the burden of proving an exemption or an exception from a
14definition is upon the person claiming it, and in any criminal
15proceeding alleging a violation of this article, the burden of
16producing evidence to support a defense based upon an exemption
17or an exception from a definition is upon the person claiming it.

18(g) Compliance with this article does not satisfy nor substitute
19for any requirements for license, registration, or regulation
20mandated by other laws.

21

SEC. 3.  

Section 4406 of the Commercial Code is amended to
22read:

23

4406.  

(a) A bank that sends or makes available to a customer
24a statement of account showing payment of items for the account
25shall either return or make available to the customer the items paid
26or provide information in the statement of account sufficient to
27allow the customer to reasonably identify the items paid. The
28statement of account provides sufficient information if the item is
29described by item number, amount, and date of payment. If the
30bank does not return the items, it shall provide in the statement of
31account the telephone number that the customer may call to request
32an item, a substitute check, or a legible copy thereof pursuant to
33subdivision (b).

34(b) If the items are not returned to the customer, the person
35retaining the items shall either retain the items or, if the items are
36destroyed, maintain the capacity to furnish legible copies of the
37items until the expiration of seven years after receipt of the items.
38A customer may request an item from the bank that paid the item,
39and that bank shall provide in a reasonable time either the item or,
40if the item has been destroyed or is not otherwise obtainable, a
P12   1legible copy of the item. If the paid item requested by a customer
2was presented as a substitute check, the bank shall provide, in a
3reasonable time, either the substitute check or, if the substitute
4check has been destroyed or is not otherwise obtainable, a legible
5copy of the substitute check. A bank shall provide, upon request,
6and without charge to the customer, at least two items, substitute
7checks, or legible copies thereof, with respect to each statement
8of account sent to the customer.

9(c) If a bank sends or makes available a statement of account
10or items pursuant to subdivision (a), the customer shall exercise
11reasonable promptness in examining the statement or the items to
12determine whether any payment was not authorized because of an
13alteration of an item or because a purported signature by or on
14behalf of the customer was not authorized. If, based on the
15statement or items provided, the customer should reasonably have
16discovered the unauthorized payment, the customer shall promptly
17notify the bank of the relevant facts.

18(d) If the bank proves that the customer failed, with respect to
19an item, to comply with the duties imposed on the customer by
20subdivision (c), the customer is precluded from asserting any of
21the following against the bank:

22(1) The customer’s unauthorized signature or any alteration on
23the item if the bank also proves that it suffered a loss by reason of
24the failure.

25(2) The customer’s unauthorized signature or alteration by the
26same wrongdoer on any other item paid in good faith by the bank
27if the payment was made before the bank received notice from the
28customer of the unauthorized signature or alteration and after the
29customer had been afforded a reasonable period of time, not
30exceeding 30 days, in which to examine the item or statement of
31account and notify the bank.

32(e) If subdivision (d) applies and the customer proves that the
33bank failed to exercise ordinary care in paying the item and that
34the failure contributed to loss, the loss is allocated between the
35customer precluded and the bank asserting the preclusion according
36to the extent to which the failure of the customer to comply with
37subdivision (c) and the failure of the bank to exercise ordinary
38care contributed to the loss. If the customer proves that the bank
39did not pay the item in good faith, the preclusion under subdivision
40(d) does not apply.

P13   1(f) Without regard to care or lack of care of either the customer
2or the bank, a customer who does not within one year after the
3statement or items are made available to the customer (subdivision
4(a)) discover and report the customer’s unauthorized signature on
5or any alteration on the item is precluded from asserting against
6the bank the unauthorized signature or alteration. If there is a
7preclusion under this subdivision, the payer bank may not recover
8for breach of warranty under Section 4208 with respect to the
9unauthorized signature or alteration to which the preclusion applies.

10(g) As used in this section, “substitute check” shall have the
11same meaning as used in Section 229.2 of Title 12 of the Code of
12Federal Regulations.

begin delete

13(h) This section shall become operative on January 1, 2015.

end delete
14

SEC. 4.  

Section 2510 of the Corporations Code is amended to
15read:

16

2510.  

“Social purpose corporation subject to the Banking Law”
17means any of the following:

18(a) A social purpose corporation that, with the approval of the
19Commissioner of Business Oversight, is incorporated for the
20purpose of engaging in, or that is authorized by the Commissioner
21of Business Oversight to engage in, the commercial banking
22business under the Banking Law (Division 1.1 (commencing with
23Section 1000) of the Financial Code).

24(b) Any social purpose corporation that, with the approval of
25the Commissioner of Business Oversight, is incorporated for the
26purpose of engaging in, or that is authorized by the Commissioner
27of Business Oversight to engage in, the industrial banking business
28under the Banking Law (Division 1.1 (commencing with Section
291000) of the Financial Code).

30(c) Any social purpose corporation, other than a social purpose
31corporation described in subdivision (d), that, with the approval
32of the Commissioner of Business Oversight, is incorporated for
33the purpose of engaging in, or that is authorized by the
34Commissioner of Business Oversight to engage in, the trust
35business under the Banking Law (Division 1.1 (commencing with
36Section 1000) of the Financial Code).

37(d) Any social purpose corporation that is authorized by the
38Commissioner of Business Oversight and the Commissioner of
39Insurance to maintain a title insurance department to engage in
P14   1title insurance business and a trust department to engage in trust
2business.

3(e) Any social purpose corporation that, with the approval of
4the Commissioner of Business Oversight, is incorporated for the
5purpose of engaging in, or that is authorized by the Commissioner
6of Business Oversight to engage in, business under Article 1
7(commencing with Section 1850) of Chapter 21 of Division 1.1
8of the Financial Code.

9

SEC. 5.  

Section 2601 of the Corporations Code is amended to
10read:

11

2601.  

(a) The Secretary of State shall not file articles setting
12forth a name in which “bank,” “trust,” “trustee,” or related words
13appear, unless the certificate of approval of the Commissioner of
14Business Oversight is attached to the articles. This subdivision
15does not apply to the articles of any social purpose corporation
16subject to the Banking Law on which is endorsed the approval of
17the Commissioner of Business Oversight.

18(b) (1) The Secretary of State shall not file articles that set forth
19a name that is likely to mislead the public or that is the same as,
20or resembles so closely as to tend to deceive, the name of a
21domestic corporation, the name of a domestic social purpose
22corporation, or the name of a foreign corporation that is authorized
23to transact intrastate business or has registered its name pursuant
24to Section 2101, a name that a foreign corporation has assumed
25under subdivision (b) of Section 2106, a name that will become
26the record name of a corporation or social purpose corporation or
27a foreign corporation upon the effective date of a filed corporate
28instrument where there is a delayed effective date pursuant to
29subdivision (c) of Section 110 or subdivision (c) of Section 5008,
30or a name that is under reservation for another corporation or social
31purpose corporation pursuant to this title, except that a social
32purpose corporation may adopt a name that is substantially the
33same as an existing corporation or social purpose corporation,
34foreign or domestic, which is authorized to transact intrastate
35business or has registered its name pursuant to Section 2101, upon
36proof of consent by the domestic or foreign corporation or social
37purpose corporation and a finding by the Secretary of State that
38under the circumstances the public is not likely to be misled. The
39use by a social purpose corporation of a name in violation of this
P15   1section may be enjoined notwithstanding the filing of its articles
2by the Secretary of State.

3(2) A corporation formed pursuant to this division before
4January 1, 2015, may elect to change its status from a flexible
5purpose corporation to a social purpose corporation by amending
6its articles of incorporation to change its name to replace “flexible
7purpose corporation” with “social purpose corporation” and to
8replace the term “flexible purpose corporation” with “social
9purpose corporation” as applicable in any statements contained in
10the articles. For any flexible purpose corporation formed prior to
11January 1, 2015, that has not amended its articles of incorporation
12to change its status to a social purpose corporation, any reference
13in this division to social purpose corporation shall be deemed a
14reference to “flexible purpose corporation.”

15(c) Any applicant may, upon payment of the fee prescribed in
16Article 3 (commencing with Section 12180) of Chapter 3 of Part
172 of Division 3 of Title 2 of the Government Code, obtain from
18the Secretary of State a certificate of reservation of any name not
19prohibited by subdivision (b), and upon the issuance of the
20certificate the name stated in the certificate shall be reserved for
21a period of 60 days. The Secretary of State shall not, however,
22issue certificates reserving the same name for two or more
23consecutive 60-day periods to the same applicant or for the use or
24benefit of the same person. No consecutive reservations shall be
25made by or for the use or benefit of the same person of names so
26similar as to fall within the prohibitions of subdivision (b).

27

SEC. 6.  

Section 25100 of the Corporations Code is amended
28to read:

29

25100.  

The following securities are exempted from Sections
3025110, 25120, and 25130:

31(a) Any security (including a revenue obligation) issued or
32guaranteed by the United States, any state, any city, county, city
33and county, public district, public authority, public corporation,
34public entity, or political subdivision of a state or any agency or
35corporate or other instrumentality of any one or more of the
36foregoing; or any certificate of deposit for any of the foregoing.

37(b) Any security issued or guaranteed by Canada, any Canadian
38province, any political subdivision or municipality of that province,
39or by any other foreign government with which the United States
40currently maintains diplomatic relations, if the security is
P16   1 recognized as a valid obligation by the issuer or guarantor; or any
2certificate of deposit for any of the foregoing.

3(c) Any security issued or guaranteed by and representing an
4interest in or a direct obligation of a national bank or a bank or
5trust company incorporated under the laws of this state, and any
6security issued by a bank to one or more other banks and
7representing an interest in an asset of the issuing bank.

8(d) Any security issued or guaranteed by a federal savings
9association or federal savings bank or federal land bank or joint
10land bank or national farm loan association or by any savings
11association, as defined in subdivision (a) of Section 5102 of the
12Financial Code, which is subject to the supervision and regulation
13of the Commissioner of Business Oversight of this state.

14(e) Any security (other than an interest in all or portions of a
15parcel or parcels of real property which are subdivided land or a
16subdivision or in a real estate development), the issuance of which
17is subject to authorization by the Insurance Commissioner, the
18Public Utilities Commission, or the Real Estate Commissioner of
19this state.

20(f) Any security consisting of any interest in all or portions of
21a parcel or parcels of real property that are subdivided lands or a
22subdivision or in a real estate development; provided that the
23exemption in this subdivision shall not be applicable to: (1) any
24investment contract sold or offered for sale with, or as part of, that
25interest, or (2) any person engaged in the business of selling,
26distributing, or supplying water for irrigation purposes or domestic
27use that is not a public utility except that the exemption is
28applicable to any security of a mutual water company (other than
29an investment contract as described in paragraph (1)) offered or
30sold in connection with subdivided lands pursuant to Chapter 2
31(commencing with Section 14310) of Part 7 of Division 3 of Title
321.

33(g) Any mutual capital certificates or savings accounts, as
34defined in the Savings Association Law, issued by a savings
35association, as defined by subdivision (a) of Section 5102 of the
36Financial Code, and holding a license or certificate of authority
37then in force from the Commissioner of Business Oversight of this
38state.

P17   1(h) Any security issued or guaranteed by any federal credit
2union, or by any credit union organized and supervised, or
3regulated, under the Credit Union Law.

4(i) Any security issued or guaranteed by any railroad, other
5common carrier, public utility, or public utility holding company
6which is (1) subject to the jurisdiction of the Interstate Commerce
7 Commission or its successor or (2) a holding company registered
8with the Securities and Exchange Commission under the Public
9Utility Holding Company Act of 1935 or a subsidiary of that
10company within the meaning of that act or (3) regulated in respect
11of the issuance or guarantee of the security by a governmental
12authority of the United States, of any state, of Canada or of any
13Canadian province; and the security is subject to registration with
14or authorization of issuance by that authority.

15(j) Any security (except evidences of indebtedness, whether
16interest bearing or not) of an issuer (1) organized exclusively for
17educational, benevolent, fraternal, religious, charitable, social, or
18reformatory purposes and not for pecuniary profit, if no part of the
19net earnings of the issuer inures to the benefit of any private
20shareholder or individual, or (2) organized as a chamber of
21commerce or trade or professional association. The fact that
22amounts received from memberships or dues or both will or may
23be used to construct or otherwise acquire facilities for use by
24members of the nonprofit organization does not disqualify the
25organization for this exemption. This exemption does not apply
26to the securities of any nonprofit organization if any promoter
27thereof expects or intends to make a profit directly or indirectly
28from any business or activity associated with the organization or
29operation of that nonprofit organization or from remuneration
30received from that nonprofit organization.

31(k) Any agreement, commonly known as a “life income
32contract,” of an issuer (1) organized exclusively for educational,
33benevolent, fraternal, religious, charitable, social, or reformatory
34purposes and not for pecuniary profit and (2) which the
35commissioner designates by rule or order, with a donor in
36consideration of a donation of property to that issuer and providing
37for the payment to the donor or persons designated by him or her
38of income or specified periodic payments from the donated
39property or other property for the life of the donor or those other
40persons.

P18   1(l) Any note, draft, bill of exchange, or banker’s acceptance
2which is freely transferable and of prime quality, arises out of a
3current transaction or the proceeds of which have been or are to
4be used for current transactions, and which evidences an obligation
5to pay cash within nine months of the date of issuance, exclusive
6of days of grace, or any renewal of that paper which is likewise
7limited, or any guarantee of that paper or of that renewal, provided
8that the paper is not offered to the public in amounts of less than
9twenty-five thousand dollars ($25,000) in the aggregate to any one
10purchaser. In addition, the commissioner may, by rule or order,
11exempt any issuer of any notes, drafts, bills of exchange or banker’s
12acceptances from qualification of those securities when the
13 commissioner finds that the qualification is not necessary or
14appropriate in the public interest or for the protection of investors.

15(m) Any security issued by any corporation organized and
16existing under the provisions of Chapter 1 (commencing with
17Section 54001) of Division 20 of the Food and Agricultural Code.

18(n) Any beneficial interest in an employees’ pension,
19profit-sharing, stock bonus, or similar benefit plan which meets
20the requirements for qualification under Section 401 of the federal
21Internal Revenue Code or any statute amendatory thereof or
22supplementary thereto. A determination letter from the Internal
23Revenue Service stating that an employees’ pension, profit-sharing,
24stock bonus, or similar benefit plan meets those requirements shall
25be conclusive evidence that the plan is an employees’ pension,
26profit-sharing, stock bonus, or similar benefit plan within the
27 meaning of the first sentence of this subdivision until the date the
28determination letter is revoked in writing by the Internal Revenue
29Service, regardless of whether or not the revocation is retroactive.

30(o) Any security listed or approved for listing upon notice of
31issuance on a national securities exchange, if the exchange has
32been certified by rule or order of the commissioner and any warrant
33or right to purchase or subscribe to the security. The exemption
34afforded by this subdivision does not apply to securities listed or
35approved for listing upon notice of issuance on a national securities
36exchange, in a rollup transaction unless the rollup transaction is
37an eligible rollup transaction as defined in Section 25014.7.

38That certification of any exchange shall be made by the
39commissioner upon the written request of the exchange if the
40commissioner finds that the exchange, in acting on applications
P19   1 for listing of common stock, substantially applies the minimum
2standards set forth in either subparagraph (A) or (B) of paragraph
3(1), and, in considering suspension or removal from listing,
4substantially applies each of the criteria set forth in paragraph (2).

5(1) Listing standards:

6(A) (i) Shareholders’ equity of at least four million dollars
7($4,000,000).

8(ii) Pretax income of at least seven hundred fifty thousand
9dollars ($750,000) in the issuer’s last fiscal year or in two of its
10last three fiscal years.

11(iii) Minimum public distribution of 500,000 shares (exclusive
12of the holdings of officers, directors, controlling shareholders, and
13other concentrated or family holdings), together with a minimum
14of 800 public holders or minimum public distribution of 1,000,000
15shares together with a minimum of 400 public holders. The
16exchange may also consider the listing of a company’s securities
17if the company has a minimum of 500,000 shares publicly held, a
18minimum of 400 shareholders and daily trading volume in the
19issue has been approximately 2,000 shares or more for the six
20months preceding the date of application. In evaluating the
21suitability of an issue for listing under this trading provision, the
22exchange shall review the nature and frequency of that activity
23and any other factors as it may determine to be relevant in
24ascertaining whether the issue is suitable for trading. A security
25that trades infrequently shall not be considered for listing under
26this paragraph even though average daily volume amounts to 2,000
27shares per day or more.

28Companies whose securities are concentrated in a limited
29geographical area, or whose securities are largely held in block by
30institutional investors, normally may not be considered eligible
31for listing unless the public distribution appreciably exceeds
32500,000 shares.

33(iv) Minimum price of three dollars ($3) per share for a
34reasonable period of time prior to the filing of a listing application;
35provided, however, in certain instances an exchange may favorably
36 consider listing an issue selling for less than three dollars ($3) per
37share after considering all pertinent factors, including market
38conditions in general, whether historically the issue has sold above
39three dollars ($3) per share, the applicant’s capitalization, and the
40number of outstanding and publicly held shares of the issue.

P20   1(v) An aggregate market value for publicly held shares of at
2least three million dollars ($3,000,000).

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

5(ii) Minimum public distribution set forth in clause (iii) of
6subparagraph (A) of paragraph (1).

7(iii) Operating history of at least three years.

8(iv) An aggregate market value for publicly held shares of at
9least fifteen million dollars ($15,000,000).

10(2) Criteria for consideration of suspension or removal from
11listing:

12(A) If a company that (A) has shareholders’ equity of less than
13one million dollars ($1,000,000) has sustained net losses in each
14of its two most recent fiscal years, or (B) has net tangible assets
15of less than three million dollars ($3,000,000) and has sustained
16net losses in three of its four most recent fiscal years.

17(B) If the number of shares publicly held (excluding the holdings
18of officers, directors, controlling shareholders, and other
19concentrated or family holdings) is less than 150,000.

20(C) If the total number of shareholders is less than 400 or if the
21number of shareholders of lots of 100 shares or more is less than
22300.

23(D) If the aggregate market value of shares publicly held is less
24than seven hundred fifty thousand dollars ($750,000).

25(E) If shares of common stock sell at a price of less than three
26dollars ($3) per share for a substantial period of time and the issuer
27shall fail to effectuate a reverse stock split of the shares within a
28reasonable period of time after being requested by the exchange
29to take that action.

30A national securities exchange, certified by rule or order of the
31commissioner under this subdivision, shall file annual reports when
32requested to do so by the commissioner. The annual reports shall
33contain, by issuer: the variances granted to an exchange’s listing
34standards, including variances from corporate governance and
35voting rights’ standards, for any security of that issuer; the reasons
36for the variances; a discussion of the review procedure instituted
37by the exchange to determine the effect of the variances on
38investors and whether the variances should be continued; and any
39other information that the commissioner deems relevant. The
40purpose of these reports is to assist the commissioner in
P21   1determining whether the quantitative and qualitative requirements
2of this subdivision are substantially being met by the exchange in
3general or with regard to any particular security.

4The commissioner after appropriate notice and opportunity for
5hearing in accordance with the provisions of the Administrative
6Procedure Act, Chapter 5 (commencing with Section 11500) of
7Part 1 of Division 3 of Title 2 of the Government Code, may, in
8his or her discretion, by rule or order, decertify any exchange
9previously certified that ceases substantially to apply the minimum
10standards or criteria as set forth in paragraphs (1) and (2).

11A rule or order of certification shall conclusively establish that
12any security listed or approved for listing upon notice of issuance
13on any exchange named in a rule or order of certification, and any
14warrant or right to purchase or subscribe to that security, is exempt
15under this subdivision until the adoption by the commissioner of
16any rule or order decertifying the exchange.

17(p) A promissory note secured by a lien on real property, which
18is neither one of a series of notes of equal priority secured by
19 interests in the same real property nor a note in which beneficial
20interests are sold to more than one person or entity.

21(q) Any unincorporated interindemnity or reciprocal or
22interinsurance contract, that qualifies under the provisions of
23Section 1280.7 of the Insurance Code, between members of a
24cooperative corporation, organized and operating under Part 2
25(commencing with Section 12200) of Division 3 of Title 1, and
26whose members consist only of physicians and surgeons licensed
27in California, which contracts indemnify solely in respect to
28medical malpractice claims against the members, and which do
29not collect in advance of loss any moneys other than contributions
30by each member to a collective reserve trust fund or for necessary
31expenses of administration.

32(1) Whenever it appears to the commissioner that any person
33has engaged or is about to engage in any act or practice constituting
34a violation of any provision of Section 1280.7 of the Insurance
35Code, the commissioner may, in the commissioner’s discretion,
36bring an action in the name of the people of the State of California
37in the superior court to enjoin the acts or practices or to enforce
38compliance with Section 1280.7 of the Insurance Code. Upon a
39proper showing a permanent or preliminary injunction, a restraining
40order, or a writ of mandate shall be granted and a receiver or
P22   1conservator may be appointed for the defendant or the defendant’s
2assets.

3(2) The commissioner may, in the commissioner’s discretion,
4(A) make public or private investigations within or outside of this
5state as the commissioner deems necessary to determine whether
6any person has violated or is about to violate any provision of
7Section 1280.7 of the Insurance Code or to aid in the enforcement
8of Section 1280.7, and (B) publish information concerning the
9violation of Section 1280.7.

10(3) For the purpose of any investigation or proceeding under
11this section, the commissioner or any officer designated by the
12commissioner may administer oaths and affirmations, subpoena
13witnesses, compel their attendance, take evidence, and require the
14production of any books, papers, correspondence, memoranda,
15agreements, or other documents or records which the commissioner
16deems relevant or material to the inquiry.

17(4) In case of contumacy by, or refusal to obey a subpoena
18issued to, any person, the superior court, upon application by the
19commissioner, may issue to the person an order requiring the
20person to appear before the commissioner, or the officer designated
21by the commissioner, to produce documentary evidence, if so
22ordered, or to give evidence touching the matter under investigation
23or in question. Failure to obey the order of the court may be
24punished by the court as a contempt.

25(5) No person is excused from attending or testifying or from
26producing any document or record before the commissioner or in
27obedience to the subpoena of the commissioner or any officer
28designated by the commissioner, or in any proceeding instituted
29by the commissioner, on the ground that the testimony or evidence
30(documentary or otherwise), required of the person may tend to
31incriminate the person or subject the person to a penalty or
32forfeiture, but no individual may be prosecuted or subjected to any
33penalty or forfeiture for or on account of any transaction, matter,
34or thing concerning which the person is compelled, after validly
35claiming the privilege against self-incrimination, to testify or
36produce evidence (documentary or otherwise), except that the
37individual testifying is not exempt from prosecution and
38punishment for perjury or contempt committed in testifying.

39(6) The cost of any review, examination, audit, or investigation
40made by the commissioner under Section 1280.7 of the Insurance
P23   1Code shall be paid to the commissioner by the person subject to
2the review, examination, audit, or investigation, and the
3commissioner may maintain an action for the recovery of these
4costs in any court of competent jurisdiction. In determining the
5cost, the commissioner may use the actual amount of the salary or
6other compensation paid to the persons making the review,
7examination, audit, or investigation plus the actual amount of
8expenses including overhead reasonably incurred in the
9performance of the work.

10The recoverable cost of each review, examination, audit, or
11investigation made by the commissioner under Section 1280.7 of
12the Insurance Code shall not exceed twenty-five thousand dollars
13($25,000), except that costs exceeding twenty-five thousand dollars
14($25,000) shall be recoverable if the costs are necessary to prevent
15a violation of any provision of Section 1280.7 of the Insurance
16Code.

17(r) Any shares or memberships issued by any corporation
18organized and existing pursuant to the provisions of Part 2
19(commencing with Section 12200) of Division 3 of Title 1,
20provided the aggregate investment of any shareholder or member
21in shares or memberships sold pursuant to this subdivision does
22not exceed one thousand dollars ($1,000). This exemption does
23not apply to the shares or memberships of that corporation if any
24promoter thereof expects or intends to make a profit directly or
25indirectly from any business or activity associated with the
26corporation or the operation of the corporation or from
27remuneration, other than reasonable salary, received from the
28corporation. This exemption does not apply to nonvoting shares
29or memberships of that corporation issued to any person who does
30not possess, and who will not acquire in connection with the
31issuance of nonvoting shares or memberships, voting power
32(Section 12253) in the corporation. This exemption also does not
33apply to shares or memberships issued by a nonprofit cooperative
34corporation organized to facilitate the creation of an unincorporated
35interindemnity arrangement that provides indemnification for
36medical malpractice to its physician and surgeon members as set
37forth in subdivision (q).

38(s) Any security consisting of or representing an interest in a
39pool of mortgage loans that meets each of the following
40requirements:

P24   1(1) The pool consists of whole mortgage loans or participation
2interests in those loans, which loans were originated or acquired
3in the ordinary course of business by a national bank or federal
4savings association or federal savings bank having its principal
5office in this state, by a bank incorporated under the laws of this
6state or by a savings association as defined in subdivision (a) of
7Section 5102 of the Financial Code and which is subject to the
8supervision and regulation of the Commissioner of Business
9Oversight, and each of which at the time of transfer to the pool is
10an authorized investment for the originating or acquiring institution.

11(2) The pool of mortgage loans is held in trust by a trustee which
12is a financial institution specified in paragraph (1) as trustee or
13otherwise.

14(3) The loans are serviced by a financial institution specified in
15paragraph (1).

16(4) The security is not offered in amounts of less than
17twenty-five thousand dollars ($25,000) in the aggregate to any one
18purchaser.

19(5) The security is offered pursuant to a registration under the
20Securities Act of 1933, or pursuant to an exemption under
21Regulation A under that act, or in the opinion of counsel for the
22issuer, is offered pursuant to an exemption under Section 4(2) of
23that act.

24(t) (1) Any security issued or guaranteed by and representing
25an interest in or a direct obligation of an industrial loan company
26incorporated under the laws of the state and authorized by the
27Commissioner of Business Oversight to engage in industrial loan
28business.

29(2) Any investment certificate in or issued by any industrial
30loan company that is organized under the laws of a state of the
31United States other than this state, that is insured by the Federal
32Deposit Insurance Corporation, and that maintains a branch office
33in this state.

34

SEC. 7.  

Section 25254 of the Corporations Code is amended
35to read:

36

25254.  

(a) If the commissioner determines it is in the public
37interest, the commissioner may include in any administrative action
38brought under this part a claim for ancillary relief, including, but
39not limited to, a claim for restitution or disgorgement or damages
40on behalf of the persons injured by the act or practice constituting
P25   1the subject matter of the action, and the administrative law judge
2shall have jurisdiction to award additional relief.

3(b) In an administrative action brought under this part, the
4commissioner is entitled to recover costs, which in the discretion
5of the administrative law judge may include an amount representing
6reasonable attorney’s fees and investigative expenses for the
7services rendered, for deposit into the State Corporations Fund for
8the use of the Department of Business Oversight.

9(c) After the exhaustion of the review procedures provided in
10accordance with the provisions of the Administrative Procedure
11Act, Chapter 5 (commencing with Section 11500) of Part 1 of
12Division 3 of Title 2 of the Government Code, the commissioner
13may apply to the appropriate superior court for a judgment in the
14amount of the ancillary relief and costs awarded in a final decision
15and order compelling the respondent, or the named or cited person,
16to comply with the final decision of the commissioner brought
17under this division. The application shall include a certified copy
18of the final decision of the commission and shall constitute a
19sufficient showing to warrant the issuance of the judgment and
20order from superior court.

21

SEC. 8.  

Section 25532 of the Corporations Code is amended
22to read:

23

25532.  

(a) If, in the opinion of the commissioner, (1) the sale
24of a security is subject to qualification under this law and it is being
25or has been offered or sold without first being qualified, the
26commissioner may order the issuer or offeror of the security to
27desist and refrain from the further offer or sale of the security until
28qualification has been made under this law or (2) the sale of a
29security is subject to the requirements of Section 25100.1, 25101.1,
30or 25102.1 and the security is being or has been offered or sold
31without first meeting the requirements of those sections, the
32commissioner may order the issuer or offeror of that security to
33desist and refrain from the further offer or sale of the security until
34those requirements have been met.

35(b) If, in the opinion of the commissioner, a person has been or
36is acting as a broker-dealer or investment adviser, or has been or
37is engaging in broker-dealer or investment adviser activities, in
38violation of Section 25210, 25230, or 25230.1, the commissioner
39may order that person to desist and refrain from the activity until
P26   1the person has been appropriately licensed or the required filing
2has been made under this law.

3(c) If, in the opinion of the commissioner, a person has violated
4or is violating Section 25401, the commissioner may order that
5person to desist and refrain from the violation.

6(d) If the commissioner determines that a person has engaged,
7is engaging, or is about to engage in an act, practice, or course of
8business constituting a violation of this division or a rule adopted
9or order issued under this division, the commissioner may issue
10an order directing the person to desist and refrain from engaging
11in the act, practice, or course of business, or take other action
12necessary or appropriate to comply with this division.

13(e) If the commissioner determines it is in the public interest,
14the commissioner may include in any administrative action brought
15under this division a claim for ancillary relief, including, but not
16limited to, a claim for restitution or disgorgement or damages on
17behalf of the persons injured by the act or practice constituting the
18subject matter of the action, and the administrative law judge shall
19have jurisdiction to award additional relief.

20(f) If, after an order has been served under subdivision (a), (b),
21(c), or (d), a request for hearing is filed in writing within 30 days
22of the date of service of the order by the person to whom the order
23was directed, a hearing shall be held in accordance with provisions
24of the Administrative Procedure Act, Chapter 5 (commencing with
25Section 11500) of Part 1 of Division 3 of Title 2 of the Government
26Code, and the commissioner shall have all of the powers granted
27under that chapter. Unless the hearing is commenced within 15
28business days after the request is filed (or the person affected
29consents to a later date), the order is rescinded.

30If that person fails to file a written request for a hearing within
3130 days from the date of service of the order, the order shall be
32deemed a final order of the commissioner and is not subject to
33review by any court or agency, notwithstanding Section 25609.

34The commissioner may file a certified copy of the final order
35with the clerk of the superior court or any court of competent
36 jurisdiction. The order so filed has the same effect as a judgment
37of the court and may be recorded, enforced, or satisfied in the same
38manner as a judgment of the court.

39If a person does not comply with an order under this section, the
40commissioner may petition the superior court or any court of
P27   1competent jurisdiction to enforce the order. The court may not
2require the commissioner to post a bond in an action or proceeding
3under this section. If the court finds, after service and opportunity
4for hearing, that the person was not in compliance with the order,
5the court may adjudge the person in civil contempt of the order.
6The court may impose a further civil penalty against the person
7for contempt and may grant any other relief the court determines
8is just and proper in the circumstances.

9

SEC. 9.  

Section 5100.2 of the Financial Code is amended to
10read:

11

5100.2.  

For purposes of this division:

12(a) Any reference to regulations of the federal Office of the
13Comptroller of the Currency or the Federal Deposit Insurance
14Corporation shall also be deemed to include and refer to regulations
15adopted by the Federal Home Loan Bank Board or the Federal
16Savings and Loan Insurance Corporation, to the extent these
17regulations have been continued in effect and made enforceable
18by the Office of the Comptroller of the Currency or Federal Deposit
19Insurance Corporation, respectively, pursuant to the Financial
20Institutions Reform, Recovery, and Enforcement Act of 1989
21(Public Law 101-73).

22(b) Any reference to charters issued by the Office of the
23Comptroller of the Currency shall also be deemed to include and
24refer to charters issued by the Federal Home Loan Bank Board.

25

SEC. 10.  

Section 18139 of the Financial Code is amended to
26read:

27

18139.  

A sale, merger, or conversion involving an industrial
28loan company and another industrial loan company, a bank, or a
29savings association is subject to Division 1.6 (commencing with
30Section 4800).

31

SEC. 11.  

Section 18427.9 of the Financial Code is amended
32to read:

33

18427.9.  

There shall be exempted from the provisions of
34Section 18427.1 all of the following:

35(a) (1) Any offer, not involving a public offering, to an affiliate
36or to a person of the type described in subdivision (i) of Section
3725102 of the Corporations Code or in the regulations of the
38Commissioner of Business Oversight adopted thereunder.

P28   1(2) The execution and delivery of an agreement for the sale of
2securities to any person of the type described in paragraph (1),
3 subject to all of the following:

4(A) The agreement shall contain substantially the following
5provision:
6“The sale of the securities which are the subject of this agreement
7has not been authorized by a permit issued by the Commissioner
8of Business Oversight. The issuance of the securities or the
9payment or receipt of any part of the consideration therefor prior
10to the issuance of a permit is unlawful, unless the sale of securities
11is exempt from Section 18427.1 of the California Financial Code.
12The rights of all parties to this agreement are expressly conditioned
13upon the issuance of a permit, unless the sale is so exempt.”

14(B) No part of the purchase price may be paid or received, and
15none of the securities may be issued, until a permit authorizing the
16sale of the securities is issued, unless the sale is exempt from
17Section 18427.1.

18(b) Any transaction or security which the commissioner by
19regulation or order exempts as not being comprehended within the
20purposes of this article and the regulation of which he or she finds
21is not necessary or appropriate in the public interest or for the
22protection of investors.

23

SEC. 12.  

Section 53638 of the Government Code is amended
24to read:

25

53638.  

(a) The deposit shall not exceed the shareholder’s
26equity of any depository bank. For the purposes of this subdivision,
27shareholder’s equity shall be determined in accordance with Section
28463 of the Financial Code, but shall be deemed to include capital
29notes and debentures.

30(b) The deposit shall not exceed the total of the net worth of
31any depository savings association or federal association, except
32that deposits not exceeding a total of five hundred thousand dollars
33($500,000) may be made to a savings association or federal
34association without regard to the net worth of that depository, if
35such deposits are insured or secured as required by law.

36(c) The deposit to the share accounts of any regularly chartered
37credit union shall not exceed the total of the unimpaired capital
38and surplus of the credit union, as defined by rule of the
39Commissioner of Business Oversight, except that the deposit to
40any credit union share account in an amount not exceeding five
P29   1hundred thousand dollars ($500,000) may be made if the share
2accounts of that credit union are insured or guaranteed pursuant
3to Section 14858 of the Financial Code or are secured as required
4by law.

5(d) The deposit in investment certificates of a federally insured
6industrial loan company shall not exceed the total of the unimpaired
7capital and surplus of the insured industrial loan company.



O

    96