BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING


          SB  
          1196 (Hill)


          As Amended  August 19, 2016


          Majority vote


          SENATE VOTE:  38-0


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |20-0 |Gonzalez, Bigelow,    |                    |
          |                |     |Bloom, Bonilla,       |                    |
          |                |     |Bonta, Calderon,      |                    |
          |                |     |Chang, Daly, Eggman,  |                    |
          |                |     |Gallagher, Eduardo    |                    |
          |                |     |Garcia, Holden,       |                    |
          |                |     |Jones, Obernolte,     |                    |
          |                |     |Quirk, Santiago,      |                    |
          |                |     |Wagner, Weber, Wood,  |                    |
          |                |     |Chau                  |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Business &      |16-0 |Salas, Brough, Baker, |                    |
          |Professions     |     |Bloom, Campos,        |                    |
          |                |     |Chávez, Dahle, Dodd,  |                    |
          |                |     |Eggman, Gatto, Gomez, |                    |
          |                |     |Holden, Jones,        |                    |








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          |                |     |Mullin, Ting, Wood    |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          SUMMARY:  Subjects the Bureau of Security and Investigative  
          Services (BSIS) to review by the appropriate committees of the  
          Legislature, and makes various changes to provisions in the  
          Alarm Company Act, Locksmith Act, Private Investigator Act,  
          Private Security Services Act, Proprietary Security Services  
          Act, and Collateral Recovery Act to improve the oversight,  
          enforcement and regulation by the BSIS of licensees under each  
          Act; adds a sunset review date for the Bureau of Real Estate  
          (CalBRE) and Bureau of Real Estate Appraisers (BREA), and makes  
          various changes to provisions in the Real Estate Law and the  
          Real Estate Appraisers' Licensing and Certification Law to  
          improve the oversight, enforcement and regulation by the CalBRE  
          and BREA, and makes other technical changes.  Specifically, this  
          bill:


          1)Subjects the BSIS to review by the appropriate committees of  
            the Legislature by January 1, 2020.
          2)Updates the fine and citation structure for violations of  
            provisions in the Alarm Company Act, Private Investigator Act,  
            Private Security Services Act, and Collateral Recovery Act, as  
            specified.


          3)Requires the insurer of any insurance policy secured by a  
            licensee list the BSIS as the certificate holder for the  
            purposes of receiving notifications related to the policy's  
            status.


          4)Requires a licensee who is a private investigator to notify  
            the BSIS within 30 days of any change in its corporate  
            officers, or members required to be named.








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          5)Provides that a licensee or qualified manager who possesses a  
            valid firearms qualification card may carry a firearm capable  
            of being concealed upon the person in a concealed manner if he  
            or she complies with Penal Code Section 26150.


          6)Requires that a denial of a firearms qualification card be in  
            writing and with a description of the basis for denial, inform  
            the applicant that a review by the Private Investigator  
            Disciplinary Review Committee to contest the denial must be  
            requested within 30 days following the issuance of the denial;  
            specify that no review will be granted to an individual who is  
            otherwise prohibited from carrying a firearm.


          7)Prohibits a person required to be registered as a security  
            guard from carrying or using a firearm unless he or she  
            possesses a valid and current firearms permit that is  
            associated with a valid and current security guard  
            registration.


          8)Requires that a security guard carry on his or her person,  
            while on duty, a valid and current security guard registration  
            card, or if pending receipt of the registration card after the  
            bureau's approval, a hardcopy printout of the approved  
            security guard registration information, as provided, and a  
            valid picture identification.


          9)Requires that a security guard carry on his or her person,  
            while on duty either a valid and current firearms permit, or  
            if pending receipt of the permit after the BSIS approval, a  
            hardcopy printout of the approved firearms permit information,  
            as provided, and a valid picture identification.










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          10)  Requires a person registered as a patrolperson, in addition  
            to a person who is a registered security guard, and his or her  
            employer to deliver to the director of the BSIS, within seven  
            days, a written report describing fully the circumstances  
            surrounding any incident involving the discharge of any  
            firearm in which he or she was involved while acting within  
            the scope of his or her employment.


          11)  Specifies that a person entering the employ of a licensee  
            to perform the functions of a security guard or security  
            patrolperson is exempt from completing a course of study in  
            the exercise of power to arrest prior to being assigned to a  
            duty location if that person is a peace officer, as defined,  
            and has successfully completed a course of study in the  
            exercise of power to arrest approved by the Commission on  
            Peace Officer Standards and Training, or is a federal  
            qualified law enforcement officer, as defined, and has  
            successfully completed a course of study in the exercise of  
            power to arrest.


          12)  Permits a duly appointed peace officer, as defined, or a  
            federal qualified law enforcement officer, as defined, and who  
            has written approval from his or her primary employer, to  
            carry a firearm while working as a security guard.


          13)  Exempts from the requirement for a licensee, qualified  
            manager of a licensee, or a security guard who, in the course  
            of his or her employment, may be required to carry a firearm,  
            prior to carrying a firearm, to complete a course of training  
            in the carrying and use of firearms and receive a  
            qualification card, if that person is a peace officer, as  
            defined, or a federal qualified law enforcement officer, as  
            defined, who has completed a course of study in the use of  
            firearms.










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          14)  Provides that agreements entered into on or after January  
            1, 2017, that include an automatic renewal provision renewing  
            the agreement for a period of more than one month, must  
            include a clear and distinct disclosure, as specified,  
            separate from the terms and conditions to advise the consumer  
            that the agreement contains the automatic renewal provision;  
            require the consumer to acknowledge the disclosure by signing  
            or initialing it; and, void invalidate the automatic renewal  
            provision if it is not separately acknowledged.


          15)  Requires the BSIS to issue a firearms permit, beginning  
            January 1, 2018, when specified conditions are met, including  
            among others:


             a)   The applicant is a licensee, qualified manager of a  
               licensee, or a registered security guard, subject to  
               specified provisions, and the firearms permit is associated  
               with a security guard registration regardless of any other  
               license possessed or associated with the firearms permit;  
               and,
             b)   The applicant is a registered security guard and he or  
               she has been found capable of exercising appropriate  
               judgment, restraint, and self-control, for the purposes of  
               carrying and using a firearm during the course of his or  
               her duties.


             c)   The applicant has filed with the bureau a classifiable  
               fingerprint card, a completed application for a firearms  
               permit, as specified.  In lieu of a classifiable  
               fingerprint card, the applicant may submit fingerprints  
               into an electronic fingerprinting system administered by  
               the Department of Justice (DOJ).  The terminal operator may  
               charge a fee sufficient to reimburse it for the costs  
               incurred in providing this service.










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          16)  Prohibits the BSIS from issuing a firearms permit,  
            beginning January 1, 2018, if the applicant:
             a)   Is a registered security guard who has been found  
               incapable, at the time of application, of exercising  
               appropriate judgment restraint, and self-control for the  
               purposes of carrying and using a firearm during the course  
               of his or her duties; however, specifies that an applicant  
               who has been denied a permit for this reason may reapply  
               for the permit after 12 months from the date of denial and  
               that this application will be treated as an initial  
               application; and,
             b)   Is a qualified manager of a licensee, who within the  
               past 12 months, has been found incapable of exercising  
               appropriate judgment restraint, and self-control for the  
               purposes of carrying and using a firearm during the course  
               of his or her duties, as specified.


          17)  Requires the BSIS to seek an emergency order against the  
            holder of a firearms permit if, after the BSIS's investigation  
            relating to the following events, the BSIS determines that the  
            permit holder presents an undue hazard to the public safety  
            that may result in substantial injury to another:
             a)   Receipt of subsequent arrest information for assault,  
               battery, or any use of force or violence on any person  
               committed by the permit holder;
             b)   A report from a BSIS-approved firearms training facility  
               or instructor;


             c)   A report from the permit holder's employer of former  
               employer, or a complaint filed by any member of the public,  
               that the permit holder may be a threat to public safety;  
               or,


             d)   The permit holder's appropriate judgment, restraint, and  
               self-control pursuant to the assessment required under  
               Business and Professions Code (BPC) Section 7583.47.








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          18)  Exempts from the requirement for a licensee, qualified  
            manager of a licensee, or a security guard who wishes to carry  
            a baton in the performance of his or her duties, to qualify to  
            carry the weapon, if that person is a peace officer, as  
            defined, or a federal qualified law enforcement officer, as  
            defined, who has completed a course of study in the use of  
            batons.
          19)  Permits the director of the BSIS to assess fines for  
            specified violations, including among others, carrying or  
            using a firearm while performing duties not related to the  
            qualifying license or registration to which the BSIS  
            associated the firearms permit.


          20)  Requires the BSIS to deny a firearms permit to any  
            applicant, who within the past 12 months, has been found  
            incapable of exercising appropriate judgment restraint, and  
            self-control for the purposes of carrying and using a firearm  
            during the course of his or her duties, to the assessment  
            required under BPC Section 7583.47.


          21)  Requires the BSIS to issue a firearms permit when specified  
            conditions are met, including among others, the applicant is a  
            licensee, qualified manager of a licensee, a designated branch  
            office manager of a licensee, or a registered alarm agent,  
            subject to specified provisions, including among others, that  
            the applicant has filed with the bureau a classifiable  
            fingerprint card, a completed application for a firearms  
            permit, as specified.  In lieu of a classifiable fingerprint  
            card, the applicant may submit fingerprints into an electronic  
            fingerprinting system administered by the DOJ.  The terminal  
            operator may charge a fee sufficient to reimburse it for the  
            costs incurred in providing this service. 


          22)  Requires that a denial of a firearms permit on the basis of  








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            the results of an assessment, required for a permit associated  
            with a security guard registration, be in writing and with a  
            description of the basis for denial; and, inform the applicant  
            that he or she must request within 30 days following the  
            issuance of the denial a hearing to contest the denial.


          23)  Prohibits the BSIS from issuing a firearms permit, if the  
            applicant is a licensee, qualified manager of a licensee, a  
            designated branch office manager of a licensee, or a  
            registered alarm agent, who within the past 12 months, has  
            been found incapable of exercising appropriate judgment  
            restraint, and self-control for the purposes of carrying and  
            using a firearm during the course of his or her duties, to the  
            assessment required under BPC Section 7583.47.


          24)  Exempts a duly appointed peace officer, as defined, or a  
            federal qualified law enforcement officer, as defined, and who  
            has met specified provisions, from the prohibition for a  
            licensee, qualified manager, branch office manager, or alarm  
            agent to carry, use, or possess a loaded or unloaded firearm  
            in the course and scope of his or her employment, whether or  
            not it is serviceable or operative, unless he or she has in  
            his or her possession a valid and current firearms  
            qualification card.


          25)  Prohibits a licensee, qualified manager, branch office  
            manager, or alarm agent to use a firearm which is in violation  
            of law, or in knowing violation of the standards for carrying  
            and usage of firearms, as taught in the course of training in  
            the carrying and use of firearms, including, but not limited  
            to, carrying or using a firearm while performing duties not  
            related to the qualifying license, certificate, or  
            registration to which the BSIS associated the firearms permit.


          26)  Provides that if a licensee fails to provide proof of the  








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            required insurance upon request by the BSIS, the license is  
            subject to suspension and is automatically suspended until the  
            licensee provides proof to the BSIS of compliance with the  
            insurance coverage requirement; prior to an automatic  
            suspension, the BSIS is required to notify the licensee in  
            writing that he or she has 30 days to provide proof to the  
            BSIS of having the required insurance; and, if the licensee  
            fails to provide proof of insurance coverage within the notice  
            period, the BSIS may automatically suspend the license.


          27)Requires every agreement, beginning January 1, 2017,  
            including but not limited to, materials to be provided for the  
            installation of an alarm system, and any amendments to the  
            provisions of an initial agreement, to be in writing, except  
            as provided; require each initial agreement to contain, among  
            other things, a disclosure that alarm company operators are  
            licensed and regulated by the BSIS, Department of Consumer  
            Affairs (DCA), including the BSIS's current address and  
            contact information.
          28)  Adds a four year sunset review date to the CalBRE and BREA.
          29)  Permits the Commissioner to suspend the license of a real  
            estate licensee who has entered into a guilty plea for a  
            felony or a crime substantially related to the qualifications,  
            functions, or duties of a real estate licensee.


          30)  Requires the CalBRE to notify person whose license is  
            subject to suspension of his or her right to elect to have the  
            issue of the suspension heard.


          31)  Requires that the suspension be rescinded and the license  
            reinstated to its status prior to the suspension if the plea  
            of guilty is withdrawn by the licensee. 


          32)  Requires an applicant for a Real Estate Appraiser's license  
            to complete a BREA-approved course and examination that tests  








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            the applicant's knowledge of state and federal laws relating  
            to the practice of appraising.   


          33)  Makes other technical changes.


          FISCAL EFFECT:  The provisions of this bill related to the BSIS  
          will result in the following costs: 


          1)Costs to conduct compliance inspections of firearms training  
            facilities are expected to be minor and absorbable.  The BSIS  
            currently has 367 licensed firearm training facilities and  
            assumes a 5% increase annually.


          2)Costs of $40,000 in the current year, $282,000 in fiscal year  
            2017-18, and $225,000 in 2018-19 and ongoing to the BSIS  
            (Private Security Services Fund), and 3.0 Personnel Years (PY)  
            of licensing staff, to develop and process psychological  
            assessments submitted with Firearm Permit applications.  The  
            2017-18 cost includes $100,000 in contract costs. 


          3)Onetime costs of approximately $397,000 to add psychological  
            testing and firearm inspection codes to the BreEZe system. 


          4)Unknown penalty and fine revenue gains.


          5)The Committee notes that the BSIS has projected expenditures  
            of approximately $12.1 million (mainly from the Private  
            Security Services Fund) annually, supporting 51.4 PY.  This is  
            offset by the collection of approximately $12.1 million in fee  
            revenues.  The Committee also notes that the Private Security  
            Services Fund and the Private Investigator Fund have revenues  
            and expenditures that are in balance, and both funds have  








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            healthy reserves to fund the additional expenditures related  
            to this bill. 


          According to the August 1, 2016 Assembly Appropriations  
          Committee, the provisions of this bill related to the CalBRE and  
          BREA will result in the following costs: 


          1)Minor and absorbable costs to CalBRE to handle the additional  
            requirements for suspended licenses.


          2)Minor and absorbable costs to BREA to update the application  
            for a real estate appraiser and the applicant's packet.


          COMMENTS:  


          Purpose.  This bill is sponsored by the author.  According to  
          the author, "[This bill] ensures that CalBRE and BREA are  
          reviewed by the appropriate policy committees of the Legislature  
          in four years (2021).  The bill additionally provides the Real  
          Estate Commissioner the authority to suspend the license of a  
          real estate licensee who has entered into a guilty plea for a  
          felony or a crime substantially related to the qualifications,  
          functions, or duties of a real estate license and requires an  
          applicant for a Real Estate Appraiser's license to complete a  
          course and examination that tests the applicant's knowledge of  
          state and federal laws relating to the practice of appraising.


          The bill also includes a number of consumer protection and  
          public safety reforms related to the operations of BSIS and  
          ensures that BSIS is reviewed by the appropriate policy  
          committees of the Legislature."










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          Background.  Joint Oversight Hearings and Sunset Review of the  
          (Department of Consumer Affairs) DCA Licensing Boards.  In March  
          of 2015 and 2016, the Assembly Business and Professions  
          Committee and the Senate Business, Professions and Economic  
          Development Committee (Committees) conducted multiple joint  
          oversight hearings to review regulatory boards within the DCA  
          and one regulatory entity outside of the DCA.  The sunset bills  
          are intended to implement legislative changes recommended in the  
          respective background reports drafted by the Committee staff for  
          the agencies reviewed that year.


          Background on the BSIS.  The BSIS currently licenses about  
          380,000 companies and employees serving in the areas of alarm  
          services, locksmith services, private investigation, private  
          security, repossession, and firearm and baton training.   
          Specifically, the BSIS regulates the following Acts:  1) Alarm  
          Company Act; 2) Locksmith Act; 3) Private Investigator Act; 4)  
          Private Security Services Act; 5) Proprietary Security Services  
          Act; and 6) Collateral Recovery Act.  


          Issuing Firearm/Baton Permits.  California currently mandates  
          applicants for a firearm or baton permit to meet specified  
          minimum requirements, including among other things, completing a  
          written examination, completing a training course in the use of  
          firearms or batons, and submitting a classifiable fingerprint  
          card to specified agencies.  This bill expands on those  
          provisions by requiring an applicant to be registered with the  
          BSIS, and has demonstrated that he or she has been found capable  
          of exercising appropriate judgment, restraint, and self-control,  
          for the purposes of carrying and using a firearm during the  
          course of his or her duties.


          Assessing Applicants for Firearm/Baton Permits.  Several states  
          may use third-party vendors to develop assessment tools in the  
          process of issuing firearms permits.  However, California  
          currently does not have a standardized assessment.  This bill  








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          requires the BSIS to implement a process to administer an  
          assessment and to consult with subject matter experts, such as  
          psychologists, who can assist the BSIS in establishing criteria  
          for a contract with a vendor to administer the assessment,  
          identify minimum standards for the assessment, and evaluate  
          currently available assessments.


          Mandatory Reporting Requirements.  The BSIS is not required by  
          law to collect reports of shooting incidents involving armed  
          guards.  However, entities overseeing the actions of licensed  
          armed guards are required to submit these reports.  It is  
          unknown how many incidents that meet the criteria for reporting  
          are not reported to the BSIS because this process depends upon  
          self-reporting.  As a result of issues that have been raised  
          about the effectiveness of the self-reporting process for  
          firearm discharge incidents, this bill requires a person  
          registered as a security guard or patrolperson, and his or her  
          employer, to submit an incident report to the director of the  
          DCA describing fully the circumstances surrounding any incident  
          involving the discharge of any firearm while acting within the  
          course and scope of his or her employment.


          Cite and Fine Updates.  The BSIS issues citations and fines as a  
          means to encourage compliance with the laws and regulations of  
          the six acts within its oversight authority.  This bill updates  
          the fine and citation structure for violations of provisions in  
          the Alarm Company Act, Private Investigator Act, Private  
          Security Services Act, and Collateral Recovery Act in order to  
          help the BSIS better encourage compliance with existing laws and  
          regulations.


          Background on the CalBRE.  CalBRE is the state entity currently  
          charged with responsibility to enforce the Real Estate Law, the  
          Subdivided Lands Act, and the Vacation Ownership and Time-share  
          Act of 2004.  As a result of Governor Brown's reorganization  
          plan to the Legislature in 2012, the CalBRE became a bureau  








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          within the DCA, moving from the independent Department of Real  
          Estate (DRE) and AB 1317 (Frazier), Chapter 352, Statutes of  
          2013, enacted those statutory changes.  With respect to its core  
          functions, CalBRE currently licenses 405,985 persons in  
          California.  Last fiscal year, CalBRE issued over 25,000 new  
          licenses and renewed over 79,000.


          CalBRE Licensee Suspension.  CalBRE has seen instances where  
          major criminal cases involving real estate fraud have taken  
          years to work their way through federal and state criminal  
          courts.  In these cases, CalBRE has seen licensees who were  
          defendants plead guilty relatively early in the process as part  
          of a plea bargain that furthers the prosecution of other  
          defendants.  Those guilty pleas may not result in a conviction  
          for months, if not years, as the case against the other  
          defendants proceeds.  As presently written in statute, that  
          guilty licensee (who has entered his or her own voluntary and  
          knowing plea) may continue to practice real estate.  


          This bill provides the Commissioner the authority to suspend the  
          license of a real estate licensee who has entered into a guilty  
          plea for a felony or a crime substantially related to the  
          qualifications, functions, or duties of a real estate licensee.


          Background on the BREA.  In 1989, Title XI of the federal  
          Financial Institutions Reform, Recovery and Enforcement Act  
          (FIRREA) was adopted by congress mandating states to license and  
          certify real estate appraisers who appraise property for  
          federally related transactions.  The federal law was enacted as  
          a result of the savings and loan crisis.  In response to the  
          federal mandate, the California Legislature enacted the Real  
          Estate Appraisers Licensing and Certification Law. 


          The BREA, which is entirely funded by licensing fees, is a  
          single program comprised of two core components, licensing and  








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          enforcement.  The Licensing Division implements the minimum  
          requirements for licensure, according to criteria established by  
          the federal government and California law.  The Licensing  
          Division also registers Appraisal Management Companies (AMC) in  
          compliance with California law.  The Enforcement Division  
          investigates the background of applicants, licensees, and AMC  
          registrants to ensure they meet the standards for licensure.   
          The Enforcement Division also investigates complaints of  
          violations of California law and national appraisal standards  
          filed against licensed appraisers and registered AMCs.


          Federal Oversight of the BREA.  The following entities are not  
          part of BREA, but they have influence over BREA and its  
          operations at the federal level: 


          1)The Appraisal Subcommittee (ASC) was created in 1989 pursuant  
            to Title XI of the FIRREA.  The ASC's role as an independent  
            federal institution is to generally oversee the real estate  
            appraisal process as it relates to federally regulated  
            transactions and oversees the Appraisal Foundation.
          2)The Appraisal Foundation (Foundation) is a non-profit  
            organization that works to advance professionalism for  
            appraisers through the promulgation of standards, appraiser  
            qualifications, and guidance regarding appraisal methods and  
            techniques.  The Foundation is comprised of the Appraisal  
            Standards Board, the Appraisal Qualifications Board, and the  
            Appraisal Practices Board.


          Licensee Education.  Prior to licensure, applicants are not  
          required take a course or pass an exam to show fluency in  
          federal and state laws and regulations.  Only upon renewal of  
          the licensure must real estate appraisers demonstrate their  
          knowledge of federal and state laws and regulations.  Real  
          estate appraiser licenses must be renewed every two years and  
          all licensed appraisers must meet minimum continuing education  
          (CE) requirements before renewing their license.  In practical  








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          terms, this requires a renewal of the seven-hour Uniform  
          Standards of Professional Appraisal Practice course every two  
          years on its own, and a full CE (56 hours) renewal every four  
          years.  CE courses or seminars must cover appraisal related  
          topics including subjects such as land use planning, appraisal  
          computer applications, cost estimating, and green building  
          appraisals. 


          This bill requires an applicant for a real estate appraiser's  
          license to complete a BREA-approved course and examination  
          testing the applicant on federal and state laws regulating the  
          appraisal profession.




          Analysis Prepared by:                                             
                          Gabby Nepomuceno / B. & P. / (916) 319-3301  FN:  
           0004939