Amended in Assembly March 31, 2016

Amended in Assembly September 3, 2015

Senate Bill No. 726

Introduced by Senator Hueso

February 27, 2015

An act to begin delete amend Section 25400 of, and to end delete add Section 25401.2 begin delete to, end delete begin insert to end insert the Corporations Code, relating to corporate securities.

LEGISLATIVE COUNSEL’S DIGEST

SB 726, as amended, Hueso. Corporate securities: unlawful conduct.

(1) The Corporate Securities Law of 1968 generally regulates the offer and sale of corporate securities within the state, and specifically makes specified conduct with regard to the offer and sale of corporate securities unlawful. begin insert That law provides that any willful violation of that law is a crime. end insert

This bill would make it unlawful for any person, directly or indirectly, in this begin delete state, for a consideration, received directly or indirectly from a broker-dealer or other person selling or offering for sale or purchasing or offering to purchase the security, to employ, hire, or pay any 3rd party to induce action by any state government official and prohibiting that 3rd party from disclosing on whose behalf the 3rd party is acting. The bill would also make it unlawful for any person, in connection with the offer, sale, or purchase of a security, directly or indirectly, to make a false or misleading statement to any state government official in order to cause an investigation of a public company. end delete begin insert state to knowingly make an untrue statement of material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which the statements are made, not misleading, to any state government official with the intention of inducing an investigation of a publicly traded company for the purpose of manipulating the value of a security of that publicly traded company for financial gain. end insert

begin insert

By expanding the scope of a crime, this bill would impose a state-mandated local program.

end insert

(2) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

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

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

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 25401.2 is added to the end insert begin insert Corporations
Code end insert begin insert , to read: end insert

begin insert

begin insert 25401.2. end insert   

It is unlawful for any person, directly or indirectly,
in this state to knowingly make an untrue statement of material
fact or omit to state a material fact necessary in order to make the
statements made, in light of the circumstances under which the
statements are made, not misleading, to any state government
official with the intention of inducing an investigation of a publicly
traded company for the purpose of manipulating the value of a
security of that publicly traded company for financial gain.

end insert

begin delete

SECTION 1.  

Section 25400 of the Corporations Code is
amended to read:

25400.  

It is unlawful for any person, directly or indirectly, in
this state:

(a) For the purpose of creating a false or misleading appearance
of active trading in any security or a false or misleading appearance
with respect to the market for any security, (1) to effect any
transaction in a security which involves no change in the beneficial
ownership thereof, or (2) to enter an order or orders for the
purchase of any security with the knowledge that an order or orders
of substantially the same size, at substantially the same time and
at substantially the same price, for the sale of any such security,
has been or will be entered by or for the same or different parties,
or (3) to enter an order or orders for the sale of any security with
the knowledge that an order or orders of substantially the same
size, at substantially the same time and at substantially the same
price, for the purchase of any such security, has been or will be
entered by or for the same or different parties.

(b) To effect, alone or with one or more other persons, a series
of transactions in any security creating actual or apparent active
trading in such security or raising or depressing the price of such
security, for the purpose of inducing the purchase or sale of such
security by others.

(c) If such person is a broker-dealer or other person selling or
offering for sale or purchasing or offering to purchase the security,
to induce the purchase or sale of any security by the circulation or
dissemination of information to the effect that the price of any
such security will or is likely to rise or fall because of market
operations of any one or more persons conducted for the purpose
of raising or depressing the price of such security.

(d) If such person is a broker-dealer or other person selling or
offering for sale or purchasing or offering to purchase the security,
to make, for the purpose of inducing the purchase or sale of such
security by others, any statement which was, at the time and in the
light of the circumstances under which it was made, false or
misleading with respect to any material fact, or which omitted to
state any material fact necessary in order to make the statements
made, in the light of the circumstances under which they were
made, not misleading, and which he knew or had reasonable ground
to believe was so false or misleading.

(e) For a consideration, received directly or indirectly from a
broker-dealer or other person selling or offering for sale or
purchasing or offering to purchase the security, to do either of the
following:

(1) To induce the purchase or sale of any security by the
circulation or dissemination of information to the effect that the
price of such security will or is likely to rise or fall because of the
market operations of any one or more persons conducted for the
purpose of raising or depressing the price of such security.

(2) To employ, hire, or pay any third party to induce action by
any state government official and prohibiting that third party from
disclosing on whose behalf the third party is acting.

SEC. 2.  

Section 25401.2 is added to the Corporations Code,
to read:

25401.2.  

It is unlawful for any person, in connection with the
offer, sale, or purchase of a security, directly or indirectly, to make
a false or misleading statement to any state government official in
order to cause an investigation of a public company.

end delete

begin delete SEC. 3. end delete

begin insert SEC. 2. end insert   

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.